Lowest earners hit hardest by essential bill rises

As consumers brace themselves for the higher prices kicking in from today (1st April) across bills including energy, water and broadband, those on the lowest incomes are running out of options, Citizens Advice warns.

Households in the lowest 10% for income already spend around two-fifths (41%) of their earnings, after housing – on water, energy, broadband and car insurance bills. This compares to 11% for those on middle incomes, with those in the top 10% for income spending just 5%.

These latest findings come from the Institute for Public Policy Research (IPPR), as part of a Citizens Advice-led partnership with IPPR, abrdn Financial Fairness Trust and Policy in Practice, looking at social tariffs. Their research found single-adult households, and particularly those with children, are more likely than other groups to be spending 20% or more of their post-housing income on these bills, leaving them more exposed to price shocks.

If well-targeted social tariffs and bill support schemes were rolled out across water, energy, broadband and car insurance markets, the IPPR found that could save households hundreds of pounds a year. For example, if social tariffs reduced these essential bills by 25%, for those in the lowest 10% for income, it could bring in savings of around £13 a week or £680 a year. This would be equivalent to a boost of income (after housing costs) of around a tenth for a typical household in this group.

Dame Clare Moriarty, Chief Executive of Citizens Advice, said “After years of cost-of-living pressures, households across the country are about to feel the extra shock of rising essential bills. But for those on the lowest incomes, these unavoidable costs are already eating away at their finances, leaving their budgets stretched beyond breaking point.

“Social tariffs could be an effective safety net and put money back in people’s pockets, but the government and providers must work together to make sure nobody struggling to make ends meet misses out.

“We want to see people eligible for bill support automatically enrolled to receive it. This change can’t come soon enough.”

Professor Ashwin Kumar, Director of Research and Policy at IPPR, said  “Essential bills are leaving lowest earners with little room to breathe and causing huge anxieties. Well-designed social tariffs and bill support – across water, energy, broadband and insurance markets – could save households hundreds of pounds a year and provide a vital lifeline to some of the most vulnerable people across the country.”