Five Million UK Households 'Pushed' Towards 'Fuel Stress' As Energy Price Cap Rises to Almost £2K

The number of UK households driven into “fuel stress” - a term applied when at least 10 percent of a family budget is spent on energy bills - will double to five million as the energy price cap rises by a record sum, the Resolution Foundation, a think tank, has warned.

The energy price gap is the maximum amount that suppliers can charge customers for each unit of gas and electricity they use.

As of 1 April, the cap on the most widely-used tariffs imposed by Britain's energy regulator, Ofgem, rises by 54%, meaning energy bills for some 22 million customers will increase by around £693 ($913) per year, from £1,277 to £1,971 for those on default tariffs paying by direct debit, affecting 22 million customers. Pre-payment customers are now facing a hike of £708 from £1,309 to £2,017.

The Resolution Foundation estimated that the poorest fifth of UK households would be forced to spend more than twice the share of their budgets on energy bills than the richest fifth. This, warned the watchdog, would not be mitigated by measures such as the new government tax rebate scheme.

Currently, some 24% of households in the north east of England are experiencing “fuel stress”, said the Resolution Foundation. In autumn, it projected the figure might rise to 41%, driven by yet another forecast energy price cap spike.

The Office for Budget Responsibility (OBR) in its predictions for the economy had estimated that skyrocketing costs could hit the nation by October, when the price cap is likely to rise by another 42 percent.

According to analysis carried out by energy research specialist Cornwall Insight, the average bill could rise by a further £500, after factoring in the fallout from the ongoing Russian operation to "demiltarise and de-Nazify Ukraine", after the Donetsk and Lugansk People’s Republics (DPR and LPR) appealed for help in defending themselves against continued attacks from Kiev forces. Labelled “an invasion” by Washington and its NATO allies, it has resulted in sweeping sanctions applied to Moscow.

Earlier in March, US President Joe Biden ordered a boycott of Russian energy imports and called on Europe to do as much as it could to reduce their dependence on Russian fuel. Gas prices both in the US and in Europe hit record highs after the penalties came into effect, along with the Western countries’ decision to freeze the Nord Stream 2 pipeline and the Russian presidential decree stipulating that all contracts for pipeline gas deliveries with companies registered in "unfriendly" countries be settled in rubles, going into effect on Friday.

Calls For Emergency Budget

According to the Office for Budget Responsibility (OBR), inflation is anticipated to reach a 40-year high of 8.7 per cent next winter. The independent UK economic forecaster predicted in March that racing inflation, April’s net taxes rise would set livings standards plummeting by 2.2 per cent in 2022-23, warning of an impending real living standards fall that would be the largest for the financial year since records began in 1956.

The dire forecasts have fuelled calls for an emergency budget to be implemented in the UK.

“Another increase in energy bills this autumn hastens the need for more immediate support," advised Jonathan Marshall, senior economist at the Resolution Foundation.

Furthermore, it isn’t just energy bills that are pummelling the cost of living: broadband, mobile and water bills, council tax and national insurance contributions are also rising this month.

The Chancellor, who delivered his Spring Statement, dubbed the mini-budget, on 23 March, promised to slash 5p off the tax on a litre of gasoline and diesel for a year, to add £500 million to the Household Support Fund, distributed by councils to help families on low incomes, and a reduction on VAT from 5% to 0% for households that have invested in solar panels, heat pumps, or insulation to save on energy consumption.

The chancellor also said that the threshold for paying national insurance will rise by £3,000 instead of £300, while the cost of the insurance itself is scheduled to rise by 1.25%.

However, all these measures have been slammed by Tory backbenchers as not enough.

Senior Tory MP Robert Halfon was quoted by The Sun as saying:

“As the cap rises today, it will put huge pressure on millions of families. The £9 billion spent on cutting energy bills is hugely welcome, but cutting the green levies or introducing a downwards green levies escalator — when international energy prices are so high — would really make a difference.”

Labour leader Sir Keir Starmer echoed the sentiments, saying:

"People don't want a revolution. They do want to know 'how am I going to pay my energy bill?"

Kit Malthouse, Minister of State in the Home Office and Ministry of Justice, acknowledged that the impact of higher costs was "very tough" and that UK Chancellor Rishi Sunak was trying to help but "can't go all the way and ameliorate it all I'm afraid".

"The chancellor is trying to do a very difficult thing, which is to balance the requirements of the British people for assistance at a time of need against the long time financial health of the whole country," Malthouse was cited by Sky News as saying.