Liz Truss has announced that households across the country with typical usage will pay no more than £2,500 a year for energy from the start of October until 2024. While the Energy Price Guarantee plan outlined by the new Prime Minister in parliament on Thursday will bring relief to most gas and electricity customers, commentators are warning that many are already having difficulty coping with rising bills.
Richard Lane, StepChange director of external affairs, said the relative relief that people will feel “can’t mask the fact that many people are already struggling at current prices”. He said: “Benefits should also be uprated this autumn to help address the wider cost-of-living pressures that are disproportionately affecting those on low incomes.”
Ofgem’s energy price cap had been due to rise from £1,971 to £3,549 a year from October 1, stretching budgets for some 24 million households on the standard tariff to the very limit of their financial resources.
Households will still receive the non-repayable £400 rebate from the UK Government as part of the cost of living support package previously announced by former chancellor Rishi Sunak, and other support payments promised for this winter will remain in place.
These will be delivered by the Department for Work and Pensions (DWP) and HM Revenue and Customs (HMRC).
This includes:
- Second instalment of the £650 Cost of Living Payment - a payment for £324 due to be paid to those on DWP and HMRC qualifying benefits over autumn/winter
- £150 Disability Cost of Living Payment - due to be paid to around six million people claiming disability benefits from September 20
- £300 Pensioner Cost of Living Payment - due to be paid along with Winter Fuel Payments over November and December
With households facing a range of rising costs, Consumer Prices Index inflation (CPI) reached 10.1% in July, the highest level in more than 40 years.
Earlier this year, the State Pension and other benefits increased by 3.1% for the financial year 2022/23.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown said: “The reality is, we still face a long hard winter, with many pensioners facing difficult decisions about how they manage their fuel bills alongside soaring food prices.
“The average income for a pensioner couple is around £511 per week, so even at this new level some pensioners could see fuel bills taking up almost 10% of their income.
“Single pensioner households could find it harder still - if their fuel needs hit the price cap that’s a whopping 19% of their income allocated to keeping the lights on and the heating running.”
Ms Morrissey continued: “Those pensioners solely dependent on the State Pension will find it hardest of all - a full new State Pension pays out just over £9,600 a year while those on the basic pension get just under £7,400 - energy bills will continue to be an enormous source of stress.
“Under the triple lock, pensioners are in line for a blockbusting inflation-linked increase next April, but with the cost of bills biting now that feels like a very long way away.”
Ms Morrissey urged pensioners on low incomes to check whether they could be eligible for Pension Credit - find out more about this under-claimed benefit here.
James Taylor, director of strategy at disability equality charity Scope, said: “Freezing the price cap at twice the average cost of a year ago is a sticking plaster on the financial pain disabled people are experiencing.
“The cost of charging a powered wheelchair has doubled in a year. Spiralling costs - energy, fuel, food and inflation - have already left many disabled households in debt and on the brink.”
Mubin Haq, chief executive of charitable trust abrdn Financial Fairness Trust, said: “While the UK Government might have avoided the roof falling in on household finances, there are still serious leaks.
“Our research shows 10 million families are struggling or in serious financial difficulties due to the cost increases they already faced.”
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