Rising energy bills ‘unaffordable’ for quarter of households

Millions of families in England will be dragged into fuel poverty overnight when energy bills soar this April, research has found.

The number of households who will find them unaffordable is to treble to 6.3 million when the price cap lifts, according to the Resolution Foundation.

It said this meant more than a quarter of households would suffer “fuel stress”, the definition of fuel poverty in England, which means having to spend at least 10 per cent of family budgets on energy bills.

The figure is 9 per cent but will hit 27 per cent if the price cap rises by more than half to about £2,000 a year as expected on April 1. Ofgem will announce the new price cap level on February 7 but drastic rises in wholesale gas prices mean a large increase is all but inevitable.

Levels of fuel stress are likely to be highest in the northeast and the West Midlands, at 33 per cent and 32 per cent respectively, the foundation says. Others who will be hit hard include pensioners (38 per cent), those in local authority housing (35 per cent) and those in poorly insulated homes.

Its report says the sheer scale of energy bill increases mean that fuel stress will no longer be confined to the poorest households. However, low and middle-income families will find it hardest to cope as they spend a far greater share of their family budgets on these essentials. The government should target support at lower-income households, it adds, with this done through the benefits system.

It is calling for benefits to increase faster than planned or for additional payments to be made, based on the warm homes discount. This £140 payment should grow by at least £300, it says, and be widened to all families in receipt of pension credit or working-age benefits. This would cut the number of households in fuel stress by about five percentage points, equivalent to more than one million families, it says.

Further reductions could be achieved by spreading the costs of energy firm failures over a number of years, it adds. The think tank also calls for the temporary transfer to general taxation of the levies needed to transform Britain’s energy supply. This would cut all energy bills by about £245 and reduce the number of families in “fuel stress” by more than seven percentage points, or 1.7 million, at a cost of £4.8 billion.

Jonny Marshall, senior economist at the foundation, said: “Fuel stress levels are particularly high among pensioner households, and those in poorly insulated homes — a stark reminder of the need to modernise Britain’s leaky housing stock and curb national dependency on gas for power and heating.”

Nigel Pocklington, chief executive of Good Energy, a green energy company, said ministers had a “burning deadline” in the next three weeks to decide how to offset the rise in bills, adding: “You absolutely need to be concerned for vulnerable households and homes and families that will be put into fuel poverty.”