On 8 September, the new Prime Minister, Liz Truss announced that an energy price cap will be introduced to protect households from spiralling energy costs. This is because household energy costs have doubled in the last year from an average of £1,277 to the current figure of £1,971.
The Energy Price Guarantee has been set at £2,500 per household per annum until 2024. Without this government scheme, energy costs were predicted to have been over £3,500 per year. The Energy Price Guarantee was welcome as the measures provide greater certainty to people about what their energy bills will cost over the next two years with no further rises (unless they use more fuel). The scheme also includes households that use heating oil or that live in park homes which was reassuring for people in those situations, despite the current lack of detail over how this will work in practice. Whilst the energy price guarantee will help to prevent significant numbers of people from falling into fuel poverty, the measures announced do not go far enough to support people that have already cut back on their essential needs and are already experiencing fuel poverty.
The UK’s cost of living crisis is the worst in 50 years with prices rising 10.1% so far in the last year and is predicted to rise further. This is leaving many households feeling the pinch on everyday essential items like food, clothes, fuel and energy. As a result, 10 million households are already struggling financially. Many households are already falling into arrears or resorting to using credit to pay for essentials.
Charities have called the cost of living crisis a ‘national emergency’ as it has far-reaching implications on people’s finances, health and wellbeing. For example, if people are unable to afford their heating bills, they will not turn on their heating which is likely to lead to respiratory and other illnesses. Unfortunately, even with the energy price cap, the cost of living crisis is only going to get worse for people over the winter. Further targeted government support will be vital for those households that are vulnerable and/or on a low income. For example, there needs to be support for people on lower incomes that spend a greater percentage of their income on their energy bills and those people that are considered vulnerable and need to use more energy at home. Ways to do this include uplifting Universal Credit and applying the living wage to all to ensure that people have adequate incomes. In the longer term, the focus should be on providing greater job security.
So what can people do to protect themselves from financial hardship?
Our research shows that whilst it can be difficult to discuss money issues, being more open to talking about money can make a big difference as it’s important to recognise that you are not alone. Many people are in a similar situation and are also feeling financial pressure. The important news is that there is support for people that are struggling financially that need advice and help. For example:
- Millions of people are eligible for Government support and do not realise they are entitled to benefits or support. Turn2Us offer a free and independent benefit checker.
- Lightning Reach connects people in hardship with the help they need.
- If you are struggling to pay your bills, speak to your providers and seek free, independent debt advice which is available from Citizens Advice, Stepchange or National Debtline.
- From our research, we’ve developed MoneySkills to budget planner and allows you to set financial goals to prioritise your spending.
- MoneyHelper shares advice on managing money and how to prioritise bills.
Dr Lindsey Appleyard, Assistant Professor (Research), Coventry University
13 September 2022