Universal Credit cuts and Energy bill rises a ‘perfect storm’, warns Citizens Advice charity

Consumer support charity Citizens Advice has warned families could face a “perfect storm” this autumn, as energy prices rise and Universal Credit payments fall.

The energy price cap will increase from October 1 for the 15 million households it protects, driven by a record high in gas prices.

Those on default tariffs paying by direct debit will see an increase of £139 from £1,138 to £1277, while prepayment customers will see an increase of £153 from £1,156 to £1309.

Read also: Rishi Sunak urged to extend £20 Universal Credit boost

Energy regulator Ofgem says that the increase is driven by a rise of over 50 per cent in energy costs over the last six months, with gas prices hitting a record high as the world emerges from lockdown.

CambridgeshireLive email updates: We bring the stories to you

Signing up to the CambridgeshireLive newsletter means you’ll receive our daily news email.

It couldn’t be simpler and it takes seconds – simply click here, enter your email address and follow the instructions.

You can also enter your address at the top of this page in the box below the picture on most desktop and mobile platforms.

Changed your mind? There’s an ‘unsubscribe’ button at the bottom of every newsletter we send out.

It will come at the same time as the Government’s planned cut of £20 to Universal Credit, which is set to affect six million households and the end of the furlough scheme.

Citizens Advice examined how the changes will combine to hit families, with rising numbers of people already behind on their energy bills and millions more reliant on Universal Credit.

Its analysis found:

  • Almost 2 million households are estimated to be behind on their energy bills, even before the new price rise and planned Universal Credit cut – an increase of around 410,000 from before the coronavirus pandemic.
  • More than one in four (28%) households in which someone receives Universal Credit are behind on their energy bill – seven times the rate among households who do not receive the payment (4%).
  • Nearly a quarter of people (22%), or nearly 6 million households, already say they are worried about paying their energy bills.
  • Three-quarters of Citizens Advice benefit and debt clients say they would be unable to cover their living costs with the combined effect of the £20 Universal Credit cut and the rise in energy bills.

Citizens Advice executive director James Plunkett said: “This price hike could lead to a perfect storm for families this autumn, hitting people at the same time as a Universal Credit cut and the end of furlough.

“It’s particularly worrying given families on Universal Credit are far more likely to already be in energy debt.

“With bills rising and incomes falling, many families will find it hard to escape. For many, debt will be the inevitable consequence.

“It all adds to the growing case to rethink the Government’s planned cut to Universal Credit and keep this lifeline which has been vital to keeping so many afloat.”

Find the latest news for your area:

What is the default tariff cap?

The default tariff cap is a safety net for households on a ‘default’ (or ‘standard variable’) energy tariff. It sets a limit on the amount that suppliers can charge consumers for a unit of energy.

The rate is adjusted twice a year by the energy regulator Ofgem.

It does not apply to fixed-term energy tariffs and standard variable green energy tariffs Ofgem has exempted from the cap.

What to do if you are struggling to pay energy bills

Ofgem has given advice to households that have fallen behind on bills or are in vulnerable circumstances.

  • Contact your supplier to access the support available. You may be eligible for extra help such as affordable debt repayment plans or payment breaks, emergency credit for prepayment meters and a £140 bill rebate under the Warm Home Discount. Last week suppliers also signed up to an industry commitment to reach out to those who most need help this winter.
  • Ask your supplier to put you on a better deal, or shop around and switch to save money.

Want the latest Cambs news direct to your inbox? Sign up here.

Cambridgeshire Live – Home