Feature: Concerns over widening inequalities as Ofgem sets new price cap

Fuel stress is set to affect five million families as they’re hit with an extra £693 a year on their energy bills. But is the government doing enough to help those at the heart of the cost of living crisis?

The Resolution Foundation estimates that the price cap rise will treble the number of families in England living in ‘fuel stress’, i.e. spending at least 10% of their family budget on energy bills. That’s over a quarter of households in England.

Along with soaring fuel costs, UK households are also faced with rising food bills and a looming increase in National Insurance, with many still recovering from the £20 cut to Universal Credit. 

The government has attempted to counteract the spiralling cost of living by introducing the Energy Rebate Plan (ERP), which includes a £200 rebate on energy bills (which works more like a loan than a grant) and a £150 Council Tax rebate for those living in A-D band properties across England.

However, this universal approach risks failing to provide targeted support to those who need it most, experts have warned.

Specific groups, such as pensioners, those in local authority housing, or those living in poorly insulated homes will be hit the hardest by the price cap hike. 

Further issues, such as the limited range of Council Tax bands eligible, will mean more people will struggle to access the support they need.

Around one-in-eight of the poorest tenth of families don’t live in Band A-D properties, and therefore won’t receive the rebate automatically, while those that don’t pay Council Tax (such as students, some tenants, and some benefit claimants) won’t get the full package of support either.

Moreover, as the financial relief is expected to be funded by higher bills over the five years from 2023, experts have argued that this is a short-term solution that will only temporarily offset the problem, and risks further spiralling costs. 

Adam Corlett, Principal Economist at the Resolution Foundation, said: ‘The Chancellor’s approach of funding a reduction in energy bills this year through higher bills over the following five years is also a risky strategy, especially if the cost of gas doesn’t fall soon and sharply. High energy bills could be a feature of the 2020s – emphasising the need to wean Britain off fossil fuels.’

Many have argued that the only way to address this issue is to move away from fossil fuels. However, the UK government has, instead, decided to approve a new North Sea oil and gas field. The location will be 145 miles from Peterhead, Aberdeenshire, and is expected to produce 5.5m barrels of oil –  enough gas to meet UK demand for roughly a day and a half. 

And while Ofgem justified the price cap increase with rising global fuel prices, oil giant Shell announced £14.5b in profits for 2021 – including £4.7b in the last 3 months alone. Earlier this week, Exxon said that they had made £16.9b billion in profit in 2021.

Friends of the Earth Scotland’s Just Transition Campaigner Ryan Morrison said: ‘The UK’s energy system is fundamentally broken. Today is clear evidence that it doesn’t work for people or the planet. Oil company bosses are being allowed to profit from climate breakdown and the gas price crisis on the back of widespread misery for people around the world.’

Photo by Mykola Makhlai