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The poorest UK households may end up having to spend a fifth of their income after housing costs on electricity, Bloomberg has reported, citing data from the Joseph Rowntree Foundation, a charity focused on poverty.
According to the data, people living alone could be required to spend more than half of their income on energy after an energy price cap was raised, which is expected to happen in April.
Ofgem, the UK’s energy market regulator, updates the energy price cap twice a year based on the wider price context. Expectations are for a substantial increase at the April update, by up to 56 percent. Another increase may well follow in October unless the government intervenes to cushion the blow, with the total increase in electricity prices for households without fixed-price utility contracts likely to rise by 75 percent.
Earlier this month, 20 Conservative Members of Parliament and peers called on the UK’s Prime Minister Boris Johnson in a letter to Sunday Telegraph to have the value added tax (VAT) and the environmental levies on energy bills removed.
Yet the UK’s PM dismissed the calls, saying removing VAT on utility bills could result in assisting “a lot of people who perhaps don’t need the support”. That’s despite pledges that once the UK was out of the European Union, the VAT on utility bills would be scrapped.
“Rising energy prices will affect us all, but our analysis shows they have the potential to devastate the budgets of families on the lowest incomes,” Katie Schmuecker, deputy director of policy and partnerships at the Joseph Rowntree Foundation, told Bloomberg. “The alarm is sounding loud and clear. The case for targeted support to help people on the lowest incomes could not be clearer.”
According to research from the foundation, 3.8 million British households are behind on their electricity bill payments, with the total outstanding amount at some $7.1 billion.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com