Observer editorial| Observer editorial

This year will go down as a year of hardship for so many people: 2022 brought spiking energy bills and record levels of inflation that have eroded people’s incomes. But as former prime minister Gordon Brown warns in today’s ObserverNext year will be even more difficult for low-income households, including those with less-affluent pensioners, parents who are low-paid and their children, and those with disabilities.

This is the result of Britain’s recession, forecast by the Bank of England to last two years, and energy bills that are forecast to continue to rise as government support with energy costs falls. From next April, the government’s energy price guarantee will become less generous, capping the average bill at £3,000 rather than £2,500 a year and the universal £400 worth of support that was paid to all households in winter 2022 will be withdrawn. To offset this reduction, the government has increased the level of targeted support at those in receipt of means-tested benefits: all pensioners and those receiving disability benefits will get £300 and £150, as they did last year, and people on means-tested benefits will get a one-off payment of £900, up from £650 last year. This means that there is less support, but more attention is paid to low-income households.

Brown points out in a new analysis that this will leave vulnerable families with fuel poverty. Fuel poverty is defined as households spending 10% or less of their income on their energy bills each year. Based on this measure, seven in ten pensioners will be suffering from fuel poverty by April 2019. This number rises to 96% for families with two or more kids and 85% for couples with three or more. A little over a third of families will be required to heat their homes with energy, which is an extremely unsustainable scenario considering the rising costs of housing and food.

Despite government efforts to target the lower income households with the support, it is still a poor way to provide support and it leaves many families without the support they need. Four in 10 of the poorest fifth of households are not in receipt of means-tested benefits, so do not even qualify for the £900 top-up. Using means-tested benefits as a passport for this payment means that if a family goes over the benefits threshold by just £1, they will lose the £900 in its entirety. Last, energy use is higher than average in poorer households that are larger, or where people live in poorly insulated, bad-quality housing – more likely to be the case for people living in poverty in the first place.

The outcome is that, even taking into account the means-tested support package, analysis by the Resolution Foundation shows that half of households in the poorest fifth of the income distribution will still be facing energy bills of more than £1,000 more than they did in 2022. This extra £1,000 is not money they can afford; so many of these individuals are already living in impossible circumstances, facing choices between keeping their homes warm or putting food on the table for their children, forced to rely on food banks because they can’t afford basic essentials. The highest prices are faced by the poorest households. They also have to rely upon prepaid energy meters. According to the Resolution Foundation, the effective inflation rate for the 10 most poor households is 12.5%. This compares with 9.6% for those in the top 10. This gap has been the largest since 2006.

The prime minister and chancellor would no doubt argue it is out of their hands; they would claim to have done as much as they can given the grim economic circumstances the country faces and the crisis in energy prices caused by Russia’s war in Ukraine. Three reasons make this unlikely. First, successive Conservative chancellors cut tax credits, benefits and the financial safety net available to low-paid parents and people with disabilities over the past decade, while giving away costly tax cuts that have disproportionately helped better-off families. These actions have made low-income households less financially secure over the long-term. Second, as Brown argues, there are obvious sources of extra revenue available to the chancellor, Jeremy Hunt, including taxing non-doms and increased taxes on bankers’ bonuses, whose receipts could be channelled as extra support towards the poorest households next year. Third, Britain’s dreadful growth prospects are not just a product of global headwinds, but of 12 years of Conservative economic policy: a failure to invest in productivity-boosting measures such as skills and infrastructure and the ideological pursuit of the hardest form of Brexit that has left Britain – and everyone who lives in it – considerably poorer for the long term.

The situation facing Britain’s least affluent families next year is an economic emergency. If the government does not act quickly to increase support levels starting next April, more children, seniors, and people with disabilities could be living in fuel poverty and freezing homes with serious consequences for their long-term health. The government must heed Gordon Brown’s warning, and act.