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Energy bills will cost two months' wages next year if ministers don’t act, warns TUC
New analysis published by the TUC today (Friday) shows that energy bills are now expected to cost more than two months of average take-home pay in 2023 – unless the government intervenes.
Average take-home pay (after tax) will be £2,054 per month in 2023 based on Bank of England forecasts, so at £4,108, two months’ pay will be less than the £4,200 predicted cost of energy bills per household in 2023.
The union body is publishing proposals today that it says should form the basis of this emergency support, along with a longer-term plan to prevent similar future crises.
An emergency of pandemic-scale
The TUC is calling on the government to bring trade union and business leaders into the Treasury to devise an urgent response to the crisis together – just as happened during the pandemic.
This approach led to the highly successful furlough scheme, which protected jobs, families and businesses.
In the early days of the pandemic, the TUC had published proposals for a furlough scheme that became a central part of emergency pandemic support.
Urgent help for families
Today the union body is publishing proposals for urgent cost of living support:
- Stop the October energy price cap increase: Without intervention, the typical family bill will rise by £1,500 from October. The government should step in to cover the cost of the increase in full – at an estimated cost of £38.5bn. The TUC says the revenue raised from the windfall tax can be significantly increased to help cover this cost. But this must not be a no-strings handout to energy retailers. Instead, government should reform the energy system, taking the energy retailers into public ownership and requiring new pricing structures that make basic energy needs affordable. The cost of nationalising the energy retailers, at £2.85bn, is significantly less than the costs of mitigating price rises.
- Uprate the minimum wage, universal credit and state pension in October: Annual increases to the National Minimum Wage and social security usually take place in April. The TUC proposes that the April 2023 increases should be brought forward to October, based as usual on the recommendations of the Low Pay Commission and on September’s inflation figure – expected to be 10 per cent
- Fund pay rises in the public sector that keep up with inflation: The Treasury should announce it will fund government departments and local authorities to provide pay rises across the public sector that keep up with inflation. This will protect millions of households from surging prices. And it will help prevent a recession by maintaining consumer spending and supporting businesses confidence.
Preventing a future crisis
The TUC says the current crisis has hit families at a time when they were already more than a decade into the longest and deepest squeeze on wages for 200 years – a political choice of the last 12 years of Tory governments.
The union body adds that the wages crisis has been compounded by the shock to energy prices. Instead of investing in energy efficiency and renewable power sources, a privatised energy market creamed off excess profits while leaving us all vulnerable to unstable global markets.
The TUC says that the government should set out a programme to make UK living standards more resilient and the UK economy more resistant to a future crisis. This should include:
- A plan to get pay rising for all workers – including stronger pay bargaining rights so that working people and their unions can make fair pay agreements across whole industries.
- Rapid rollout of home energy efficiency and taking the energy retail companies into public ownership.
- Social security that prevents poverty - universal credit and benefits should be raised to 80 percent of the national living wage, along with a significant boost to support for families with children.
TUC General Secretary Frances O’Grady said:
“No one should struggle to get by in one of the richest countries in the world.
“But up and down the country, millions of families are being pushed to the brink by eyewatering energy bills. With prices set to skyrocket even further, it’s time to say enough is enough.
“Boris Johnson, Liz Truss and Rishi Sunak need to wake up to the size of this crisis. This requires a pandemic-scale intervention.
“Ministers must cancel the catastrophic rise to energy bills this autumn. And to make sure energy remains affordable to everyone, they should bring the energy retail companies into public ownership.
“Ministers should also act to boost pay – as well as Universal Credit, pensions and the minimum wage by bringing forward planned increases to October.
“And they should fund it through a bigger windfall tax on the obscene profits of energy giants.”
On the need for a long-term plan, Frances added:
“Without a long-term plan to prevent a similar living standards emergency, we will keep lurching from crisis to crisis.
“After the longest and harshest wage squeeze in modern history, that means getting wages rising in every corner of the country by strengthening collective bargaining.
“It means boosting Universal Credit so that working people have an adequate safety net.
“And it means fixing our broken energy market by lifting the burden of failed privatisation off families to get bills down for good.”
- Full TUC briefing: The full TUC proposals for emergency support and long-term resilience can be found here: https://www.tuc.org.uk/sites/default/files/2022-08/RespondingToCostOfLivingCrisis.pdf
- Price cap and wages analysis: The statement in this release that energy bills will cost two months’ take home pay in 2023 is based on:
- Cornwall Insight’s forecast that the price cap will rise to £4,266 in January 2023 as wholesale prices surge again and Ofgem revises cap methodology: www.cornwall-insight.com/price-cap-forecasts-for-january-rise-to-over-4200-as-wholesale-prices-surge-again-and-ofgem-revises-cap-methodology/
- TUC analysis which finds that average take-home regular pay after Income Tax and National Insurance deductions will be £2054 a month in 2023 Q1. This is based on ONS Average Weekly Earnings and BoE wage growth forecasts.
- The TUC estimates that the full cost of covering the rise to household bills in the autumn will be £38.5bn. The TUC has showed how increases in the windfall tax could help fund this package, and notes that government must go ahead with the planned increase in corporation tax.
- TUC report: A fairer energy system for families and the climate, July 2022 https://www.tuc.org.uk/research-analysis/reports/fairer-energy-system-families-and-climate
- About the TUC: The Trades Union Congress (TUC) exists to make the working world a better place for everyone. We bring together the 5.5 million working people who make up our 48 member unions. We support unions to grow and thrive, and we stand up for everyone who works for a living.
TUC press office
020 7467 1248
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