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JRF - Rising energy bills to ‘devastate’ poorest families, adding to harmful legacy for millions of children sinking deeper into poverty

New analysis from the Joseph Rowntree Foundation finds households on low incomes will be spending on average 18% of their income after housing costs on energy bills after April. For single adult households on low incomes this rises to a shocking 54%, an increase of 21 percentage points since 2019/20.

Lone parents and couples without children will spend around a quarter of their incomes on energy bills, an increase of almost 10 percentage points in the same period.

The analysis compares the household spend on gas and electricity bills of several different family types on low and middle incomes between 2019-20 and after the increase in April this year. [1]

While there is little difference in the overall increase in bills from April, with all households facing an immediate increase of between around 40% and 47%, the difference in the proportion of household incomes these increases will represent is stark. Middle-income households will be spending on average 6% of their incomes on energy bills, and no more than 8% for any family type considered.

The figures are released alongside JRF’s flagship state-of-the-nation report which reveals a worrying increase in the number of children growing up in very deep poverty. Around 1.8 million children are growing up in very deep poverty, meaning the household’s income is so low that it is completely inadequate to cover the basics. [2] This represents an increase of half a million children between 2011-12 and 2019-20.

The findings also highlight large numbers of children living on low incomes for prolonged periods of time in the years running up to the pandemic. Around 1 in 5 children have lived on a low income for at least three of the four years between 2016 and 2019. For children in lone parent families this rises to around one in three children. For many young children, this persistence of poverty means going without essentials is all they have ever known or can remember.

The longer a family spends living on an income that doesn’t cover their basic costs, and the lower that income is, the worse the consequences. People in this situation are likely to find it difficult to adequately heat their home, feed their family or provide the most basic items like clothing and furniture. Growing up in poverty impacts all areas of a child’s life, including their health and development, attainment at school and employment prospects later in life. [3]

The report paints a stark picture of the state of the nation going into the coronavirus pandemic, with rising child and pensioner poverty, and very high poverty rates for larger families and single-parent families, as well as Bangladeshi, Pakistani and Black families. The economic impacts during the pandemic were very uneven, with people on the lowest incomes most likely to find their earnings reduced if they were working and to get into debt.

JRF is warning that without additional support, people already in poverty are likely to find a sharp increase in energy bills very difficult to cope with. People living in deep and persistent poverty were already under constant pressure trying to afford food, bills and other essentials. With the impact of rising energy bills expected to be much harsher for families on low incomes, there is a clear case for targeted protections to prevent serious hardship once the energy price cap is lifted.

Following a cut to Universal Credit in the autumn, the level of support for people who are unable to work or looking for work remains profoundly inadequate. JRF is calling for an immediate emergency payment for people on the lowest incomes to help prevent hardship in the months ahead.

The report finds that people in poverty are also less likely to have savings that can act as a buffer when costs go up. Just over a third of people in poverty having liquid savings of less than £250 compared with one in six of the overall population. Recent JRF research found that around 3.8 million households are in an estimated £5.2bn of arrears with household bills, a number that has tripled since the pandemic hit. [4]

Katie Schmuecker, Deputy Director of Policy & Partnerships at JRF said:

“No childhood should be defined by a daily struggle to afford the basics. But the reality is that many children growing up today won’t have known anything else. The fact that more children are in poverty and sinking deeper into poverty should shame us all.

“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. The Government cannot stand by and allow the rising cost of living to knock people off their feet. The alarm is sounding loud and clear and the case for targeted support to help people on the lowest incomes could not be clearer.

“But this must go hand in hand with urgent action to strengthen our social security system, which was woefully inadequate even before living costs began to rise. Our basic rate of benefits is at its lowest real rate for 30 years and this is causing avoidable hardship. The Government must do the right thing and strengthen this vital public service.”

[1] The chart below shows the proportion of different households’ incomes that is spent on energy, in 2019/20 and after April 2022. The full analysis is available on request.

Energy bills as a proportion of After Housing Costs income

Rising energy bills to 'devastate' poorest families

Original article link: https://www.jrf.org.uk/press/rising-energy-bills-%E2%80%98devastate%E2%80%99-poorest-families-adding-harmful-legacy-millions-children

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