TUC - Energy bills set to rise at least 14 times faster than wages in 2022

15 Mar 2022 11:32 AM

Record energy prices could “wipe out” entire value of pay rises this year

Energy bills are set to rise at least 14 times faster than wages this year, according to new TUC analysis published recently (Saturday).  

The analysis shows that while gas and electricity bills are set to increase by 54 per cent when the price cap set by Ofgem is increased in April, by contrast average weekly wages are set to rise by just 3.75 per cent per cent in 2022. 

The TUC estimates that record-high energy prices could wipe out the entire value of pay rises this year. 

Average wages are forecast to increase by around £1,000 a year (in nominal terms) in 2022. 

But the rise in the energy price cap in April of £693 will wipe out 70 per cent of these gains. 

And the anticipated further rise in October – when the energy price cap is expected to have risen by more than £1,500 for the year - could wipe out any gains altogether.  

Low-paid hit hardest 

The TUC says those on low incomes will be hit hardest by sky-rocketing bills. 

Low-paid workers on Universal Credit will see their benefits uprated by just 3.1 per cent (£121 over the year) from April 2022. 

With average energy bills forecast to increase by at least £693 and potentially much higher this will leave many with a huge financial deficit. 

The TUC says even uprating benefits in line with the expected inflation figure of 8.1 per cent would give families just £6.07 a week, or £316 a year extra – a figure overwhelmed by the rise in energy costs. 

“Left badly exposed”  

The TUC says years of weak wage growth and benefit cuts have left working families “badly exposed” to the cost-of-living crisis.  

Even before the new energy price cap was announced, pay growth was failing to keep up with utility bills. 

The TUC estimates that since 2010 energy bills have risen at twice the speed of average wages. 

“Toxic combination”  

The union body says a toxic combination of soaring bills and weak pay growth have pushed many households “to the brink.” 

UK workers are currently enduring the longest pay squeeze in more than 200 years with real wages still worth less than in 2008. 

After more than a decade of pay stagnation real wages are forecast to fall by £50 a month this year. 

The TUC says this hit to real wages could be even greater with inflation expected to remain higher for longer.  

Urgent action needed 

The TUC says with the conflict in Ukraine set to hike up energy costs further, the government must urgently come forward with new measures to support struggling families. 

The union body says the previous ‘energy loans’ announced by the Chancellor in February were “woefully inadequate”. 

The TUC is calling on ministers to: 

TUC General Secretary Frances O’Grady recently said:  

“Everyone who works for a living ought to earn enough to get by.  

“But years of wage stagnation, and cuts to social security, have left millions badly exposed to sky-high bills. 

“With households across Britain pushed to the brink, the government must do far more to help workers with crippling energy costs.  

“That means imposing a windfall tax on oil and gas profits and using the money raised to give hard-pressed families energy grants – not loans. 

“It means a real increase to universal credit to stop low-income workers from being pushed into poverty. That’s the fastest way to get support to families who need it.  

“And it means coming up with a long-term plan to get wages rising across the economy.”

Editors Note

  1. Ofgem has announced that the energy price cap will rise by £693 per year in April 2022, from £1277 to £1971 per year (difference due to rounding) – see https://www.ofgem.gov.uk/publications/price-cap-increase-ps693-april  
  2. The Bank of England’s inflation report, published in February, predicted that average weekly earnings would rise by 3.75 per cent in 2022. This analysis applies the Bank of England’s forecast of a 3.75 per cent increase in average weekly earnings to the latest figure for average weekly earnings of £542 a week – meaning that the average pay increase is expected to be £20.3 a week, or £1057 a year.  
  3. The Resolution Foundations’ latest living standards outlook, published on the 8th March 2022, says: “Even after the 54 per cent rise in the energy price cap scheduled for April 2022, war in Ukraine means the price cap is expected to rise again significantly in October (to around £2,900 according to Resolution Foundation calculations – around a 47 per cent rise on April’s cap – or potentially up to £3,000 according to other predictions.” See https://www.resolutionfoundation.org/publications/the-living-standards-outlook-2022/  
  4. Analysis of energy prices rising twice as fast as wages over the past decade is based on comparing the electricity and gas index within the CPI measure of inflation with average weekly earnings