People claiming benefits such as Universal Credit and Jobseeker's Allowance face a gaping hole in their finances later this year.
Some could see their entire income swallowed up by the rise in energy bills after Ofgem announced the price cap will rise to £3,549 a year. This comes into effect on October 1, with a further rise then expected in January.
The shocking impact of the autumn increase on low-income families could see people's finances "wiped out by stratospheric energy bills that make up almost 120% of their income after housing costs, leaving many destitute", according to the latest analysis from the Joseph Rowntree Foundation (JRF).
READ MORE: DWP urging people to apply for extra £3,300
The independent organisation also said the cost of living crisis is set to get even worse by 2023/2024.
Taking a look at how benefits such as Universal Credit, ESA and JSA will be hit this autumn, the new maximum monthly bill under the changes to the energy price cap will see many left with very little to live on, and some plunged into debt just from gas and electricity charges alone, Birmingham Live reports.
The figures below are for standard allowances of the three benefits. Those who get top-ups will fare better as the cost of living crisis deepens to disastrous levels later this year. But others will see themselves almost £52 out of pocket if their energy payments soar to the peak level of the Ofgem change.
Universal Credit
Universal Credit is paid monthly, on the same date, depending on when a claimant received their first amount. The amounts given below are standard allowances. Some people may receive top-ups if they have children, disabled children, childcare costs, disabilities, or care for a severely disabled person.
Single and under 25
Universal Credit standard allowance: £265.31 a month
Annual energy bill rise in October 2022: £3,549 a year or £295.75 a month
Remaining income: Shortfall of -£30.44 a month
Single and aged 25 or over
Universal Credit standard allowance: £334.91 a month
Energy bill rise in October 2022: £3,549 a year or £295.75 a month
Remaining income: £39.16 a month
Couple with both under 25
Universal Credit standard allowance: £416.45 a month
Energy bill rise in October 2022: £3,549 a year or £295.75 a month
Remaining income: £120.70 a month
Couple with one or both 25 or over
Universal Credit standard allowance: £525.72 a month
Energy bill rise in October 2022: £3,549 or £295.75 a month
Remaining income: £229.97 a month
Employment & Support Allowance (ESA)
Under 25 and in the work-related activity group
ESA personal allowance: £61.05 a week (=£244.20 a month)
Energy bill rise in October 2022: £3,549 or £295.75 a month
Remaining income: Shortfall of -£51.55 a month
25 or over and in the work-related activity group
ESA personal allowance: £77 a week (=£308 a month)
Energy bill rise in October 2022: £3,549 or £295.75 a month
Remaining income: £12.25 a month
Others on ESA who aren't able to work get a higher amount and should be entitled to additional top-ups such as Enhanced Disability Premium. They may also qualify for the Severe Disability Premium.
ESA is listed in weekly amounts but is actually paid out every two weeks. We've also shown it as a monthly sum to compare with Universal Credit.
Jobseeker's Allowance (JSA)
Under 25
JSA personal allowance: £61.05 a week (=£244.20 a month)
Energy bill rise in October 2022: £3,549 or £295.75 a month
Remaining income: Shortfall of -£51.55 a month
25 or over
JSA personal allowance: £77 a week (=£308 a month)
Energy bill rise in October 2022: £3,549 or £295.75 a month
Remaining income: £12.25 a month
JSA is listed in weekly amounts but is actually paid out every two weeks. We've also shown it as a monthly sum to compare with Universal Credit.
The JRF is warning energy may become a luxury only the wealthy can afford, as it reveals low-income families will endure "unthinkable bills that take a bigger bite out of their household budgets than those of the better off."
It says that things will get so bad that by 2023/2024 the poorest fifth of families, forecast to have an average income of £11,600 after taxes and paying for housing, will pay out on average almost half (46%) of their income on energy bills. However, middle-income families, with average incomes of £31,400, will spend less than half that share – a still historically large 19 per cent – paying the same bills.
Many households will be put in impossible situations. The energy bill for a low-income single adult household is forecast to exceed the entirety (up to 120%) of their income after housing costs., leaving them no money left over for food or other essentials. That means in order to pay energy bills alone, they would have to use their entire income and find even more money. They would almost certainly become destitute as a result.
Couples without children and lone parents on low incomes will hand over almost two-thirds of their income just to keep the lights on or cook dinner every day. For pensioners in the same financial situation, energy will make up around 40% of their disposable income.
Peter Matejic, Chief Analyst at the Joseph Rowntree Foundation, said: "The Government devised its support package based on a previous energy price forecast made obsolete by [Friday's] extraordinary announcement. With the price cap very likely to increase significantly and forecast to remain high well throughout next year, our analysis shows it is a sheer fantasy to think struggling families can pay these stratospheric energy bills without further Government intervention on a significant scale.
"It is impossible to think a care worker or a shop assistant will have to scramble to find hundreds more pounds to pay for their heating or that the entirety of someone’s income for a whole year will be less than their energy bill. But that's what these figures suggest will be the case unless significant further steps are taken quickly."
He added: "Ministers have a choice about who shoulders most of the burden – families, businesses or the public finances. Whoever occupies number 10 next will be remembered for who they protect - they must make sure energy doesn’t become a luxury only the wealthy can afford.
"The Government must immediately respond with a comprehensive emergency package to cover the period of these extreme price rises, just as they did so creatively and quickly with furlough during the early stages of the pandemic."
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