Rising energy costs triggered by the conflict in Iran are set to leave typical British households nearly £500 worse off this year, according to new analysis from the Resolution Foundation.
The thinktank calculates that the median working-age household, previously on track for modest income growth of 0.9%, could now see income fall by 0.6%, a swing worth around £480. Lower-income households will still see some benefit from the abolition of the two-child limit and above-inflation increases in Universal Credit, but the foundation estimates average income growth for the poorest fifth has been cut from 2.8% to just 1.2% as a result of the conflict.
The Foundation is urging ministers to accelerate work on a social tariff, a targeted support mechanism for lower-income energy users estimated and has the backing of former Conservative chancellor Jeremy Hunt, who estimated it would cost between £5bn and £10bn, but would sit within the Government’s fiscal rules. A Hunt-linked consultancy has previously estimated the Windfall Tax on energy firms could be generating excess revenue for the Treasury.
Meanwhile, Energy UK chief executive Dhara Vyas confirmed to media that a bill rise from 1 July is now inevitable, describing the market as “wildly unpredictable” given daily swings in global gas prices. She backed targeted support and called for accelerated investment in clean power as the only sustainable long-term answer to energy price volatility.
A spokesperson for the End Fuel Poverty Coalition commented:
“There is broad agreement that targeted support for struggling households is needed while clean power and improved energy efficiency is the long-term solution.
“New polling makes clear that the public understands the urgency of the here and now. Over four in ten people say they simply cannot afford the expected rise in bills this July, with many more worried about the impact of oil and gas prices on energy bills.
“Ministers should set out what support will be available and use the receipts from the Energy Profits Levy to pay for it. This Windfall Tax retains the support of voters and given that two thirds of the public believe energy firms are already profiteering from the Iran conflict, it is no wonder that voters back the Levy by a two-to-one majority.
“The Government should be listening to that public consensus, not to the powerful oil and gas lobbyists calling for the Windfall Tax to be ended just as energy profits are set to spike again.”