Not all poor people get benefits, so where is their flat rate for energy bills? | Torsten Bell

JThe fall statement wasn’t exactly full of joy, with its forecast of a 500,000 rise in unemployment, but it did include information on energy bill support after April – Jeremy Hunt announced a less generous version of Liz Truss’ price guarantee, capping typical bills at £3,000 from £2,500 now.

Low-income households cannot afford it, so Hunt also announced a £900 lump sum for households on benefits such as Universal Credit. Can we count on such payments? They were only used in July and November 2022 (Hunt repeats a Rishi Sunak innovation), which means we have little evidence. So a University of Bath briefing on the experience, drawing on interviews with applicants, adds value.

The good news: it worked. Giving it automatically to benefit recipients meant that payments arrived in bank accounts without delay. Unsurprisingly, the money was used to spend the month, with a quarter saving it for energy bills.

The payments have made a difference, but relying on them has major downsides: it drives a wedge between those on Universal Credit and someone who earns £1 too much to qualify, who gets nothing. Remember that four of the 10 poorest households do not receive any allowances.

This cliff edge also creates real disincentives to work more. The research included a provider who involuntarily lost his energy support because he had worked more hours in the previous month.

Introducing policy in times of crisis is never easy and we must recognize that politicians have limited options. But they must be transparent about the brutal justice involved. A single person earning £20,000, not on benefits, faces an average bill increase of £1,900 next year compared to 2021-22 – an 11% reduction in disposable income. A difficult year is coming.