'Terrifying' £3000 drop in UK households' spending power: This is how it could affect you

As reported by the BBC, a new energy price cap has been imposed by the UK government due to the inflation on energy costs. The cap has been raised to £3,549 a year and will come into effect on 1 October. The price cap indicates the maximum amount of money households in the UK can be charged by energy companies for their power consumption.

As per a report by The Guardian, some ‘terrifying’ and ‘shocking’ outcomes of this price hike has been stated by the think-tank Resolution Foundation. The current inflation could see household incomes reducing by 10% and could push 3 million people into poverty.

Big drop in UK households’ income

According to the data by Resolution Foundation, rise in energy prices could see single low-income adults having to spend 116% of their income on energy bills in 2023-24 while low-income families could be spending about 50% of their income on energy bills.

The Guardian quotes Lalitha Try, a Resolution Foundation researcher, who spoke of the imperative necessity of government aid and said,

No responsible government could accept such an outlook, so radical policy action is required to address it. We are going to need an energy support package worth tens of billions of pounds, coupled with increasing benefits next year by October’s inflation rate.

How would it affect you?

As per BBC, already 1 in 8 UK households are already struggling to pay their bills. This will rise to 40% of all households under the new price regime. With people having to choose between heating or purchasing other essentials, there could also be serious and long-term health impact on people.

The government will be providing all households a one-time £400 discount on their fuel bill starting October. Low-income households who receive benefits or tax credit will be paid £650.

The energy discount is but a tiny dip in the bucket compared to what British households have to contend with next year. Lalitha Try states,

Typical households are on course to see their real incomes fall by £3,000 over the next two years – the biggest squeeze in at least a century – while 3 million extra people could fall into absolute poverty.

With food and energy bill piling up, households will be left with not much to spare. This disposable income is essential to maintain basic living standards, health and wellness.

This is projected to have an impact especially on children’s health and development, with child poverty expected to rise to 31% in 2023-24 from 23% in 2021-22, which is an increase of 1 million children.

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