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‘Catastrophic’ energy price rises will hit ethnic minorities hardest

Exclusive: Energy bills are throwing low-income families into debt shows new data as the price cap rises to £3,549

Ruby Lott-Lavigna
26 August 2022, 10.39am
PA Images / Alamy Stock Photo
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Soaring energy bills will disproportionately hit people from Black, Asian and minority ethnic backgrounds a leading anti-poverty charity has warned.

Soaring energy bills will disproportionately hit people from Black, Asian and minority ethnic backgrounds – as well as other vulnerable groups, a leading anti-poverty charity has warned.

As the UK’s energy regulator announces that its annual price cap will rise to £3,549 from 1 October, a report from the Joseph Rowntree Foundation (JRF) has found that among low-income households, 32% of Black, Asian and mixed households are already likely to be in energy arrears. Among low-income white households, the figure is 14%.

JRF measured 4,000 families between May and June, finding that 46% of low-income households overall were likely to be in arrears in at least one household bill. Of those households in arrears, 88% had gone without at least one essential – such as food, heating or adequate clothing – in the previous 30 days.

The research suggests that younger households, families with three or more children, people suffering loneliness and households subject to benefit sanctions are also at greater risk of falling into arrears.

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Of all low-income families surveyed, 27% had not been able to adequately heat their home since the start of 2022 – which would translate into 3.2 million households nationally.

As winter approaches, charities fear a “catastrophic” debt crisis, where people will face choosing between paying energy bills and buying other essentials.

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“Without further targeted support from the government, the impact of October’s energy price cap rise is going to be catastrophic for low-income households,” Sue Anderson, head of media at the debt counselling organisation StepChange, told openDemocracy.

“Millions of people simply do not have sufficient income to cover household bills of this magnitude, and that’s without taking the current inflated prices of food and fuel into consideration.

“Consumers should not be asked to pay anything they can’t afford, with token payments used in cases where they can’t afford to repay,” Anderson said.

“Suppliers must prioritise consumers’ ongoing usage and keep people on supply over debt repayments during this period.”

The price cap, which is set by energy regulator Ofgem, sets the maximum rates that suppliers can charge for energy. The new figure of £3,549 – a rise of 80% from the current cap – is based on an estimate of a household’s “typical consumption” of electricity and gas. Some households, therefore, might end up paying even more if their energy use is higher.

It is deeply, deeply concerning that we're just going to see both arrears, debts, and ‘going without’ all rising

Rachelle Earwaker, an economist at JRF, told openDemocracy that the UK is likely to see a growing energy debt crisis.

“When you do have your costs rising at such a quick rate, you either fall behind on paying your bills, you go into debt to pay your bills, or you go without,” she said.

“The really worrying thing was in May, we saw all of those things were on the rise. It is deeply, deeply concerning that we're just going to see both arrears, debts, and ‘going without’ all rising, probably all at once.”

Debt advisors are calling on Ofgem to protect people who fall into arrears.

“Ofgem also needs to take action to ensure people who cannot afford their energy bills are treated fairly and not subject to harsh collection practices,” Jane Tully, director of external affairs and partnerships at the Money Advice Trust.

openDemocracy has contacted Ofgem for comment.

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