New Ofgem cap means poorest homes to spend up to 47% of budget on energy

Apply for credit cards

Some of Britain’s poorest families will see as much as 47% of their entire household budget swallowed up by energy costs this autumn, figures produced for the Guardian show.

The calculations were done by investment platform Interactive Investor on Friday morning, moments after the new energy price cap announcement, and are based on figures from Ofgem and Office for National Statistics (ONS) family spending data.

energy cap

Households in Great Britain face a leap in bills from October after the regulator raised the price cap, taking the average gas and electricity bill to £3,549 a year.

Alice Guy, a personal finance expert at the platform, said: “The figures are truly terrifying. The rising energy price cap will have a disproportionate and devastating effect on poorer families who will spend a huge proportion of their budget on energy this autumn … Meanwhile, affluent families are better insulated from the effects of the energy crisis. While still painful, they will spend a much smaller proportion of their household budget on fuel this autumn.”

Poorer households are more likely to be on prepayment meters and pay a premium

The new figures can be compared against ONS family spending data for 2021 when energy spending as a percentage of a household’s total budget was 8% for those in the bottom tenth of the population, or decile, 6% for those on middle incomes (the fifth income decile) and 3% for the richest households.

This data found that in 2021 the average amount spent weekly on energy by those three groups was £17, £24 and £32 respectively.

  Truss energy bill freeze will not come cheap and economic effects are unclear

View image in fullscreenFor people in the bottom income group living alone or with one other person in a small home, spending on energy bills will rise 23%. Illustration: Stephen Cheetham

Small house or flat with one or two people

The new calculations looking ahead to 1 October onwards show that for those in the bottom income group, the amount they typically spend on energy as a proportion of the total household budget will leap to 23%.

For a middle income family it will be 11%, and for those in the top tenth of the population in terms of income, it will be 5%.

View image in fullscreenFor people in the bottom income group living with one or two people in a medium-sized house, spending on energy bills will rise 33%. Illustration: Stephen Cheetham

Medium house with two or three people

For those in the bottom 10% by income, energy will typically swallow up 33% of their entire budget from the start of October, unless something changes between now and then.

For those in the middle income bracket, it will be an estimated 16% of their budget going on gas and electricity.

Credit burau

skip past newsletter promotion

Sign up to Business Today

Free daily newsletter

Get set for the working day – we’ll point you to all the business news and analysis you need every morning

Enter your email address Enter your email address Sign upPrivacy Notice: Newsletters may contain info about charities, online ads, and content funded by outside parties. For more information see our Privacy Policy. We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply.

  ‘UK travel is on sale’: plunging pound attracts US visitors

For the most financially comfortable households it will typically be 7%.

View image in fullscreenFor people in the bottom income group living with four or five people in a large property, almost half their budget will be used up paying for energy bills. Illustration: Stephen Cheetham

Larger house with four or five people

For those in the bottom income group, a bigger property and more people is likely to mean that more gas and electricity is used, meaning bigger bills.

The calculations indicate that almost half (47%) of their entire budget will be swallowed up by energy costs – which come on top of higher rent and mortgage costs for many, and soaring prices for food, transport and other necessities.

For a middle income household, the percentage will be about half that: 23%.

For those in the very top income bracket – who are most able to withstand bill shocks – it is estimated to be 10%.

However, it needs to be remembered that no two households’ energy usage is the same – there are many variables at play.

The energy efficiency – or inefficiency – of a property, as well as each household’s individual energy consumption, will play a big part in determining the ultimate size of people’s bills.

Leave a Reply