'Rough justice': The people set to lose out from Rishi Sunak’s cost of living package

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·Political Correspondent, Yahoo News UK
·4-min read
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British Prime Minister Boris Johnson reacts as British Chancellor of the Exchequer Rishi Sunak delivers a statement at the House of Commons in London, Britain May 26, 2022. UK Parliament/Jessica Taylor/Handout via REUTERS ATTENTION EDITORS - THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. MANDATORY CREDIT. IMAGE MUST NOT BE ALTERED.
Large families on benefits are set to benefit the least from Rishi Sunak's emergency cost of living package. (Reuters)

Large families with children are set to lose out in Rishi Sunak's new package of measures to help those struggling with soaring energy bills.

The chancellor announced £15bn worth of financial support last week following months of criticism for not going far enough to support households suffering the most from the rising cost of living.

The measures came after Ofgem boss Jonathan Brearley warned MPs that the energy bill price cap is set to hit £2,800 in October - meaning it will have more than doubled in just 12 months.

Energy bills already soared on 1 April after the energy price cap increased by 54%, adding £693 to the average household bill.

Energy bills are set to rise again this winter (Yahoo News UK/Flourish/Ofgem)
Energy bills are set to rise again this winter (Yahoo News UK/Flourish/Ofgem)

Elsewhere, soaring inflation continues to drive up the costs of essentials like food and fuel - with the Office for National Statistics (ONS) this month reporting the CPI hit 9% in the 12 months to April 2022.

Read more: Sainsbury’s commits £500m to price cuts amid cost of living crisis

Watch: Sunak defends energy bill rebate going to every household

Among the measures in Sunak's mini-budget to tackle cost of living squeeze are:

  • £400 to all households to help with energy bills

  • £650 for over 8 million households on means-tested benefits

  • £300 top up of the Winter Fuel Payment going to all pensioner households

  • £150 to around 6 million people who receive a non-means tested disability benefit

  • £500 million extra for the Household Support Fund from October 2022

Annual effects of all policy changes implemented in 2022 by equivalised after housing cost household income vingtile 2022-23. (Resolution Foundation)
Annual effects of all policy changes implemented in 2022 by equivalised after housing cost household income vingtile 2022-23. (Resolution Foundation)

Winners

The clear winners of Sunak's latest spending commitments are pensioners, who will all receive £400 off their energy bills plus a £300 boost to the warm homes discount.

Some pensioners may also receive other support, depending on eligibility - such as an extra £650 if claiming benefits like pension credit, and an extra £150 if receiving non-means tested benefits like Personal Independence Payments (PIP).

Poorer households are also benefitting from the new measures. Sunak's package means the government is offsetting on average 82% of the energy price rise - which rises to 93% for the poorest households.

The new measures target support at those who will suffer the most from higher energy prices
Analysis from the Resolution Foundation reveals the new measures target support at those who will suffer the most from higher energy prices. (Resolution Foundation)

Described by the Resolution Foundation as "highly progressive", Sunak's recent financial announcements on spending and tax mean:

  • households in the bottom quintile gain £1,195

  • household in the middle quintile gain £799

  • households in the top quintile lose £456

“The chancellor has delivered a bold and well targeted support package which, when combined with his previous support, will almost entirely offset the rise in energy bills for low-income families, as well as the majority of bill rises for everyone else," said Mike Brewer, chief economist at the Resolution Foundation, on Friday.

Read more: Sainsbury’s commits £500m to price cuts amid cost of living crisis

He added: “The biggest winners from yesterday’s package are wealthy pensioners who may not need extra support, but still stand to gain £850 - while large families on low incomes may feel rough justice as their higher energy usage isn’t reflected in flat-rate lump sum payments."

Losers

The biggest losers are working-age households on benefits with children, who would have been better off if the government had uprated benefits inline with inflation in October - which is currently at 9%.

While they will receive a £650 one-off payment, this does not take into account factors like energy usage.

RF
Households on benefits with two or more children would be better off if the government had uprating benefits. (Resolution Foundation)

Households with three or more children on average spend £500 more on energy each year than those without - yet they will receive the same one-off payment.

And households which do not qualify for any benefits, but may still be struggling with energy bills, will receive just £400.

Read more: Cost of pasta jumps 50% as inflation hits poorest households

"On average the poorest households will now be approximately compensated for the rising cost of living this year," said Paul Johnson, director of the Institute for Fiscal Studies (IFS) .

"The flat rate nature of payments to benefit recipients does mean, though, that the package is less generous to poor families with children than to those without."

Watch: Sunak unveils £21bn cost of living package and U-turns on windfall tax

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