From the 14th of July, more than eight million households will receive the new cost-of-living payment. This is the latest support coming from the UK government to tackle the current crisis facing the nation.
Across the UK, a cash payment will be made available to help ease the cost of living pressures. The first of two costs of living instalments will be received by millions from 14 July 2022 totalling £650.
Meanwhile, the second part of the £1,200 support package will be available later this year, with the eligibility date yet to be announced.
In England, Wales, Scotland and Northern Ireland, this first £650 instalment for qualifying low income will have landed in bank accounts by the 14 July. This comes as part of a government package worth £37 billion to support families in the UK.
Initially, millions of households will be £326 better off with further support given to support groups who are most vulnerable to the rising costs facing UK homes. The increasing responsibility of the government has called for these measures to protect those who are paying the highest price for rising inflation.
What Is Causing The Rise In Cost Of Living?
Across the UK, the cost of living crisis is hitting homes hard. Record gas prices and European conflicts have led to unprecedented times. The combination of multiple factors has been the prime cause.
Some of these factors include:
- High demand for gas and oil due to the economy emerging from the pandemic.
- Uncertainty over supplies due to Russia’s invasion of Ukraine
- Higher costs for energy companies due to rising costs of energy.
- Shortages in staff across sectors such as transport and hospitality.
- Supply chain disruptions across the globe lead to shortages of some goods.
- Many foreign workers leaving the country due to Brexit resulting in more shortages of staff.
With rises in prices and energy bill surges, now may be an ideal time to consider finding a cheaper supplier. You can search here to find the cheapest energy deals on the market and see if you can get a better tariff.
What Are The Government Doing?
This year, a variety of methods have been implemented to support low-income households in the UK. £37 billion of support has been provided to mitigate the worst of the pressures facing the nation.
Some of the support so far has included a £400 discount on energy bills for all homes. The initial £200 voucher was doubled, as well as a repayment plan was scrapped.
So, from October, homes in the UK will see their energy bill of £400 cheaper due to the grant. Customers don’t have to do anything to receive this payment with it being automatically deducted by your energy supplier.
For properties in Council Tax bands A-D, an extra £150 has been made available, meaning that this year, some of the lowest-income households will receive at least £1,200 in support.
In addition, changes have been made to the Universal Credit taper rate as well as work allowances worth £1,000 a year on average for 1.7 million working claimants. A rise in the National Living Wage has also been implanted, increasing to £9.50 an hour.
A windfall tax has also been issued as energy giants such as Shell and BP profited from Russia’s invasion of Ukraine, the world emerging from the pandemic and the increase in demand. Therefore a one-off tax hit in the energy industry has been given.
Support for the Household Support Fund has been expanded to help families with energy and food bills and fuel duty was also cut by 5p per litre for 12 months in March 2022.
The £37 billion of support also includes a tax cut for around 30 million workers, all through an increase in National Insurance contribution thresholds. However, many have called for more measures to be provided to help families with the cost of living crisis.
What Is Fuel Poverty?
Households spending 10% or more of their disposable income on energy are described as living in fuel poverty.
More families are living in fuel poverty than ever seen before, meaning now is the time to track how much energy you are using. This free, easy-to-use electricity usage calculator allows you to see your energy usage, helping to save money and reduce energy bills.
This year, a rise in the price cap set by Ofgem meant that an extra £700 was added on top of the current average household energy bill. Now, the total average cost for homes is £1,971.
What About The Energy Price Cap Rise?
In October this year, Ofgem will announce the latest price cap update. However, this news will not be welcomed as forecasts predict a rise to around £2,800. One of the major factors in this increase is the ongoing war in Ukraine.
In the short-term, gas prices appear to be lowering, however, long-term prices are still extremely high. Therefore, it is likely that further price cap rises are more than likely.
This unwelcome news for millions in the United Kingdom doesn’t come as a surprise, with many predicting a bleak winter unless things were to change between Russia and Ukraine.
This once-in-a-generation cost of living crisis looks to continue with rising energy prices. With energy companies purchasing gas ahead of time, the long-term prices will still be extremely high, meaning our gas market is seeing a rare event.
Unfortunately, this is driving up all of our bills and it is expected that the price cap could go up to around a level of £2,800. Russia, one of the largest global gas exporters, has faced sanctions from across the globe, resulting in a crippling effect on both UK and the European economy.
As it stands, the current energy price cap is roughly £1,970. The new update will see the already significant increase jump to £2,800. Culminating events, such as Ukraine’s inability to export essential goods to the UK mean the situation is worsening.
Goods such as sunflower oil and grain are vital to the UK economy. However, plans are in place to protect households against the rise. Those paying their bills by direct debit will be particularly supported to ensure credit balances do not become excessive.
Just last year, more than 25 energy suppliers collapsed due to these unprecedented times. Now, to mitigate against this difficult financial period, energy suppliers may be given sufficient control over key assets.
What About the Latest Energy Bill Warning?
Money-Saving Expert Martin Lewis has stated that people need to do something about their energy tariffs as soon as possible. If households want to secure a fixed energy deal, they may need to act fast.
There are talks that energy suppliers may pull the cheapest existing customer fixed tariffs and replace them with costlier ones. Those on a fixed tariff pay the same amount each month for a set period.
More and more energy companies are now switching to renewable energy to help lower energy bills for UK customers. You can find out which providers use renewable products to see if you could save money by using a green energy supplier here.
With wholesale energy prices soaring over the last week, energy firms could replace their cheapest existing customer fixes with more expensive tariffs. Those considering fixing may look to switch now. The best place to switch is by finding the cheapest energy deals here.
However, it is advised that homes should only consider switching to a fixed tariff that is no more than 35% above its current price-capped tariff.
What Are The Cheapest Ways To Power Your Home?
Despite spiralling energy costs, it is recommended that the cheapest way to heat your home and have a shower is to use gas rather than electricity. On average, a five-minute shower costs 19p, compared to 5p using water heated by a gas boiler.
When it comes to cooking, an electric oven costs up to 37p for 20 minutes compared to 9p for the average gas oven. For heating food in a microwave, this costs around 2p for four minutes.
What Are The Average Prices For Using Household Appliances?
According to Dr Glew, head of energy efficiency and policy at Leeds Beckett University, even with recent bill surges, electricity is much more expensive than gas to heat water.
To reheat food, using a microwave is much cheaper than an oven and heating water in a kettle, and then transferring to a pan may be quicker, however, it would likely cost more.
Here are some of the average figures for the cost of using household appliances:
- Kettle: To boil 1 litre of water, it will cost
- Toaster: 1p.
- Oven on for 20 minutes: Gas 9p, electricity up to 37p.
- Microwave for 4 minutes: 2p.
- Cooker: 15 minutes on the electric hob to boil water in a pan – 14p without a lid, 7p with a lid.
- Heating room for an hour: depends on how big the room is and how cold. A gas boiler and radiators cost an average of 47p, while an electric portable heater can cost up to £1.50