Wales to suffer most under energy price rises as '1 in 4 in poverty'

Work and Economy Correspondent Carole Green speaks to Rhyl residents at the Men's Shed

Wales could suffer the effects of the 'cost of living crisis' the most, as 1 in 4 people currently live in poverty, a new report reveals.

Low-income families could spend on average 18% of their income after housing costs on energy bills after April, according to analysis from the Joseph Rowntree Foundation (JRF).

This rises to 54% for single adult households, and around a quarter for single parents and couples without children.

Dave Innes, Head of Economics at JRF, said: "Wales has a higher number of people in poverty than the rest of the country. Nearly a quarter of people in Wales are in poverty.

"There's lots of reasons for that, some of those are things that have affected people across the whole country. We've seen, for example, our social security system be weakened a lot in recent years so it provides much less protection for people. So the rate of adult unemployment benefit that you get if you're out of work is at its lowest level for 30 years now.

"But also in Wales we've seen more people in lower wage jobs that leave them much more exposed when shocks such as this cost of living crisis hit them."

In comparison, middle-income households are expected to spend on average 6% of their incomes on energy bills, the analysis shows.

The analysis is based on the assumption that the energy price cap will rise by just under 50% from April.

The Government said it would continue to “look closely” at what further measures may be needed to help with high energy costs.

• Joseph Rowntree Foundation's Head of Economics explains how the people of Wales are affected

"Energy bills are at an all-time high, food costs are mounting and inflation has climbed to its highest rate in a decade," Wales’ economy minister Vaughan Gething said at a press conference.

"However, instead of helping the situation, it's been made worse by the UK government.

"The cruel decision to cut the £20 uplift to universal credit and the national insurance hike in April will make the cost of living crisis even worse."

The JRF released the figures alongside its annual UK Poverty report, which it said shows a “worrying increase” in the number of children living in the deepest poverty.

"These energy prices are really doubly difficult for families with a low income to start with," Mr Innes said, "and that's because energy takes up a bigger share of their income to start with."

"So when energy prices rise, it eats more and more into their budget and leaves less for other things. Those choices are just so much more difficult for those families."

What defines poverty?

According to Mr Innes, poverty means "you're in a situation where you're struggling to afford the essential things that you need in life".He added: "It also means to participate in society - what that means on daily basis is that you're struggling to manage your budget and when something like this 'cost of living crisis' comes along, you have very little to fall back on and that can lead you to debt or to a very difficult situation."

A fifth of children were living in households in the UK with a low income for at least three of the four years between 2016-2019, rising to around one in three children in single parent families.

The child poverty rate for children in families with three or more children was almost twice as high as the rate for children in one- or two-child families (47% versus 24%).

The JRF said there seems “little prospect” of reversing the recent rising child poverty trends, and also rising pensioner poverty.

Overall, 22% of people in the UK were living in poverty in 2019-20 – 14.5 million people.

Of these, 8.1 million were working-age adults, 4.3 million were children and 2.1 million were pensioners.

More than a million households (containing 2.4 million people) experienced destitution in 2019 – up 35% in two years. This is the most severe form of poverty.

People from Bangladeshi, Pakistani and black families are likely to continue to have higher poverty rates and worse outcomes across many areas, the report said.

Other groups with higher poverty rates include lone parents, disabled people, and unpaid carers.

The JRF said poorer households will have less of a buffer against rising costs or unexpected expenses as they are less likely to have savings.

It is calling for the Government to help the poorest households with targeted emergency payments, and to strengthen the “woefully inadequate” social security system which is causing “avoidable hardship”.

Katie Schmuecker, JRF deputy director of policy and partnerships, said: “No childhood should be defined by a daily struggle to afford the basics. But the reality is that many children growing up today won’t have known anything else.

“The fact that more children are in poverty and sinking deeper into poverty should shame us all.

“Rising energy prices will affect us all, but our analysis shows they have the potential to devastate the budgets of families on the lowest incomes.

“The Government cannot stand by and allow the rising cost of living to knock people off their feet.”

Action for Children said poorer families with children will be hardest hit by cost-of-living rises as they face bigger bills, have smaller savings and are less able to take on extra work.

Director of policy and campaigns Imran Hussain said: “It’s been clear from our services for many years that more and more families have been falling into deep poverty.

“The Government has been in denial about high and rising child poverty and simply doesn’t have a strategy to tackle it.”

A UK Government spokesman said: “We recognise the pressures people are facing on their household bills, which is why we have taken decisive steps to support them.

“The energy price cap has been protecting around 15 million households from high global gas prices. We are also supporting vulnerable and low-income households with the cost of fuel bills through schemes such as the Warm Home Discount and our £500 million Household Support Fund.

“Working families on Universal Credit are already seeing more money in their pockets, with an average of £1,000 more a year, and we’re increasing the living wage again in April.

“We will continue to look closely at the pressures facing people and what further measures might be needed on abating high energy costs.”