Thousands of vulnerable people may lose £140 discount if their energy firm collapses

Millions of the most vulnerable households could lose a £140 discount on their energy bills if their supplier collapses, it has emerged.

Under the terms of the Warm Homes Discount, if you’re on selected benefits, a low income or are over the age of 62, you could get a £140 winter energy saving to help heat your home over the colder months.

The benefit is in place to safeguard the most vulnerable people – including the elderly who may find themselves forced to choose between food and heating when the temperatures drop.

However Business Secretary Kwasi Kwarteng today refused to rule out whether the saving will remain in place for those pushed onto another supplier because their energy company has stopped trading.

It comes after four suppliers went but last month, with Bulb the latest to be in rescue talks and warnings four more could follow in the next seven days.

The failed suppliers come in response to a record high in gas prices fuelled by a surge in demand post Covid.

UK energy companies are now in talks with the government over a bailout due to soaring prices, with emergency loans for some companies among options reportedly being discussed.

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© Getty Images Energy prices have risen 250% since January this year

Some have previously called for the energy price cap to be suspended, to allow firms to pass on more of the cost to taxpayers at a time when millions are already being hit by a £20 a week Universal Credit cut and rising inflation.

The energy price cap is in place to limit how much greedy energy firms can bill the customers on the most expensive variable tariffs.

It’s led to fresh calls for the government to review an imminent cut to Universal Credit to protect families at risk of severe poverty.

Think tank the Resolution Foundation said some 4.4million households on Universal Credit are poised to see their energy bills rise significantly in October – the same month they will typically lose over 5% of disposable income as the £20-a-week uplift to the benefits payment ends.

The energy price cap is set to rise by £139 a year (12%) to £1,277 for a typical gas and electricity customer a year from October 1.

But a larger increase of £153 (13%) a year will affect pre-payment meter customers, the Foundation said.

Families on Universal Credit are four times as likely as the wider population to be on pre-payment meters – and pre-payment meter customers are overwhelmingly on variable rather than fixed rate tariffs and so will be more swiftly affected by price rises – it added.

Dame Clare Moriarty, chief executive of Citizens Advice, said: “This is a hugely unsettling time for millions of energy customers. It’s particularly worrying for many on the lowest incomes who’ll be facing the double whammy of rising fuel bills and a benefits cut.

“With choppy waters ahead, the single best thing the Government can do is keep its lifeline of £20-a-week to Universal Credit.”

The uplift in Universal Credit payments is scheduled to end on October 6.

Downing Street has insisted the cut will go ahead.

A Number 10 spokesman said the “uplift to Universal Credit was always temporary”.

It had been designed to “help claimants through the economic shock and the toughest period of the pandemic”.

Jonny Marshall, senior economist at the Resolution Foundation, said: “Low income families are facing a cost of living crunch on several fronts this autumn with energy bills rising alongside wider price increases, while Universal Credit is also due to be cut by £20 a week.

“Around 15 million households are set to face higher prices next week when the energy price cap is raised.

“This will be particularly acute for low income families on Universal Credit, who are four times as likely as the rest of the population to be on pre-payment meters, and therefore face even bigger increases to their bills.

“The Government must ensure that the cost and volatility of rising energy bills doesn’t fall entirely on households, for example by making support schemes like the Warm Homes Discount more widely available to households, and maintaining the £20 a week uplift to Universal Credit.

Conservative former Cabinet minister Damian Green said “now is not the time” to cut the benefit: “We are clearly coming into a huge problem for the cost of living for people, so those who are receiving Universal Credit – many of them are in work and so therefore are working as hard as they can to keep their families out of poverty – they will be the ones who are going to be most hit by the upcoming problems with inflation and energy prices and so on.”

Professor David Gordon, director of the University of Bristol’s Poverty Institute said the reduction in Universal Credit payments combined with rapid rises in living costs “are likely to result in the largest jump in child and adult poverty since World War Two”.

He warned: “If this coming winter is not unusually warm then fuel poverty and excess winter deaths are likely to increase significantly.”

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