The first cost of living payment, due to start dropping into people's accounts from this Thursday, could be swallowed up in less than five weeks, warns a charity, as families face stark choices about which bills to pay.
Millions of households are to be given an extra £326 this month, which is the first part of a £650 government rescue package, to help people on low incomes plan and prepare for escalating energy bills and other rising prices.
The money is to begin being paid out on Thursday and will be given to those on means-tested benefits including Universal Credit, Income-based Jobseekers Allowance, Income-related Employment and Support Allowance, Income Support, Working Tax Credit, Child Tax Credit and Pension Credit.
But despite fresh predictions suggesting gas and electric charges will rise by a staggering 64% this October, poverty charity Turn2us says many of those getting the additional cash will struggle to make it last any more than a month as families face stark choices 'just to put food on the table'.
After paying housing, council tax and utility bills it says many home are very often left with nothing at all - meaning that this first injection of government cash is going to do little to relieve other pressures which await them.
Instead, Turn2us expects some will use the £326 to pay off debt they have already incurred as outgoings have spiralled while others will use use the cash to improve utility bill arrears because accounts are already in the red. Very few, it says, will find they have much left to help cover any other additional rising costs like food, fuel or energy prices.
Michael Clarke from the charity said: "Every day we see more people struggling to afford life’s absolute basics as the cost-of-living continues to push millions of people onto the edge of a financial crisis. We are hearing from parents who are skipping meals to try and keep their children fed, or who are making impossible choices between paying rocketing energy bills or rent.
"The £650 payment is a welcome cash injection for some, but more must be done in the longer term to ensure everyone can afford the basics and not be reliant on one-off acts of generosity from the government. It is therefore vital that benefits are increased in line with inflation as a minimum and that our social security system is strengthened in the future. As a country, we must ask ourselves how many more of us need to fall into crisis before we’re given sufficient support to weather this storm?"
Research firm Cornwall Insight has forecast that the October energy price cap could rise to £3,245 a year for the average bill payer when it is next reviewed in the autumn - before climbing even higher in the new year.
Consumer champion Martin Lewis is among those to have done the sums and predicts a £100 bill will therefore rise to £165 in October, and to £170 in January while a £150 bill, he says, will go up to £250, and then £255, while those currently paying £200 will have to find £330 in October and then £340 in January. Anyone paying £300 a month could be hit with an initial rise to £495, and then £510, he believes.
And the news comes as the latest child poverty statistics, released by the End Child Poverty Coalition, reveal 3.6 million 0 to 15-year-olds in the UK were living in poverty between 2020 and 2021, a situation only expected to get worse as costs continue to rise and the government’s current economic support package fails to keep up with the impact rising inflation is having on finances.
Diane Coyle, Bennett Professor of Public Policy at University of Cambridge, said these are pressures not seen on households for 40 years.
She said: "Following a decade of significantly low growth in incomes, the pandemic has left many people across the country in a financially vulnerable position. We have not experienced these kinds of economic pressures and shocks since the 1970s, which is desperately worrying for people on the lowest incomes as we know that stagflation hits them the hardest.
"While rising inflation and the cost-of-living crisis is the immediate problem, improved living standards for people of all income levels and across the UK will require the government to tackle deep-seated economic weaknesses that have been a decade in the making."