Estimates day debate, Department of Work and Pensions expenditure on cost-of-living measures, 5 July 2022

According to a study by the National Institute of Economic and Social Research, an estimated 1.5 million households across the UK will struggle to pay food and energy bills over the next year due to rising prices and higher taxes.


Key messages

  • Councils and local partners play a vital role in supporting the most economically vulnerable households and mitigating the impacts of the cost-of-living crisis. The LGA is working with councils to take a cross-cutting approach to addressing cost of living pressures, bringing together services including health, housing, welfare, social care, employment, education and the environment. Councils continue to do all they can to protect people against rising costs.  
  • The rising costs of fuel, food and other essentials are combining with existing disadvantage within our communities, mean many more households will be at greater risk of both immediate hardship and a declining standard of living. According to a study by the National Institute of Economic and Social Research, an estimated 1.5 million households across the UK will struggle to pay food and energy bills over the next year due to rising prices and higher taxes.
  • The Government have introduced a number of measures to mitigate the immediate cost-of-living pressures and rising poverty. These include the Household Support Fund (HSF), which has been extended until the end of the financial year; the £150 council tax rebate this Spring; the £650 cost of living payments, which will be distributed to 8 million low-income households who are in receipt of certain benefits in two instalments in July and Autumn 2022; and a £400 energy discount for every UK household that has a contract with an energy provider.
  • While these measures will help ease some immediate hardship, by their nature emergency support packages cannot provide a long-term solution that tackles the drivers of increasing financial insecurity and poverty. Moreover, the strict spending requirements and short-term nature of funds, such as the HSF, have limited some councils’ ability to be target support to where it is most needed. We urge the Government to review the spending criteria of the HSF, in consultation with the sector to ensure councils can more effectively meet the needs of those in crisis.
  • We want to work with government to ensure we move from crisis support, towards improving life chances and building resilience. The LGA continues to call for councils and local partners to be provided with adequate, sustainable resources to provide targeted and effective crisis support, alongside services which increase opportunity and lift people out of poverty for good.
  • Crucially, this must be underpinned by a fair, accessible and sufficient mainstream benefits system that provides financial stability for low-income households, protects those who are unable to work, reduces health inequalities and links effectively with local partners to improve people’s socio-economic wellbeing. A national safety net which covers household’s current basic costs, will be vital to tackle poverty, reduce the growing demand for crisis support and enable councils to target limited local discretionary support to the most vulnerable people and those with complex needs. 
  • Longer-term, it is vital that councils are given the freedom and flexibility to lead local approaches which build strong local economies, including increasing the supply of affordable housing, integrating skills and employment provision, and prioritising vulnerable households to benefit from energy-saving initiatives. We continue working with Government to ensure councils can deliver better outcomes for their communities through progressive devolution.

Local welfare assistance

Councils’ discretionary Local Welfare Assistance Schemes (LWAS) play an essential role supporting the most economically vulnerable households from falling into destitution. In addition to providing residents with immediate support, such as cash payments, vouchers or essential goods, many welfare schemes also provide a pathway to wrap-around support services that tackle more deep-rooted issues and address users’ longer-term needs. Wrap-around support can include welfare benefit entitlement checks; debt advice; and employment, health, and housing support, both through council-delivered services and referral partnerships with voluntary sector and other statutory organisations.

However, since 2015, councils have not received any separately identified funding from Government to deliver LWAS. At the same time, councils have faced significant reductions in funding to their core budgets while demand has risen across services. This has constrained many councils’ ability to match the demand for local welfare assistance with investment. To redress this and ensure all councils have the resources and capacity to deliver effective local welfare provision, we continue to call for Government to restore separately identified funding for local welfare support.

Household Support Fund

In response to COVID-19 and the current rise in cost of living, Government has provided councils with a various emergency funds to support their most financially vulnerable residents with cash-based grants, such as the Household Support Fund (HSF) and the COVID Winter Grant Scheme.

While this funding has been helpful and much-needed, the strict spending requirements and short-term nature of these funds have limited some councils’ ability to be target support to where it is needed. For example, councils have not been able to spend any of this funding on advice services- such as debt or benefits advice- and are limited on who they can offer it to.

In April 2022, the Government updated the spending award criteria for the HSF, so that councils must spend at least a third of the funding on households that include someone of state pension age, in addition to the third that is ringfenced for households that have a child. While we are pleased that pensioner poverty has been recognised as a national priority, councils have told us that this new criteria for the HSF has hindered their ability to deliver crisis support where they know it is needed. Areas with relatively young populations may find the requirement to spend a third of the grant on pension-age households an inefficient use of the Fund as this limits the support available for other vulnerable low-income households in different demographic groups, such as disabled people or unpaid carers.

We urge therefore urge the Government to review the spending criteria of the HSF in consultation with the sector, to ensure councils can more effectively use the fund to meet the needs of those in their communities.  

Tackling rising energy costs

On 26 May, the Government announced a £15 billion cost of living support package, which will be funded in part by a new ‘windfall’ tax on the profits of oil and gas companies operating in the UK. As part of the package, every UK household with an energy account will receive a £400 discount in the Autumn to help with the cost of energy bills. In addition to this, low-income households in receipt of certain means-tested benefits will receive a £700 cost-of-living payment split into two instalments; one in July and one in the Autumn. All pensioner households will also receive a £300 cost of living payment this Autumn and around 6 million people who receive certain disability benefits will receive a £150 payment.

While these payments will go some way in alleviating immediate hardship, Ofgem predict that the energy price cap will rise by almost £900 this October (from £1971 to an estimated £2800), on top of the £693 increase for 22 million customers in April. Therefore, further support measures will be needed to mitigate the impact of rising fuel costs on the most vulnerable households to prevent them falling into poverty and destitution.

Moreover, operators of heat networks and heat network customers are being disproportionately affected by wholesale gas price increases as customers are not protected by the Energy Price Cap or the Supplier of Last Resort mechanism. Local Authority operators are facing significant additional budget pressure and customers are seeing price increases of 400 per cent, and sometimes up to 1000 per cent. Councils will either need to pass the additional cost on the householder, which are often social housing tenants, or absorb the additional cost themselves which quickly becomes financially unviable.

We therefore support the industry’s ask of government to fund a local authority administered hardship fund similar to the Household Support Fund for heat network customers on ‘cost recovery’ schemes, and targeted grant funding to prop up Energy Supply Companies (ESCos) operating ‘price matching’ schemes. In the medium term, we would like Government to bring forward the commitments to build and support the heat network market, and deliver better consumer protection, as set out in Government Heat and Building Strategy, before the market is irreparably damaged and consumers lose trust in the technology, which will be vital in decarbonising heat.

We support the Government’s ambition outlined in the Energy Security Strategy to protect consumers from unfair pricing by enabling an extension of the price cap beyond 2023. However, fuel poverty is increasing now, and energy price hikes will further hit households in the months ahead. We therefore need urgent efforts to decarbonise energy and insulate homes, focussing on households in fuel poverty to make households more resilient to rising energy costs, particularly in the winter months. Achieving the Government’s ambition to retrofit 3.1 million homes to Energy Performance Certificate (EPC) rating C by 2030 could save up to £770 million a year in household energy bills by 2030. However, meeting this ambition would require retrofitting 900 homes a day.

The Government must therefore provide the appropriate amount of investment to kick-start an energy revolution in social housing and enable councils to deliver deep energy retrofit and roll out innovative renewable technology to upgrade housing stock to the benefit of residents. One solution would be to bring forward the £3.8 billion Social Housing Decarbonisation Fund to help the rollout of an ambitious national retrofit programme across all tenures. This would enable councils to have a larger, more meaningful impact to meet net zero targets at a faster pace and help tackle fuel poverty.

Tackling food poverty

Access to food that is healthy, nutritious and affordable continues to be a huge challenge for families in our most disadvantaged communities. Figures from the Food Foundation show that for households in the bottom 10 per cent of household income to follow healthy eating guidance, they would have to spend 74 per cent of their income on food.

We believe that that the Government’s response to the National Food Strategy represents a missed opportunity to tackle the underlying causes of food insecurity, childhood obesity and the affordability of nutritious food. Many of these issues will continue to be exacerbated by the growing cost of living crisis if further action is not taken.

There are a number of specific measures the Government should consider to reduce the number of people facing food insecurity:

  • Government should expand access to, and the value of, Healthy Start Vouchers, which help pregnant women and families with children under four years of age to buy fruit, vegetables, vitamins and baby milk. Under the current criteria, over 250,000 children under five who face food insecurity are ineligible.
  • Government should review the eligibility criteria for Free School Meals (FSM) and expand the criteria to encompass all children facing food insecurity. As FSM is a benefit worth £440 per child per year, extending eligibility would represent a meaningful saving for many low-income households who are currently ineligible.
  • This move could also have significant long-term health and socio-economic benefits. Child Poverty Action Group research found that the introduction of universal provision of FSM to infants on average reducfed the chances of a child becoming obese by 0.7 percentage points relative to the pre-policy average. This equates to a 7.4 per cent reduction in obesity rates. FSMs have also been linked to improving attention and performance of children from low-income backgrounds. Expanding FSM provision could therefore contribute towards key objectives such as tackling health inequality, reducing the pressure on health services and closing the attainment gap between disadvantaged children and their peers.
  • Government should implement automatic enrolment of all children who are eligible for FSM using DWP data. At present, up to 11 per cent of children who are eligible for FSM have not taken up the offer, equating to 215,000 school children in England. Automatic enrolment would ensure that these children who are eligible for FSM using DWP data. At present, up to 11 per cent of children who are eligible for FSM have not taken up the offer, equating to 215,000 school children in England. Automatic enrolment would ensure that these children to not miss out.

Contact

Megan Edwards, Public Affairs and Campaigns Adviser

megan.edwards@local.gov.uk