Rising electricity and gas prices push more homes into fuel poverty

Rising energy prices push another one million homes into fuel poverty

Rising gas and electricity prices pushed another one million households in the UK into fuel poverty in 2009, figures show.

The number of households suffering from fuel poverty in the UK - judged as spending more than 10 per cent of income on keeping homes warm - reached around 5.5 million in 2009, up from 4.5 million in 2008, the latest figures available show. In England, there were four million fuel-poor households, up from 3.3 million in 2008, the data showed.

The Department of Energy and Climate Change (Decc) said the latest rise in fuel poverty levels, which have been increasing since 2004, was largely due to rising fuel prices which saw gas costs jump by 14 per cent and electricity by 5 per cent that year.

The majority of fuel poor households across the UK were considered to be vulnerable - those with elderly, disabled or long-term sick people or children. There were 4.5 million vulnerable UK households spending more than a 10th of their income on heating their homes in 2009, a rise of 750,000 from 2008 figures. In England the number had jumped half a million to 3.2 million homes, the official figures showed.

The latest data on the struggle people are facing over fuel bills comes just days after British Gas announced another price hike, citing rises in wholesale gas costs, which will see gas and electricity bills jump by 18 per cent and 16 per cent on average.

Last month, Scottish Power announced a similar hike in bills and the rest of the “big six” suppliers are expected to follow suit in coming weeks.

Decc said figures for the levels of fuel poverty for 2010 and 2011 would only be known in the next couple of years - and the effect of the latest rises in household energy bills would not be fully felt until 2012.

The department estimates that in 2010, there were still 4 million homes in England in fuel poverty, a figure which was expected to rise slightly to 4.1 million homes in 2011.

Officials said that rising incomes, improvements in energy efficiency of housing and social and discounted tariffs had prevented some people from falling into fuel poverty, and had even lifted some homes out of the situation.

But Climate Change minister Greg Barker said: “I know rising energy prices are hitting households hard. These new figures show the old policies to help the most vulnerable were not working.

“That’s why, this year, we’ve introduced the Warm Home Discount which will require the Big Six energy companies to provide discounts of at least £120 to about 600,000 of the poorest pensioners. We’re also pushing for stronger competition to keep price rises as low as possible.

“In the longer term, we’ll be helping people use less energy with the Green Deal which will provide extra support for the poorest and most vulnerable to benefit from energy efficiency measures.”

The Green Deal is the Government’s flagship energy efficiency programme, which aims to cover the upfront costs of work on homes to make them more efficient, for example by installing new boilers, insulation and small scale renewables. The costs of the scheme will be paid back from savings on people’s bills.

But the Government’s own Committee on Climate Change warned last month that ministers needed to sign up to ambitious targets to ensure the Green Deal delivers emissions cuts and savings on bills. The committee said the Government should commit to insulating all lofts and cavity walls by 2015 and two million solid walls by 2020 as part of the Green Deal, and that energy companies should be “on the hook” to deliver on the goals.

Earlier this week, ministers unveiled their plans for reform of the electricity market which they said would deliver the £110 billion investment needed in the sector to keep the lights on, cut emissions and keep bills down.

Energy Secretary Chris Huhne said the moves, which aim to incentivise the building of new nuclear reactors and wind farms by providing long-term contracts with guaranteed prices for the electricity produced, would help reduce the UK’s reliance on fossil fuels and the impact for consumers of rising gas and oil costs.

Decc estimates that introducing the electricity market reforms will add around £160 to bills by 2030, but leaving the current system in place will cost £200 a year for households.

But if gas and oil prices continue to rise, consumers could benefit more from a shift away from fossil fuel electricity generation, ministers said.

The average dual fuel bill is currently more than £1,130, according to Consumer Focus, but that figure is set to rise to almost £1,200 when British Gas and Scottish Power increases come in during August. And average bills could leap further still if the other major gas and electricity companies put up their prices as expected.

Consumer Focus said that as many as 6.4 million households could be in fuel poverty following the rises expected in the coming months.

Audrey Gallacher, director of energy at Consumer Focus, said: “Fuel poverty levels are set to soar as energy price hikes and the cost of investment in making our energy supply more secure and sustainable kick in.

“Increasing energy costs create hardship for millions of the poorest pensioners, families and disabled people, leaving many cutting back on heating or other essentials. It is an issue which cannot be left on the backburner.

“Worryingly the predictions for fuel poverty in 2011 are likely to be an underestimate as four of the Big Six have yet to announce their expected price rises.

“If these are in line with the increases announced from British Gas and Scottish Power around 12 million people, or 6.4 million British households, are likely to be in fuel poverty when the latest price rises hit.

“Help must be better targeted at those who need it the most through the energy supplier energy efficiency schemes.

“Given the scale of the problem however these schemes alone are not enough to tackle it. This must be one part of a broader coherent UK Government strategy to help those living in fuel poverty,” she urged.

Age UK said almost half the people living in fuel poverty were over 60, and the problem continued to hit older people the hardest, with worse to come as energy companies announce more price hikes.

Derek Lickorish, chairman of the Government’s fuel poverty advisory group said: “Despite such welcome initiatives as the Warm Homes Discount and the potential for the Green Deal, the scale of the fuel poverty challenge dwarfs the assistance that is likely to be available.”

He said the carbon floor price and new obligations on energy companies to help customers, particularly vulnerable ones, improve their energy efficiency would exacerbate the problem as they would be paid for via consumers’ bills.

“The Treasury is likely to eventually benefit by more than £1.4 billion per annum through its carbon floor price; the majority of this should be used to help boost additional Green Deal support for fuel poverty households,” he urged.

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