Simon Read: Economic boom? Not for the masses struggling with bills

  • @simonnread

Egghead economists were quick to queue up to offer endless opinions about the state of UK plc on Thursday after it was revealed we've climbed out of recession (again). While that may be good news for the rent-a-quotes, it's not such fabulous news for the rest of us.

Why? Because millions of families will continue to be hard up and forced to further tighten their financial belts. Especially after EDF Energy yesterday added to their woes by announcing a massive 10.8 per cent increase in annual gas and electricity bills.

The move will add roughly £130 to the average bill – an increase higher than any other energy supplier. That's peanuts to the average fatcat energy boss – of which there are plenty – but could prove a crucial difference between heating and eating for many vulnerable folk.

My conversations with some bosses of the big firms show how out of touch they are with their customers. When I questioned profits of 5 per cent and ask why they couldn't be cut to 3 per cent, I was told: "That would only cut average bills by around £30. What's the point?"

The point? £30 is a lot of money when you have none to spare. It may only pay for a starter in the kind of restaurants I imagine the fatcats frequent, but a struggling family may have to stretch £30 to pay for food for a week.

EDF's price rise also increases suggestions that the Big Six energy firms are working as a cartel. While the firm's tariffs will still be slightly cheaper on average than the other suppliers who have increased their prices, it's illuminating to know that the average bills across the suppliers will be within £36 of each other, taking into account the most recent increases.

"Another price rise, hot on the heels of those we've already seen, will again feed into consumer concerns on pack behaviour and whether price changes are driven by real supply and demand issues," said Audrey Gallacher, director of energy at Consumer Focus.

Energy firms, of course, deny that they set prices collectively. So it must be a huge coincidence that they have increased prices within weeks of each other. Of the Big Six firms, we're only waiting for E.on to join in, but since the firm has promised not to increase prices before the end of the year, we're expecting its announcement towards the end of November.

Once the winter price increases take effect, the average household energy bill will have rocketed by £812, or 156 per cent, from £522 in 2004 to a record high of £1,334 by the end of this year, according to uSwitch.

The comparison site's research suggests that almost nine out of ten households are expected to ration their energy usage this winter. Meanwhile the cost of energy has become the top household worry for consumers, ahead of the rising cost of food, petrol prices and mortgage and rent payments.

"The figures speak for themselves," said Ann Robinson, director of consumer policy at uSwitch. "With the average household energy bill rocketing by 156 per cent in the last eight years, it's no surprise that consumers believe that energy is rapidly becoming unaffordable."

She reckons some seven million households will this winter face living in fuel poverty, when a 10th of their available income is spent on heating their home. More worrying are the rising number of unnecessary winter deaths which are caused by elderly people turning their heating down or off because they can't afford their bills.

So I'm pleased to report that it's not all bad news from the energy firms. They are all – pleasingly – making progress in terms of identifying hard-up customers and targeting efforts to help them.

EDF said yesterday, for instance, that it will guarantee 100,000 vulnerable older customers the cheapest possible price. Other energy firms should do the same.

British Gas says it is working hard to help vulnerable customers, but forcing hard-up folk on to meters, which means they end up paying more for their bills, hardly helps. I hope the company's bosses read our article about Laura Coyle on page 61 and adopts a more positive approach to people who get behind with their bills.

However the Government also needs to do its part to help those in fuel poverty. For starters, it needs to force the Department of Work and Pensions to share information about vulnerable people – such as the disabled and families living on low incomes – with the energy companies and charities, so that those most in need can be identified for extra help.

Which brings us back to the burgeoning economy. Although GDP growth was only 1 per cent this month, that's been enough to push the UK out of recession, we're told. But individuals don't normally feel the benefit of GDP growth – through pay increases or more jobs – until months later.

And by that time we will all be worse off anyway, hit by rising fuel bills, higher food prices and soaring inflation. With that in mind, finding ways to cut energy costs becomes more important than ever.