Simon Read: Energy price changes are set to hit more people than ever. It's wrong
Simon Read is Personal Finance Editor at The Independent. He edits the Saturday Your Money section and writes the Daily Money column and Wednesday’s Midweek Money section in i newspaper. He also writes for the news and business pages of the Independent and i newspaper and is a regular money commentator on TV station London Live. He has won numerous awards including Consumer Finance Journalist of the Year.
Friday 15 November 2013
People on the lowest income brackets will suffer most from the current round of energy price hikes. Debt charity Christians Against Poverty reports than many of the people it helps are surviving on a meagre £12,000 a year average income.
That leaves little room for flexibility huge energy bill increase can leave many unable to afford to pay to heat their homes. It leads them to have to make the drastic choice of whether to buy food or turn the boiler on. In stark terms, they have to choose whether to heat or eat.
It's a situation you might expect to find in an emerging country, not in Britain. The latest to suffer will be customers of SSE – formerly Scottish and Southern Energy – who were hit with an 8.2 per cent price rise yesterday that will see average annual duel fuel bills climb to £1,380.
CAP chief executive Matt Barlow said: "When people in such fragile situations are forced to cope with increased gas and electricity costs, you know that families will live in unheated homes this winter.
"When you think that some of that housing will be inadequate, you start to understand it's a very distressing picture."
And things are not going to get any better. Gas, electricity and water bills will continue to rise by more than inflation for another 17 years, the National Audit Office warned this week. It blamed the future price rises on the Government's decision to load two-thirds of the £310bn cost of infrastructure projects needed to maintain energy and water supplies on to customers' bills rather than fund them through taxation.
It predicted that the average household energy bill will rise by 66 per cent – from roughly £1,290 this year to £2,135 by 2030. Meanwhile water bills could leap by 80 per cent – from £388 this year to £698 in 2030.
Even before the current round of increases, many people are still struggling to pay their energy bills. In fact one in twenty gas or electricity accounts was behind in payments to their energy supplier last year, according to regulator Ofgem.
Some 1.3 million electricity accounts and 1.1 million gas accounts – 5 per cent overall – were in debt last year, according to the regulator's annual Social Obligations Report.
The average debt for a single fuel account last year was £457.13 and it took 77 weeks – just under a year and a half – to clear.
So we have rising bills and rising energy debts. And despite the government claiming it will increase support for families who cannot afford to heat their homes, Government spending to tackle fuel poverty actually fell to its lowest level last year.
In October the Government promised that by 2014-15 it would be pumping more cash into fighting fuel poverty than in 2009-10, before the coalition came to power.
In fact, in 2012-13, Government spending on energy efficiency for the fuel poor plummeted by more than half from its 2010-11 peak, according to analysis from the Energy Bill Revolution. It claims that by 2014-15, spending on fuel poverty will still be more than £800m below the levels seen at the end of the last Labour government, contradicting the claim made to the Energy and Climate Change Select Committee.
Ed Matthew, director of the Energy Bill Revolution, said: "It is scandalous that last year with soaring heating bills and freezing cold temperatures our government spent less than ever on fighting cold homes." He's called for the Chancellor in his Autumn Statement on 5 December to increase investment in energy efficiency, to help get a grip on fuel poverty. Let's hope Mr Osborne is listening.
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