Is UK fuel poverty set to treble?

Fuel poverty is a big problem in the UK and one that has potentially been exacerbated by the coronavirus pandemic. Fuel poverty can be defined as when a household spends more than 10% of its income on fuel use. This includes things such as heating, hot water, lighting, and the use of appliances. Overall, fuel poverty is caused my four main issues:

  1. Low household income
  2. High energy costs
  3. Poor energy efficiency of the home
  4. Under occupancy of the home

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Hand holding candle to keep warm. Person is in fuel poverty as they're unable to afford their energy bills.

And things could be about to get even worse for millions more households - figures from an independent think-tank which warns that fuel poverty could treble in the UK once the energy price cap is increased in April.

What does the independent think-tank say?

The number of UK households experiencing fuel poverty could treble to around 6.3 million overnight. This is according to Resolution Foundation, an independent think-tank whose focus is on improving the living standards for those on low to middle incomes. The increase in the number of people falling into fuel poverty is expected to come as a direct result of the price cap increase, which many are forecasting will rise by more than 50% to around £2,000 on April 1.

According to the think tank’s latest release, Higher and higher - Averting a looming energy bill crisis, fuel poverty will no longer just be confined to the poorest households, but will affect those in middle-income families as well.

As things stands, 9% of English households currently experience fuel poverty, but this figure is expected to increase to 27% when the price cap is increased. Below are a few key statistics from the publication, indicating what percentage of demographics will experience fuel poverty the most in the coming months:

  • 33% of households in the North-East
  • 32% of households in the West Midlands
  • 38% of pensioner households
  • 69% of households with an energy performance certificate F-rating

Senior economist at the Resolution Foundation, Jonny Marshall, said: “Fuel stress levels are particularly high among pensioner households and those in poorly insulated homes – a stark reminder of the need to modernise Britain’s leaky housing stock and curb national dependency on gas for power and heating.”

Both Labour and Tory MPs are urging the government to cut the VAT on energy bills to help alleviate the increased pressure on household budgets

What does the think-tank suggest?

The think-tank has called on the government to intervene and have given a few suggestions. They have said the most effective way to support lower-income families is through benefits, and so the planned 3.1% increase in benefit payments from in April will be a good starting point. But it still might not be enough.

Another suggestion was to improve upon the current Warm Home Discount. Resolution Foundation has said to raise the £140 payment by at least £300, to widen its eligibility to all families in receipt on pension credit or working age benefits, and to make the payments automatic so they are timelier. They have also suggested to implement another discount this spring or summer, outside of the normal winter payments.

Alongside the changes in the benefits payment, the think-tank has also suggested for the government to cut everyone else’s energy bills too. This can be done by transferring environmental and social levies to general taxation, cutting average bills by around £245 and reducing the number of families in fuel poverty by 1.7 million. This would come at the cost of £4.8bn to the taxpayer.

Overall, the steps that Resolution Foundation has suggested would reduce energy bills up to £545 a year, at a cost of £7.3 billion, which would mean 2.7 million fewer families would be living in fuel poverty.

“While not cheap at £7.3 billion, this plan is affordable, and by cutting bills by up to £545 would help prevent the upcoming rise in energy bills turning into a cost of living catastrophe for millions of families,” Marshall said.

What other support is available for now?

Things may seem overwhelming at the moment but there is always help out there! Here are a few things you can do in order to support yourselves and/or families.

  • The Winter Fuel Payment is a one-off, tax-free payment from the government to help elderly people pay for their energy bills in the winter. Payments can be between £100 - £300 depending on your circumstances.

  • The Warm Home Discount is a government led scheme that gives low-income households a discount on their energy bills. If you are eligible, you’ll get a one-off annual rebate to help with your energy bill.

  • The Cold Winter Payment is a special fund provided by the government to help those most vulnerable to pay for their energy bills. This is particularly so during times of particularly cold and adverse weather.

  • Fuel Direct is a government scheme which lets you pay off energy debt directly from any benefits you receive, helping to avoid any further debt or poverty.

Photo by Dazzle Jam from Pexels

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Vishal Barath

Vishal Barath

With a background in digital marketing, Vishal provides insightful articles into the latest happenings in the energy sector.