UK energy debt – everyone should be warm this winter

Inflation is rising faster than incomes and the UK’s cost of living crisis is becoming more extreme. It has been a long time in the making, driven by structural inequalities of power and wealth that leave millions of us insecure and exposed to economic shocks.

Even before this current crisis, household debt owed by people on the lowest incomes was on the rise. Now families are being forced to take on more and more debt and a silent crisis is building across the UK. Average household incomes are due to fall by an unprecedented 7.1% over the next two years, forcing people to juggle bills, delay payments, and borrow to try to make ends meet.

Over the last 18 months, rapidly rising energy prices have put increasing strain on household finances and have become a salient political issue. A broad civil society resistance movement has emerged and has won significant concessions, forcing the government to make several interventions.

In March this year, when average energy bills reached £1,971, the Chancellor announced that all bill payers would receive a £200 ‘discount’ on their energy bills, with five years to repay the ‘discount’ in instalments of £40 a year. We said at the time that “Dressing up a loan as a discount is an insult to households struggling to make ends meet. Far from providing support, this could worsen the household debt crisis.”

In May, the government was forced to turn this loan into a grant and double the amount to £400. More extensive targeted support of up to £1,200 for ‘vulnerable households’ and local authority hardship funds were also announced. We reacted by welcoming the support but warned that “this package doesn’t amount to a serious proposal to tackle the UK household debt crisis.”

As international gas prices reached record highs over the summer, there were eye watering predictions of average yearly bills reaching three to four thousand pounds. Energy arrears were growing and our analysis revealed that total energy debt had reached a record £2.1bn.

We stepped up our lobbying and campaigning with three demands – a cap on unit energy costs, a complete write off of household energy debts paid for by an expanded energy windfall tax, and a ban on the forced installation of pre-pay energy meters.

We had a partial victory on the first demand in September, with the government’s Energy Price Guarantee capping unit energy costs in line with an average bill of £2,500 per year. However, this is still a near doubling from £1,277 in March and at the recent Autumn Statement it was confirmed that the Energy Price Guarantee will rise to £3,000 in April 2023. Without further support this will plunge even more people into unmanageable debt. 

Our latest calculations show that energy debt has now reached another record high of £2.4bn and the government has shown little appetite for tackling this unsustainable debt pile. Paying down back this debt whilst incomes are falling and energy costs are rising sharply is unfair and unrealistic.

We continue to call for those that have benefitted from obscene energy profits to be properly taxed to pay down these arrears and give everyone a chance of keeping the lights on this winter.

Around 4.5 million households are also using pre-payment meters (PPMs) that penalise them with even higher charges. Suppliers can install PPMs by force after energy debt has built up, so higher pre-pay energy costs can be a long-term consequence of energy debt, continuing long after the debt is paid back, or tenants have moved out. Daily ‘standing charges’ continue to build up and need to be repaid even when a meter runs out of credit and no energy is being used.

Nearly half a million warrants for forced installation of PPMs have been granted since covid protections ended and Citizens Advice are seeing record numbers of people who are unable to top up their prepayment meter. There is a real danger that many more households with PPMs will be unable to keep them topped up throughout this winter, leaving people unable to heat their homes, switch the lights on or cook food.

An important Private Members’ bill tabled by Anne McLaughlin MP aims to tackle this highly dangerous aspect of our unjust two-tier energy system by stopping the disconnecting of pre-payment meter customers who have run out of credit. Her stark warning to the government was that “If we don’t deal with this urgently, then I’m afraid people are going to die.”

So far, the government hasn’t heeded this warning. It’s up to all of us to make them.

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