As the colder months draw in, our cost of living crisis shows no signs of abating, with inflation continuing to rise much faster than wages and benefits. That’s little surprise given how long it has been in the making, driven by the structural inequalities of power and wealth that leave millions of people insecure and exposed to economic shocks.
Even before this crisis, the household debt which weighs down people on the lowest incomes was on the rise. This year, with average household income now due to fall by an unprecedented 1.5-2.25%, that debt crisis will be worsening as people are forced to juggle bills, delay payments, and borrow more to try to make ends meet.
Despite the introduction of the Energy Price Cap Guarantee by new prime minister Liz Truss, average bills are set to almost double from £1,277 in March to £2,500 in October. After a decade and a half of falling incomes, this remains too high for a significant proportion of UK households to absorb. That means even more people being pushed into energy debt.
Rapidly rising energy prices are putting a huge strain on families. In April, before prices were increased again, households were already reported to have built up £2.1 billion in energy debt. Due to a lag in reporting figures, the true picture could be a lot worse: one poll in July suggested a doubling of arrears since September 2021.
39-year-old Louisa, a campaigner with our South London group of Together Against Debt, is one of the many people across the country struggling with energy debt. She is currently facing over £2000 in gas debt, and at the present rate, it will take her another four years to pay it off—during which time she can’t move to a cheaper supplier.
‘My anxiety gets worse every time my bills are due, as I fear I won’t be able to make ends meet,’ she told me. The current crisis has already seen Louisa’s electric jump from £40 a month to £60 or £70, and a £100 grocery shop for her family now only lasts us one week when it used to last two. ‘Writing off this gas debt would make a real difference to my family this winter.’
Forcing people to pay back these energy debts at a time of falling incomes and rising inflation is both unfair and unrealistic. Instead, to help households like Louisa’s, the government should expand the energy windfall tax and raise corporation tax as planned, the revenue from which could go toward paying off household energy debt—and giving everyone a fighting chance of keeping the lights on this winter.
An energy debt write-off is especially urgent for many of the 4.5 million pre-payment meter (PPM) users who are at risk of disconnection in the coming months. Suppliers can install PPMs by force after energy debt has built up and penalise people with higher ongoing costs. Daily ‘standing charges’ continue to add up and need to be re-paid, even when the meter runs out of credit and no energy is being used.
In July, Citizens Advice saw record numbers of people who were unable to top up their PPM, leaving them unable to heat their homes, cook food, or even switch the lights. Pre-pay energy costs should be brought down to the level of the standard dual fuel rate and the cost incurred by energy suppliers—and there should also be a ban on the installation of new PPMs, to phase out this punitive two-tier approach.
These are all measures that urgently need to take place. But that people are facing situations like Louisa’s at all speaks to the failures of our privatised energy production, transmission, and supply system in providing either affordable or sustainable energy. Profiteering has pushed up prices—as the government has already tacitly acknowledged by initially introducing a windfall tax—and the failure of Bulb Energy alone could cost billpayers an extra £150 each this year. We shouldn’t be forced to pay the costs of market failure while shareholders accrue the benefits.
Instead, the big five energy suppliers should be brought into public ownership, and/or a permanent public energy supplier created out of the infrastructure and customer base of those failed energy companies already being supported by the government. Public ownership would present a vital challenge to the failing for-profit provider model, and genuinely diversify the energy supply market.
There is more than can be done, too. We need to insulate our leaky homes, which have left us vulnerable to rising prices. A ‘Great Homes Upgrade’ would use public investment and improve regulatory standards to reduce our reliance on gas and bring down energy bills in the future.
The government’s current energy plan could cost up to £150 billion and still leaves energy bills almost doubled for millions of households this year. Bearing down on prices is urgent and necessary, but households in energy debt need more. Cancelling all energy arrears would cost little in comparison, and give households in energy debt a chance of getting through this bleak winter.