Household Energy Debt

Jim Shannon Excerpts

Tuesday 23rd April 2024 Westminster Hall

[Kenny MacAskill (East Lothian) (Alba)]

I beg to move,

That this House has considered levels of household energy debt.

It is a pleasure to serve under your chairmanship, Sir George. It may seem strange to be debating energy debt with summer fast approaching. However, although the weather has largely improved, the energy debt situation most certainly has not. Millions have not bright sunshine, but black clouds hanging over them. Growing numbers in Scotland and across the UK are struggling, and many are drowning, as debts mount but energy needs remain constant. Ofgem has found that energy debt levels now stand at a staggering £3.1 billion—billion, not million—and that the average debt has increased by about 50% over the last 12 months, with the number of households in debt increasing by about 20%.

The situation is worsening. National Energy Action, a fuel poverty charity, estimates that even with new price cap levels, about 6 million households in the UK will be in fuel poverty. The situation in Scotland, with its more northerly latitude and harsher climate, is even more bleak. Energy Action Scotland suggests, based on the Scottish Government’s house condition survey, that fuel poverty afflicted 31% of households in 2022. That is almost one third of people in an energy-rich land that powers the UK economy living in fuel poverty—and that was two years ago. In northern areas and the islands, the figure was almost, or even over, 50%. Those are the parts closest to the oil and gas fields, yet they are denied access to affordable fuel.

The new bounty of renewable energy adds to the perversity. Scotland is providing 124 billion kWh to be cabled south. That is enough to power Scotland’s homes 12 and a half times over, yet many Scots cannot afford to heat their own home. What an absurdity for a country to be energy rich, yet its people fuel poor.

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Gentleman for bringing this issue forward. He is right to highlight fuel poverty. In England, the fuel poverty figure—the proportion of households where more than 10% of wages go to pay for fuel—is about 13%, and he mentioned that in Scotland it is 31%. In Northern Ireland, it stands at 22%. Does he agree that people need help? As he rightly said, just because the summer months are coming and it will get better does not mean that the problem is disappearing. We must take more effective steps right now, and we look to the Minister for the answers.

[Kenny MacAskill]

I fully accept the hon. Member’s intervention. This is an issue across the United Kingdom, including Northern Ireland. Climatic matters are worsening the situation in Scotland, but other factors affect other areas. As I will go on to say, the days of the summer months being some protection are long passing.

What does this mean for those in debt? They are real people, not statistics. Citizens Advice Scotland states that the average fuel debt for someone seeking its help is about £2,300. That is just the average—for some, it will be worse—and it is only for fuel; people may have other debts as they juggle their finances trying to manage. During 2023, the disability charity Scope received 7,422 referrals to its disability energy support service. Of those referred, 364 were in debt. Disabled households require an additional £975 per month simply to have the standard of living of a non-disabled household, yet their average debt is more than £1,100.

According to Age Scotland, older people have been massively impacted. Its research highlights that the majority of over-50s in Scotland feel financially squeezed and are cutting back on essentials, yet pensioners in Scotland have the highest rates of fuel poverty, with 36% in fuel poverty according to the most recent data. Worryingly, 24%—more than any other household group—are classified as living in extreme fuel poverty. All those statistics will have worsened as energy prices have risen and the general cost of living increased. The perversity of having to choose between heating and eating is growing, not diminishing. These are not just numbers or statistics; they are human beings, some of them even children.

While spring is usually a season for looking forward with anticipation, this spring has seen the heaviest rainfall ever recorded in many parts of Scotland, and with that rain come damp and cold. The days may be getting longer, but the need to heat homes remains as vital as when the nights were longer. Climate change is making our climate more changeable, but that simply makes it more challenging. As inclement weather straddles even supposedly moderate months, heating is often a year-round requirement, and not just for those who are unwell or housebound. The seasons turn and summer will be followed by autumn and then winter, exacerbating an already difficult situation. The thought of the colder months to come will send a shiver through many—from fear, not cold.

Energy is about access to not just heat but power. It allows the mother to power the washing machine to keep her kids clean and tidy; the parent to power the school laptop, ensuring that those children can achieve their educational potential; and individuals to charge their phones in order to access employment opportunities, benefiting not just themselves but society collectively. Rather than berating and punishing people for not being in work, maybe the Prime Minister would be better advised to assist them in achieving it.

The need for power even applies to those who need life-saving equipment. Ill health not only often keeps people housebound but makes them more susceptible to the cold. Being able to keep warm is essential for recovery. Similarly, dialysis and oxygen are not luxuries to prettify someone’s home; they are essential for their very existence. That is why the debate is urgent. The time to act is now, not when winter is upon us. By then the situation will be even worse for many, and tragically it may even be too late for some.

National Energy Action advised that not only are more people falling into debt but those already in debt are seeing their situation worsen. Only about one third of the overall debt figure of £3.1 billion consists of debt where there is an arrangement to pay. That arrangement may be manageable for many, but for some it might prove too much, as energy and other costs increase. What happens then? Two thirds of that debt—over £2 billion—consists of “arrears”, which is defined as debt without a repayment arrangement. If someone has no plan for how to repay, and is struggling to meet their current bills without even considering meeting arrears that have accrued, how will they get through spring, let alone winter? Many people see no way out of the morass facing them.

Action is needed to address energy debt every bit as much as the continuing crisis of energy costs. Ofgem has called for inputs on debt and affordability, with submissions closing on 13 May. However, Ofgem is a creature of statute; it can only do what it is authorised to do, and the parameters and the final decision remain with Government. That is another reason why this debate is apposite: it is not just that the situation is worsening, but that the decisions must be made now.

Those facing this crisis with the burden weighing them down are not the feckless or ne’er-do-wells who never seek to pay their way, but the poorest and most vulnerable in our society. It is not a “won’t pay” campaign, as I once ran in Scotland against Thatcher’s poll tax, but simply a “can’t pay” situation for those who just do not have the cash or wherewithal.

Another cruelty of our energy market is that those with the least pay the most, hence they face the highest risk of debt, not just difficulty in paying their bills. Energy costs have increased for all, but the proportion paid by the poorest and most vulnerable is greatest. As National Energy Action pointed out, standing charges have almost doubled over the past five years, with households now paying over £300 regardless of payment method. It is an energy poll tax that hits the poorest hardest. The billionaire with his swimming pool pays the same as the widow with her kids in a council flat. Charges vary across the country, with those in colder Scotland paying a higher rate than those here in London.

Tariff prices are also highest for those least able to pay. Standard credit is far more expensive than direct debit, but for some no other method is available. They are left paying more from a smaller budget. Prepayment has seen tariff costs belatedly reduced and is now the cheapest tariff, but it can have other issues for those forced to pay by that means. Let us recall that the moratorium on forced installation of prepayment meters has ended. Warrants are now being obtained to force them on even those who do not want them, for they obviously suit suppliers, who can monitor and even restrict consumption, even if more people will be afflicted by that perverse euphemism, “self-disconnection”—a benign phrase, but a wicked outcome. It is not a voluntary choice, but imposed by financial circumstances. Lacking the funds to buy the card or pay for more credit, people simply go without.

Let us also remember that putting people on to prepayment meters has other significant consequences. As Citizens Advice Scotland points out, it results in debt repayments being added to consumption charges—folk pay more but get less, with debt, not just standing charges, to be met before they even get a flicker—and people may not be able to switch supplier even if lower tariffs are available.

The Government will claim that energy prices have fallen and, of course, over the recent period that is most certainly true; however, the baseline is not last year, but when the energy crisis arose. Prices are far higher than they were then, and the supposed global issue of energy costs, whether due to the war in Ukraine or other international pressures, has seen prices in the UK rise far higher than in other lands. Everyone is suffering as a result—business and domestic customers—but it is the poorest and most vulnerable feeling the most pain.

Moreover, while the energy price guarantee has dropped, let us not forget that there has been sleight of hand. Not only is the guarantee predicated on average costs, hence it takes no account of differing circumstances—climatic issues in northern parts, personal needs such as ill health, and so on—but the average energy consumption used in formulating it was reduced, as it was stated that household insulation had improved. Of course, that is the case for many well-insulated new homes, but in all likelihood it will not apply to someone in an older property, whether they own it or live in a council house, are a housing association tenant or have a private landlord, yet their needs remain the same.

National Energy Action states that if it was calculated on the former assessment, the price cap would be £1,769, not £1,690, for the typical dual fuel household. That is almost an additional £100 for those in the poorest housing stock to find. Prior to the crisis, the price cap for the typical dual fuel household paying by direct debit was £1,138. It is now 56% higher, but costs have risen even more for those in harder-to-heat households or on higher tariff payment methods.

Ofgem acknowledges that there is £3 billion of debt in the energy market. The End Fuel Poverty Coalition calculates that there are allowances in the energy price cap to service that debt amounting to £1.5 billion per annum. That just pays for servicing the debt, not for reducing it. Can the Minister confirm whether that is the case? If that is happening, how is it being calculated, collected and distributed? Where is the transparency? Are consumers paying for their suppliers’ accrued debt? Surely we are entitled to know what we are paying for and what the big corporates are getting from us.

We know that there is a crisis at the moment and that the winter to come could be harsh and cruel, so what is to be done? First, a social tariff, once alluded to by Ministers and standard in many lands—even those without the exorbitant prices we face—should be introduced. That would provide solace for the poorest and most vulnerable. Secondly, we should restore the moratorium on the forced installation of prepayment meters, which is iniquitous and cruel.

Thirdly, the warm home discount scheme needs to be reviewed and enhanced. Rather than being issued arbitrarily to second home owners—never mind to those not requiring them, as was once done—payments should be centred on those most in need, addressing hardship and mitigating existing and even increasing debt. The current support of £150 is simply inadequate and too many are missing out entirely, even though they are entitled and in need. The payment was £140 before the energy crisis arose and prices rocketed; it badly needs to be increased to reflect that. The Social Market Foundation has made proposals that the Government would do well to adopt.

Finally, we need a debt write-off scheme, as suggested by National Energy Action. The amount owed and the number in debt are such that many can never make full repayment. The only way to achieve much reduction is to provide support through matching payments. The details of the scheme can be discussed, but the principle should be non-negotiable. It need not be a blank cheque for others simply to cease paying; it could be time limited to debt incurred during the fuel crisis, and other criteria could be applied. Banks were bailed out. Wastage of personal protective equipment, if not fraud, has been written off. It seems that there are unlimited funds for weapons of war, but not for a war on poverty. If assistance can be given to the few, similar support should be provided for the many.

Energy debt levels are rising and, with winter looming, fears for access to warmth and power, as well as for people’s ability simply to keep body and soul together, are increasing. Those are basic human needs and should be human rights. Action needs to be taken to ease the cost of energy and reduce the burden of debt for the poorest and most vulnerable. Will the Minister meet me and representatives of National Energy Action to discuss the crisis? Even more importantly, will she address the perversity of fuel poverty in an energy-rich land?