800,000 children live in families that are behind on their energy bills
Saving Our Safety Net Fact of the Week
(Warning: long post.) This week’s headline comes from Show Some Warmth, an excellent new report from the Children’s Society that looked at the problem of energy debt – families falling into debt because they cannot pay their energy bills. The report found that 3.8 million children live in families that have difficulty with their energy bills. Of these, 2.2 million children live in families that have been in energy debt at some point and 800,000 in families that are in energy debt now. The fact is, too, that two million low income homes are poorly insulated for want of effective government action to improve domestic energy efficiency.
The report surveyed parents and children to show that a majority (56 per cent) of families in energy debt had cut back on their heating or energy use – 30 per cent had stopped heating their bedrooms and 10 per cent had had to stop heating their children’s bedrooms. Nearly half (48 per cent) went without a daily hot meal 20 per cent had cut back on food and 30 per cent on clothing.
These direct impacts have knock-on effects. In the survey, 19 per cent of parents who had faced energy debt said their children had had health problems related to living in a cold home. 40 per cent of the children in families that had faced energy debt said their bedrooms were always or sometimes too cold to sleep at night – it does not take a great deal of imagination to understand how this might affect children’s education.
We know that parents with low incomes frequently go without to protect their children and not being able to protect your children from being cold or hungry will be really difficult. 54 per cent of the parents who had faced energy debt said they had suffered stress, anxiety or depression and 29 per cent said there had been problems for family relationships.
The latest inflation figures showed the pressure on gas and electricity prices easing a little, but this comes after a long period in which energy prices have gone up at a much faster rate than overall inflation. In the chart below I’ve indexed the CPI and the energy component of CPI to 2000 and the difference is dramatic:
No surprise, then, that gas and electricity are still the bills families worry about most. YouGov research earlier this month showed that they topped the list for more than a quarter of respondents to their survey:
(I should add that 31 per cent answered “none of the above”.)
How should public policy respond to energy debt? The Children’s Society report points to some problems with the energy companies, but we should recognise that there has been one significant improvement. In the past, there was a major problem with gas and energy suppliers cutting off families that fell into debt. The report reveals that this is now the exception as Ofgem (the industry regulator) has led the way in minimising disconnections, especially for people in vulnerable groups (though it does still happen – the report points to 556 electricity and 84 gas disconnections in 2013). But this news isn’t quite as good as it sounds: the companies now often switch people who fall behind in their payments to pre-payment meters. This is to stop them falling further behind, but it does mean that these families now have to cut themselves off.
Energy debt is not the same issue as fuel poverty, but the two are clearly linked. The Department for Energy and Climate Change says a family is in fuel poverty if its housing costs are above average and, if they spent that amount, their remaining income would be below the poverty line. The latest fuel poverty statistics (which are for 2012) show the number of families in fuel poverty coming down slowly, but still at a high level: 2.28 million.
Three major factors come together to make families more likely to be in fuel poverty or to suffer energy debt: the price of energy, the incomes of the families and how much it costs to heat their homes. We have seen above that energy prices rose substantially more than other prices in the late 2000s, so this became the “point where the shoe pinches” for people with low incomes. The Children’s Society found that 24 per cent of low income families (income less than £15,000) have experienced energy debt, compared with 15 per cent of other families. Fuel poverty is, almost by definition, limited to people in the bottom half of the income distribution, but even among this group there is a clear income gradient:
Fuel poverty by income decile groups (after housing costs), 2012
It costs more to heat energy inefficient houses. The energy efficiency of a house is typically measured using a Standard Assessment Procedure and houses given an Energy Performance Certificate (EPC) of E, F or G are regarded as inefficient while those rated C or above are efficient. The Children’s Society reports that 27 per cent of families with children generally live in an inefficient home but this rises to 32 per cent of families who cannot afford to keep warm. In 2012, only 2 per cent of families in properties rated C or above were fuel poor, 7 per cent in those rated D, 20 per cent in E rated, 23 per cent in F rated and 35 per cent in G rated.
We need action on all three fronts. The Children’s Society has called on the energy companies to assess when families are likely to be vulnerable and give those with debts the opportunity to negotiate an affordable repayment plan. I’d add that a moratorium on energy price increases would help too. We also need real increase in the wages and benefits of low income families and the Children’s Society has called for the government to extend the Warm Homes Discount (a £140 discount on energy bills for vulnerable groups, but currently mainly limited to pensioners) to all families with children living in poverty.
And we need to do more to increase houses’ energy efficiency. The TUC is a member of the alliance of unions, businesses and campaign groups that have set up the Energy Bill Revolution. Building the Future, a research report commissioned from Cambridge Econometrics looked at the impact of using infrastructure funds to expand the government’s Green Deal to make two million low-income homes energy efficient (EPC band C) by 2020 and all low income homes to that standard by 2025. In addition to making a major difference to fuel poverty and energy debt, this policy would generate £3.20 in growth (and generate £1.27 in tax revenue) for every £1 invested and create up to 108,000 jobs and a world leading energy efficiency industry. It would cut gas imports by a quarter, saving £2.7bn per year by 2030 on imported gas and reduce the need for new energy supply infrastructure.