Fuel poverty affects a quarter of UK's households as bills soar and pay freezes

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Exclusive: Figure rises from a fifth of homes last year, meaning coalition will fail to meet its legal duty to end fuel poverty by 2016

the Guardian,

1 December, 2011

A quarter of all households in England and Wales have now fallen into fuel poverty following an autumn of steep increases in energy bills and stagnating incomes, the Guardian can reveal.

The dramatic increase in fuel poverty – up from nearly one in five households last year to one in four now – will be highly embarrassing to the government, which has a statutory obligation to eliminate fuel poverty by 2016. It now looks certain to fail to meet its legal duty.

Previous government projections forecast that this year would see 4.1m households in fuel poverty, which is defined as those who have to spend 10% or more of their income to achieve adequate warmth and light.

But these estimates were calculated before the huge prices rises announced last summer by the big six energy suppliers. New calculations, provided to the statutory consumer body Consumer Focus and seen by the Guardian, based on actual bills, show the figure for England alone is now over 5m households.

The revelation comes as figures show that average families now face the worst squeeze on incomes since records began in the 1950s. In its analysis of George Osborne's autumn statement, the influential Institute of Fiscal Studies said median income families would be worse off in 2015 than they were in 2002, pinpointing the relentless rise in fuel prices as one of the main factors, along with stagnating wages and government welfare cuts.

The summer price hikes saw the biggest supplier, British Gas, put its gas and electricity prices up by 18% and 16%, which means that an average annual dual-fuel bill for its 9m customers has risen from £1,096 to £1,288.

The new figures show sharp regional differences in the levels of fuel poverty. In Wales, an additional half a million households, over 40% of the total, are now fuel poor. The north-east and West Midlands have levels of fuel poverty over 30%, while the north west has just under 30%. The figure for the south-east, meanwhile, is just 17%.

Some 2.5m people are already in debt to their energy supplier, and the depth of debt is increasing rapidly. The average debt for gas of those in arrears is now £320.

The main political parties attacked the big six energy suppliers at their autumn conferences this year for price rises that have averaged 21% since last year. Over the past five years, average prices have gone up 88%. At the Lib Dem conference, Chris Huhne, the energy secretary, accused the six suppliers, who provide 99% of UK household energy, of malpractice. In their defence, the companies argue that the price rises reflect the soaring cost of energy on global markets. The regulator Ofgem is conducting an audit of where the companies make their profits and is expected to report by end of the year.

Dr Brenda Boardman, fellow at Oxford University's environmental change institute, said that the pressure was building on politicians to act against the energy sector, as MPs encounter fuel poverty in their constituencies every week. Each 1% price rise pushes at least another 40,000 households into fuel poverty, forcing people to make decisions about turning heating off or cutting back on food or building up debt, she said. Inadequate heating contributes to "excess" winter deaths, which are already running at 27,000 a year. It also puts more pressure on a health service already strained by cuts, since it contributes to health problems.

The Department of Energy and Climate Change commissioned an independent review of fuel poverty after last autumn's comprehensive spending review. Its interim findings, published earlier this month, proposed changing the definition of fuel poverty. If adopted, the proposals would halve the numbers of households defined as being in fuel poverty.

The Guardian has learned that the DECC approached various former Labour ministers in 2010 to conduct the review in an effort of defuse the political storm likely to brew over fuel poverty. Lord Whitty, former chair of Consumer Focus, confirmed that he and others had been approached but said he had declined because he felt the Treasury was putting too much emphasis on redefining fuel poverty in an attempt to minimise the problem. The review was eventually overseen by Professor John Hills, a respected poverty expert at the London School of Economics. A DECC spokesperson said the Hills review would help it direct resources to those who needed them most.

Boardman said the government's "Achilles heel is what it is doing to push up prices itself". As part of its annual energy review last week, DECC showed that its measures to tackle climate change, such as the new Energy Company Obligation and the Green Deal finance for households to improve energy efficiency, would increase average bills by £280 by 2020. It also calculated that its policies would help bring reductions in energy use and savings of an average £373, so there would be a net decrease. However, fuel poverty campaigners say the averaging of savings across all households is misleading since only some will be beneficiaries. They fear that the measures will be taken up by richer households but paid for in taxes on all households, in effect requiring the poor to subsidise the more affluent.