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A coalition of Age Concern‚ Child Poverty Action Group‚ and National Energy Action is today issuing a challenge to the Government and energy industry to make social tariffs fair for the 5.5 million households who are likely to be in fuel poverty this winter.¹

As the party leaders continue to battle it out over the fairness agenda‚ new figures show the combined profits of the big six energy companies last year were more than double those in 2006‚ rising from £2.07 billion in 2006 to £4.3 billion in 2007. Yet their spend on social assistance schemes decreased significantly as a percentage of their profits‚ from just 2.1% of profit levels in 2006‚ to only 1.2% in 2007.²

The majority of money spent on social assistance schemes is used to subsidise discounted tariffs. However‚ as a recent cross-party committee of MPs has warned‚ Social tariffs are failing to help the most vulnerable households out of fuel poverty. Only a minority of those in fuel poverty are on these tariffs³ and these rates are not always the cheapest offered by energy suppliers. These tariffs are not sufficiently publicised and are not included on price comparison websites.

The coalition is calling for radical reforms to make social tariffs fit for purpose:
Social tariffs must be made mandatory4 and should be the lowest rate offered by suppliers‚ regardless of geographical location.

• Social tariffs should be made available to all vulnerable households who need them.
• Targets should be set to help switch vulnerable customers to social tariffs with penalties considered for energy companies that fail to take action.⁵
• Social tariffs should be promoted more widely and included on price comparison sites and helplines.
• As ministers discuss how to help people cope with rising energy prices the organisations are urging the Government to take the lead by working with suppliers on reforming social tariffs‚ as even some of the energy companies have admitted that voluntary social tariffs aren’t adequate.

Four of the big six energy companies have already announced further price rises to counteract a dip in profits for the first half of this year‚ and the rest are set to follow – which is likely to push another million households into fuel poverty.⁶ Energy companies have committed to spending an extra £50million on social assistance schemes this year⁷‚ but this is just a drop in the ocean of what is needed to help the millions living in fuel poverty‚ and a fraction of the profits being made.

Table of energy company profits and social tariff spend

Gordon Lishman Director General of Age Concern‚ said:
“All of the political parties are talking about fairness. Our challenge to them and the energy industry is to make social tariffs fair for the millions of the poorest pensioners and families they are currently failing to help.

“It is shocking that by the end of the year more than one in three pensioner households are likely to be in fuel poverty‚ yet few of them will get any help from their energy supplier. Even some of the big energy companies have admitted that voluntary social tariffs aren’t working. The Government and the energy companies must work together to share the rising costs of energy prices fairly by reforming social tariffs. “

Paul Dornan‚ Head of Policy for Child Poverty Action Group‚ said:
"Social tariffs have been playing too small a role. The poorest families now face an urgent situation with rocketing fuel prices that they simply cannot afford. We cannot have families huddling in the cold this winter inside their own homes which they can't afford to heat. The voluntary approach is failing and government and the energy companies need a plan of action within weeks to ensure the millions of fuel poor households are on social tariffs in time for winter."

Maria Wardrobe‚ NEA Director of Communications said:
 “At best‚ the £225 million promised by suppliers to help those in need will lift just 100‚000 out of fuel poverty. This is woefully inadequate when you consider that 5 million households in the UK are struggling to pay their fuel bills and energy companies’ have experienced record profits.

“It seems that in this era of expensive energy‚ consumers take on all the risk and companies’ reap all the benefits. The Government must address this injustice and force suppliers to offer poor and vulnerable households their cheapest prices.”

ENDS

Notes to editors:

1. In 2006 there were and estimated 3.5 million households in fuel poverty in the UK. Before the most recent round of price hike there were an estimated 4.5 million households in fuel poverty. With the rises that have already been announced by four of the big six energy companies there are now likely to be 5 million households in fuel poverty‚ which is predicted to rise to 5.5 million households in fuel poverty by the end of the year.
2. The total spend on social assistance schemes increased by around £10m in 2007 but decreased as a percentage of profits. In 2006 the combined profit for the big six energy companies was £2‚074.7 million‚ whilst their total spend on social assistance schemes was £44.75 million – comparatively 2.16% of their profit levels. In 2007 their collective profit was £4‚303.6 million and their social assistance scheme spend estimated by BERR in April 2008 was £50 million – amounting to 1.16% of profits. The actual level of social assistance scheme spend is likely to be slightly higher than this - around £60m‚ which would be equivalent to 1.27% of profits - but figures have not been confirmed by Scottish and Southern and Scottish Power.
3. Energywatch estimates only 540‚000 consumers are receiving support under the energy suppliers’ social packages. The vast majority of the estimated 4.5 million fuel-poor are‚ therefore‚ not benefiting from these schemes.
4. Through legislation‚ energy suppliers should be made to offer social tariffs as their lowest rate.
5. The current Pensions Bill is likely to permit data-sharing to enable energy companies to target social tariffs and energy efficiency measures to low income pensioners. In the long-term this should also be extended to other vulnerable groups. Under the Government's carbon emissions reduction target (CERT) scheme energy companies have targets to reach people on low incomes‚ those with disabilities and the over 70s with energy efficiency measures. We would like to see similar targets in place for social tariffs.
6. See footnote 1.
7. In April this year BERR stated that energy firms collectively spent £50million on social assistance schemes last year.  Berr also announced that spending will increase to £100million this year‚ 125million in 2009-10 and £150million in 2010-11. It has been estimated this extra funding will lift 100‚000 households out of fuel poverty.
8. The profit and social assistance scheme spend figures were all supplied‚ or verified‚ by the relevant energy company press offices. The profit figures used are generally those that each company would usually provide as its reported UK profit figures in their annual report. The measure of profit used varies from company to company. Although not all energy firms have supplied data on their social tariff spend for 2007 and 2008‚ the £50m social assistance scheme spend for 2007 and £100m spend for 2008 were announced by BERR in April 2008.

 

• The figures attributed to Eon UK in this press release are corrected from those initially issued. We initially stated that Eon’s social assistance scheme spend was £2.3m in 2006‚ £6.7m in 2007 and would be a minimum of £13.4m in 2008 – which were the figures provided to us by Eon. These have now been revised by Eon to the figures in the table above. This has changed the combined totals spent on social assistance schemes in both years. In 2006 the combined profit for the big six energy companies was £2‚074.7 million‚ whilst their total spend on social assistance schemes was £44.75 million – comparatively 2.16% of their profit levels‚ previously reported as £40.35 million – comparatively 1.94% of profits. In 2007 their collective profit was £4‚303.6 million and their social assistance scheme spend was reported as an estimated £50 million by BERR – amounting to 1.16% of profits‚ this is likely to be a slightly higher spend of around £60m which would amount to 1.27% of profits.

For further information‚ please contact:
• Age Concern: Emma Hayes‚ 020 8765 7515‚ emma.hayes@ace.org.uk
• Child Poverty Action Group: Tim Nichols‚ 020 7812 5216 or 07816 909302‚
tnichols@cpag.org.uk
• National Energy Action: Zoe McLeod‚ 07940 109631‚ zoe.mcleod@nea.org.uk

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