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In response to Alistair Darling’s evidence to the Treasury Select Committee today Age Concern is accusing the Chancellor of sleepwalking through an escalating fuel poverty crisis.

The charity estimates that at least another 400,000 households could be pushed into fuel poverty by the end of the summer.¹ Yet the Government seems to be ignoring the fact that the fuel poverty strategy is failing, with the help being offered to groups at risk of fuel poverty barely scratching the surface of the problem.

Energy companies are reporting massive profits for the last year² and Age Concern estimates the Government could make an extra £600m on VAT income on energy bills when the next rounds of price rises come into effect.³ The Government and energy giants have touted the extra £225 million to be spent on social assistance schemes as a major concession.⁴ Yet, this investment is only expected to help 100,000 households, despite the fact price hikes could push up to 1.6 million households into fuel poverty this year alone.⁵

Patrick South, Head of Public Affairs for Age Concern, said:
“The Chancellor’s performance before MPs today will reinforce concerns that the Government is sleepwalking through the fuel poverty crisis. Rather than deflecting questions with platitudes, people living in fuel poverty want ministers to wake-up to the hardship they’re facing by taking decisive action.

“The Government needs to wake-up to the reality of the scale of the problem. The Prime Minister must prove he is in touch with people’s concerns by holding his own fuel poverty summit to kick-start the Government’s failing strategy.”

Age Concern’s calls to the Government:

•  The Government’s fuel poverty strategy should be urgently revised, with new policies and measures announced as soon as possible.
• Mandatory social tariffs for vulnerable households, which offer the lowest market rate, must be made compulsory through the current Energy Bill.
• A commitment to recycle the £400 million in extra VAT revenue the Government is receiving from fuel price increases to fund measures to help those in fuel poverty.
• The Warm Front programme should be urgently reviewed, with funding immediately increased by at least 25% and the maximum grant available under the scheme increased significantly.
• The Winter Fuel Payment should be permanently increased to reflect unprecedented energy price increases in recent years and should also be extended to other vulnerable groups under the age of 60.
• The Government should use statutory powers to abolish unfair pre-payment meter premiums.

ENDS

Sources for figures and estimates: Energy bill figures from 1997 – 2007 are from BERR. Energy bill estimates for May 2008 are from Energywatch. Energy bill estimate for Winter 2008 is based on a 25% increase in energy prices. Age Concern’s estimates on Government VAT income on energy bills is based on 5% of the average energy bill for the year multiplied by the number of households in the UK. Household figures for 1991, 2001 and 2007 taken from ONS Social Trends statistics.

1. It has widely been predicted that we could see energy price rises of up to 25% by winter 2008/09. Uswitch has predicted a rise of ten per cent could be introduced by the end of the summer and a further 15 per cent in the early stages of next year. The Department for Business, Enterprise and Regulatory Reform estimates that every 1% energy price rise pushes 40,000 households into fuel poverty – a 10% rise would affect 400,000 households. This is on top of the estimated 600,000 households estimated to have been pushed into fuel poverty by hikes at the start of the year.
2. British Gas made £571million profit in the last year (up from £95m the year before) and Scottish and Southern announced profits of £1.23 billion for last year (up from £858m the previous year).
3. The Government receives income from VAT receipts on energy bills. This is around 5% of the price of energy bills (Source: Ofgem). Age Concern’s estimate is based on what income this would generate using figures for average energy bills and the number of households in the UK.
4. In April this year it was announced that an extra £225 m is to be spent on social assistance schemes by energy companies over the next three years. Energy firms have collectively spent £50million on social assistance schemes in the last year.  Spending will increase to £100million this year, 125million in 2009-10 and £150million in 2010-11.
5. National Energy Action estimates that 600,000 households in the UK have been pushed into fuel poverty by energy price hikes at the start of 2008 and a further 1 million households could be affected if 25% price increases occur later in the year.