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FRFI 205 October / November 2008

Millions face fuel poverty as Labour backs energy giants

Millions of people will be forced into fuel poverty this winter in Britain as the price of electricity and gas soars. In 2008, every major energy supplier – EDF Energy, British Gas, E.On, Scottish Power, N Power and Scottish and Southern Energy – announced two separate price hikes averaging a total of 38%. At the beginning of 2008 the average annual household energy bill was around £900; now it will be of the order of £1,250 to £1,350 depending on the supplier. In 2002, the average bill was around £320. It will be the poorest sections of the working class who will be forced to pay the most for Britain’s economic crisis.

Fuel poverty, which is defined as spending more than a tenth of household income on energy, is not new. At the start of 2008, one in six households, 4.4 million people, were suffering from fuel poverty, already up from 3.5 million in 2006. The latest rises will bring the total to 5.5 million by the end of 2008, double the number in 2005, and representing a quarter of all households. According to Age Concern, pensioners will face bills averaging £1,262 – 19% of the income for a single pensioner on basic benefits and 12.5% for a couple. Families would have to pay an average bill of £1,340, 14% of the income for a lone parent family and 12% for a couple receiving basic state benefits. With a third of pensioners facing fuel poverty, the number dying from hypothermia this winter – 32,000 on average – is bound to increase as more and more are forced to choose between buying food and heating their homes.

Many poor people face a double whammy. Five million people use prepayment meters for their energy. Their tariffs are anyway higher than for those who have quarterly bills. Customers using meters typically pay £150 more a year than those who pay by direct debit. Metered households will face additional ‘catch up’ charges as the recent price rises will not be reflected in their meter settings; these have to be adjusted manually by the energy companies. According to consumer body Energywatch: ‘If you have not had your meter read for 18 months, say, there could have been at least three price rises in that time. Unless you are keenly aware of gas and electricity bill increases, any shortfall would come as a terrible shock, especially in the face of other rising household costs.’

When the Labour Party was elected in 1997, one of its aims was supposed to be the eradication of fuel poverty and it introduced the Winter Fuel Payment in 1998. Then it covered a third of the average energy bill; now it covers less than a fifth. The increase this year of £50 for those between 60 and 79, and £100 for those over 80, is only a fraction of the £350 increase in average bills. At the same time, energy company profits have soared: from £2 billion for the ‘big six’ in 2006 to £4.3 billion in 2007. However, when it came to demands for a windfall tax of £1 billion to help offset the increased bills, Labour showed its true colours: it rejected the proposal and instead threw the responsibility on to consumers to reduce energy use with a £910 million package which would provide half-price home insulation for up to two million households and a freeze on bills for a half million of the poorest. The cost of home insulation would be borne by the energy companies. However, Neil Marshall of the National Insulation Association said only 150,000 additional households could benefit this winter and the government itself does not think the programme could be complete before 2020. Anyway, as David Porter, spokesman for the Association of Electricity Producers, said: ‘Whenever people impose costs on an industry like ours, inevitably the bill to some extent always ends up with the customers...in the end someone has got to pay for this’. In other words, it will be the working class.

Britain is virtually unique in Europe in that energy suppliers have been both privatised and deregulated. We were told at the time of privatisation that increased competition would mean lower prices. Some chance! Competition breeds monopoly. Six years ago Britain had around 20 energy companies; today the market is dominated by just six. Together they act as a cartel, simultaneously announcing price rises. E.On has raised prices 41% this year; on 10 September when its Chief Executive Owen-Lloyd was asked how high energy prices could be affected by a harsh winter, he replied: ‘It will make more money for us.’ Such is the arrogance and contempt of the rich and their Labour hirelings for the poor and working class.

Paul Mallon