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Citizens Advice is calling on the government to introduce an energy social tariff by 2024.
The call for a social tariff comes in a new report commissioned by Citizens Advice and led by the Social Market Foundation and Public First. It would consist of a cash payment to fuel poor households, varying according to their household income and energy use – a solution the report says would help the most people, while also being affordable to the government.
The government’s Energy Price Guarantee is officially set to rise to £3000 from April, but is widely expected to remain at £2500. Under either scenario households will be spending more than twice as much on energy compared to just a year and a half ago.
If the EPG remains at £2500, ten million households will face crisis-level energy costs, with more than 10% of their income after housing costs going on energy – a key indicator of fuel poverty. If the EPG increases to £3000 the number of households affected in this way rises to 12 million.
People on the lowest incomes will be hit much harder, with energy making up more than half of their total household income after housing costs in either scenario, up from 34% in 2019.
Energy prices are not expected to return to a pre-pandemic level for the next decade. Citizens Advice argues only a social tariff can limit the impact of the crisis, as well as help accelerate a fair and affordable transition to net zero.
Improving energy efficiency
As well as supporting people with higher bills through a social tariff, Citizens Advice and its partners are calling for a national programme of loft and cavity wall insulation for all households in fuel poverty.
UK homes use more gas than most other Western European countries and are particularly exposed to any hikes in wholesale prices. With some people seeing 30% of their energy bill go straight out of the window, a national insulation programme will help keep houses warmer, reduce gas usage and insulate people against price spikes.
At a total cost of £1.1bn, this would save more than a million households up to £561 a year.
Dame Clare Moriarty, Chief Executive of Citizens Advice, said:
Energy affordability is a long-term problem that needs a long-term solution. A social tariff protects millions of people from spending excessive amounts on their bills.
High energy costs have left too many people choosing between heating and eating. Uncertainty over future high prices only adds to the stress and worry felt in households across the country.
This policy helps make energy bills more affordable in the years ahead and supports the shift to warmer, safer homes that are ready for the net zero transition.
Martin Lewis, Money Saving Expert, said:
I’ve argued for a social tariff for years, and now it could be a crucial building block to help repair our broken consumer energy market. When things return to a more normal situation we must work out what energy market we want.
There are two main routes – either regulate all pricing or have a competitive switching market. We’ve long aimed for the latter situation, but it has failed many. That’s why we must be blunt and identify who are the legitimate and who are the illegitimate victims of competition.
If I, as a wealthy, financially educated person chose not to switch, that’s my problem. If a struggling low-income 90 year old grandmother with onset dementia doesn’t switch – that’s all our problem. A social tariff looks to protect those who need it.
Dhara Vyas, Deputy CEO of Energy UK, said:
Energy UK welcomes this research. It solidifies the need for more targeted support for consumers on an issue which requires an enduring solution, such as a Social Tariff.
The rising cost of energy over the past 18 months has left more households than ever before in need of increasing support with their bills, and the cost-of-living crisis showing no signs of ending soon. Long-term energy affordability needs to remain a top priority.
Improving energy efficiency in homes will help people lower their costs in the long term, whilst strengthening the UK’s security of supply and boosting economic growth.
To ensure continued support for everyone and ease the burden of high living costs, suppliers are ready to work with the government to make progress with the introduction of targeted support, such as a social tariff, no later than April 2024.
