A “missing middle” of more than 7 million people will be left struggling to pay energy bills without additional and ongoing government support, new research shows today.
Three million British households face years of spending more than 10% of their income (after housing costs) on heat and light if energy bills remain at £3,000, according to a report from the Social Market Foundation think-tank and the Public First consultancy.
In a report commissioned and supported by Citizens Advice, the researchers said that politicians must put in place long-term policies to provide targeted financial support for millions of households for what could be “a decade of painfully high energy bills.”
The report also shows how a major drive to insulate Britain’s draughty homes could cut the nation’s energy bills by tens of billions of pounds.
From April 2023 until March 2024, the Government’s energy price guarantee will keep typical bills at £3,000, with additional help for households getting welfare or pensions.
Bills are expected to remain at similar levels for several more years, and the SMF/PF analysis shows that energy costs on that level will mean real hardship for many more households who are not covered by that additional support package.
Who are the missing middle?
In total, 12 million households would face crisis-level energy costs with bills at their current levels. Around three-quarters of those households currently receive welfare benefits or the state pension, meaning they qualify for additional government payments.
That leaves 3 million households who face paying more than 10% of their income on fuel but do not receive benefits or pensions and therefore miss out on extra support. Without that additional support, they face real hardship over energy costs.
Based on 2.4 people per household, that figure of 3 million households means there are 7.2 million people in the “missing middle” of energy bill policy.
Many of those who miss out on energy bill support are on mid-range incomes. 16% of households in the 4th income decile will spend 10% of income on energy but not get extra support. The figure is 12% for the 5th decile and 11% for the sixth.
And while those missing millions suffer, the research shows that many of the pensioner households who will get government help are in less financial need. The report shows that using the state pension alongside benefits to decide who gets help means that around one in three households in the richest 10% will receive government support.
The researchers said their analysis shows why politicians need a long-term approach to energy bill support that can more accurately direct government help to the households the greatest need.
That means developing new tools that will allow the state to identify households in need of help with energy, then deliver that help in a way that avoids the omissions and waste of current policies.
This project was commissioned by and is supported by Citizens Advice, with SMF and Public First developing long term policy plans to protect households from high energy prices.
It is based on extensive statistical analysis, economic modelling and public opinion research.
Polling for the project shows that voters are increasingly prepared to accept higher taxation to fund help with bills. In July, 52% of people we polled said they supported bill support policies “even if this means taxes rise as a result”. In October, this had risen to 64%.
New polling on energy efficiency
The research also shows how a major drive to increase the energy efficiency of Britain’s badly-insulated homes would significantly cut energy bills and enjoy strong public support.
Upgrading all 14.1 million UK homes rated EPC D or below to EPC C would cost in the region of £119bn and deliver total annual energy bill savings of £10.2bn
An efficiency policy that prioritised fuel poverty would seek to upgrade 3.2 million energy-efficient homes whose residents have low incomes. The cost would be around £27bn, delivering annual savings of £3bn.
In principle, the public are very supportive of the idea that there should be a government energy efficiency scheme. Across all adults 77% they were supportive compared to just 5% who were opposed.
However, voters are divided on how any government support on efficiency should be allocated. 40% of respondents preferred such help to be targeted at those on lower incomes, while 54% said it should be available to everyone.
There are significant limits on how much householders are prepared to pay for energy efficiency work. We found 14% of homeowners would not be willing to contribute at all and a further 23% would not contribute more than £250. Only 10% of homeowners said they would be willing to contribute £3,000 or more.
Amy Norman, SMF Senior Researcher said:
“High energy prices could be the new normal, but our current energy policies aren’t set up to help people with what could be a decade of painfully high bills. Our current approach means millions of people are missing out on the help they really need.
“Politicians of all parties should come together to develop workable long-term policies that get help to the people who need it most. That means developing new systems to identify people in need and get help to them: the public sector today simply lacks the tools needed to make sure money to help with energy bills is going to the right places.”
Daisy Powell-Chandler, Head of Energy and Environment at Public First, said:
“Crippling energy costs make the case for action on energy efficiency stronger than ever: we simply cannot afford to go on wasting heat. Radical policy change is required to better understand where the need is greatest and how to support and incentivise Britons to upgrade their homes – while getting financial support to the families who need it now.
“Solving these problems will not be cheap or simple but the pay offs will be myriad: lower household bills, falling poverty, reduced government spending, more jobs, better health outcomes, increased energy security, a lower carbon footprint and cosier homes.”
Dame Clare Moriarty, Chief Executive of Citizens Advice, said:
“Sky-high bills are pushing families who’ve never needed support before to seek help from Citizens Advice. Meanwhile people who were already struggling are being dragged deeper into the red.
“With huge energy costs here to stay, it’s absolutely vital support continues to reach those on benefits. But this research shows the government must also come up with a clear plan to ensure people in need don’t fall through the cracks of current support measures.
“Longer term, we must ensure people can keep their homes warm and their bills down. The best way of doing that is by insulating cold and draughty houses.”
- The SMF report, Energy bill support – interim report, will be published at https://www.smf.co.uk/publications/energy-bill-support-interim-report/ on Thursday 1st December 2022.
Figure: Households spending over 10% of AHC income on energy, by social security eligibility and income decile
Source: SMF analysis of Living Costs and Food Survey. Assumes an average annual energy bill of £3,000.
- This project was commissioned by and is supported by Citizens Advice, with SMF and Public First developing long term policy plans to protect households from high energy prices. For the report and full information about the project, see https://www.smf.co.uk/future-of-energy-bills/
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