Millions of households face another winter of fuel poverty as Ofgem prepares to raise its energy price cap to a three-year high.
Energy consultancy Cornwall Insight expects the cap to rise by 4 percent from October, following a much sharper 13 percent increase in July. The increase will more than wipe out the effect of Prime Minister Andy Burnham’s decision to remove VAT from household electricity bills.
Even Energy UK, the body representing the energy companies, now admits that bills are unaffordable for millions. It says some households need “emergency support” beyond the existing £150 Warm Home Discount and has called for a “better targeted and more agile” scheme.
At the end of last winter, households behind on their energy bills owed suppliers a record £4.7bn. That mountain of debt isn’t the result of millions of people suddenly forgetting how to budget. It’s what happens when wages, benefits and pensions don’t cover the basic cost of living, while heat and electricity are sold as commodities.
Energy UK chief executive Dhara Vyas said: “Suppliers continue to do all they can to help their customers but as well as persistently high bills, record levels of debt show how the current system is failing to provide the right support to those in need.”
The claim that suppliers are doing “all they can” needs taking with a large pinch of salt. They’re doing what they can within an energy system organised around private profit. Under capitalism, energy isn’t supplied according to social need. It’s sold to those who can pay, while those who can’t are pushed into debt, forced to ration heating or made dependent on limited state support.
Wholesale prices have risen since the US-Israeli war of aggression against Iran began in February. Heatwaves across Europe have also increased demand for electricity to power air conditioning and other cooling systems. Energy markets are tied directly to imperialist conflict and a climate crisis created by capitalism, but the risks are passed down to workers through higher bills.
The earlier energy price explosion following the Russian intervention in the Ukrainian civil war wasn’t an unavoidable act of nature either. The British government voluntarily backed sanctions that drove cheap Russian gas out of the European market. Britain and the rest of Europe then became more dependent on expensive liquefied natural gas shipped from abroad, much of it supplied by US companies.
This was a political choice. The British ruling class placed its alliance with Washington and its wider imperialist strategy above affordable energy for the population. US gas exporters gained a lucrative market, while British workers were told to accept soaring bills as the unavoidable price of events overseas. Around £40bn of public money was then committed to supporting household bills, effectively using the state to keep money flowing through the energy market after government policy had made prices unaffordable.
The present Warm Home Discount gives a one-off £150 rebate to around six million people receiving means-tested benefits. It has increased by just £10 over the past decade, despite the enormous rise in energy costs.
The rebate is also funded through a levy on energy bills. Rather than making the energy companies or the wider capitalist class pay, the scheme largely redistributes money between different groups of consumers. Workers are made to subsidise other workers while private ownership and market pricing remain untouched.
Energy UK says another 2.5 million people need help because medical conditions or poorly insulated homes force them to use more energy. Its proposed “social discount” would combine information about people’s income, health and energy use to provide adjustable support. The scheme would cost £1.9bn and could provide some households with as much as £450.
That would offer real short-term relief to people facing impossible bills. But its basic purpose would still be to help households meet prices set by the capitalist energy market, rather than challenging why an essential service has been made unaffordable in the first place. It would also divide people into tightly means-tested categories, forcing them to prove sufficient poverty, illness or energy need before receiving help.
Energy UK has suggested funding the scheme either through another levy on bills or through general taxation. Unless the cost is imposed directly on capital, both approaches leave workers paying for a crisis they didn’t create.
National Energy Action chief executive Adam Scorer said: “We desperately need a new approach.”
“There will be a lot of detail to get right, but if government genuinely wants to provide breathing space for people in fuel poverty, it needs to take this challenge on and work with energy companies and charities to design something truly fit for purpose.”
The energy industry wants the state to provide just enough “breathing space” to keep households paying bills that it admits are unaffordable. Britain’s rulers chose sanctions, expensive US liquefied natural gas and deeper involvement in imperialist conflict. They’ve left the working class to cover the cost through higher bills, debt and taxes while the structure of the energy market remains safely intact.
