Energy UK, the suppliers’ trade body, demands immediate government action to help households pay their bills. Prices have just risen by 4 percent; forecasts point to another rise of 16 percent in January. Delay, the suppliers warn, will produce a longer, deeper and more costly crisis. They give us a particularly instructive figure: the cost of customer debt already adds £67 a year to everybody’s bill.
Let us follow that £67. Households cannot meet the charges. They fall into debt. The cost of that debt is added to the charges paid by other households, including those already struggling to pay. The inability to afford energy becomes a reason to make energy dearer. An excellent arrangement—for producing further debt.
The October increase affects households in England, Scotland and Wales on variable tariffs covered by Ofgem’s price cap. At these rates, a typical household using gas and electricity and paying by direct debit would pay £1,723 over a year, about £60 more than before. Cornwall Insight forecasts £1,999 from January. Around 20 million households are on variable tariffs affected by the cap.
Observe what is being capped. The regulator fixes a maximum price for each unit of gas and electricity; the household’s total bill depends on how much it uses. Its income imposes another limit, one which the price cap cannot oblige the supplier to respect. A regulated price can still be a price the customer cannot pay. For the poorest households, the distance between these two limits is measured in debt.
Adam Scorer, chief executive of the fuel poverty charity National Energy, describes precisely what is happening:
“[The increase in debt is] not more people getting into debt, that’s more poor people getting into more serious levels of debt.”
The distinction deserves attention. An account of rising debt which leaves out the people owing it leaves out the substance of the crisis. Those already unable to meet their bills are being driven further behind. A new increase reaches them with the old debt still outstanding; money needed for current consumption must also answer the claims of past consumption. The household needs heat today, and owes money for the heat it needed yesterday.
“Until you do something about that, there’s no way forward, there’s no breathing space, there’s no future for households who can’t see their way beyond debt,” Scorer says.
Now the suppliers themselves appeal for intervention. EDF Energy’s boss, Simone Rossi, warns that Britain is “walking into a second energy crisis”. Dhara Vyas, Energy UK’s chief executive, recalls the rise in bills in 2022 following Russia’s intervention in the Ukrainian civil war:
“We cannot afford to wait for the same scale of crisis before acting again. We must heed the lessons from that time,” she says.
Certainly, the households sinking into debt have no reason to wait. But the suppliers have an interest of their own in preventing this crisis. Their business requires customers capable of paying. However necessary the energy supplied, however much the household needs it, an unpaid bill remains an unpaid bill. The trade body asks the government to act where the customer’s income fails. Public assistance can relieve the household’s distress and enable the supplier to collect its charges. Both consequences belong to the same transaction.
There is no mystery in this agreement between the businesses and a fuel poverty charity. People need help to obtain heat; businesses need help to obtain payment. When the suppliers recommend action, we should read their proposals with this relationship in mind. Their concern becomes particularly urgent when debts have grown large enough to add £67 to the average annual bill.
Energy UK wants targeted support beyond the £150 Warm Home Discount provided to people on benefits, eventually leading to a discounted social tariff. It wants debt relief for the most severely affected households, together with measures to prevent debts accumulating among new tenants and homeowners. These measures could make a substantial difference to people who cannot meet their bills. They would also help restore payments within an industry whose customers are increasingly unable to afford what it sells.
The trade body further proposes removing more levies from electricity bills and transferring them to taxation, as part of a wider move towards electrification. A charge transferred to taxation still has to be met. Whether this benefits working people, and by how much, depends on which taxes supply the money and which classes pay them. The phrase “the taxpayer” is very convenient here: it gathers the worker and the wealthy owner under one name, although they have very different means and interests.
Some assistance has already been provided. VAT on electricity bills was cut on Thursday; some levies were cancelled or moved into taxation earlier this year. Energy UK acknowledges these measures and says that higher wholesale prices have wiped out the savings. It attributes those prices partly to the US-Israeli war on Iran and disrupted shipping through the Strait of Hormuz. The relief is consumed by the next increase.
The suppliers face higher purchasing costs. Accept that explanation in full. It explains why supplying energy has become more expensive; the decision about who must bear the expense remains. Under the existing arrangement, the additional cost reaches households through their tariffs, the poorest households sink further into debt, and the cost associated with debt returns through everybody’s bills. International disruption enters the home as a demand for money. The household has no control over the disruption and must nevertheless settle the account.
Here the ownership of the industry acquires a very practical meaning. The household consumes energy because life requires it. The supplier sells energy because its business requires payment. Government intervention is called for when these requirements can no longer be reconciled through the household’s income. Assistance may be urgently necessary, but every new rise can reopen the same difficulty. The promise of “breathing space” describes the temporary character of the remedy rather well.
Under socialism, energy held in social ownership and organised through planning could be funded around the requirement to maintain household supply. The costs of imported fuel, transport and disrupted supplies would enter the plan; decisions about household contributions, public funding and investment would be made together. A loss of income could be met by reducing what a household was required to contribute, with the cost met from social resources. The need for heat would continue to determine provision when the household’s ability to pay had failed.
This would give debt relief a different place in the organisation of energy. Cancelling arrears while allowing new unaffordable charges to replace them leaves the conditions for debt in operation. Planning would have to address those conditions: the relationship between incomes, the cost of a necessary supply, and the resources available to fund it. Collective control would also permit investment in electrification to be considered alongside supply and household needs, instead of making the electricity bill carry whatever charges happen to be assigned to it.
Such an arrangement requires workers to exercise power over the industry and over the distribution of its costs. The supplier’s programme asks the existing state to help households remain paying customers. Social ownership would give those households, as members of the working population, a claim over how the service itself was organised. That is the significance of changing ownership. It changes who decides what the money is for.
“We’re looking at any measure that can give people breathing space, that can take the pressure off,” says Prime Minister Andy Burnham. He accepts that the cost of energy, petrol and diesel is “very difficult indeed”. Vyas warns that last-minute emergency interventions risk poor targeting and greater expense. There is already an October increase, a January forecast, and a mounting burden of debt. The government has ample material on which to act.
Working people have every interest in obtaining the proposed relief. They should also recognise how modest a concession the suppliers are seeking from the state: help customers pay for a necessity which the suppliers continue to sell as a commodity. The £67 tells us how this trade in a necessity proceeds. Families’ inability to pay has itself become another item for families to pay.
