Before Christmas, Ofgem chief Alistair Buchanan was reported as saying that energy companies had improved from a B- to a B+ in their “end of term report card”. It is unlikely that the millions of people frightened to turn up their heating during the recent arctic temperatures would agree with this complacent endorsement.
As Energy Secretary Ed Miliband admitted recently, we should feel ashamed that more than five million households live in fuel poverty in one of the richest countries in the world. Half of these households are pensioners, many of whom are extremely vulnerable to the cold weather. Yet Miliband’s words are meaningless without firm action to back them up and there is clearly a huge job still to be done by the Government in order to reverse the escalating fuel poverty crisis. Meanwhile the energy companies continue to get away with dragging their feet when it comes to helping their poorest and most vulnerable customers.
Progress on offering discounted rates and scrapping unfair pricing policies such as overcharging those who pay by cash or cheque continues to be painfully slow, and unsurprisingly it is the poorest pensioners and families who are suffering as a result. Until the government makes it compulsory for the lowest tariffs to be offered by energy suppliers to all of their fuel-poor customers, the very poorest will continue to get a raw deal.
In his Hugo Young lecture before Christmas, Peter Mandelson spoke of the need for ‘smart government’ to ensure that markets deliver fairness. Surely, there can be no more compelling example of the need for exactly this kind of intervention to end the injustice that means that the poorest pay more for their energy than the wealthy.
There is undoubtedly a very urgent need for radical, long-term measures to be introduced which go well beyond simply papering over the cracks of the government’s failing fuel poverty strategy. This means quickly devising and implementing a new strategy, supported by a fair funding formula that recognises the estimated £9 billion in windfall gains likely to accrue to the energy industry from the EU Emissions Trading Scheme.
Despite speculation that energy prices will start to fall in the spring (and this is by no means certain given the Russian gas crisis), this cannot come soon enough for the millions living in fuel poverty. The government’s £60 one-off payment this month may give some relief to worried pensioners. But the extra £25 cold weather payment triggered by the freezing weather conditions won’t even make it into the pockets of up to 1.8 million eligible pensioners who are not receiving Pension Credit – a fact that appears to have been overlooked by policy-makers.
Many pensioners will have been helped slightly by the recent VAT cut, but with food and energy bills exempt from the reduction, the very poorest will have seen little or no reprieve in their basic outgoings. With these costs taking up such a high proportion of their income, our evidence clearly shows that the oldest and poorest have already been hit much harder than other groups by the double whammy of high energy prices and the economic downturn.
Additional measures to help older savers are of course welcome but should focus on supporting those on lower incomes. Many older people who rely on the interest from savings to top up their retirement income have been left feeling penalised for being prudent and will be anxiously counting the cost of recent interest rate cuts, particularly as so many are already struggling to pay high household bills. Banks and savings institutions should be looking to show they value their older customers in these difficult times. But the government should also be standing up for this group by insisting that banks such as HBOS and RBS, in which it now has a considerable stake, join other financial institutions in offering access to their current accounts through the post office network. Being able to access their money in this way could make a huge difference to millions of pensioners who depend on their local post office, particularly those who lack internet access and live in rural and deprived urban areas where there are far fewer bank branches.
There is a real danger however, that by focusing on measures such as abolishing tax on savings and increasing personal allowances to help older people through the looming recession, the current political debate will overlook the more desperate plight of the 2.1 million pensioners who are struggling to survive below the poverty line. As well as supporting those with modest savings, now more than ever, the government should be focusing its attention on helping the very poorest. Automatically paying the billions of pounds in unclaimed benefits cash to all those entitled, rather than relying on people to claim, would be a good start and could immediately bring millions of pensioners in from the cold.
Gordon Lishman is Director General of Age Concern