Scrapping green levies won’t help the fuel poor

Much of the debate on energy prices has focused on the role that so-called ‘green levies’ have played in contributing to rising costs, as we saw in David Cameron’s announcements yesterday.

Back in party conference season there were already indications that the Conservatives were looking closely at the obligations placed on energy companies and the impact these may have on bills, but pressure has intensified as each energy company announcing price rises has placed the blame squarely on the costs of delivering government policies.

The ensuing political ping-pong has meant that for the past few weeks energy prices – and fuel poverty – have been rarely out of the headlines. Although it’s encouraging that the plight of those in fuel poverty is being recognised, the current discourse has several potentially alarming consequences.

Of most tangible concern is the threat to the Energy Company Obligation, which involves fitting insulation and energy saving measures into the homes of vulnerable customers. It may either be extended over a longer period of time resulting in fewer measures being installed this year or scrapped completely. National Energy Action has long criticised ECO for its regressive approach. However, it is currently the only mechanism available for helping vulnerable households heat and insulate their homes, and is currently the only levy which is bringing real benefits.

With winter approaching, removing this scheme without any suitable alternative would be disastrous. Media headlines claim that all of ECO is directed at helping vulnerable customers and costs are much higher than government predicted. However, the truth is that only £540 million of the assumed £1.3bn is to be directed at vulnerable households and that element is proving by far the most cost effective element to deliver. NEA is urging government to allow the suppliers to spend all of their obligation on Affordable Warmth to achieve lower costs per price of carbon saved and meet the urgent need of keeping our poorest people warmer.

The intense focus on energy prices ignores one important fact: one of the main reasons over 3 million households are in fuel poverty is not because of the price we pay per kilowatt hour (or because of any additional charges on our bills) but because we have some of the poorest quality, energy inefficient housing in Europe.

Over half of the fuel poor households in England live in properties with an abysmally low energy rating of E, F or G and are responsible for over 75 per cent of the aggregated fuel gap which measures affordability of energy. Households classified as fuel poor are much more like to have uninsulated, non-cavity wall types and are much more likely to use an inefficient type of boiler.

It is unhelpful, unnecessary and wrong to position this debate as a virtual battleground where social and environmental objectives stand on opposite sides of the field. While the green and consumer lobbies may differ in their overall objectives, the mechanisms for reaching these objectives are largely sympathetic.

Improving energy efficiency benefits both individual householders and the environment; decreasing our reliance on fossil fuels positively impacts on greenhouse gas emissions and should (eventually) ensure that we can keep the lights on at a price we can all afford.

What we need is an approach that ensures that the costs of energy policies are not disproportionately met by those on lower incomes.  Having an initial protected block of energy consumption that is exempt from levies would help keep bills down and ensure that those on low incomes aren’t paying more than their fair share.

In the long term, it is essential that the government addresses fuel poverty through an ambitious strategy funded directly by Treasury, instead of loading social responsibilities onto private companies. Over the next 15 years the Government will raise around £4bn a year in carbon taxes, while the latest price rises alone will provide an additional £150 million in VAT revenue if all suppliers follow suit.

Channelling this money back into a national energy efficiency scheme could help to take 9 out of 10 people out of fuel poverty, as well as reduce the burden on our health service and improve our local economies.

Jenny Saunders is the Chief Executive of National Energy Action