Plan to cap energy costs will not stop social housing tenants slipping into spiral of debt to fund fuel bills

Research undertaken by Peabody found that even as early as April this year, one in 10 residents were borrowing from short-term lenders to pay bills and even with today’s announcement, costs this winter will still be significantly more than they were six months ago suggesting many more people will go into debt to pay for the basics. According to the Institute of Fiscal Studies, one in four of the poorest households will still face a rise in bills of more than £1,800 if they can’t reduce usage.

Around 80 per cent of residents surveyed earlier this year were already turning their heating off or down when they would usually have it on and almost half (42 per cent) were spending less on food to compensate for the rise in fuel bills. More than 40 per cent were restricting heat use and spending less on food, neither heating nor eating adequately.

While the cost-of-living package announced by the previous chancellor and today’s news will be a lifeline for some, a report published by Peabody says more needs to be done. It makes several recommendations, calling on Ofgem and the government to make changes that will address injustices faced by those on the lowest incomes.

With almost half (42%) of social renting households using a prepayment meter, Peabody says the increasingly expensive standing charges for meters that disproportionately impact those on the lowest incomes should be abolished. Social housing tenants are over twice as likely as private rented tenants to have prepayment meters, and over 10 times as likely as owner occupiers.

They also say the smart prepayment meter rollout needs to be sped up to make it easier for people to switch to paying by direct debit if they want to and call for the implementation of a social tariff which would bring the cost of using a meter to the same level as direct debit customers.

While the government has announced that there will be a fund to help heat network customers (those who do not have a direct relationship with their supplier), Peabody believes there needs to be more regulation to protect residents longer term from volatile energy markets. A price cap would prevent residential customers from paying more than they would if they were not on a heat network, and more should be done to protect non-profit heat providers from volatile wholesale markets. In addition, little guidance has been provided to heat network suppliers like Peabody on how to pass on the £400 discount to customers.

Ian McDermott, Chief Executive of Peabody, said: “While we welcome announcements today that will make some difference to people’s energy bills, more needs to be done to tackle the injustices faced by people on low incomes, particularly households with prepayment meters who pay more for their energy. There is no justification for this. 

“Our customers were worried about the cost of energy long before the current crisis, with many already making the stark choice between heating and eating. With more than one in 10 people saying they have borrowed from short-term high-interest lenders to pay their energy bills; I am extremely concerned about rising debt and the impact this will have on people’s mental and physical wellbeing. 

“Alongside the energy price guarantee, Ofgem and government could act now to address the unfairness built into the system and make a real difference to our residents and others on low incomes.”