The price of power is a country shivering in the dark
Surging energy costs and political squabbles cast a dystopian spectre over Britain’s future
THIS is the stuff of dystopian nightmare: swathes of our towns and cities gone dark as the power fails and basic services cease to function.
Welcome to the United Kingdom, as a disturbing power vacuum sweeps over the land, and our leaders prevaricate in the face of catastrophe.
The power itself is not failing; the infrastructure so essential to 21st century living remains intact. Soaring energy costs, however, have simply left people’s ability to pay far behind.
As the lights go out, so too does access to the basic amenities of our ever-online, digital modernity. No gas means no heat for homes or for cooking; no electricity means no television, no internet, no mobile phones, no communications, nor any of the tasks we use them for in our everyday lives.
Of course, not everyone faces this terrible ‘energy famine’, not in notoriously unequal Britain. For some, the lights stay on; the 21st century continues apace.
As the cold and the dark and the hunger crash through our neighbourhoods, all while we see those brightly lit affluent spaces taunting us from afar, the question becomes: what happens next? States have fallen for less. Does the spectre of civil unrest haunt the urban realm?
We hope this is fiction. But as the cost-of-living crisis deepens, and energy prices continue to abandon the spending power of mere mortals, one has to wonder. Many voices are crying out, something needs to be done.
People are feeling it, and then some. This is no longer a simple — and cruel — calculus of whether to eat something or turn on the heating; it is now a question of skipping both in a desperate struggle to make ends meet.
It must be noted, however, that austerity and welfare reform had already left plenty of people struggling to get by and sinking deeper into poverty long before the advent of this current crisis. These were, of course, marginalised people — or people who could be conveniently marginalised — whose voices and experiences counted for little in the wider schemes of UK politics.
Not so now, as the crisis crawls up the social scale; clawing its way through the lives and finances of households hitherto getting by. It’s not just the ‘skivers’ getting shafted; it’s the ‘strivers’ too.
There’s a strong sense of urgency; just not among those who stalk the corridors of political power, whose hands may yet craft some meaningful response to the crisis. We watch, knowing full well our fate, while we wait for the politicians to act.
“The cost-of-living crisis is already having a devastating impact on people’s lives,” said Morgan Wild recently, head of policy at Citizens Advice. “Every day we hear from people who can’t afford to turn the lights on or cook their kids a hot meal.
“The Government did the right thing by bringing in targeted support, but it won’t be enough for people to manage these previously unthinkable price hikes. The obvious place to start is to increase benefits to keep pace with the cost of living. There’s no time to waste.”
Winter is coming
Come Winter, the next bombshell drops.
In October, regulator Ofgem is widely expected to raise the cap on energy prices resulting in another massive hike in household bills. We won’t know the exact figure until later this month, but on past form it’s likely going to hurt.
Back in April, the rate for default tariffs paid by direct debit shot up from £1,277 to £1,971 for the average annual bill. For those on prepayment meters — which penalise the poor by charging a higher rate — the figure rocketed from £1,309 a year to £2,017. Ouch doesn’t even begin to cover it.
Earlier this month, regulator Ofgem confirmed it will review the price cap every three months, instead of six as was the practice previously; so, we can look forward to a further hike in January.
What can we expect? According to forecast figures released by thinktank Cornwall Insight, the only way is up — and then some.
Its forecast for October predicts an average annual bill of £3,582. Come January, it suggests a further rise, leading to an annual household bill equivalent to £4,266 for the three months to March 2023. Sour news for us all; devastating for those on low incomes.
“Ultimately energy has to be paid for in full and the price cap has to reflect the costs to the supplier of buying it wholesale and supplying it to homes, which makes up most of people’s bills,” says Ofgem. “The price cap is also not a cap on the maximum bill a household can be charged, which is based on their usage.”
So, use less to (still) pay more?
Jonathan Brearley, the regulator’s chief executive added: “The trade-offs we need to make on behalf of consumers are extremely difficult and there are simply no easy answers right now.”
Cold comfort for consumers at the sharp end, of course. Technocratic managerialism doesn’t mean much, when the wolves are howling at the door.
“No one should struggle to get by in one of the richest countries in the world,” said Frances O’Grady, general secretary of the Trades Union Congress (TUC). “But up and down the country, millions of families are being pushed to the brink by eye-watering energy bills. With prices set to skyrocket even further, it’s time to say enough is enough.”
Come next year, the trade union body warns, energy bills in the UK might well gobble up the equivalent of two months’ take home pay. Well, that’s if you’re on the Bank of England’s forecast for next year’s average salary after tax: £2,054 a month (£24,628 a year).
Many of us aren’t, of course; averages hide much. Pensioners, people claiming benefits, and low income workers (some of them reliant on social security support to top-up their pay) will find themselves paying considerably more than the equivalent of two months’ worth of their incomes. That’s if they can afford to pay at all.
Government — especially outgoing Prime Minister Boris Johnson and the contenders to succeed him, Rishi Sunak and Lizz Truss — need to “wake up to the size of this crisis” and deliver a “pandemic-scale intervention”, O’Grady said.
As part of its analysis of this sorry state of affairs, the TUC presented its own proposals to help them get the ball rolling, should they feel so inclined.
“Ministers must cancel the catastrophic rise to energy bills this Autumn. And to make sure energy remains affordable to everyone, they should bring the energy retail companies into public ownership,” she added.
“Ministers should also act to boost pay — as well as Universal Credit, pensions and the minimum wage by bringing forward planned increases to October. And they should fund it through a bigger windfall tax on the obscene profits of energy giants.”
Trade unionists aren’t the only ones demanding change. Towards the end of July, the Business, Energy & Industrial Strategy Select Committee of MPs published its report on the energy market and the future of energy pricing.
“Once again, the energy crisis is racing ahead of the Government,” said committee chair, Darren Jones MP. “To prevent millions from dropping into unmanageable debt it’s imperative that the support package is updated and implemented before October, when the squeeze will become a full-on throttling of household finances and further tip the economy towards recession.”
The Government’s Energy Bills Support Scheme provides a £400 discount on energy bills in October for every household, a £650 means-tested one-off payment to eight million low-income households, £150 for those on disability benefits and £300 for pensioners. But as the committee pointed out, this was designed when the forecast for the October price cap was a ‘mere’ £2,800.
“We were told by a number of witnesses, ‘if you think things are bad now, you’ve not seen anything yet’,” Jones added. “This Winter is going to be extremely difficult for family finances and it’s therefore critical that public funds are better targeted to those who need it the most.”
On the longer term, the MPs have called for a massive retrofit programme to insulate Britain’s homes. It also calls for the scrapping of the price cap approach in favour of the introduction of discounted social tariffs for vulnerable customers and a relative tariff for the rest of the market.
Furthermore, the MPs called out the “injustice” of vulnerable people unable to pay their bills being moved on to more expensive prepayment meters. This is “unacceptable”, says the report.
The potential scale of the crisis is terrifying. Some 15 million people — over half of all UK households — will be plunged into fuel poverty by January 2023, according to a study by academics at York University.
They define fuel poverty as having to spend over 10% of net income on fuel. On this measure, people living in the poorest and coldest regions of the UK will be the worst affected, along with those who are already “most likely” struggling with the cost of living.
Some of the worse-off regions include Yorkshire and the Humber, where it claims 58.5% of households will be plunged into fuel poverty, even with the Government’s £400 fuel rebate. In London, 47.5% and in Northern Ireland 71.7% face the prospect of fuel poverty. More than 80% of large families, lone parents and pensioner couples will be hit, the authors calculate.
Similarly, back in July the Joseph Rowntree Foundation (JRF) warned it will be “virtually impossible” for Britain’s poorest families to pay their energy bills next year without significant support.
“People who rely on social security have been put through the wringer this year and many will wonder how things could get any worse,” said Peter Matejic, the JRF’s director of evidence and insight. “Unfortunately, our research shows this is exactly what could happen if the Government doesn’t take further action to protect those most at risk.
“With energy bills an increasing percentage of people’s outgoings, the deprivation so many have felt this year will be compounded. That means more meals skipped and more people going cold or hungry.”
After housing costs (themselves an eye-watering strain for many households), the JRF’s analysis found that low-income families will burn 26% of their income on gas and electricity next year, compared to just 12% two years previously. Middle income families will use 11% of their income to meet the same costs, rising from 4% two years ago.
Worse still, the JRF claims some households will need to spend two thirds of their income on energy bills next year. A single, childless, working-age person on a low income can expect to pay 67% if they consume the same amount of energy as in 2021/22.
Furthermore, working-age, lone-parent, low-income families will lose almost a third (35%) of their income to energy bills, and pensioners on low incomes will pay out over a fifth (22%) of their income if they consume the same amount of energy as in 2021/22.
This means they will face an impossible choice of living in a cold home, going without something else essential, getting behind with bills, or getting into debt.
“One of the simplest ways to relieve the burden on poorer households is to stop deducting debt repayments from benefits at unaffordable rates,” Matejic added. “This practice makes an already inadequate rate of social security even lower still.
“In addition, the government should increase basic Universal Credit entitlements to ensure it always, at a minimum, enables people to afford the essentials when they fall on hard times.”
Crisis, what crisis?
Life isn’t so tough for some, though.
The big energy companies, it turns out, are not exactly feeling the pinch; nor is there much apparent sense of urgency within Westminster’s corridors of power.
The rest of us might be counting the pennies, worrying we won’t have enough to keep the ‘lecky on, but shareholders and senior executives are divvying up the billions in profits. Certainly, the industry chiefs who gathered for a cosy chat with Boris Johnson this month are far from facing a cold, dark winter.
As The Guardian noted, Eon reaped £3.4 billion profits in the first half of 2022; National Grid £3.4 billion in the 2021–22 financial year; Centrica took in £1.3 billion in the first six months of this year; however EDF made a £4.5 billion loss — but then it is owned by the French government, which made the decision to shield its citizens from soaring prices.
If a comment from industry body Energy UK is anything to go by, the meeting with the Prime Minister went well enough, at least from its perspective.
“The latest bill projections for this winter are extremely worrying: both the Government and the energy sector know that we need to work together and act quickly to put in more support for them,” said Dhara Vyas, the organisation’s director of advocacy.
“While energy suppliers continue to do all they can to support customers, they know that more people than ever will struggle to afford their bills and so the demand for extra help will far outstrip the support that is in place.
“[The] meeting was very welcome and the whole energy sector is committed to working with Government over the coming weeks to see what measures can be put in place to reduce the burden on customers.”
All very stock response; even so the wording and tone doesn’t exactly speak of an industry sweating over its prospects. There’s little worry in boardrooms, it seems, that things here in the UK might go a little French any time soon. Those dividends and executive perks are secure.
As for the two rivals slugging it out to replace Johnson as Conservative Party leader and Prime Minister, getting a grip on their position is slippery. The attitudes of Rishi Sunak and Liz Truss are perhaps most readily described as somewhere between indifferent and ambivalent at best. Both, you might say, are rather more interested in another kind of power.
The same might be said of Labour Party leader Sir Keir Starmer, although in somewhat different circumstances. Of course, he is some two years away from a shot at becoming Prime Minister, whereas it is a certainty that in mere weeks, either Sunak or Truss will take residence in Number 10.
Despite the duo’s various pronouncements over the course of their respective campaigns, it is hard to discern a firm stance on the energy crisis from either contender; it’s anybody’s guess how they’ll tackle the issue come the day they secure their prize.
As for Starmer, he’s dipped his toe in the tepid water, demanding the energy price cap be frozen; a safeguard against further crippling price rises. He’s also calling for a windfall tax on energy companies, a massive home insulation programme, but has stopped short of calling for nationalisation.
Given such demands were already being voiced, he is — dare we suggest? — a little late to the party.
Something certainly needs to be done; unlike the Chancellor of the Exchequer (or big energy firms, for that matter), ordinary people don’t have access to a ‘magic money tree’ that will see them through the crisis.
Little wonder, given the sorry situation, that the JRF and Save the Children, along with 70 further charities, have signed an open letter (see below) to urge the two Tory leadership candidates to treat the matter with the urgency so many feel it requires.
This is nothing less than a national emergency, they declare; one that requires the fullest mobilisation of the State’s resources to see the country through the dark times. You’d think politicians would be up for that: the chance to play hero, staring down the menace and overcoming the odds in the face of dire adversity.
Thing is, one supposes, an energy crisis isn’t all that telegenic. Unlike Johnson playing the Ukraine card for all it’s worth, you don’t get to dress up in combat gear, take part in military training exercises and mock-throw a grenade for the delight of the news media’s cameras. No, it’s grittier than that; more kitchen sink drama than war story kitsch.
Even so, the signatories of the letter urge Sunak and Truss to take heed, show “compassion and leadership” and do what must be done to save the country. One or other will soon have the means and the mechanisms at their disposal, if not the will.
“History shows that, when Britain faces a national emergency, Government is at its best when it steps up and takes determined and creative action to protect people and businesses, often in previously ‘unthinkable’ ways,” said Paul Kissack, the JRF’s chief executive.
“We saw that after the 2008 crash with the nationalisation of banks. We saw it in the pandemic with a generous furlough scheme. The nation faces another national emergency now, and people rightly expect the Government to act to offer protection. Instead, we are seeing a Government asleep at the wheel, and leadership contenders failing to grasp the scale and urgency of the crisis.
“Even before the current crisis the social security system failed to cover the essentials, degraded by years of cuts. People are already selling their possessions, taking on risky debt and building up arrears they may never be able to pay back. And things are about to get far worse.
“Planning for a substantial support package needs to start immediately. Without it, vulnerable people will face a catastrophe on a vast scale when winter sets in. The consequences of sitting idly by are unthinkable.”
Dan Paskins, director of UK impact at Save the Children, added: “When energy bills rocket in the Autumn, families who already have it tough are going to find things even harder. Parents will face impossible choices over whether to prioritise feeding their children or heating their homes. We have signed this letter because the UK Government must do more — and fast.”
There are fearful times ahead. Darkness is coming; hunger is looming. If that sounds over-dramatic, remember — this is dystopian foreboding. Reality likes to mock our dread spectres: the future will be decided by those with power.
S.O.S from a nation in peril
The text of JRF & Co’s letter in full
We believe the impact of the cost-of living crisis on low-income households is the gravest issue our country faces.
So far this year, nearly three quarters of low-income households receiving Universal Credit or other means-tested benefits, many of them working families, have been forced to go without at least one essential. This means people having to skip meals or not being able to heat their homes properly.
Many of our organisations work directly with these families and are becoming overwhelmed, too often unable to provide the support so desperately needed.
This situation cannot be allowed to continue. As the prospective leaders of this country, we urge you to act now to demonstrate the compassion and leadership needed to tackle this issue head on.
We ask you both to pledge that, under your premiership, everyone who needs it will be properly supported when they hit hard times. This means ensuring that, at a minimum, the social security system always provides people with enough to be able to afford the essentials.
Low-income households need urgent reassurance now that they will receive sufficient support to weather the cost-of-living storm as it intensifies further this winter. This means committing to:
Ensuring that low-income households are provided with sufficient support to cope with the average £2,800 rise in the cost of living they face to April 2023. Given the £1,200 in core support committed so far to households on means tested benefits, this means this support should be at least doubled. It should also vary by need, with higher payments for households with higher needs, for instance families with children.
The most efficient way to provide this support would be through further payments through the social security system. Making debt deduction rates from benefits more affordable. Those subject to debt deductions face particularly high levels of hardship. This simple, low-cost action would enable people to keep more of their money and immediately relieve some of the financial pain they are enduring.
You were both senior members of a government that pledged to ensure that the most vulnerable and least well off get the support they need. It is only right that this be your top priority should you take office.
Joseph Rowntree Foundation
Save the Children UK, [along with]
The Trussell Trust; The Children’s Society; The Trade Unions Congress; StepChange Debt Charity; Scope; Age UK; Shelter; Rethink Mental Illness; Macmillan Cancer Support; Mind; Oxfam GB; Action for Children; Centrepoint; Turn2Us; Young Women’s Trust; Royal National Institute of Blind People; Christians Against Poverty UK; FareShare UK; MS Society; Money Advice Trust; Trust for London; Motor Neurone Disease Association; Carers UK; Parkinsons UK; The Money and Mental Health Policy Institute; British Association of Social Workers
The Independent Food Aid Network; Policy in Practice; Lloyds Bank Foundation for England & Wales; Gingerbread; Generation Rent; Nacro; The Food Foundation; Disability Benefits Consortium; End Furniture Poverty UK; PlaceShapers; North East Child Poverty Commission; Children North East; The Bevan Foundation; The Poverty Alliance; The Association of Charitable Organisations; Sustain; One Parent Families Scotland; The Equality Trust; 4in10 London’s Child Poverty Network; Communities that Work; The Mighty Creatives
Karbon Homes; Chartered Institute of Housing; National Federation of ALMOs; Poverty Truth Community; Home-Start UK; Family Fund; We Care Campaign; The Hygiene Bank; Glass Door Homeless Charity; Citizens Advice Scotland; Mencap; Transforming Lives for Good; Leonard Cheshire; Charity Finance Group; Women’s Regional Consortium Northern Ireland; Feeding Britain; UK Community Foundations; APLE Collective; Debt Justice; Greater Manchester Poverty Action; National Education Union
 Source: Joseph Rowntree Foundation (June 2022) Not heating, eating or meeting bills: managing a cost of living crisis on a low income. This surveyed ‘low-income’ households in the bottom 40% of incomes, including the approximately 5.6 million of these that claim means-tested benefits.