Today, 50+ faith, charity and community leaders signed an open letter to the PM, urging further targeting support for the poorest households in response to rising costs. Click here to read the letter.
Having faced the prospect of average household energy costs topping £5,000, it could be easy to overlook the devastating consequences of typical bills reaching £2,500 from October. The doubling of energy costs in less than a year is simply unaffordable to the millions of families that struggle week by week to make ends meet.
With the exception of declarations of war, the government’s 8 September announcement of an energy price freeze is probably the most expensive one-off statement in the history of the United Kingdom. However, its only documentation was a 220-word written statement delivered to the House of Commons two hours late. All this got rather less attention than it would otherwise have received, when the Queen’s death was announced later that day.
On Friday the Chancellor will deliver a “mini-budget”, which may give the details that have thus far been absent. The Office of Budgetary Responsibility has offered to analyse the statement – but extraordinarily the Chancellor has refused, meaning that whatever happens on Friday there will be a strong suspicion that we will not be in possession of the full facts.
Energy costs of £5,000 per household were potentially devastating for many, and they also threatened the stability of the entire economy. Money flows in cycles from households to businesses and government and back again. Huge energy price rises raised the prospect of a downward spiral of millions of people being unable to pay their bills; business losing customers and being unable to pay staff; government losing tax revenue and being less able to intervene.
The Energy Price Guarantee places a floor under that spiral and allows those with the means to plan for the future. It also highlights those families who are going to be left exposed to unaffordable price rises.
We now know that people relying on benefits will substantially worse off next year, and we know that those who are nearest to poverty will not be able to make their budgets work.
The scale of the problem is enormous: an average family of four receiving Universal Credit will need to find £1,400 of the next 6 months to simply stand still. As 47% of adults receiving Universal Credit miss meals because they are unable to afford them – standing still is not good, and fall back is potentially disastrous.
Whilst foodbanks and now ‘warm hubs’ are gearing up to meet what we know will be an extraordinary rise in need, only timely, targeted financial support can hold back the tide of poverty and destitution we will see this winter.
We know that by implementing the Energy Price Guarantee, the government is focussing money on those that use the most energy. This tends to be the those with the most money overall. It is simply not right that those who are struggling the most get the least support. This must be rebalanced, but there is no indication of how that will happen.
There was no mention of any rebalancing or targeted support in the government’s 8 September statement. It may still be coming, but the messages have been mixed. There is political advantage to be had in this mixed messaging, but it comes at the price of families facing worry, uncertainty and making painful decisions to cut back on essentials in the absence of any firm basis to plan from.
In my view, the absence of targeted support will not stand. The huge tide of need will eventually become too difficult to ignore. The question is how much suffering will happen before the obviously necessary policy is put in place.
According to the International Energy Authority, across the world we are extracting more fossil fuels this year than in any year in the history of humanity. We know fossil fuels drive climate change, and despite much vaunted increases in renewables, we continue to use more year on year. In order to increase fossil fuel supply, both 100+ new North Sea drilling licences and an end to the ban on fracking in the UK were announced.
As a nation, we are choosing to extract more fossil fuels. Up until a month ago, the Government agreed with energy experts and insisted that doing this would not change the price to consumers, because fuels are sold on a world market and even big increases in UK production would not shift world prices. The Government has suddenly reversed its position, now claiming that increased UK production will reduce the prices paid by UK consumers. We have yet to see the analysis that supports this change of view.
However, the true cost of ever more fossil fuel production is paid in extreme weather events, failed crops and millions of people being displaced around the world, as the increasing effects of climate change are felt. Upping fossil fuel producing may possibly reduce, by a small amount, the amount we need to borrow to pay for this intervention – but it is borrowing from our future in a much more fundamental way, and a way that is much harder to repay.
Looking forward to Friday’s Mini-Budget
For some the potential crisis is over. The Energy Price Guarantee will make many, possibly most, family’s budgets liveable. But for many others the worst is yet to come. It is the latter group that the mini-budget should be focused on supporting, and who churches must stand beside as we enter a difficult winter.
The central question we need answered on Friday is: will those who are already struggling be able to make ends meet this winter? Will they have enough to live? If not, the new administration’s first (mini) budget, whatever else it holds, should be judged as a failure.