Fuel poverty gap on the rise

Posted by Ian Carpenter in Personal Finance on 20 May 2013 - Ian is Operations Director at checkmyfile

A Government report reveals mixed results on the impact of energy costs, with less households struggling to meet pay their bills while those who are in difficulty are finding it even harder to make payments.

Research carried out by the Department for Energy and Climate (DECC) suggests that the number of people in ‘fuel poverty’ – defined as spending more than 10% of household income on fuel – dropped by 250,000, to 4.5m in 2011. Good news, but continued focus is required on those with low incomes, who are in danger of not being able to pay their energy bills. The Low Income High Cost (LHIC) measure aims to identify how many fall into this category, with those classified as ‘fuel poor’ falling by 100,000 to 2.6m. The fuel poverty gap, which is measured by calculating the difference between the required spending on energy bills and the average level of spending, has increased over the same period.

The report states that those in fuel poverty, based on the LHIC measure, need their bills to fall by £448 a year in order to lift them out of the classification, an increase of £26 on the previous year. The energy companies are going to have to drop their prices by a significant margin to make this happen.

Energy and Climate Change Minister, Greg Barker, says, “I am very encouraged by this modest fall in the number of households living in fuel poverty. But there is absolutely no room for complacency. There is still an unacceptably high number of people living in cold, damp, unhealthy conditions.”

The financial hardship felt my many has been exaggerated by the financial crisis engulfing most of the world but, whatever the economic climate, those living in a developed country like the UK should not have trouble meeting their energy bills – more needs to be done both by the government and the private sector to provide assistance where it is needed most.

Ian Carpenter is Operations Director at checkmyfile, has a degree in Business Studies, and is a Graduate Member of the Institute of Credit Management. He can be contacted at ian.carpenter@checkmyfile.com

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