Memorandum submitted by the Citizens Advice
Bureau
EXECUTIVE SUMMARY
1. Citizens Advice is very pleased to be
able to contribute to the select committee's timely inquiry into
the uncompetitive character of the energy market and energy prices.
Our comments focus predominantly on part of the inquiry which
deals with "progress in reducing fuel poverty and the appropriate
policy instruments for doing so." In particular, we consider
the impact that rising energy prices have had on CAB clients,
who are often among the most vulnerable members of society, and
the consequent growth in the level of fuel debts.
2. The recent anouncements made in the 2008
Budget statement were very welcome since they heralded a determination
to secure a narrowing of the differential between fuel prepayment
meters and other prices, an increase in the Winter Fuel Allowance,
and plans for a significant increase in fuel suppliers' social
programmes. The three-fold increase in the amount spent on social
programmes by suppliers—from £50 million a year at
present to at least £150 million per year over the period
ahead—offers the potential to make major progress in tackling
fuel poverty. Yet to truly make a difference it will be imperative
that this increase in spending is overseen to ensure that it is
spent in the most effective ways.
3. In our view the interventions announced in
the Budget statement are overdue and very much required. Citizens
Advice has for some time called for more action to help those
on low incomes who are struggling to cope with rising fuel bills,
for example by calling on fuel companies to equalise the difference
in tariffs between prepayment users and direct debit customers.
4. CAB evidence shows that many people are struggling
to heat their homes and that a broad and sustained programme of
remedial measures is taken to tackle this problem and supplement
the announcements made in the recent Budget. This should comprise:
— extension of the Winter Fuel Payment
to other vulnerable groups who currently are excluded from the
scheme;
— a comprehensive benefit take-up campaign
be launched—this approach has a proven track record in delivering
significant benefits to large numbers of people in fuel poverty
in the most cost-efficient manner; and
— an increase in the funding of the
Warm Front programme, plus resolution, as a matter of urgency,
of the significant problem of funding shortfalls for Warm Front
and the consequent need for top-ups from eligible consumers, which
currently undermines the impact of the programme.
INTRODUCTION
5. The Citizens Advice service provides free,
independent, confidential and impartial advice to everyone on
their rights and responsibilities. It values diversity, promotes
equality and challenges discrimination. The service aims: to provide
the advice people need for the problems they face; and to improve
the policies and practices that affect people's lives.
6. The Citizens Advice Bureaux (CAB) network
is the largest independent network of free advice centres in Europe,
providing advice from over 3,200 outlets throughout Wales, England
and Northern Ireland. We provide advice from a range of outlets,
including GPs' surgeries, hospitals, community centres, county
courts and magistrates' courts, and mobile services both in rural
areas and to serve particular dispersed groups.
7. In 2006/7, the CAB service dealt with 5.7
million enquiries on the whole range of issues bureaux give advice
on, including 1.7 million on debt.
8. The CAB service has seen a significant increase
in inquiries on fuel issues over recent years. In 2006/07 we received
60,000 new enquiries specifically about fuel debts—an increase
of 33% on the previous year. In addition, the service dealt with
47,000 enquiries about a range of other fuel matters, a 74% increase
on 2005/06.
THE IMPACT
OF RISING
PRICES ON
CONSUMERS
9. The recent spate of large price rises announced
by all the major fuel suppliers means that consumers have seen
massive rises in their annual energy bills, with energy prices
currently about 50% above their 2003 levels in real terms. Such
hefty price rises are hitting vulnerable people and those on low
incomes particularly hard, especially since they have been accompanied
by rises in other essential expenditure—rises which show
no sign of slowing, for example water and sewerage bills are set
to rise by an average of 5.8% for the average household from April
2008 while council tax bills will increase on average by 4.0%
in England in 2008-09.[39]
10. Benefit income and wages have failed to
keep pace with such increases and their impact can be seen in
the significant rise in the number of enquiries relating to fuel
debt and disconnection dealt with by Citizens Advice Bureaux.
Annual statistics released by Citizens Advice for 2006-7 reveal
that many hundreds of thousands of people are increasingly struggling
to meet their day-to-day living expenses, with problems relating
to gas and electricity debt shooting up by 33% on the previous
year. More recently, new figures released by Citizens Advice about
debt problems dealt with in the first two months of 2008 reveal
continuing increases in problems relating to basic essentials
such as gas and electricity, water, telephone and council tax
debts.[40]
11. In addition, energywatch found that a comparison
of the same three-month period in 2004 and 2007 shows there has
been a 64% rise in consumers owing more than £600 on their
electricity bills and an 19% rise in consumers owing more than
£600 on their gas bills.[41]
12. Large price rises have reversed some of
the progress previously made in eradicating fuel poverty, with
the Fuel Poverty Advisory Group's (FPAG) annual report 2007 stating
that "it is likely that in 2007 there were about 2.9m households
and 2.3m vulnerable households in fuel poverty in England—the
highest levels for nearly a decade."[42]
13. The increased flow of individual cases reported
by CABx describing how clients are struggling to make ends meet
demonstrates the difficulties faced by people on low fixed incomes
in attempting to cope with massive rises to their fuel bills:
A CAB in Buckinghamshire reported that their
client, a man with long term physical and mental health problems,
came to the CAB for money advice since he had a number of priority
debts to sort out. The client is in receipt of short term, lower
rate incapacity benefit of £59.20 per week but his ongoing
payments for gas, electricity and water account for approximately
half his weekly income. Since it is difficult for him to meet
essential expenditure and have sufficient available income to
offer creditors, he has made the decision to not use his gas heating
as he says he cannot afford to pay this and his other priority
commitments.
A Lincolnshire CAB reported a case in which their
clients, a young couple in their twenties in rented accommodation
with good jobs and a 2-year-old child, had been managing to repay
debts which they had previously accumulated. However, the spate
of recent household fuel rises have tipped the balance of their
precarious finances and pushed them into a state where they cannot
afford to maintain their repayments at current level. As a consequence
they are sinking deeper into debt.
A Leicestershire CAB client, a disabled man in
his fifties, came to the bureau for assistance because he was
extremely worried about paying his electricity bill. His electricity
supplier had increased their prices by 34% in the last year, meaning
that the client was now unable to afford regular electricity payments
and was faced with the prospect of getting into debt or self-disconnecting
from his electricity supply.
A CAB in Buckinghamshire reported that their
client, a man with long term physical and mental health problems,
came to the CAB for money advice since he had a number of priority
debts to sort out. The client is in receipt of short term, lower
rate incapacity benefit of £59.20 per week but his ongoing
payments for gas, electricity and water account for approximately
half his weekly income. Since it is difficult for him to meet
essential expenditure and have sufficient available income to
offer creditors, he has made the decision to not use his gas heating
as he says he cannot afford to pay this and his other priority
commitments.
A CAB in the East of England saw a disabled client
who was living in fuel poverty. The client was in receipt of Disability
Living Allowance (DLA) and Income Support and relies on storage
heaters to heat her home. Her total cash income is approximately
£70 per week. Out of this she is paying throughout the year
in excess of £30 per week on her electricity. If she did
not have DLA she would find it difficult to afford any heating
to speak of at all. The client felt that she had to choose between
being cold and being hungry.
POLICY RESPONSES
TO FUEL
POVERTY AND
RISING PRICES
14. The government has set itself the extremely
challenging target of abolishing fuel poverty for vulnerable households
by 2010 and for all households by 2016—we would argue that
it needs to give itself the tools to give it a fighting chance
of meeting this target.
15. As we state above, we welcome the measures
contained in the recent Budget statement including the rises in
the Winter Fuel Payment, the commitment to reduce the differential
between prepayment meters and other means of payment and plans
for a significant increase in fuel suppliers' social programmes.
16. We recommend a number of complementary measures:
extending eligibility for the Winter Fuel Payment; launching a
comprehensive and sustained benefits take-up campaign; and increasing
the funding for Warm Front and reviewing the way it currently
works in order to overcome present shortcomings.
EXTENDING ELIGIBILITY
FOR THE
WINTER FUEL
PAYMENT
17. Citizens Advice welcomed the increases in
the Winter Fuel Payment, as announced in the 2008 Budget Statement.
These increases will certainly be welcomed by pensioners. However,
it is important to note that while the Winter Fuel Payment is
highly valued by many pensioners it is a very poorly targeted
benefit, with all pensioners—regardless of income—entitled
to it. It is therefore understandable that proposals for more
targeted use of this money to alleviate fuel poverty has been
advanced, for example the Fuel Poverty Advisory Group (FPAG) has
suggested discontinuing Winter Fuel Payments for higher rate tax
payers, which would free up over £200m pa which could be
used to fund increases in the Warm Front programme.[43]
In our view, this proposal has much to recommend it provided that
such a change to a system based on means-testing does not adversely
affect levels of take-up among eligible pensioners.
18. We also recommend that consideration is
given to extending eligibility to winter fuel payments to other
groups who may live on low benefit incomes and struggle to afford
their fuel bills. Such groups might include people under 60 years
of age including disabled people, people with a long-term illness,
and households with young or disabled children. This measure would
provide help to such groups in the short-term. Over the longer
term it would be preferable to look at raising levels of benefit
income, or perhaps consider uprating benefit levels more closely
to fuel prices.
LAUNCHING A
COMPREHENSIVE BENEFITS
CHECKING SERVICE
19. The government should consider proper funding
for holistic benefits advice, which would allow people to claim
benefits currently unclaimed as well as providing information
about getting a better energy deal, helping with energy efficiency
measures etc. Government research has shown that "income
improvements were the most important factor in reducing fuel poverty",
with 61 per cent of the reduction in fuel poverty since 1996 attributable
to improvements in incomes.[44]
Funding holistic benefits advice is therefore the most efficient
way of tackling fuel poverty and this exercise would go a long
way towards putting extra money in people's pockets and enabling
them to pay their bills with dignity.
20. Citizens Advice Bureaux already provide
a great deal of advice to clients when helping them to resolve
their problems. In 2006-07 bureaux dealt with more than 5.7m problems,
helping approximately two million clients. Additional funding
for holistic benefits advice would enable bureaux to supplement
this with proactive benefit take-up campaigns, targeting people
who may not visit bureaux and who may be unaware they are missing
out on benefit income that they are entitled to. Information about
the impact that such campaigns can have and the key factors necessary
for successful campaigns is provided in Serious benefits—the
success of CAB take-up campaigns, (Citizens Advice, April 2003).
21. Such efforts are very much needed, with
official estimates suggesting that up to four in 10 pensioners
entitled to pension credit are not getting the extra cash they
are due, and that as much as £2.5 billion went unclaimed
in the financial year 2005/06, the most recent year for which
figures are available.[45]
The amount of Housing Benefit and Council Tax Benefit not being
claimed is also large, and take-up of these benefits has actually
declined in recent years.
22. Recently three Citizens Advice Bureaux have
started to work in partnership with Ofgem, the energy regulator,
to pilot a campaign to (i) make sure people are getting the best
deal for their energy and; (ii) to provide information about what
help is available from the energy industry and government for
people struggling to pay gas and electricity bills. This work
is particularly focussed on encouraging people with prepayment
meters to exercise their ability to switch supplier to get a better
deal. The pilots are targeted at frontline workers (eg CAB advisers
and housing association advisers) who can spread the message to
people they deal with as part of their everyday work, as well
as to customers themselves.
23. Learning from these small-scale pilots is
likely to be invaluable in coordinating efforts to target a range
of help and assistance with affordability of fuel to third-parties
and customers.
INCREASED FUNDING
FOR WARM
FRONT PROGRAMME
PLUS REVIEW
OF CURRENT
OPERATION
24. In the Comprehensive Spending Review it
was decided to cut the annual Warm Front budget by nearly 25%
for the period 2008-2011. The decision to cut one of the government's
principal means of tackling fuel poverty in England was deeply
regrettable at a time when rising fuel prices have pushed the
numbers of people living in fuel poverty to their highest for
almost a decade.
25. Warm Front annual expenditure should, in
the 2008-11 period, be restored to at least its 2007-08 level
of £350m per annum. The Fuel Poverty Advisory Group (FPAG)
has suggested a number of sources where funding for this expenditure,
and we would encourage government to look closely at the options
outlined.
26. Although very supportive of the Warm Front
programme in principle, many Citizens Advice Bureaux have reported
difficulties experienced in the operation of the scheme. This
issue was debated in Parliament on 3 March 2008 and the problems
highlighted mirror many of those experienced by CAB clients. In
general, the problems with Warm Front relate to the costs quoted
by authorised contractors for carrying out work, the failure of
the Warm Front grant to cover the cost of work required and the
consequent need for applicants to find substantial sums to `top-up'
the grant. The following cases highlight these difficulties:
A CAB in the West Midlands reported that their
client, aged 69, came to the bureau as his boiler stopped working
in December 2007 and he had no hot water or heating during the
coldest months of the year. The client had received independent
estimates for a replacement boiler and was advised that the cost
would be between £1,300—£1,700. He was then told
by a friend that he might be entitled to a Warm Front Grant to
assist with payment. The client therefore made an application
to Warm Front and was informed that he had qualified for a Grant
of £2,700. Given that he expected the grant to easily cover
the cost of the new boiler, the client also asked for replacement
radiators as his were over 20 years old. The client was sent a
letter from Warm Front, stating that the total cost of the work
recommended would be £3,821.81, meaning that the client needed
to pay £1,255.36 towards this figure.
A CAB in County Durham reported a case in which
their client, aged 63 and in receipt of pension credit, received
a Warm Front grant for the cost of installing oil-fired central
heating worth £4,000. However, the total cost of the work
was £6,960.67 so the client was expected to find the excess
of £2,960.67 before the work could be carried out. The client
could not afford to pay nearly £3,000 and so had to continue
living in an inadequately heated home. The client contacted a
local heating company that informed her that in their estimation
the work should cost approximately £4,000.
A Middlesex CAB's client reported a distinct
difference between the prices quoted by local heating engineers
and the Warm Front approved contractor. The client, a widowed
female, aged 79 and in receipt of Pension Credit, was awarded
a Warm Front grant of £2,700 but the cost of the work was
£3,460.63, with the balance to be paid by client. The client
was unhappy with this quote as she had also obtained quotations
from local companies, the highest of which was £3,100. The
client was also understandably concerned that the Warm Front approved
contractor was based almost 300 miles away in Sunderland, and
she might therefore experience problems contacting them if anything
were to go wrong with the new boiler.
27. Along with other consumer organizations,
Citizens Advice has highlighted the inadequacy of the grant and
the consequent need for eligible customers to find large sums
of money before the work can be carried out, for some considerable
time. Improvements have not yet materialized and a number of Citizens
Advice Bureaux now report that they may soon start to think twice
before referring clients to apply to the Warm Front programme.
Citizens Advice recommends that a solution is found as a matter
of urgency to the significant problem of funding shortfalls for
Warm Front, and the consequent need for top-ups from eligible
consumers, which currently undermines the impact of the programme.
April 2008
39 Oral Statement by John Healey MP, Minister of State
for Local Government, Department for Communitites and Local Government,
27 March 2008 Back
40
Many more seek help with mortgage arrears-new Citizens Advice
figures, Citizens Advice, Press Release, 18 March 2008 Back
41
Serious energy debt taking toll of consumers, energywatch, Press
Release, 25 January 2008 Back
42
Fuel Poverty Advisory Group-Sixth Annual Report, 2007, p.4 Back
43
Fuel Poverty Advisory Group-Sixth Annual Report, 2007 Back
44
The UK Fuel Poverty Strategy-3rd Annual Progress Report 2005,
Defra and DTI, p.27 Back
45
Source: Department for Work and Pensions Income Related Benefits
Take-Up Estimates 05/06 Back
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