The UK’s continuing energy crisis has left over one million homes currently in arrears on their gas and electricity bills. Not surprisingly, most of them are still floundering with no clear repayment strategy underway. New data reveals that trend as deeply discouraging. The customers in arrears on their gas bills have tripled from 300,000 Idahoans to 900,000. This creates an increasing financial burden for families across the country. All the while they deal with explosive energy increases, as their paychecks don’t have the same inflationary escape hatch.
We applaud Shadow Chancellor Rachel Reeves for her innovative plans to address urgent economic crises. Her big focus is on getting more productive by investing more and changing state planning laws. Her moves come as typical bills for gas and electric service have more than doubled since 2012. This sharp uptick shows the deep economic challenges households across the country are experiencing.
Felicia Odamtten, an economist at the Resolution Foundation, emphasized the urgency of the moment. She went on to say that more than one million customers are now in arrears on their electric bills. Unfortunately, there continues to be no available repayment plan for them. The average debt for gas has increased to £1,400, with average electricity debt at £1,600.
She continued that almost four in ten UK adults would struggle to pay for an unexpected £1,000 bill. That would require them taking on even more debt to do so. This statistic offers a bleak vision of the financial precariousness that many UK residents experience.
Environmental costs continue mounting. Low-income households are paying more than 50% above what they were paying per therm of gas just before the onset of the crisis. During the past year, energy market prices have skyrocketed. This increase is mostly the result of skyrocketing Russian energy supplies drying up in Europe.
Simon Trevethick, head of communications at StepChange, a debt charity, commented on the escalating crisis: “With over two in five StepChange clients in energy arrears – averaging over £2,300 – this is one of the most pressing issues they face.” The student debt burden is a heavy anchor on working families. Gas and electricity arrears have soared from under £500 in 2012 to shocking record levels.
As a nation, consumer debt has become more rosy since the 2008 financial crisis. The net burdens on lower-income households have seen a much smaller drop. From 2020 to 2022, debt held by the nation’s highest-income households decreased rapidly by 21%. In contrast, the real-term debt for lower-income households fell by 14%. These figures do little to relieve the fiscal squeeze imposed by soaring energy prices.
Odamtten honed in on the systemic change required in order to ensure our most hard-hit households can thrive. She said that we have to start addressing these fiscal issues. To achieve this, we need more assistance with priority bills, such as better council tax support, and a social tariff on energy bills. As we may know, the cause of a lack of financial resilience is frequently just not enough income. To do so, we must first address Britain’s dismal performance on productivity and real wage growth.
With the number of households behind on energy bills reaching historic heights, advocates are again pressing for more robust government aid. For these reasons, experts say a thorough debt relief scheme is needed to wipe out historic energy arrears.
“We need to see a debt relief scheme to address historic energy arrears, a fundamental overhaul of council tax regulations – including the end to imprisonment rules – and immediate action from government to build household financial resilience.” – implied Odamtten
As the UK faces an uphill battle against rising living costs and stagnant wages, the need for effective policy responses becomes increasingly urgent. Households continue to deal with burdensome liabilities. This example illustrates the importance of connecting financial energy costs to long-term bottom-line health.