Growing Energy debt is a sign of policy failure

The Herald reports today that the amount of people in arrears on their energy bills (defined as being more than 91 days behind on an energy bill) has increased dramatically in the past few years and the amount owed by UK households has tripled from £1.55 billion in 2019 to more than £4.43 billion today - £400 million of which is estimated to be owed by the most vulnerable Scottish households alone. More than 1.1 million electricity customers and more than 900,000 gas customers are in energy debt. This report comes just as it’s announced that the UK energy regulator Ofgem has increased the maximum cap that energy companies can charge customers yet again.

The “cost of living crisis” isn’t just a measure of how much more expensive life is compared to our meagre wages, it’s a sign of a massive shift in the patterns of spending that we’re experiencing. Even many households who - on the crude face of “income vs expenditure” - are doing “okay” are seeing an increasing share of their income being expended on energy costs either directly through their energy bills or indirectly in the inflation caused to the price of just about everything else. This is probably why even if you are one of those doing okay, you might have noticed that the price of eating out - or even the price of eating in - has been sliding up faster than you’d like.

A lot of this is simple policy failure. Energy you spend heating a home that wasn’t designed to the highest possible energy standards (this includes most of the new homes being built today) and which has not yet been retrofitted to get as close to that standard as possible is quite literally your money being burned to keep you warm. When we published our Common Home Plan in 2019 (when UK energy arrears were “only” about £1.55 billion) we called for the government to stop treating insulation projects as an optional extra for those households who could afford it and to start treating it as a public works programme - a massive infrastructure project of national importance that should be carried out in the public interest. Had the Scottish Government adopted that plan then, we’d now be five years into its implementation and almost half a million households would have been freed from energy poverty forever.

We would also have been breaking the hold of the energy companies who have been profiting massively from our energy poverty through an aggressive system of renationalisations and transfers of energy assets into public hands - something that can be done using devolved powers, despite the Scottish Government’s protests to the contrary. The profits from those energy assets could have been used to subsidise energy bills, particularly for vulnerable households who were still waiting for their retrofits.

Instead, the best the Government appears to do is to call for energy companies to slightly discount their rates and to tell poor people to earn more money.

The amount of debt that vulnerable households are in is not the result of a moral failure on the part of poor people or their unrestrained spending. Energy is as fundamental to life as food and housing and that so many of us are going into debt to pay for any or all of them is a sign of serious economic failure. Paying off these energy arrears won’t fix the problem either - that will just further enrich the energy companies who profiteered while creating the debts.

In addition to the reforms above and in addition to fundamentally restructuring the energy sector so that it works for people not profit, Scotland and the UK should consider how it approaches debt as an economic focus. In our book Sorted, we call for a National Household Debt Reduction Scheme including measures such as demonetising the housing sector to limit the power of banks to inflate house prices, applying an aggressive windfall tax to sectors who profit from crisis, and forcing lenders to take a haircut on unpaid household debts to ensure economic and social stability.

The alternative is to carry on pushing people into debt while they’re just trying to meet the basics for living while the people who put them in that debt post yet another round of “record profits”.