UK Treasury profits as fuel poverty increases


By a Newsnet reporter

As record numbers struggle to pay fuel bills, and more families fall into fuel poverty, it has emerged that the UK Treasury has pocketed £1.4 billion over the past year in VAT from domestic energy bills.  The sharp price increases imposed by the big six energy companies over the summer could see the total Treasury take increase by a further £150 million.

The figures have prompted SNP Work and Pensions spokesperson Eilidh Whiteford MP to demand the UK Government do more to help vulnerable households and more to tackle fuel poverty.

Fuel poverty is defined as having to spend more than 10% of household income on fuel in order to maintain adequate heating.  According to a report on the state of poverty and social exclusion in the UK published in December by the respected Joseph Rowntree Foundation, the proportion of households in fuel poverty has risen significantly in the last few years.  The Foundation reported that almost all households in the bottom tenth by income are in fuel poverty, as are half of households in the second bottom tenth, a total of 4 million households in the UK.

Fuel poverty is particularly a problem for retired people and families with very young children, who are more susceptible to suffer ill health as a result of inadequate heating.  According to anti-poverty campaign groups, in Scotland there are an estimated 2000 excess deaths during the winter months amongst people aged over 65.  

In 2002, it was estimated that over half of Scots pensioners with an income of less than £200 per week were in fuel poverty.  The more recent report from the Joseph Rowntree Foundation says that across the UK, households in fuel poverty rose from 6% of the total in 2003 to 18% of total households by 2009.  The Foundation notes that this threefold increase was the steepest increase in any indicator of poverty examined in the report.  Much of the blame for this increase is placed on fuel bills which have risen much more quickly than incomes, especially the incomes of the lowest paid.  

The UK Treasury benefits from rising fuel prices as it gains in VAT receipts.   According to figures obtained by Dr Whiteford, total domestic sales of electricity and gas in 2010 were £27 billion (before VAT) making VAT receipts around £1.4 billion. If current prices remain in place for a year, and consumption remains at 2010 levels, then VAT receipts would increase by around £150 million.

Dr Whiteford said:

“While vulnerable households in Scotland worry how they are going to afford their winter fuel bills the Chancellor is raking in record amounts of VAT from gas and electricity bills.

“Over the last year the Chancellor has pocketed £1.4 billion in VAT from soaring energy bills, but he has done precious little to help the people who suffer from fuel poverty in Scotland.  It is high time that the UK government used some of this windfall to tackle fuel poverty.

“The SNP government is working hard on improving energy efficiency in Scotland’s homes.  Our £50 million warm homes fund will build on the success of the energy assistance package helping those in communities worst affected by fuel poverty.

“Since April 2009, the existing Energy Assistance Package has helped over 150,000 people on low incomes reduce their energy bills and keep their homes warm, now and for years to come.  However in tackling fuel poverty we are in a constant battle with rising prices.

“Fuel poverty is a disgrace in energy-rich Scotland, and if the UK government does not want to help then they should transfer the energy and economic powers from Westminster to the Scottish Parliament to allow the Scottish Government to act.”