Energy inequality
Britain is suffering from energy inequality, as lower income households pay significantly more for their energy than those with more money. According to new research from comparethemarket.com, lower income households spend on average £60 more every year on their energy bills than higher income households.
Britain is suffering from energy inequality, as lower income households pay significantly more for their energy than those with more money. According to new research from comparethemarket.com, lower income households spend on average £60 more every year on their energy bills than higher income households.
A clear divide
A higher percentage (43%) of those earning between £16,000 and £19,999 are on a standard variable tariff than those earning between £25,000 and £34,999 (37%). The difference is even more pronounced when those on the lowest incomes are considered, with more than half of all households on an income under £12,000 on a Standard Variable Tariff (SVT). By comparison, only 32% of those with a household income between £45,000 and £59,999 are on a SVT.
Energy inequality is also evident when looking at the percentage of income spent on energy bills. For the 10% of households with the lowest disposable income across Britain, energy spend makes up 7.8% of total weekly expenditure. This is over three times more than the top 10% of households’, who have the highest disposable incomes, relative spend on their energy bills.
What are some of the reasons behind energy inequality?
The research shows that poorer households spend notably more per unit of energy consumed than higher income households. That’s because a greater proportion of poorer households are on standard variable tariffs or use prepayment plans. Both these methods of paying for energy usually lead to higher unit costs and more expensive bills.
The twenty cheapest available tariffs on the market are all currently more than £300 cheaper than the current default and forthcoming price cap levels of £1,179 and £1,162 respectively. This means that households that have not switched risk paying significantly more for their energy than those that have.
Peter Earl
Head of Energy at Compare the Market
“These findings indicate a pattern of inequality at the heart of the energy market. It is regressive that those who are most disadvantaged by higher energy bills end up paying more than those who can more easily afford it. While the difference in prices may seem small to some, for those struggling to make ends meet it isn’t small change, and month-to-month can quickly add up.
“Encouragingly, there is a market solution to this issue, which is to urge all households with a standard meter to switch to a competitively priced fixed tariff deal. The energy price cap, far from being an affordable or good value price to pay for energy, is in fact hundreds of pounds more expensive than the cheapest tariff currently on the market.”
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