Tony Lodge Letter: Fuel poverty (The Times)

CPS Research Fellow Tony Lodge is published in The Times’ Letters to the Editor today on fuel poverty.

‘Invisible taxation’ from domestic energy bills will increase the risk of more households living in fuel poverty

Sir, The rise in fuel poverty (“Price rise sends fuel poverty soaring”, Dec 2) is a direct result of the energy policies pursued over the past 15 years and it will continue to rise for three reasons.

First, from 2013 the Government plans to introduce a carbon price floor that will set a rising price for every tonne of carbon emitted from Britain’s growing number of fossil-fuelled power stations. The energy companies will pass the extra costs of this tax to consumers. Since May 2010 the coalition has approved more than 7,000MW of new gas-fired power stations. Second, renewable electricity policies intended to meet the EU Renewables Directive in 2020 will impose extra costs of about £15 billion per annum, roughly equivalent to 1 per cent of current GDP, made up of £8 billion in subsidy, £5 billion in grid integration, and £2 billion in VAT.

Less than one third of this (£4.5 billion) will be recovered through “invisible taxation” from domestic energy bills, at an average cost of about £170 per household. This burden will increase the risk of more households falling into fuel poverty with very significant increases for those on lower incomes. Third, the delays to zero carbon nuclear power stations (which produce comparatively cheap electricity and are unaffected by a carbon price floor) will prolong the misery: the first new plants will not now be online until 2020, at the earliest.

Tony Lodge 
Research Fellow, Centre for Policy Studies


Date Added: Wednesday 7th December 2011