Gas bills to soar by another 40pc

One in three pensioners faces fuel poverty as energy bills look set to surge by £360 per home
Lisa Bachelor and Jill Insley
The Observer,
Sunday June 8 2008
Article history


market prices, industry experts are warning.

Wholesale gas prices, the prices energy companies buy at, soared to a record high on Friday, taking the increase since the beginning of the year to 76 per cent.

To restore the balance between wholesale prices and those that householders pay, the average gas and electricity bills a year will have to increase to £1,410, almost £500 more than a year ago.

'The last time wholesale gas prices broke above retail gas prices was three years ago, in June 2005,' said Joe Malinowski of TheEnergyShop.com. 'In the following 18 months energy bills rose by a record 47 per cent. A very similar thing is going to happen this time around, except that the money value of the increase is going to be even higher.'

The surge came on the same day that the price of oil shot up by its biggest one-day advance ever to hit a record of more than $139 a barrel. The rise staggered Wall Street, causing the Dow Jones Index to close 3.1 per cent down, its eighth-biggest point drop ever.

Yesterday energy officials from the world's biggest consumer nations started two days of talks in a bid to tackle the growing global economic threat of soaring oil, coal and natural gas prices.

New highs in food and energy bills have been a particularly heavy burden for pensioners in recent months, with eight out of 10 admitting that they have already cut back on their spending this year.

Eighty-five per cent of the over-55s questioned on behalf of Skipton Building Society said that they had cut back, compared with just over half of the 16- to 34-year-olds interviewed.

The official number of pensioners living below the poverty line is two million, according to the government. But experts predict that an updated figure, due to be announced on Tuesday, will be higher as a result of high inflation, low income from pensions and a failure to raise the winter fuel allowance.

According to recent European Union statistics, only pensioners in Latvia, Spain and Cyprus are more likely to fall into poverty than those in the UK. 'The huge rise in the cost of living recently is hitting many of the poorest pensioners particularly hard,' said Gordon Lishman, director general of Age Concern. 'Hikes in food, water and energy bills have been a heavy blow to older people on low fixed incomes already struggling to make ends meet, and many will be cutting back to reduce their bills.'

The charity estimates that one in three pensioner households will be pushed into fuel poverty by the end of the year if energy prices increase by the predicted 25 per cent. Fuel poverty is defined as when a household spends 10 per cent or more of its income on gas and electricity.

A separate report from the economics consultancy Capital Economics also concludes that pensioners and low-income households will have to cut back more than others in the months ahead. It calculates that food, energy and petrol account for almost 30 per cent of the spending of these households, compared with 17 per cent for high-income homes. The debt charity, the Consumer Credit Counselling Service, said it had seen a huge increase in the number of over-60s seeking advice and even being pushed into bankruptcy over the past year.

Home repossessions have nearly doubled in the first three months of this year, according to debt advice charities.

Suman Antcliffe, of the Burton upon Trent Citizens Advice Bureau, said the current housing problems had started in a 'unique and different way', because the problems were caused by people borrowing on credit cards and personal loans, then remortgaging and taking out another secured loan on their home to consolidate the debt and reduce the size of monthly payments. The Chancellor, Alistair Darling, is particularly concerned about lenders aggressively marketing this type of second loan. He has called a meeting with the Council of Mortgage Lenders this week, at which he will threaten to crack down on rogue lenders if the industry does not police itself better.

Companies which provide these secured loans, rather than traditional mortgages, are regulated by the Office of Fair Trading, but the Treasury is considering bringing them under the stricter gaze of the City watchdog, the Financial Services Authority.

About this articleClose This article appeared in the Observer on Sunday June 08 2008 on p4 of the News section. It was last updated at 02:00 on June 08 2008.