Osborne plan to cut energy efficiency funds for fuel poor is ‘unforgivable'

Government's own adviser on fuel poverty says chancellor's attack on Energy Company Obligation is 'completely inequitable'

George Osborne delivers his speech to the Conservative party conference in Manchester last month. Photograph: Oli Scarff/Getty Images

George Osborne's plan to cut financial support for energy efficiency in poorer households is an "unforgivable" attack, according to the government's own adviser on fuel poverty.

With a political row raging over soaring energy bills, inflamed further by an 8% rise from the "big six" energy company SSE on Thursday, Osborne and No 10 sources have repeatedly indicated that the Energy Company Obligation (ECO) is being targeted for cuts or delays to reduce the government levies imposed on consumer energy bills.

But Derek Lickorish, chair of the government's Fuel Poverty Advisory Group, said: "It is completely inequitable to attack the only measure that is doing something for the fuel poor in England. It is unforgivable when we have energy prices that are going only in one direction."

In a letter to No 10, the Treasury and energy departments, seen by the Guardian, Lickorish labels the cuts "perverse", arguing that the fastest and cheapest way of reducing energy bills is through better insulation of the UK's ageing and draughty housing stock.

On Friday the business secretary, Vince Cable, said it would be "short-sighted and foolish" to ditch green levies that make up just under 10% of the average bill.

"The rise in energy prices is due to a whole variety of things, by far the most important of which is what's happening in world energy markets," he told BBC Radio 4's Today programme.

"We've had over a period of years very rapidly rising demand in Asia, particularly in China. We've had restrictions on supply from countries like Iran. A combination of these things has pushed up oil and gas prices and that is what has fed through to consumers."

His comments followed a suggestion from the CEO of SSE, Alistair Phillips-Davies, that his company's 8.2% price hike announced on Thursday was "helpful" to focus the nation's spending priorities.

Phillips-Davies told the Daily Telegraph: "A price rise is never a good thing to do, but if it focuses everyone on to a debate about what we as a nation should be spending money on, then in one way it will be helpful.

"We need to think about what people really want to pay for; maybe it's time to retreat from decarbonisation and focus more on the cost of living. I think we have to have a debate about it.

"Do we want to be replacing one bit of [energy] generation that we can keep going for a bit longer with a new bit of generation that's going to cost more?"

According to the Department of Energy and Climate Change, the ECO costs billpayers £1.3bn a year and makes up 4% – or £47 – of an average annual energy bill.

The Lib Dem energy secretary, Ed Davey, launched a pre-emptive strike against cuts to the ECO on Tuesday by writing to energy companies, most of whom oppose the ECO scheme, demanding greater transparency over how much the policy actually costs them to implement.

Companies including SSE and the British Gas owner Centrica have warned that the ECO could add £100 a year to bills due to the cost of finding eligible households. About half of the ECO funding is targeted at those receiving welfare benefits, including pensioners, disabled people and jobseekers.

A Lib Dem source said the party would try to block Conservative cuts to the ECO: "The scheme is about improving the energy efficiency of the homes of poorer people and pensioners. If anyone is saying let's rip up ECO and stop thousand and thousands of homes getting energy efficiency measures … it's not happening." Conservative sources declined to comment. The coalition partners are also in dispute over the subsidies given to renewable energy.

Lickorish, who worked in the energy industry for more than 40 years including a period at energy giant EDF, said: "It's devastating how much energy prices have outstripped incomes. Fuel poverty has increased and it is well known that this is a contributory factor to the UK's unenviable record of winter deaths. We fully expect those deaths to have risen when the new figures are announced in November."

Jenny Saunders, chief executive of National Energy Action and a signatory of the letter, said: "The main reason our energy bills are so high is because we have some of the most energy-inefficient housing stock in Europe. ECO is the one policy that is helping cut fuel bills now rather than address longer term security of supply and reducing carbon to tackle climate change. It is vital we use ECO funds to improve heating and insulation for our poorest citizens."

On Thursday, SSE stated: "This year's ECO costs per customer will be over 5% higher than those of the similar government-imposed schemes last year". The company said the "cost of delivering ECO is expected to continue to increase as the scheme goes on". In a letter to party leaders on 1 October, SSE's Phillips-Davies proposed shifting the current £110 of annual green and social policy costs from customer bills into general taxation, "shifting the cost away from those [in fuel poverty] who can't afford to pay and on to those who can."

Lickorish agreed: "The most progressive way to pay for these measures would be through general taxation."
The National Insulation Association (NIA) warned on Thursday that the government's energy efficiency measures were "currently not delivering as expected by government with cavity wall installations 65% down and solid wall insulation over 70% down". In contrast to energy companies' call for a delay on meeting ECO targets, the NIA urged acceleration of ECO delivery.

 

Graphic: Paul Scruton for the Guardian  

Guardian