Green taxes could force one in four into fuel poverty



One in four households will be driven into fuel poverty if the Government pursues controversial green energy targets, ministers have been warned.

‘Radical policy change’ may be necessary to protect millions of struggling families from biggest household price shock since the 1970s, according to City analysts.



The warning comes as middle-income homes are already suffering an ‘unprecedented collapse’ in living standards as inflation and poor wages wipe thousands off incomes.

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Energy industry analyst Martin Brough, of Deutsche Bank, warned that a quarter of households could be driven into fuel poverty by 2015.

He said: ‘Our analysis suggests rising energy bills and sluggish income growth will make household energy less affordable than at any time since the oil shocks of the 1970s.’



Energy tariffs have leapt by around 20 per cent in the past year, pushing up the annual average bill to £1,293. Deutsche Bank predicts bills will rise by another 25 per cent – around £325 – by 2015, taking the figure to £1,618,

Fuel poverty: A quarter of households could be driven into the red by fuel costs by 2015



The shift to green energy is being driven by the EU and commitments made by both the last Labour government and the Coalition, based on the support of Energy and Climate Change Secretary Chris Huhne.

But Dr Robert Gross, director of the Centre for Energy Policy and Technology at Imperial College, insists families will be better off by switching from fossil fuels.

‘Cutting support for renewables would slow down the UK’s progress in reducing dependence on imported fossil fuels,’ he said.

Meanwhile, on the eve of the release of the worst unemployment figures for 17 years, the Institute for Fiscal Studies found families are about to endure their biggest income drop since the 1970s.

A typical couple with two children is likely to be £2,080 worse off in 2013 terms than they were last year as their real income falls from £30,056 to £27,976, it said.

Unemployment: The number of jobless people is set to hit a 17-year high

The IFS warned that the next two years will be ‘dominated by a large decline’ in incomes, with median incomes set to fall by 7 per cent after inflation has been taken into account – the sharpest drop in 35 years.

Robert Joyce, of the IFS, described it as the ‘delayed effect’ of the recession. ‘Real earnings didn’t fall for a while after the economy started contracting, partly because inflation was very low,’ he said. ‘But inflation has risen sharply and earnings have not done so in response.’

The IFS also forecast that 600,000 more children will be pushed into poverty by 2013, taking the total living in ‘absolute’ poverty to 3.1million.

It says the Coalition’s tax and benefit reforms will drive down incomes, and the new Universal Credit system will fail to make up for the losses of the poor.

But universities minister David Willetts said: ‘We have tried to hold down fuel duty, we are freezing council tax, we have increased the income tax allowance, we have tried to do things that help, but you can’t ignore the basic rules of economics, that when you inherit a situation where an economy has shrunk by 7 per cent there isn’t the money there.’