Energy Debt Soars And Even More In Rural Scotland
21st December 2024
Despite energy prices falling from their peak in 2022, they remain higher than before the cost of living crisis and those with built up energy debt continue to struggle to pay it off.
A number of sources show that energy debt increased over the cost of living crisis. In autumn 2023 Ofgem reported on record levels of energy debt (£2.6 billion), attributing this to both the rise in wholesale energy prices and wider cost of living pressures.[25] [26]
The number of households in debt and arrears in Great Britain (GB) increased by around 20% during 2023, from 1.9 million to 2.3 million, with levels of individual debt increasing at an even faster rate.[27]
Debt advice services show that energy debt is one of the most common forms of debt that they help people with, and that the rising cost of fuel is a key reason for increased demand for their services.[28] [29] [30] Citizens Advice helped more than twice as many adults with energy debt in England and Wales in 2023 than in 2020.[31] Although StepChange data for the UK and Scotland does not show an increase in the proportion of new clients in energy arrears between 2022-23 it does show a significant increase in average amount of energy arrears owed over this period.[32]
Average energy debts - The Resolution Foundation found that the average amount owed by Ofgem customers in arrears on their gas or electricity bill (GB) increased by half (51%) in just over a year between Q2 2022 and Q3 2023.[33] Citizens Advice data (England and Wales) show the average energy debt owed in 2023 was over £1,840, a 21% increase since 2022.[34] The average energy related debt brought to Citizens Advice Scotland in 2023/23 was around £2300 but this rose to around £3000 for clients in remote and rural areas.[35] StepChange Scotland data shows that between 2022-23 the average amount owed on utility bills was £1,960 for dual fuel arrears (up from £1,623), £1,266 for gas (up from £847) and £1,886 for electricity (up from £1,438).[36] In 2024 Ofgem estimated average debts were £851 for those with a repayment plan and £1,761 for those without.[37]
The proportion of new StepChange Scotland clients in difficulty with dual fuel energy arrears increased from 46% to 50%.[38] The increase in dual fuel arrears is also reflected in other recent Scottish sources.[39]
"These are staggering increases for clients to absorb, particularly when incomes have increased at a significantly lower rate...."
StepChange Scotland in the Red 2023
Pdf 20 Pages
Many households are struggling with their bills and their energy debt has been rising.[40] [41] The latest Ofgem statistics show that between Q1 2024 and Q2 2024, energy debt and arrears rose by 12%, from £3.31bn to £3.70bn, equating to a 43% increase from Q2 2023.[42] Recent analysis shows that while energy prices have fallen since early 2023, typical bills under the January to March 2025 price cap will be just over 40% higher than in winter 2021/22.[43]
High energy prices particularly affect low income households who are more likely to have outstanding energy debts and who spend proportionately more on energy costs than high income households,[44] making it harder to repay debt.[45] Households on prepayment meters (PPMs) are further affected by high energy prices and have historically been charged more for energy than households who pay by direct debit.[46] PPM customers are also unable to spread the costs over a longer period, pay higher standing charges and are more likely to be in fuel poverty than households paying by other methods. [47] [48]
Consumer Scotland's latest Energy Affordability tracker study (2024) also shows that despite energy prices having fallen since 2022 and consumers generally finding them more affordable, bills remain high and a significant minority of consumers are struggling to pay their energy bills.[49] [50] It shows that 9% of Scottish consumers are in energy debt, and almost half (48%) of those reported not being confident that they will be able to pay off their energy debt. Around one in six (17%) of those in energy debt had been put on a prepayment meter (PPM) as a result of their energy debt.[51]
Persistent and ‘bad' energy debt - Consumer Scotland's research found there had been an increase in the numbers of consumers behind on their bills and facing debt recovery action between the two most recent waves of the survey (October 2023 and January/February 2024). While there was a reduction in informal and credit card /overdraft debt as a form of energy debt, the percentage of respondents in energy debt who are facing debt recovery action doubled from 10% to 20%.[52]
‘the legacy of the crisis continues to affect households in the form of energy debt, built up as a direct result of high energy prices...' ‘While these findings are based on limited data, an increase in debt recovery action is something that might be expected at this point, as debt built up during the energy crisis and not yet repaid becomes a key issue for suppliers.' Consumer Scotland (2024)
It is also important to note that energy debt is the only type of ‘private debt' that can be deducted ‘at source' from a person's welfare benefit (social security) payments. Aberlour mapped the volume and types of third party deductions (including gas and electricity deductions) by local authority in Scotland as an online resource.[53] Crucially, this practice means the maximum repayment threshold can be extended from 25% of a claimants standard allowance to 40%. The DWP’s response to an FoI request by Aberlour children’s charity stated that: "You may have more than 25% of your Standard Allowance taken off if you pay a ‘last resort deduction’. A ‘last resort deduction’ helps to prevent you from being evicted or having your utilities cut off. It is paid directly to the person or organisation you owe money to."
Note
This is a section of a Scottish Government report published on 20 December 2024. Read the full report at https://www.gov.scot/publications/review-emerging-evidence-effects-cost-living-crisis-debt-scotland/pages/1/
Comment
Highland and other councillors really need to read this before raising council tax. Scottish Government needs to finally grasp the problem of council tax being a very bad tax that has not been reviewed in a long time with property valuations being very out of date.
Energy debt is just one factor of debt that is rising with the overall cost of living. Radical action is needed by politicians at all levels to address the issue seriously. All forms of debt are rising with more people struggling to pay rent to all forms of landlords - councils and others.
What is the average energy debt in the UK?
Energy debt hits a new peak of £3.7 billion as of Q2 2024 as Average debt per customer rises to a record £1,094. Other key findings from the latest data include: £2.8 billion of the total debt is owed by customers without repayment arrangements.26 Sept 2024
