comparethemarket.com reveals that the most financially disadvantaged consumers are paying over the odds for their energy
- The most deprived areas in Britain pay £60 per year more for their energy than the least deprived parts of the country
- Households with the lowest disposable income pay three times as much for their energy per week as a percentage of income than those with the highest disposable income
- A higher proportion of lower income households are on standard variable tariffs than higher income households
26th February 2020 – Britain is suffering from energy inequality, as lower income households pay significantly more for their energy than those with more money. According to new research from comparethemarket.com, lower income households spend on average £60 more every year on their energy bills than higher income households.
A higher percentage (43%) of those earning between £16,000 and £19,999 are on a standard variable tariff than those earning between £25,000 and £34,999 (37%). The difference is even more pronounced when those on the lowest incomes are considered, with more than half of all households on an income under £12,000 on a Standard Variable Tariff (SVT). By comparison, only 32% of those with a household income between £45,000 and £59,999 are on a SVT.
The research analysed energy inequality across three specific metrics: deprived vs. nondeprived areas of Britain; lower vs. higher household incomes; and the percentage of income households spend on their energy bills.
Households in deprived areas
The difference in the price households pay for energy is clear when comparing the most and the least deprived areas of Britain. In the 10% most deprived areas of Britain, the annual cost of energy is £1,123. This is £60 per year (or 5.7%) more than the annual cost of energy in the 10% most affluent areas of England, which stands at £1,063.
Lower income households
Additionally, when analysing average incomes across Britain, comparethemarket.com found that the annual cost of energy for households with an income below £25,000 is £1,105. This compares to £1,081 for households with an annual income of more than £45,000 – a difference of £24 (or 2.3%).
Percentage of income spent on energy
Energy inequality is also evident when looking at the percentage of income spent on energy bills. For the 10% of households with the lowest disposable income across Britain, energy spend makes up 7.8% of total weekly expenditure. This is over three times more than the top 10% of households’, who have the highest disposable incomes, relative spend on their energy bills.
Reasons for energy inequality
The research shows that poorer households spend notably more per unit of energy consumed than higher income households. This is because a greater proportion of poorer households are on standard variable tariffs or use prepayment plans. Both these methods of paying for energy usually mean higher unit costs and more expensive bills.
With the twenty cheapest available tariffs on the market all currently more than £300 cheaper than the current default and forthcoming price cap levels of £1,179 and £1,162 respectively, households that have not switched risk paying significantly over the odds for their energy.
| Household income | Share of customers on standard variable tariffs | Average annual bill |
| Under £5,000 | 50% | £1,106 |
| £5,050 – £8,000 | 54% | £1,131 |
| £8,001 – £9,999 | 59% | £1,123 |
| £10,000 – £12,000 | 52% | £1,112 |
| £12,001 – £15,999 | 43% | £1,097 |
| £16,000 – £19,999 | 43% | £1,103 |
| £20,000 – £24,999 | 41% | £1,090 |
| £25,000 – £34,999 | 37% | £1,083 |
| £35,000 – £44,999 | 40% | £1,086 |
| £45,000 – £59,999 | 32% | £1,072 |
| £60,000 – £79,999 | 46% | £1,089 |
| £80,000 or over | 41% | £1,083 |
Peter Earl, head of energy at comparethemarket.com, said:
“These findings indicate a pattern of inequality at the heart of the energy market. It is regressive that those who are most disadvantaged by higher energy bills end up paying more than those who can more easily afford it. While the difference in prices may seem small to some, for those struggling to make ends meet it isn’t small change, and month-to-month can quickly add up.
“Encouragingly, there is a market solution to this issue, which is to urge all households with a standard meter to switch to a competitively priced fixed tariff deal. The energy price cap, far from being an affordable or good value price to pay for energy, is in fact hundreds of pounds more expensive than the cheapest tariff currently on the market.”
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