Low-carbon levies an ‘unfair burden’ on low-income households, says IPPR report

Low-income families are paying a disproportionately higher amount towards green energy levies than others and are struggling with an “unfair burden”, a report issued by the Institute for Public Policy Research has found.

The ‘When the levy breaks: Energy bills, green levies and a fairer low-carbon transition’ report claims that people within the lowest income decile which make up the poorest 10% of households in the country spend 1.7% of their income on energy policies.

That figure is six times higher than those within the highest decile, who pay 0.3% of their income and a third higher than the second-lowest decile, who contribute 1.1%.

The thinktank claims the trend has been exaggerated by low-income consumers being excluded from lower energy tariffs due to the prevalence of pre-pay meters and because they are typically less likely to switch providers.

And the IPPR has proposed a number of policy ideas which it says would “reduce the burden on billpayers” and spread the cost of green levies more evenly across the country’s households.

Among the six recommended changes to the policy framework are:

• An introduction of a public ownership option for nuclear capacity to reduce inherent risks of developing new nuclear power.
• Adopt Denmark’s model of procurement in order to reduce offshore wind project costs and make it more straightforward for developers to secure sites.
• Lift the moratorium on onshore wind farms to ensure it is not replaced by more expensive offshore wind.
• Replace the capacity market with a strategic reserve to stop compensating energy providers for producing high-carbon power.
• Replace the energy efficiency policy with a ‘Help to Heat’ strategy which would ensure energy efficiency initiatives are targeted at households at risk of fuel poverty.
• Offer each consumer a green levy allowance to incentivise energy efficiency and reduce the “unfair burden” on low-income households.

“If the ideas we have outlined were to be adopted, we believe that consumers would need to contribute billions less in the 2020s,” the IPPR said.