Cost-of-living crisis and energy security: What does today’s Spring Statement mean for NHC members?

Chancellor Rishi Sunak delivered the Treasury’s Spring Statement to the House of Commons today to provide an update on the overall health of the economy and scale of the impact of the rising cost-of-living. Leading up to today, Sunak has faced huge pressure to alleviate escalating costs and provide additional support to low-income households.

With OBR forecasting inflation to average 7.4% this year and household energy bills soaring, people are struggling to meet rising costs. Analysis by the Joseph Rowntree Foundation has shown that persistent rising energy costs will lead to £1 in every £5 from low-income households’ budgets being spent on energy bills this year. This is particularly concerning in the North where we start with higher levels of fuel poverty than elsewhere in the country.

In the run-up to the statement, the NHC joined the Child Poverty Action Group’s (CPAG) campaign, along with more than 50 other organisations, to call for the Government to increase benefits by at least 8% to match inflation forecasts, instead of the planned 3.1% increase. The joint statement led by CPAG, and supported by others in the sector including the Chartered Institute for Housing, received coverage in the BBC, Guardian and the Mirror.

 

In response to the unfolding cost-of-living crisis, the Chancellor made a series of announcements today in the ‘mini-Budget’, including the following:

• VAT will be cut to 0% on energy saving materials (solar panels, heat pumps, insulation) for five years from April 2022 to support energy efficiency improvements to homes.
• National Insurance threshold at which people start paying contributions will be increased by £3,000 from July 2022, equalising it with the Income Tax personal allowance. The Chancellor aims to reduce the basic rate of Income Tax from 20% to 19% by the end of the Parliament in 2024.
• Offering some support to low-income households by adding £500m to the Household Support Fund administered by local authorities.

 

Commenting, NHC Chief Executive Tracy Harrison said:

“Energy bills are at the centre of the cost-of-living crisis and they are expected to increase further next month, and again in October, so the urgency to act has never been greater. We welcome the Chancellor’s expansion of VAT relief on energy efficiency products, which will provide a modest boost to efforts to green Northern homes.

While the Chancellor has also acted through the tax system, it was disappointing not to see more immediate help for households targeted through the welfare system – those on the lowest incomes are facing a second real-terms cut in their incomes this April. Looking ahead, we need a long-term, large-scale programme of home upgrades in the North: not only to increase energy security and reduce household bills, but also to cut carbon emissions from our homes, improve the quality and health of our homes, and bring new green skills and jobs to the region.”

 The Chancellor also delivered the Spring Statement today in the context of the Russian invasion of Ukraine, with Rishi Sunak outlining that the unfolding situation will add to economic pressure in the UK.

Today’s Statement confirmed that the Government will only be raising benefits by 3.1% in April as planned. The £500m extra for local authorities through the Household Support Fund to target the most vulnerable with the cost of essentials falls far short of the uplift required for low-income households to meet rising energy and food costs.

The Spring Statement documents recognise the important role of increasing the energy efficiency of our homes, stating: “Improving energy efficiency is not only good for the climate but can also save households hundreds of pounds a year, helping to eliminate fuel poverty while reducing our reliance on imported gas.”

This acknowledgement by the Treasury of the role of housing retrofit in the UK’s efforts to reduce gas demand (accelerated by Putin’s invasion of Ukraine) is hugely welcome. Announcements made today to cut VAT to 0% on energy saving materials to support households install green measures such as heat pumps and insulation has the potential to reduce gas demand and bills. However, this is a relatively modest step (expected to cost Treasury around £50m per annum) and only one part of the solution to drive down bills. For those already experiencing fuel poverty and struggling with spiralling costs, this intervention on VAT does not support them so other subsidies and grants must be part of the package to improve energy efficiency.

We know the North has a higher proportion of the UK’s older and leakier homes; the Northern Housing Monitor showed that 270,000 homes per year need to be retrofitted in the region until 2035 to meet the Government’s EPC C target. Insulating our homes and transitioning them to clean heat, such as heat pumps and heat networks, will reduce households’ exposure to volatile international gas markets and reduce our reliance on fossil fuels to heat our homes.

13.2% of households in England are experiencing fuel poverty, which is higher in the North: 17.5% of households in Yorkshire and Humber, and 14.4% in both the North East and North West. These figures are expected to significantly rise over the coming months, with End Fuel Poverty Coalition predicting that over a quarter of all households in England (over 6.3m households) will be fuel poor from April 2022 when the price cap is increased.

It was also confirmed today that we can expect the Government’s delayed energy security strategy “in the coming weeks”. The NHC will be following these developments closely to see how the Prime Minister, the Chancellor and the rest of the Cabinet plan to bring together their goals to address the cost-of-living crisis, reduce the UK’s reliance on non-renewables and reach net zero.

The NHC will continue to work with members on the decarbonisation agenda and with Government through BEIS’ Social Housing Decarbonisation Fund Consultative Panel.

If you haven’t read it already, we would recommend having a look at the Social Housing Tenants’ Climate Jury’s recommendations on how to tackle climate change in our homes and neighbourhoods for excellent insight into housing retrofit from social housing tenants, access it here.