The recently announced package to tackle the energy crisis is welcome but like previous measures, it does not address the existing North-South divide in energy needs.
In its first days in office, the new Government announced the energy price guarantee (EPG). This new energy support package – the largest so far – will ensure typical household energy prices will be capped at £2,500 a year for the next two years.
The EPG is very welcome as it will partially shelter households from increasing energy costs, but it will still have uneven impacts across the country.
Energy consumption in the UK varies greatly but it isn’t mostly driven by income levels. These differences are explained by factors such as the energy efficiency of the housing stock and weather conditions.
Previous Centre for Cities research has shown that different cities face different energy needs. On average, households in Burnley, Swansea and Bradford need to spend more money on energy than Crawley or Swindon (Figure 1).
Earlier this year, when the energy cap rose to around £1,270 a year, the domestic cost was estimated to be somewhere between £1,700 and £3,200 a year for the leakiest dwellings in the UK. Therefore, the typical household energy bill in cities with the most inefficient housing stock – like Burnley, Swansea or Bradford – is expected to be significantly higher than £2,500 a year, even considering the EPG.
In monetary terms, households living in the most inefficient homes – including most residents in cities like Burnley or Swansea (see Figure 1) – are the ones receiving the most from the EPG. However, this does not change the fact that energy bills will increase around 100 per cent, (compared to early 2021) with a disproportionate effect across households.
The expected increase has come as an enormous financial shock to everyone, especially for the households typically living in the North, Midlands and Wales that had already paying more to meet the same energy needs. As their energy bills tended to be higher before the energy crisis overall bills are expected to rise even more (in £ terms).
The same issue has been identified with the Government’s previous support package and Centre for Cities has recommended an additional one-off payment to support households living in inefficient homes (below EPC C) because it is not realistic to expect major energy efficiency (i.e. retrofitting) gains in the short term.
The Government has announced its intentions to increase energy supply in the decades ahead by increasing the extraction of oil & gas from the North Sea and promoting nuclear and other renewable sources of energy. Unfortunately, those announcements lacked policies that reduce demand by improving energy efficiency.
Ministers should accelerate the retrofit agenda by reintroducing the Green Homes Grant Scheme and bringing forward the Future Homes Standards regulation. Those policies would also have a positive contribution to reducing carbon emissions.
Moreover, the UK has the oldest housing stock in Europe and this is one of the reasons behind its low levels of energy efficiency. Almost 40 per cent of dwellings in the UK were built before 1946, compared with 24 per cent in Sweden and 11 per cent in Spain.
To improve energy efficiency at the domestic level, the UK needs to build more (efficient) homes. The current case-by-case planning system is a bottleneck to achieving such a goal by restricting the supply of new homes, and clauses 83 and 84 of the Levelling Up Bill must pass into law to make the system more rules-based and predictable.
If the Government immediately advances with these reforms, the UK will be in a much better position in two years, when the EPG is expected to expire.
This report sets out what the cost of living crisis is, what is driving it, and how the squeeze on disposable incomes is likely to be felt across the UK’s cities and largest towns.
There is a clear North-South divide in the current cost of living crisis. This is partially explained by lower income levels outside the South of England but there are also local factors driving this.
The UK should introduce a flexible zoning system to build more homes and end the housing crisis argues Anthony Breach in the final paper in his series critiquing the planning system.
The Levelling Up Bill is the last and best chance for this Government to leave a positive and permanent legacy in housing.
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