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About 1m households are behind on their gas and electricity bills with no repayment plan amid a rise in energy debt over the past decade, according to a new report.
The Resolution Foundation thinktank found that the number of customers in energy debt has increased and the size of their debts has risen. It found that between 2012 and 2024 the average gas and electricity debts more than doubled to £1,400 and £1,600, respectively, from an average of approximately £500.
The number of customers behind on their electricity bills, with no repayment plan, has more than tripled from 300,000 in 2012 to more than 1m at the end of last year, the report found. The number of customers who are behind on their gas bills also tripled from 300,000 to 900,000 over the same period.
The debt burden has risen after an increase in energy market prices due to dwindling Russian energy supplies into Europe. The Kremlin began holding back gas exports in the summer before it invaded Ukraine in early 2022, causing Europe’s gas market prices to reach record highs. Energy bills in the UK remain approximately £600 a year higher than they were before the invasion.
The report found that higher energy costs mean households are still paying 50% more for each unit of gas they use than they were before the energy crisis. The financial stress of households has been compounded by dwindling council tax support and higher council tax bills, it said.
Despite the higher energy costs, consumer debt has improved since the 2008 financial crisis, according to the report. It found that for higher income households consumer debt has fallen by 21% between the 2006 and 2008 and from 2020-2022, and even lower-income households have cut their debt by 14% in real terms over the same period.
Felicia Odamtten, an economist at the Resolution Foundation, said: “Families’ financial resilience has been tested in recent decades by a series of financial shocks along with stagnating incomes. While families have impressively still managed to reduce their credit card debt and save a bit more, new financial worries have emerged with arrears on priority bills skyrocketing.
“Tackling these financial problems will require additional help with priority bills, such as improved council tax support and a social tariff on energy bills. But all too often, lack of financial resilience is simply a consequence of lack of income and addressing this will mean fixing Britain’s dire record on productivity and real wage growth,” Odamtten added.
Chancellor Rachel Reeves revealed to the Guardian last month that tackling the efficiency of the economy through higher investment and a fresh assault on planning rules would form the backbone of her tax and spending plans in the autumn budget scheduled for late November.
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Ahead of the budget, energy bills will rise by more than expected for millions of British households after the energy regulator for Great Britain, Ofgem, signalled it would raise the government’s cap on bills by 2% from October, to the equivalent of £1,755 for a typical annual dual-fuel bill, despite a fall in the wholesale price in the energy markets over recent months.
Simon Trevethick, the head of communications at StepChange, a debt charity, said its own polling has revealed that four in 10 UK adults would not be able to meet an unexpected £1,000 expense without increasing their debt.
“With over two in five StepChange clients in energy arrears – averaging over £2,300 – this is one of the most pressing issues they face,” Trevethick said.
“We need to see a debt relief scheme to address historic energy arrears, a fundamental overhaul of council tax regulations – including the end to imprisonment rules – and immediate action from government to build household financial resilience,” he added.
