Human Cost: The families faced with stark spending decisions this Christmas

As temperatures fell last week during the first cold snap of the winter, hundreds of thousands of households across the country were forced to weigh up the cost of heating their homes. Officially, around one in five Scottish households live in fuel poverty, although the true figure is likely to be much higher given the data predates last year’s surge in energy prices which pushed thousands of families to the brink. 

It’s now a sad fact of life that something most of us would have taken for granted in the past – heating our homes – has become increasingly unattainable for a large swathe of the population. According to figures from the Scottish Government, there were around 500,000 households in fuel poverty in 2021 – defined as when at least 10 per cent of household income is spent on heating the family home. Of those, nearly half were in “extreme” fuel poverty, where a fifth of all money coming in is spent on heating. However, a parliamentary question published earlier this year suggested the up-to-date figure was likely to be over a third of Scottish households (more than 800,000). 

Last year, Glasgow City Council opened a number of so-called warm banks across the city, turning buildings including mothballed community centres into places where people could go during the day if unable to heat their homes. Similar initiatives are in place across the UK. 
This winter energy prices are down from record highs. But while gas prices fell by just under a third in the year to October and electricity prices were down by more than 15 per cent, the number of people struggling with bills has barely changed. According to the Office for National Statistics (ONS), nearly 40 per cent of people currently find it difficult to pay energy bills – down from 45 per cent the previous year. 

Frazer Scott, chief executive of Energy Action Scotland, which works to end fuel poverty, says this winter is likely to be even tougher than last year for many families due to the ending of the UK Government’s Energy Bill Support Scheme in the spring. 

“Come January through to the end of March, people’s typical energy costs will be about 19 per cent higher than they were for the equivalent period last winter,” he says. “For energy costs, people will be paying more than they paid last winter. Last year we had incredibly high domestic energy debt that was accrued and has continued to accrue throughout 2023. People are likely to cut back [on heating] when faced with other huge amounts of debt.” 

In truth, while the rate of inflation has fallen markedly over the past few months, the cost of living remains historically high. The rate at which prices were growing in October (as measured by the Consumer Prices Index) stood at 4.7 per cent, down from 6.7 per cent in September and a peak of 9.6 per cent in October 2022. But while down from the 45-year high recorded earlier this year, the annual rate for food inflation remains above 10 per cent and the earlier rises are locked in. 

Research by Citizens Advice Scotland (CAS) has shown that not only are people cutting back on energy spending, but they’re also reducing the amount they spend on clothes and children’s toys in the run-up to Christmas. CAS says its research shows more than three million people have cut back on spending in the last year due to the cost of energy bills. The organisation said more than a quarter of Scots had “cut back a lot”.

Scott says there are a host of negative consequences associated with cutting back on heating, something he says is reflected in the excess mortality figures from last winter.

“The excess winter mortality figures were higher; Scottish life expectancy went down; infant mortality went up...What’s the main difference? It’s the cost of energy and cost of people being able to heat their homes to an adequate standard,” he says.

Setting out his Autumn Statement last month, Chancellor Jeremy Hunt said the household energy price cap would be extended for another year, but it will be made less generous with typical bills to be capped at £3,000 instead of the previous £2,500. Households on means-tested benefits are set to get an extra £900 in support payments next year. 

The chancellor also outlined plans to increase the legally enforceable minimum wage for people aged over 23 from £9.50 to £10.42 an hour and increase state pension payments and means-tested disability benefits in line with inflation. However, research has already shown that benefit rises are not keeping pace with the cost of living. 

Next week, finance secretary Shona Robison will set out the Scottish Government’s Budget for the coming year with at least one eye-catching policy – the council tax freeze – already announced by First Minister Humza Yousaf. However, the government finds itself in a fiscal bind due to a series of public sector pay deals made to offset the cost of living for key workers including nurses and teachers. 

In a statement to parliament last month, Robison said those pay deals had added an estimated £1.26bn to the government’s recurring pay costs in 2023/24 and £1.75bn across the public sector – around £800m above the amount budgeted for. 

“We have worked to try and mitigate the impact of Westminster austerity,” she told MSPs. “But without a change in course from Westminster I fear we are now at the limits of what it is possible to mitigate within the powers of devolution.”

In last year’s Budget, the Scottish Government allocated £3bn towards “mitigating” the cost-of-living crisis, including raising the Scottish Child Payment to £25 per eligible child, a measure campaigners have hailed as having a real and immediate impact. But this year funding constraints look likely to be even more pronounced, especially given the government has pledged to find the money for the planned freeze to council tax – an announcement made in Yousaf’s keynote speech to SNP conference which went down like a lead balloon with Scotland’s local authorities. 

“It is so important that policy makers don’t believe the cost-of-living crisis is over because of falling inflation,” says David Hilferty, a director at CAS. 

“Many people had their financial resilience absolutely wiped out by the cost-of-living crisis. High energy bills didn’t happen in a vacuum, they went alongside higher prices for everything to create a perfect storm for people. For tens of thousands of people across the country there’s no breathing space. The boiler or washing machine breaking down isn’t an annoyance, it’s a financial crisis.

“Citizens Advice Bureaux advisers across the country are sadly all too familiar with people facing impossible choices when it comes to their spending. Do they pay the rent, buy food for their kids or turn the heating on? In many cases there is only enough money for two of those options, in some awful cases there isn’t enough for one.”

While energy prices have understandably dominated much of the commentary around the cost-of-living crisis, food prices continue to create a real inflationary shock for many hard-pressed families. According to the ONS, food inflation has “eased” but only from a level not seen since the late 1970s. Staples like milk, cheese, eggs and vegetables were still almost eight per cent more expensive in the year to October. Overall, food prices were around 30 per cent higher in October this year (the latest figures available) than during the same month in 2021. Prices in restaurants and cafes were around nine per cent higher in the year to October. 

According to a study by the Resolution Foundation think tank and the London School of Economics (LSE), British living standards are now falling far behind other Western countries due to years of weak economic growth and rising inequality. Published last week, the report called for an urgent re-think of fiscal policy amid figures showing a living standards gap worth £8,300 had opened up between typical households in Britain and those in countries such as Australia, Canada, France and Germany. Previous research has shown the UK to have higher levels of inequality than many of its near neighbours. 

Setting out his economic vision in a keynote speech last week, Britain’s likely next prime minister, Keir Starmer, said an incoming Labour government would not “quickly turn on the spending taps”. Citing the example of his sister, a former nurse, who offers to “make sandwiches” rather than go to the pub for lunch, Starmer said: “There are millions of people in this country right now, who wake up in the morning and know the day will bring a fresh fight for every penny. Just like the last day. My sister is one of them. 

“So I have said to every member of my shadow cabinet, when they are drawing up their plans for our manifesto, think carefully about how precious every pound is for the people we must serve. Hold them in your mind’s eye. And approach the public finances like it’s their money. Because at the end of the day – it is.”

Starmer set out what he called “Securonomics”, a version of supply-side reform which he said would get the economy growing again and help ease the cost-of-living crisis for those worst affected. While the presentation was undoubtedly different, Starmer’s “obsession” with growth didn’t sound a million miles away from what Liz Truss had planned during her ill-fated premiership.

Scott says the government needs to act now to tackle arrears and stop millions of families falling further and further into debt.  

“Last winter there was £2.4bn of [consumer] energy debt in the system,” he says. “My understanding is that the latest figures, which aren’t out yet, will show that figure is now even higher. We think that money has to be dealt with by taxpayers in general taxation – not more energy costs. It’s just a vicious cycle which deprives more people of warmth and comfort. That’s just not right – it’s not the right way to deal with it.”

While the financial cost is huge and well documented, Scott says there is a human cost, too. 
“It has happened for years and years that people on the lowest incomes who are struggling to heat their homes experienced significant declines in health and wellbeing. If you already have an underlying health condition, it can hasten your death simply because your house is not warm enough.”