Fuel Poverty in the UK

Fuel poverty is a term that is often used in home energy but what does it mean and why are so many people in fuel poverty?

What is Fuel Poverty?

A household is deemed as being fuel poor if:

• Their fuel costs are above average
• And if that fuel spend leaves them with a disposable income below the official poverty line

It is worth noting that someone can be in fuel poverty without spending sufficiently on fuel to bring them below the poverty line if they are not using their heating as much as they should do, and if they did use that heating the cost would result in them being below the poverty line.

This is due to households avoiding meeting the poverty level through not using energy in their home, however, these households are still classed as being in fuel poverty.

The energy requirement of a home is defined by the amount of energy that is needed to have a warm home, with enough hot water for everyday use, is lit and can run the essential appliances.

Therefore, it is the home’s energy requirement amount not the actual spend on energy as this can be impacted by occupants limiting their spend and, in some cases, using excessive amounts of energy above the required amount.

There are three factors that determine whether a household is fuel poor:

• Its income
• The homes energy requirements
• Their fuel prices

How Many Households are in Fuel Poverty?

A government report from 2017 on fuel poverty estimated that in 2015 there were approximately 2.5 million households in England in fuel poverty. This equates to 11% of households.

What Factors Make Households Fuel Poor?

Income is one the largest contributing factors to fuel poverty but many households that are in fuel poverty would not be considered in poverty due to their income alone.

Property type and insulation

One of the biggest contributors after income for fuel poverty is the type of property and the condition of the heating system in the property.

The UK has an old housing stock that is very inefficient and leaky when it comes to heating these homes. These properties are poorly insulated which makes them more expensive to heat as the heat escapes from the property easily.

Government statistics show that properties that have insulated walls are less like to have occupants that are fuel poverty as they are cheaper to heat. Newer properties also have less fuel poor occupants as these properties are better insulated.

The size of the property also has an impact as the larger the property is the more it will cost to heat it.

Home Ownership

The properties that have the highest level of fuel poverty are in the privately rented sector where the landlords are not invested in spending money to increase the energy efficiency of the home in terms of insulation or boiler efficiency.

However, social landlords such as local authority and housing association properties have lower proportions of fuel poverty which is largely due to the energy efficiency programmes that they have been running over the last decade as well as rent being more reasonable than renting privately.

Owner-occupied properties have lower levels of fuel poverty which is likely to them seeing the benefit in investing in energy efficiency measures to reduce their energy costs where possible or they have taken advantage of reduced price or free insulation schemes.

Heating and fuel type

The type of heating in a home also impacts the level of fuel poverty as it is a contributor to the cost of the energy. Homes heated by gas are cheaper to run, followed by other fuels and then by electricity which is often the most expensive heating type.

If the property also has an old and inefficient boiler it can cost more to run, as can any other form of inefficient heating include electricity storage heaters. These factors combined with poorly insulated properties make them very expensive to heat.

Household composition

Statistics also show that those living in a multi-occupancy household have a higher proportion of fuel poverty than couples or a single person that is under 60 years old. Households that suffer the most from fuel poverty are lone parents with dependent children.

Energy prices

The final factor contributing to fuel poverty is the energy prices that a household pays. Those households with higher energy consumption will be more greatly impacted by any energy cost increases.

Many fuel poor households may be in fuel poverty due to the expensive energy tariffs that they are on. Some households might be on expensive tariffs as they have not switched suppliers or energy tariffs which have resulted in them being placed on standard variable tariffs that are high.

Other households may be in debt which has resulted in prepayment/s meters being installed that have more expensive tariffs.

Energy suppliers also offer discounts to those that can pay by direct debit and manage their accounts online which can disadvantage those who are in fuel poverty as they may not be able to take advantage of these discounts.

What is Being Done to Tackle Fuel Poverty?

The government introduced a fuel poverty target in December 2014 to ensure that as many fuel poor households received assistance in improving their home’s energy efficiency to a minimum of a band C rating by 2030.

There were also interim targets of band E by 2020 and band D by 2025. These band ratings relate to the assessment of a home’s energy performance which is rated on an Energy Performance Certificate (EPC).

The government released a strategy in March 2015 to support the delivery of these targets which was called ‘Cutting the cost of keeping warm: a fuel poverty strategy for England’.

Energy efficiency programmes have been created with the fuel poor in mind with a higher proportion of assistance being targeted at those households that are more likely to be in fuel poverty.

The current Energy Company Obligation (ECO) is a programme that sets targets for energy suppliers to improve the energy efficiency of UK homes.

Many of the scheme’s requirements are set so that those on benefits and meet other fuel poor criteria receive the support which will assist the government’s target to increase the energy efficiency band of fuel poor households.

Previous energy efficiency schemes such as Community Energy Savings Programme (CESP) and Carbon Emissions Reduction Target (CERT) also targeted fuel poor homes with additional targets aimed at the most deprived areas of the UK as well as rural areas which had often been ignored by previous schemes.

The energy reforms that are taking place to prevent energy suppliers from penalising energy customers who are on prepayment meters and standard energy tariffs should also impact the fuel poor figures.

These price caps prevent energy suppliers from increasing certain energy tariffs above fixed levels. There is currently a price cap for prepayment customers called the Prepayment Safeguard and there is a proposed bill called the Domestic Gas and Electricity (Tariff Cap) Bill that will tackle standard variable tariffs.

There is also an interim price cap for those customers that meet Warm Home Discount criteria that are on standard variable tariffs, this is called the Warm Home Discount Safeguard.

There are also financial supports available to households that meet set criteria to assist them with heating their home in winter including Warm Home Discount, Cold Weather Payments, and Winter Fuel Payment.

The roll out of smart meters will also have some impact as households will be able to monitor their usage more accurately and there will be no more estimated bills.

Are There Any Bodies That Help the Fuel Poor?

National Energy Action (NEA) and Energy Action Scotland (EAS) are national fuel poverty charities that are trying to end fuel poverty. NEA operates in England, Wales, and Northern Ireland, and works alongside Energy Action Scotland who covers Scotland.

These charities undertake the following activities to aid the reduction of fuel poverty:

• Campaigning on behalf of the fuel poor
• Research and analysis that helps develop policies to tackle fuel poverty
• Developing demonstration projects that show new ways to address fuel poverty
• Providing advice and guidance on delivering energy efficiency services to fuel poor households
• Developing national qualifications around fuel poverty and energy efficiency
• Utilising government funding and energy company fines to deliver energy efficiency measures to fuel poor households

What is the Future of Fuel Poverty?

The government predicts that fuel poverty should decline over the next decade or so as the energy efficiency of the UK’s housing stock improves which should enable households to heat their homes for less.

This should make a good contribution to the decline in fuel poverty, but this alone cannot be the only driver.

Government policy on how energy suppliers treat their customers is changing and restricting their practices to customers who are most disadvantaged or penalised by the energy suppliers’ tariff structure. This alongside other financial supports for heating costs should also impact on the level of fuel poverty.

But ultimately the cost of energy will still be a significant factor that cannot be fully addressed or reduced, as is the household income with the cost of living continuing to rise above salary increases. Fuel poverty will not be fully eradicated but can be reduced.