rethinking fuel poverty in the uk february 2012 donald hirsch

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Rethinking fuel poverty in the UK

February 2012

Donald Hirsch

Fuel poverty: three perspectives

The poverty perspective

• Problem: high fuel costs stress family budgets• Focus: low income households

Fuel poverty: three perspectives

The health perspective

• Problem: unaffordable fuel costs create cold homes• Focus: groups not heating houses properly

Fuel poverty: three perspectives

The environmental perspective

• Problem: poor housing stock uses fuel wastefully• Focus: thermally inefficient homes

Fuel poverty: three perspectives

The poverty perspective

The health perspective

The environmental perspective

CORE DRIVERS

• HOUSEHOLD INCOME

• FUEL EFFICIENCY OF

HOMES

An underlying concept

Fuel poverty means living in

“a household living on a lower income in a home which cannot be kept warm at reasonable cost”

Warm Homes and Energy Conservation Act 2000

Key measurement issues

• What is the threshold of low income?• What do we mean by reasonable cost?• How to combine these?

Current definition

Fuel poverty =

having to spend at least 10% of income on fuel to keep home warm

Current definitionProblem 1: It doesn’t measure affordability

Fuel poverty line (10% of income)

Available for non-fuel spending

Needed for fuel

Income

SpendingTotal income/spending

Current definition

Problem 2:

Why 10%?

Should the threshold change with changing norms?

Current definition

Problem 3:

What is adequate warmth?

15 16 17 18 19 20 21 22 23 24DEGREES CENTIGRADE

Living room standard

Non-living room standard

“no demonstrable risk” - WHO

Average centrally heated homes

Risk of respiratory problems (where humidity not optimal)

Redefining fuel poverty – low income, unreasonable fuel costs

Income

Fuel costs*

60% median income

*”Fuel costs”= required fuel spending

High fuel costs

Low Income

Redefining fuel poverty – low income, unreasonable fuel costs

Low income

High fuel costs

60% median income after fuel costs

Redefining fuel poverty – low income, unreasonable fuel costs

Low income

High fuel costs

60% median income after fuel costs

Median fuel costs

Fuel poverty

Issues arising

1. Do rising fuel prices cause “fuel poverty” to rise proportionately?

2. What level of fuel efficiency is taken as “reasonable”?

3. What are the actual consequences of fuel poverty, for material hardship and for health?

Consequences 1: fuel pre-empts family budget

Risk of spending high proportion of income* on fuel

*At least 10% of disposable income (after housing costs)

Income poor

Not income poor

Fuel poor Not fuel poor(old definition)

60%

5%34%

85%

Risk of spending high proportion of income* on fuel

*At least 10% of disposable income (after housing costs)

Hardest hit: Lone parents• Low average family income• High priority on meeting family needs

Consequences 1: fuel pre-empts family budget

Risk of low fuel spending* as a % of requirement

*Below 40% of requirement to meet temperature norm

Income poor

Not income poor

Fuel poor Not fuel poor(old definition)

12%

19%46%

43%

Consequences 2: fuel spending low relative to need

Risk of low fuel spending* as a % of requirement

*Below 40% of requirement to meet temperature norm

Consequences 2: fuel spending low relative to need

Hardest hit: Single people (pensioners and non-pensioners)• More likely to have high relative fuel costs• More likely to spend less than “need”

• Spending too little to heat an expensive home is not always linked to poverty (eg single pensioners)

• Many families in poverty spend a high proportion of income on heating, regardless of fuel efficiency

• Rising energy prices spread the problem

• Targeting the housing stock will not always reach people in greatest need

• Measures that target by income and housing efficiency may be best.

Conclusion: five key observations

Centre for Research in Social PolicySchofield Building

Loughborough UniversityLoughboroughLeicestershire

LE11 3TU

Telephone: +44 (0)1509 223372crsp@lboro.ac.ukwww.crsp.ac.uk

www.minimumincomestandard.org

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