the long cold winter: beating fuel poverty
TRANSCRIPT
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TheLongCold
Winter:BeatingfuelpovertyByJennyBird,RonCampbellandKayteLawton
ipprandNEA
March 2010
ippr2010
InstituteforPublicPolicyResearchChallengingideas Changingpolicy
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Aboutippr .......................................................................................................................... 3
AboutNEA .......................................................................................................................... 3
Abouttheauthors.............................................................................................................. 3
Acknowledgements............................................................................................................. 3
Executivesummary ............................................................................................................ 4
1.Introduction ................................................................................................................... 7
2.FuelpovertyintheUK ................................................................................................... 8
3.Currentinitiativestotacklefuelpoverty ...................................................................... 12
4.Thecostoferadicatingfuelpoverty............................................................................. 20
5.Rethinkingfuelpoverty ................................................................................................ 24
6.Nextsteps:theroutetoanewfuelpovertystrategy .................................................. 29
7.Conclusions ................................................................................................................... 34
References......................................................................................................................... 35
Contents
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TheInstituteforPublicPolicyResearch(ippr)istheUKsleadingprogressivethinktank,
producingcutting-edgeresearchandinnovativepolicyideasforajust,democraticand
sustainableworld.
Since1988,wehavebeenattheforefrontofprogressivedebateandpolicymakinginthe
UK.Throughourindependentresearchandanalysiswedefinenewagendasforchangeand
providepracticalsolutionstochallengesacrossthefullrangeofpublicpolicyissues.
WithofficesinbothLondonandNewcastle,weensureouroutlookisasbroad-basedas
possible,whileourGlobalChangeprogrammeextendsourpartnershipsandinfluence
beyondtheUK,givingusatrulyworld-classreputationforhighqualityresearch.
ippr,30-32SouthamptonStreet,LondonWC2E7RA.Tel:+44(0)2074706100E:[email protected]
www.ippr.org.RegisteredCharityNo.800065
ThispaperwasfirstpublishedinMarch 2010.ippr2010
Aboutippr
JennyBirdandKayteLawtonareResearchFellowsatippr.TheyworkonipprsCitizens,
SocietyandEconomyprogramme.Jennyspecialisesinenergyandclimatechangepolicyand
Kayteinemploymentandskills,andpovertyandinequality.RonCampbellisHeadofPolicy
andInformationatNEA.Hisroleinvolvesanalysisof,andcommentaryon,existingfuel
povertypolicyanddevelopmentandpromotionofinnovativeprogrammesandpolicyto
addressfuelpoverty.
Abouttheauthors
ThisprojectonfuelpovertywasmadepossiblebythegeneroussupportoftheUKBusiness
CouncilforSustainableEnergy.Weareverygratefultotheprojectfunders,withoutwhose
supportthisprojectcouldnothavehappened.
Wewouldliketothankalloftheindividualswhowillinglygaveuptheirtimetotakepartin
interviewsforthisproject.WewouldalsoliketothankDavidGreenandcolleaguesatUK
BCSEforprovidingcommentsonanearlierversionofthereport.
FinallyweareverygratefultocolleaguesatipprandNEAwhocontributedtothisproject
andcommentedondraftsofthisreport:TonyDolphin,LisaHarker,MatthewLockwood,
SimonRetallack,JennySaundersandKateStanley,andtoGeorginaKyriacou,whosteeredthereporttowardspublication.
Noneoftheaboveshouldbeheldresponsiblefortheviewsexpressedinthisreport,which
aresolelythoseoftheauthors.
Acknowledgements
NationalEnergyAction(NEA)isanationalcharityworkingtoreduceand,ultimately,
eradicatefuelpoverty.NEAseekstoachievetheseobjectivesthroughpolicydevelopment
andrepresentationstokeyagenciesincludinggovernment,energysuppliersandOfgem.
NEAhasacampaigningroleinpressingforadditionalprogrammesandresourcestomeetthe
needsofvulnerableenergyconsumers.
NEAalsoundertakespracticalprojectstoaddressspecificissuesrelatedtofuelpovertysuch
asenergyadviceandtraining,innovationintechnologiesforhard-to-treathousingand
schemesthatpromoteengagementwithsociallyexcludedhouseholds.
NEAworksacrossEnglandthroughthecharitysheadquartersinNewcastleuponTyneand
throughofficesinalloftheEnglishregions.NEAWalesandNEANorthernIrelandundertake
similarroleswithinthedevolvednations.
AboutNEA
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Thewinterof2009/10hasbeenoneofthecoldesttheUKhasexperiencedfordecades.
Whilethesnowandicehaveinconveniencedmillionswithdisruptionstotransportservices
anddangerousdrivingconditions,thecoldweatherwillhavecauseduntoldmiseryforpeoplelivinginfuelpoverty.Infact,moreandmorepeoplearebeingplungedintofuel
povertyasenergypricesriseandgovernmentprogrammestotacklethismajorsocialproblem
failtokeepupwiththescaleofthechallenge.
Thisreportreviewsthecurrentpolicylandscapeonfuelpovertyandaskswherepolicy
shouldgonext,iffuelpovertyistobeaddressedeffectivelyintheUK.
Whatisfuelpovertyandwhatcommitmentistheretotackleit?
TheGovernmentclassifiesahouseholdasbeinginfuelpovertyifitneedstospendmore
than10percentofitsincomeonfueltomaintainanadequatelevelofwarmth,usually
definedas21degreesforthemainlivingarea,and18degreesforotheroccupiedrooms.
TheUKgovernment,togetherwiththedevolvedadministrations,hasacommitmenttoendfuelpovertyby2016forEngland,ScotlandandNorthernIrelandandby2018forWales,and
amongvulnerablehouseholdsby2010.Itisalmostcertainthatthe2010targetwillbe
missedanditisunlikelythatthelevelofresourcesneededtoeliminatetheproblemby
2016/18willbedelivered.
Fuelpovertyiscausedbythreedifferentfactors:
Lowhouseholdincomes
Highenergyprices
Poorenergyefficiencyinhomes.
Whileanyoneoftheseaspectscanresultinpeoplebeingunabletoaffordtoadequatelyheattheirhomes,itisenergypricesthathavebeenthemaindriveroffuelpovertytrendsin
theUKoverthelast15years.Levelsoffuelpovertyfellintheearly2000swhenincreased
competitionintheenergysectorpushedpricesdownwards.However,thenumberofpeople
livinginfuelpovertyhasbeenincreasingsincearound2003,drivenmainlybydramatic
increasesindomesticenergyprices,whichhavereflectedwholesaleoilandgaspricerises.
Asthingsstand,fuelpovertylookssettogetworseinthefuture.Energypricesarelikelyto
continuetoincrease,driveninpartbythecostsofmeetingourclimatechangeobligations,
butmainlybypredictedrisesinthecostofwholesaleoilandgasowingtogrowingglobal
demandforoilandtechnicalbarrierstoincreasingsupply.Atthesametime,therecession
anditsaftermathislikelytoreduceincomesforsome,eitherthroughlossofjobsorthrough
anyreductionsinpublicspendingonfuelpovertyprogrammesand/orbenefits.
TheGovernmentscurrentfuelpovertyprogrammeconsistsofanumberofpolicymeasures,
whichaimtotackleeachofthecausesoffuelpoverty.Thesemeasuresfallbroadlyintotwo
categoriespubliclyfundedprogrammespaidforultimatelybytaxpayers,andprogrammes
paidforbyenergyconsumers,deliveredviaenergycompanies.
Publiclyfundedprogrammesinclude:
WinterFuelPaymentsandColdWeatherPayments,aimedatboostingincomes
Schemestoimproveenergyefficiencyandhousingquality,suchasWarmFrontandtheThermalComfortelementoftheDecentHomesprogramme,andtheirequivalents
inthedevolvedadministrations.
Programmesfundedviatheenergysuppliersinclude:
Measuresaimedatreducingbillsforthemostvulnerablecustomers,whicharevoluntaryatthemomentbutlikelytobecomemandatoryinthenearfuture
Executivesummary
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Schemestohelppeopleimprovetheenergyefficiencyoftheirhomes,suchastheCarbonEmissionsReductionTarget(CERT)andtheCommunityEnergySaving
Programme(CESP).
ItisdifficulttoquantifytheexactcostoferadicatingfuelpovertyentirelyintheUKsince
volatileenergyprices,theeconomiccycleandweatherpatternscanallaffectthenumberofpeopleinfuelpoverty.However,anumberofstudieshaveattemptedtoassessthecostof
bringingthehousingstockuptoaminimumlevelofenergyefficiencyandtheextentto
whichthiswouldreducefuelpoverty.Thestudiessuggestthattotalexpendituremightrange
between9.2bnand64bn(thelatteramountbeingspreadoversevenyearsbetween2009
and2016).Theupperendofthisrangevastlyexceedscurrentplannedspendinglevelson
fuelpoverty.
Recommendations
Thecurrentfuelpovertystrategywasdevisedatatimewhenenergypriceswerefallingbut
thecontexthasnowchangedsignificantlyenergypricesareprojectedtoriseandnew
technologicaldevelopmentscouldofferfreshoptionsfortacklingfuelpoverty.Wethereforemakethefollowingrecommendationsforaradicalrethinkofthefuelpovertystrategy.
1.TheUKgovernment,workingwiththedevolvedadministrations,shouldcommissionan
independent,wide-rangingreviewoftheUKsfuelpovertystrategy, whichwouldprovide
amorefundamentalrethinkthanthecurrentreviewbeingundertakenbytheDepartment
forEnergyandClimateChange(DECC).
Thisreviewshouldinvestigatethefollowingquestions:
Howcanthetrade-offbetweentheneedforlong-terminvestmentinenergyefficiencyforasustainableandcost-effectivesolutionversusshort-termspending
onincomesupportandpricereductionmeasuresbemanagedtoensureagreater
emphasisonenergyefficiency?Shouldthetermfuelpovertyberedefinedtotakeaccountofrisingfuelpricesandto
avoidperverseincentiveswhendevelopingnewpolicymeasures?Thecurrent
definitionmeansthatreducingenergybillswillresultinfewerpeoplebeingcounted
asfuelpoorthanifincomeswereincreasedbyanequivalentamount.
Aretargetstoeliminatefuelpovertyappropriate,sincefactorsbeyondgovernmentscontrolaffectlevelsoffuelpoverty?
Howcanthecostsoffuelpovertyprogrammesbemetinafairway?Thecurrentmovetowardsloadingmoreofthecostsontoenergyconsumersresultsinamore
regressivesystemofpaymentthanusingpublicmoneywould.
Whoshoulddeliverfuelpovertyprogrammes?Istherescopeforincreasedpartnershipworkingwithorganisationslikelocalauthoritiesorenergydistributorsaswellas
energysuppliers?
Whatroleistherefornewtechnologieslikesmartmetersandmicrogenerationtechnologiesintacklingfuelpoverty?
Someinterimmeasureswillberequiredwhilethereviewisbeingconducted,toimprovethe
currentstrategy.Thesearesetoutinthefollowingrecommendations.
2.Pay-as-you-savetypeprogrammestodeliverenergyefficiencyimprovementstohomes
needtobesupplementedbyprogrammesprovidingmeasuresfreeofchargetofuel-poor
households.
Fuel-poorhouseholdswillnotbeabletobenefitfrompay-as-you-saveschemes(asenergyefficiencyimprovementsforfuel-poorhouseholdswillleadtowarmerhomes,ratherthan
reducedenergybills,meaningthattheywillnothavecashsavingsfromwhichtopayback
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loans),sowillneedfinancialassistancetoimprovetheefficiencyoftheirhomes.Ideally,this
shouldbethroughapublicly-fundedscheme.
3.TheUKgovernmentanddevolvedadministrationsshouldannounceplanstointroduce
minimumenergyperformancestandardsforallhomes,ataspecifieddateinthefuture.
ThiswouldensureactionfromthosewhodonotactvoluntarilywhenthePAYSschemeisintroduced.Safeguardsshouldbeputinplacetoprotectvulnerablegroups,suchasthe
elderly.
4.TheUKgovernmentanddevolvedadministrationsshouldconsiderintroducingmore
stringentminimumenergyefficiencystandardsforrentalproperties.
Onlythosemeetingadequateenergyefficiencylevelswouldbelet.Thiswouldrequire
additionalresourcesforlocalauthoritiestoenablestrongenforcementand,possibly,
incentivestolandlords.InEngland,theHousingHealthandSafetyRatingSystemhasnot
deliveredimprovementsintheefficiencyofhomesintheprivaterentedsectorbecauseithas
notbeenadequatelyenforced.
5.TheUKgovernmentshouldinvestigatewaystoensurethatthecostsofthemandatory
pricesupportmeasurearepassedontocustomersintheleastregressivewaypossible.
Ifthepriceofofferingdiscountstofuel-poorcustomersispassedonequallytoall
customers,peopleonlowerincomeswillenduppayingproportionatelymoretowardsthe
costsofthescheme.Linkingcoststoenergyusemightbeoneoptionsincepeopleonhigher
incomestendtousemoreenergythanthoseonlowerincomes.
6.TheUKgovernmentanddevolvedadministrationsneedtocontinuetheireffortsto
improvetheuptakeofPensionCredittomaximisethebenefitoftheEnergyRebate
Scheme.
GuaranteePensionCreditrecipientswillautomaticallyreceivean80rebatefromtheir
energybillsundertheEnergyRebateScheme.However,between20and30percentof
peoplewhoareentitledtoPensionCreditdonotclaimit,meaningtheywillalsomissouton
theEnergyRebateScheme.
7.TheUKgovernmentshouldcommittomatchanyfutureincreasedspending
requirementsimposedonenergysupplierswithanequalincreaseinpublicly-fundedfuel
povertyprogrammes.
Tomakesurethatthebalancebetweengovernment-andenergycompany-ledprogrammes
doesnottiltfurthertowardsthelatter,whichwouldberegressive,theUKgovernment
shouldcommittomatchanyincreasesinspendingrequirementsonenergycompanies.Fuel
povertyprogrammesthatarefundedbyenergysuppliersaremoreregressivethanthose
fundedthroughthetaxationsystembecauseallenergycustomerscontributeequallytowards
thecostsoftheschemes,ratherthanthoseonhigherincomespayingagreaterproportion
ofthecosts.8.Therebatecreatedbymandatorysocialpricesupportshouldbeofferedinadditionto
themeasuresalreadyofferedunderthevoluntaryagreements.
Somecommentatorshavesuggestedthatcustomersshouldreceiveeitherarebateorasocial
tariff,butnotboth.However,thisgoesagainstthespiritoftheDepartmentforWorkand
PensionssharingdataonPensionCreditrecipientsinordertoprovidebenefitsforthose
people.Thereforeeligiblecustomersshouldbeabletoreceivebothformsofassistance.
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Thewinterof2009/10hasbeenoneofthecoldesttheUKhasexperiencedfordecades.
Whilethesnowandicehaveinconveniencedmillionswithdisruptionstotransportservices
anddangerousdrivingconditions,thecoldweatherwillhavecauseduntoldmiseryforpeoplelivinginfuelpoverty.
Livinginacoldhomeisnotjustanunpleasantexperience:inadequatelyheatedhousescan
haveserioushealthimplications,particularlyfortheoldandveryyoungandforpeoplewith
adisability,andcanevenbeafactorinprematuredeath.Atthesametime,coldhomesare
likelytobepoorlyinsulated,meaningmorefuelisburnedtomaintainwarmth,adding
unnecessarilytotheUKscarbonemissions.Tacklingfuelpovertycouldcreaterealreturns,
bothbyimprovingpeopleswell-beingandhelpingtheUKtoreduceitscontributionto
dangerousclimatechange.
TheGovernmenthasrightlyrecognisedfuelpovertyasanimportantissueandsince2001
hashadafuelpovertystrategytotakeactionagainsttheproblem.Nonetheless,thenumber
ofpeopleinfuelpovertyhasbeenrisingsteadilyoverthelastfiveyears.Itnowseemslikely
thattheGovernmentstargetstoeradicatefuelpovertyamongvulnerablegroupsby2010
andamongallhouseholdsbyNovember2016(or2018inWales)willbemissed.Itisclear
thefuelpovertystrategyisnotdelivering.
Thisreportreviewsthecurrentpolicylandscapeonfuelpovertyandaskswherepolicy
shouldgonext.
Methodology
Thereportisbasedonresearchcarriedoutinthelastthreemonthsof2009.Itusesadesk-
basedreviewofevidencesupplementedbyaseriesofinterviewswithexpertstakeholders
fromthefollowingorganisations:AgeConcern,All-PartyParliamentaryWarmHomesGroup,
CentreforSustainableEnergy,Centrica,ConsumerFocus,DepartmentofEnergyandClimate
Change(DECC),EDF,EnergySavingTrust,E.ON,FuelPovertyActionGroup,HelptheAged,
npower,OfgemandScottishPower.TheinterviewswereconductedinOctoberand
December2009.
Structureofthereport
Webegininthenextsectionbysettingoutthecontext,highlightingtrendsinfuelpoverty
anditsunderlyingcauses.Section3thenoutlinesthevariouspolicymeasuresthatcomprise
theGovernmentscurrentfuelpovertystrategy,whileSection4examinesthescaleofthe
challengeiffuelpovertyistobeeradicatedpermanently.Sections5and6looktothefuture
andproviderecommendationsforhowthefuelpovertyagendashouldbetakenforward.In
Section5wearguethataradicalreviewoftheentirefuelpovertystrategyisneededwhile
Section6setsoutsomespecificstepsthatshouldbetakenintheinterim.Section7
concludes.
1.Introduction
TheGovernmentsclassificationoffuelpoverty:
Ahouseholdissaidtobeinfuelpovertyifitneedstospendmorethan10percentofitsincomeonfueltomaintainanadequatelevelofwarmth,usuallydefinedas21degreesforthe
mainlivingarea,and18degreesforotheroccupiedrooms.
(DepartmentofEnergyandClimateChange2009a)
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TheGovernmentintroducedtargetsfortheeradicationoffuelpovertyin2001(Department
forTradeandIndustry[DTI]andDepartmentoftheEnvironment[DoE]2001).Thesetargets
committheGovernmenttoendingfuelpovertyinEnglandby2010forvulnerablehouseholds1,andforallhouseholdsbyNovember2016.Thedevolvedadministrationsin
ScotlandandNorthernIrelandhavenear-identicaltargets,withWaleshavingacommitment
toendfuelpovertyslightlylater,by2018.Despitetheseactions,concernsabouttheextent
offuelpovertyintheUKhaveincreasedinrecentyears,drivenprimarilybyrisingenergy
prices.
Inthissectionwebrieflysetoutthedefinitionoffuelpovertyandrecenttrends,againstthe
UKgovernmentanddevolvedadministrationstargets.Wealsoexploretheimpactthat
currentandfuturetrendsinenergyprices,employmentandhouseholdincomesmayhaveon
fuelpovertyinthefuture.
Fuelpoverty:originsandtrendsFuelpovertyhasitsrootsinthreedifferentchallenges:
Lowhouseholdincomes:althoughthereisnotasimplecausalrelationshipbetweenincomeandfuelpoverty,thereisaclearoverlapbetweenthetwo.
Energyprices:higherdomesticenergypricesresultingreaternumbersofpeopleinfuelpoverty.
Domesticenergyefficiencystandards:poorqualityhousingleadstoinefficientuseofenergyandhigherenergybills.
Figure2.1showstrendsinfuelpovertyintheUKoverthelastdecade.Althoughthenumber
ofcasesfellsignificantlyinthelate1990sandtheearlypartofthe2000s,numbershave
beenontheriseagainsince2004/5.Thesetrendshavebeendrivenprimarilybychangesinenergyprices.Figure2.2showshowdomesticgasandelectricitypricesdecreasedbetween
1996and2001followingtheintroductionofcompetitiveenergymarkets.However,prices
havebeenrisingsince2003/04,mainlyasaresultofincreasingwholesalecosts.Therateof
increasehasbeenparticularlysharpsince2005anddomesticenergypriceshavegrownmuch
morethanaverageconsumerprices(Figure2.2).
1.Avulnerablehouseholdisonethatcontainschildren,orpeoplewhoareelderly,illordisabled(DTIandDoE2001).
2.FuelpovertyintheUK
0
1
2
3
4
5
6
7
1996
1998
2000
*
2002
2004
2006
Year
Households(mi
llions)
All households Vulnerable households
Figure2.1:Fuel
povertylevelsin
theUK,
19962007
Source:DECC2009d
*datanot
availablefor
1997,1999
or2000
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Itshouldbenotedthatotherfactorsincludingtheintroductionofmoregenerousbenefits
(suchasPensionCredit,taxcreditsandWinterFuelPayments)andsomeimprovementsin
domesticenergyefficiencyhavehadabeneficialeffectonthenumberofpeopleinfuel
poverty,butenergypriceshaveremainedtheoverridingdrivingforce(EnergyAction
ScotlandandNationalEnergyAction2009,DepartmentofEnergyandClimateChange[DECC]2009a).
Thereisconsiderablevariationintheoverallincidenceoffuelpovertyacrossthefournations
oftheUK,withparticularlyhighratesinScotland,WalesandNorthernIreland,asTable2.1shows.ThiscouldbeexplainedinpartbythehigherlevelsofincomepovertyinWalesand
NorthernIreland(DepartmentforWorkandPensions[DWP]2009),andthecolderweather
inNorthernIrelandandScotland.Scotland,WalesandNorthernIrelandalsohaveahigher
proportionofpropertiesthatdonothaveaccesstomainsgasandmorepropertiesthatare
classedashard-to-treatforfuelpovertypurposesthanEnglanddoes.InNorthernIreland
thereisalsonorealcompetitiveenergymarketinthedomesticsector.
Futuredriversoffuelpoverty
Ourinterviewswithfuelpovertyexpertsrevealedaconsensusthatthreekeydriversare
movinginthewrongdirection:
1.Energypriceslooksettocontinuerisingfortheforeseeablefuture.
2.Householdincomemaydeclineintheshorttermasaresultoftherecessionandthe
associatedincreaseinworklessness.
60
80
100
120
140
160
180
200
220
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
In
dexJan1996=100
Domestic gas and electricity prices All consumer prices
Figure2.2:
ChangesinUK
consumerprices
19962009
Source:Officefor
NationalStatistics
2009a
Table2.1:FuelpovertyinthenationsoftheUK,July2009
Nation No.offuel-poorhouseholds Fuel-poorhouseholdsas%ofallhouseholds
England 3,750,000 17%
Scotland 810,000 36%
Wales 320,000 26%
NorthernIreland 250,000 38%
UnitedKingdom 5,130,000 20%
Source:NEAanalysisoftheeffectsoftrendsindomesticenergyprices.
Note:Figuresmaynotmatchwithofficialdata,whichtendtolagseveralyearsbehindthecurrentsituation.
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3.Thelikelyreductioninpublicspendingfrom2010/11toreducethefiscaldeficitcould
reducethescopeforgovernmentinterventiontotacklefuelpoverty.
ThismeansthatitisextremelyunlikelythattheGovernmentwillachieveits2010targeton
fuelpoverty,andprospectsforthe2016/18targetarenotgoodeither.
Energyprices
Risingoilandgasprices,infrastructureinvestmentprogrammesandclimatechangepolicies
willalladdtothecostofdomesticbillsoverthenextdecade.AsFigure2.3shows,oilprices
haveshownanupwardtrendsincetheearly2000s,becomingincreasinglyvolatiletowards
theendofthedecade(asdemonstratedbythesharppeakinoilpricesin2008).Gasprices
arelinkedtooilpricesandsohavefollowedasimilartrajectory.Thesetrendsareexpectedto
continueinfuturedecadesasthecombinedimpactofincreasingglobaldemand
particularlyfromemergingeconomieslikeChinaandtechnicalbarriersonthesupplyside
pushupprices.
0
50
100
150
200
250
300
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009*
Year
Index
2000
=1
00
* Average for the months January-October
Figure2.3Index
ofcrudeoilprices,
19912009
Source:DECC
EnergyStatistics
MonthlyTables,
December2009
0
200
400
600
800
1,000
1,200
1,400
1,600
Current 2015 2020
Year
Cost(real2009prices)
Estimated average bill
without any climate
change policies
Estimated average bill
with climate change
policies
Figure2.4:
Estimated
impactofclimatechange
policieson
domesticenergy
bills
Source:HM
Government
2009b
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Policiestotackleclimatechange2 willalsoresultinadditionalcostsondomesticenergybills.
TheGovernmentestimatesthatthepackageofpolicymeasuressetoutinitsLowCarbon
TransitionPlanwilladd125totheaverageenergybillin2020,representinga9percent
increaseoncurrentenergybills(HMGovernment2009a).Figure2.4showshowpricesinthe
UKareexpectedtochangeasaresultofclimatechangepolicies.Itisalsoworthnotingthatinfrastructureinvestment,whichisnecessarytomaintainenergysecurity,isalsolikelyto
increaseenergybills.
Householdincome
The2008/9recessionhasresultedinincreasedlevelsofunemploymentandworklessnessin
theUK.InthethreemonthstoJune2009,therewere3.3mworklesshouseholds(thosein
whichnoadultisdoinganypaidwork),upby239,000fromayearearlier(Officefor
NationalStatistics[ONS]2009b).Thismeansthatanextra500,000working-ageadultsand
167,000childrenarenowlivinginhouseholdswherenooneisworking.
Anincreaseinworklessnessatthehouseholdlevelisparticularlyproblematicinthecontext
offuelpovertybecausethevastmajorityofthesehouseholdswillhaveexperiencedafallin
income.Althoughwedonotyetknowwhatproportionofnewlyworklesshouseholdsare
nowexperiencingfuelpoverty,itislikelythatasignificantnumberare.Althoughthereare
signsthattheeconomyisnowinrecoveryandthelabourmarketisstartingtostabilise,there
areconcernsaboutthepaceofrecoveryandtherateofemploymentgrowth.Itiscertainly
unlikelythatemploymentwillreturntopre-recessionlevelsbefore2016.
Publicspending
Thesizeofthefiscaldeficitwhichisontracktoequalthe2009Pre-BudgetReports
forecastof178bnforthefiscalyear2009/10islikelytoresultinreductionstopublic
spendingoverthecomingyears.Ifthisincludesreductionsinbenefitexpendituretargetedat
thoseonlowincomesandspendingonfuelpovertyprogrammes,itisinevitablethatthiswill
contributetorisinglevelsoffuelpoverty.
Summary
Thenumberofpeoplelivinginfuelpovertyhasbeenrisingsince2005.Thistrendlookssettocontinueasthreedriversarecurrentlymovinginthewrongdirection:
domesticenergypricesarelikelytoincreaseoverthecomingdecadeasaresultofa
combinationofrisingwholesaleenergyprices,climatechangepolicycostsandthe
needtoupgradetheenergyinfrastructure.
Peoplewhohavelosttheirjobsasaresultoftherecessionfaceafallinincomeandresultantdifficultiesinpayingtheirenergybills.
Cutsinpublicspendingand/ormovestowardsgreaterlevelsofmeanstestingcouldalsomeanthatmorepeoplesincomesdecrease,andhencegreaterlevelsoffuel
povertycouldensue.
2.IncludingtheCarbonEmissionsReductionTarget(CERT),theCommunityEnergySavingScheme(CESP),theSupplier
Obligation,BetterBilling,SmartMetering,RenewableHeatIncentiveandproductspolicy.
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Thereisagreatdealofuncertaintyaboutwhatreallyconstitutesexpenditureontacklingfuel
poverty.Somepolicymeasurescontribute toaddressingfuelpovertybutalsohelptoachieve
othergoals,suchasincreasingincomelevelsforpensionersandreducingcarbonemissions.Thereverseisalsotrue:programmesdesignedtotackleclimatechangeortoraiseincomescanhave
knock-onbenefitsforpeopleinfuelpoverty.Themixofdevolvedandreservedpowersacross
theUKalsocausesdifficultiesinassessingwhatisbeingdone,sincesomemeasuresapply
acrosstheUKbutothersonlytoEngland,Scotland,WalesorNorthernIreland.
Regardlessofthedifficultyinquantifyingpreciselevelsofinvestmentinfuelpoverty
programmesthereisnodoubtthatexpenditurehasbeen,andcontinuestobe,substantial.
Yetthecurrentstrategyisclearlyinadequatetomeetexistingstatutorytargetsforthe
eradicationoffuelpoverty.
InthissectionweoutlinethecurrentfuelpovertypolicylandscapeintheUKinthecontext
ofthescaleofthechallengeandthecomplexfundingandregulatoryarrangementsinplace.
Weturnfirsttopublicly-fundedprogrammesandthenexamineprogrammesfundedbyenergysuppliers(whichareultimatelypaidforbyenergyconsumers).
Government-fundedprogrammes
CentralanddevolvedgovernmentsintheUKfundandmanageanumberofschemes
designedtoalleviatefuelpoverty.Inaddition,mostwelfarebenefitsprovidedbygovernment
alsoplayaroleintacklingfuelpoverty,particularlythosedesignedtosupplementthe
incomesoflow-incomehouseholds.(Paymentsthatarenotspecificallylinkedtofuelpoverty
falloutsidethescopeofthisreport.)
WinterFuelPayment
TheWinterFuelPaymentispaidtovirtuallyallhouseholdsintheUKthatcontainsomeoneaged60orover,regardlessoftheirfinancialcircumstances.Forwinter2009/10thepayment
willbemadeattworates:forhouseholdscontainingsomeoneagedbetween60and79,the
paymentis250;forahouseholdwithafamilymemberaged80oroverthepaymentis
400.Intotal,thepaymentisreceivedbymorethan12mindividualsatanoverallcostto
theExchequerof2.7bn.Figure3.1showstheincreaseingovernmentexpenditureonthe
WinterFuelPaymentoverthelastdecade.
TheWinterFuelPaymentisonlyguaranteedforthelifetimeofthecurrentParliamentbut
theConservativePartyhasalreadyindicateditsintentiontoretainthepaymentshouldit
formthenextgovernment.
3.Currentinitiativestotacklefuelpoverty
0
500
1,000
1,500
2,000
2,500
3,000
1997
-199
8
1998
-199
9
1999
-200
0
2000
-200
1
2001
-200
2
2002
-200
3
2003
-200
4
2004
-200
5
2005
-200
6
2006
-200
7
2007
-200
8
2008
-200
9
Expenditure(m)
Figure3.1:
WinterFuelPayment
expenditure,
1997/82008/9
Source:DWP
2009a
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TheuniversalnatureoftheWinterFuelPaymentissimultaneouslyaweaknessanda
strength.ThetitleofthebenefitreflectsGovernmentrecognitionthatolderpeopleoften
requireadditionalsupportinkeepingtheirhomeswarmduringthecoldermonthsofthe
year.Householdsthatdonotrequirefinancialsupportwiththeirenergycostsreceivethe
paymentanyway.Limitingthepaymenttohouseholdswithlowincomes,whoaremuchmorelikelytobeexperiencingfuelpoverty,wouldfreeupresourcestoincreasethelevelof
supportgiventolow-incomepensionerhouseholdsand/orextendthepaymentstoother
vulnerablenon-pensionerhouseholds.
However,theuniversalnatureofthepaymentpre-emptssomeofthedifficultiesassociated
withmeans-testedbenefits.Somepeopledonotclaimbecauseoffearoftheassociated
stigmaorbecauseofalackofknowledge.Andsomelow-incomehouseholdsmightfall
marginallyoverthequalifyingincomethresholdyetstillbeinfuelpoverty.
ItisdifficulttoarguethattheWinterFuelPaymentshouldgenuinelybecalledafuelpoverty
measurebecauseitisauniversalbenefit,itbearsnorelationtodomesticenergypricesand
thereisnowayofknowingifthepaymentsareactuallyspentonenergycosts.
ColdWeatherPayment
IncontrasttotheuniversalWinterFuelPayment,theColdWeatherPaymentismadeonlyto
vulnerablehouseholdsonlowincomes3 andonlywhentheweatherisespeciallysevere.
Paymentsaremadewhenaveragedailytemperatureshavereached,orareforecasttoreach,
nohigherthan0oCoveraseven-dayperiod.
AnnualexpenditureontheColdWeatherPaymenthasnormallybeenintheregionof
812minrecentyears.However,forwinter2008/9and2009/10,thepaymentwas
increasedfrom8.50to25aweek.Thisincrease,andthefactthatitwasacomparatively
coldwinter,resultedinexpenditureofsome209min2008/9(Environment,FoodandRural
AffairsSelectCommittee2009).TheColdWeatherPaymenthasbeenretainedatthe25
levelforthewinterof2009/10.Some4.1mhouseholdsintheUKareeligibleforthepayment,ofwhichmorethan2.7marepensionerhouseholds(CommonsHansard2009).
Energyefficiencyprogrammesinthefournations
TheUKgovernmentandthedevolvedadministrationsallfundtheirowndomesticenergy
efficiencyprogrammesdesignedtotacklefuelpovertyandreducedomesticcarbon
emissions.Althoughtheprogrammesdifferbetweeneachotherindesign,theyprovide
similarservices,withmostmeasurestargetedatvulnerableorlow-incomehouseholds.
WarmFrontEnglandWarmFrontprovidesfreeheatingandinsulationimprovementstopeoplewhoareaged
over60andinreceiptofaqualifyingbenefit,andtoothervulnerablehouseholds
includingfamilieswithchildrenandpeoplewithadisability.ExpenditureontheWarmFrontprogrammehasfluctuatedoverthecurrentthree-yearfundingregime.The
schemesbudgetwas374min2009/10,butwasduetofallto200min2010/11.
However,anadditional150mwasannouncedinthe2009Pre-BudgetReport,and
consequentlyoverallspendingonWarmFrontfrom2008/9to2010/11willreach
1.12bn.Itisnotyetclearwhethertheprogrammewillbeextendedbeyondtheendof
2011.
EnergyAssistancePackageScotlandTheScottishGovernmentsEnergyAssistancePackageincorporatesarangeofmeasures
dependentonthecircumstancesoftheindividualhousehold.In2009/10thebudgetfor
theEnergyAssistancePackageis51m.Thepackageconsistsoffourstages,withstages
3and4onlyavailabletocertainvulnerableorlow-incomehouseholds:
3.EligibilityforColdWeatherPaymentsisrestrictedtohouseholdsonthelowestlevelsofwelfarebenefitsandwherethereisan
additionalfactorofvulnerabilitythroughage(over60orunder5)ordisability.
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1.Energyadvice
2.Benefitentitlementchecks
3.Packageofstandardinsulationmeasures
4.Enhancedenergyefficiencypackage
HomeEnergyEfficiencySchemeWalesTheWelshAssemblyGovernmentsupportstheHomeEnergyEfficiencyScheme(HEES),
whichprovidesapackageofheatingandinsulationimprovementsuptothevalueof
3,600.Grantsareavailableforlow-incomeandvulnerablehouseholds.TheHEES
budgetfor2009/10is25mandthesameleveloffundinghasbeenallocatedfor
2010/11.TheWelshAssemblygovernmentislikelytoadoptanEnergyAssistance
PackageonasimilarbasistothatofScotland.
WarmHomesSchemeNorthernIrelandTheNorthernIrelandAssemblyfundstheWarmHomesScheme,whichprovides
insulation,andWarmHomesPlusforhouseholdswithoutcentralheating,andbothare
targetedatlow-incomehouseholds.The2009/10budgetforheatingandinsulation
improvementsthroughthisprogrammeis20m.
Tacklingfuelpovertyinsocialhousing:DecentHomesStandards
TheUKFuelPovertyStrategyindicatedthattheThermalComfortelementoftheDecent
HomesStandardwouldbethemainmechanismforaddressingfuelpovertyinsocialhousing
inEngland(DTIandDoE2001).ThetargetadoptedbyGovernmentwastoachieve
compliancewiththestandardforallsocialhousingby2010.Itisnowestimatedthat95per
centofsocialhousingwillcomply.
Fromtheoutset,theThermalComfortcriteriawerecriticisedasbeingminimaland
inadequate.TheGovernmenteffectivelyconcededthisargumentwhenitacceptedthatthe
standardwouldnotprovideaffordablewarmthforallsocialhousingtenantsandagreedthatadditionalmeasuressuchassocialtariffswouldberequired(DepartmentofTransport,
LocalGovernmentandRegions[DTLR]2001).Since2002theGovernmenthasadopted
additionaltargetstoreducetheproportionofnon-decenthomesoccupiedbyvulnerable
householdsintheprivatesector.Whilesomeprogrammes,includingWarmFront,do
incidentallyaddresstheissueofThermalComfortintheprivatesector,thereisnospecific
programmeorfundingstreamdedicatedtothisobjective.
Theconclusionthisyearofwhatmightbedescribedasphase1oftheDecentHomes
programmewillprovideanopportunitytobuildontheconsiderablesuccessofthis
programmeintheformofphase2withrigorousSAP4-basedenergyefficiencytargetsfor
heatingandinsulationbeingsetacrossalltenuregroupscoveredbythestandard.Giventhe
environmentalandsocialimperativestoimproveenergyefficiency,itwouldberemarkableifafutureDecentHomesPlusprogrammewerenotmuchmorerigorousanddemandingin
termsofenergyefficiencyspecifications.
ExpenditureontheThermalComfortelementoftheDecentHomesStandardisnotalways
easytoquantify.TheDepartmentforCommunitiesandLocalGovernment(CLG)claimsit
spent4bnonheatingandinsulationimprovementsinsocialhousingbetween2000/1and
2007/8.CLGalsoclaimsthatanadditional2bnwillbespentonthesemeasuresbetween
2008/9and2010/11(HMGovernment2008).Thisexpenditureisdirectedtothesocial
rentedstockonlyandprimarilyresultsfromsociallandlordsimplementingstandardswellin
excessofthosemandatedbytheDecentHomesStandard.
TheScottishHousingQualityStandard(SHQS)andtheWelshHousingQualityStandard
(WHQS)setminimumstandardsforsocialhousinginScotlandandWales.TheSHQSincludes
4.StandardAssessmentProcedureseeChapter4
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arequirementforhomestohaveeffectiveinsulationandafull,efficientcentralheating
system.UndertheWelshstandard,minimumstandardsaresetforenergyconsumptionfor
spaceandwaterheating.NorthernIrelandhasadoptedtheDecentHomesStandardalong
similarlinestotheEnglishstandard.
TheHousingHealthandSafetyRatingSystem(Englandonly)TheHousingAct2004introducedthenewHousingHealthandSafetyRatingSystem
(HHSRS),whichisusedtoassesstheextenttowhichadwellingposesarisktoits
occupants.TheEnglishHouseConditionSurveyrevealsthatbyfarthemostcommonthreat
tothehealthandwelfareofhouseholdersemanatesfromcoldconditionswithinthehome
(CLG2009).
UndertheHHSRS,potentialhazardsaregradedaccordingtoseverityandlikelihood,with
Category1Hazardsbeingthemostseriousandlikely.Table3.1showstheproportionof
dwellingsofdifferenttenureinEnglandwhichareconsideredtoposeaCategory1Hazard
duetoexcessivecold.
IdentificationofaCategory1HazardundertheHHSRSisintendedtotriggerremedial
action,whichismonitoredandenforcedbythelocalauthority.Sincelocalauthoritiescannot
enforceactionagainstthemselves,andbecausesuchactionwouldbedifficultinthecaseof
owner-occupiers,themostlikelytargetsforenforcementareprivatesectorlandlords.
However,whileTable3.1indicatesthatthistenurecategoryhasthehighestproportionof
excessivecoldhazard,therehasbeenvirtuallynointerventiononthepartoflocalauthorities
totakeactiontorequireheatingandinsulationstandardstobeimproved.Thisisclearlyan
areawherelackofbothfinancialandstaffingresourcesisfrustratingremedialactioninsome
oftheworstpropertiesinthehousingmarket.
Othersmallerfuelpovertyprogrammes
TheGovernmentsmajorfuelpovertyprogrammesarecomplementedbyanumberofsmallerschemes,including:
FuelpovertystreamoftheLowCarbonBuildingsProgramme:3moffundingtopilotmicrogenerationtechnologiesandenergyefficiencymeasuresindeprivedareas.
CommunityEnergyEfficiencyFund:afundworth6mwhichistestingoptionsforimprovingthedeliveryofCERT(seebelow)andWarmFrontusingarea-based
approaches.
Supportforenergycostsfundedbyenergysuppliers
InadditiontoprogrammesfundeddirectlybytheExchequer,theGovernmenthasalso
reachedagreementwithenergysuppliersthatrequirethemtocontributetowardsthecosts
ofimprovingenergyefficiencyandreducingbillsforvulnerablecustomers.Newmeasuresareonthehorizonthatwillmandatethiskindofactivity.Thecostsofmeasuresimplementedby
energysuppliersareultimatelypassedontoenergyconsumersontheirbills.Belowwe
brieflyoutlinethemainprogrammesfundedinthisway.
Table3.1:DwellingsposingCategory1HazardduetoexcessivecoldundertheHHSRS,
2007
Tenure No.ofhouseholdsposinghazard %ofhouseholdsposinghazard
Owneroccupied 1,649,360 10.6
Privaterented 416,176 15.2
Localauthority 85,441 4.3
Registeredsociallandlord 70,448 3.7
Alldwellings 2,222,704 10.0
Source:CLG2009
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Energysuppliersvoluntarysocialspend
IntheBudgetStatementof2008,theChancelloroftheExchequerannouncedanagreement
withthemajorenergysuppliersontheamountthattheywerevoluntarilypreparedtospend
onspecificprogrammestohelpreducetheenergycostsofdisadvantagedenergyconsumers
inGreatBritain.Thenegotiatedagreementwouldseesuppliersspend100mduring2008/9,125mduring2009/10and150mduring2010/11.
Inthefirstyearoftheagreement,energycompaniesexceededthepromised100m
contributionbyasignificantmargin,spendingatotalof157monsocialprogrammes.Of
totalexpenditurein2008/9,theoverwhelmingmajority(130m)wasspentonsocialtariffs
orproxies5 forsocialtariffs(Ofgem2009).Theremainingexpenditurewasallocatedto
activitiessuchasTrustFundgrantsandpartnershipworkingwiththevoluntarysector.
TheenergyregulatorOfgemnotedthatallsuppliershadmettargetsagreedwith
government(relatedtothesizeoftheircustomerbase)andthatthenumberofhouseholdsonsocialtariffsorequivalentshadmorethandoubledbetweenMarch2008andMarch2009
from460,000accountstoover1m(Ofgem2009).
However,thereareanumberofrecognisedproblemswithsocialtariffprovision,most
notablythefactthatthequalifyingcriteriavarybetweensuppliers,asdothetechniquesfor
identifyingeligiblecustomers.Whatismore,thestricterdefinitionofwhatcanbelabelleda
socialtariffthatwasintroducedbyOfgemin2008meansthatonesupplierdoesnotoffera
socialtariffatall(althoughitdoesprovideareducedratetariffforvulnerablecustomers).
Proposedmandatorysocialpricesupport
TheUKLowCarbonTransitionPlan,publishedinJuly2009,containedagovernment
undertakingtobringforwardnewlegislationattheearliestopportunitywiththeaimofplacingsocialpricesupportonastatutoryfootingwhenthecurrentvoluntaryagreement
endsinMarch2011(HMGovernment2009a).TheGovernmentalsopromisedincreased
resourcesforthismeasureandgreaterguidanceforsuppliersonthetypesofhouseholds
thatshouldbeeligibleforfuturesupport.ThismeasurewasintroducedintheQueens
Speechon18November2009asoneoftheprovisionsofanewEnergyBill.
Theproposalssetoutinthe2009EnergyBillareforanewmandatorysocialpricesupport
measurethatwouldbeintroducedinApril2011andapplytoenergysuppliersoperating
acrossGreatBritain.Theschemewouldcomprisethreeelements:
Legacyspend: thismeansthatenergysupplierswouldbeexpectedtocontinuesupportforthosepeoplealreadyreceivingsupportunderthepre-existingvoluntaryagreement.
5.TheregulatorOfgemnowprescribesthat,toqualifyasasocialtariff,chargesmustbenohigherthanthosemadetoonline
directdebitcustomersinthatparticularregion.
Table3.2:SocialtariffsavingsandcostsatMarch2009
Supplier No.ofcustomeraccounts Costtosuppliers/savingstocustomers
BritishGas 516,279 77m
EDFEnergy 145,012 9m
E.ON 51,881 16m
npower 113,836 12m
ScottishPower 72,386 2m*
SSE 102,940 15m
Total 1,004,470 130m
Source:Ofgem2009
*Thisfigureisforthefirstthreemonthsoftheyearonly
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Kernelgroupsupport: thiswouldbeadditionalexpendituretoprovideadiscountonenergybillsforaspecifiedgroupofpeople.Thisislikelytobeolderpensionersonthe
lowestincomes,probablythoseinreceiptoftheGuaranteeCreditelementofPension
Credit.
Broadergroupsupport: additionalspendtoprovideadiscounttoawider(asyetunspecified)groupofpeoplethanthosefallingintothekernelgroup.
TheChancellorsPre-BudgetReport,publishedinDecember2009,indicatedthatsupplier
supportformandatedsocialofferingswouldreach300mayearby2013/14.Thedifferent
levelsandtypesofspendingbyenergysuppliersonfuelpovertyfrom2008/9aresetoutin
Figure3.2below.
TheEnergyRebateScheme
AninterimEnergyRebateSchemeisbeingrunaheadoftheintroductionofthemandatory
socialpricesupportscheme.Thisschemewillpilotanewdata-sharingprojectbetweenthe
DWPandenergysupplierstohelpimprovetargetingoffuelpovertyprogrammes,using
powersgrantedbythePensionsAct2008tosharedataonPensionCreditcustomersforthe
purposeofreducingtheirriskoffuelpoverty.
TheEnergyRebateSchemewillprovideenergysupplierswithaccesstodataontheircustomerswhoareaged70oroverandinreceiptoftheGuaranteeCreditelementof
PensionCredit.Itisproposedthateligiblehouseholdswillreceiveadiscountof80ontheir
electricitybills.Thismeasurewillbenefitsome250,000householdsandwillcostsuppliers
around20m.Theproposeddiscountarrangementwillexcludehouseholdswhowould
otherwisebeeligiblebutwhoarecurrentlybenefitingfromavoluntarysocialtarifffromtheir
energysupplier.
Aswehavealreadynoted,expenditureonsocialtariffsbyenergycompaniesin2008/9
exceededtheamounttheyhadagreedtospendannuallyby2010/11.IftheEnergyRebate
Schemeistobefullyimplemented,thenadditionalfundingwillhavetobefoundforan
expandedprogrammeorenergysuppliersmayreallocatesomeofthefundingfromexisting
programmestowardstheEnergyRebateScheme.
CarbonEmissionsReductionTarget(CERT)
ThemainprogrammetodeliverdomesticenergyefficiencymeasuresacrossEngland,Scotland
andWalesistheCarbonEmissionsReductionTarget(CERT).TheCERTprogrammeimposes
0
50
100
150
200250
300
350
2008
/09
2009
/10
2010/11
2012/13*
2013/14
Futu
re**
Spending by energy companies ( millions)
Year
Additional spend on
mandatory price
support to 'kernel'
and 'broader' groups
Legacy social spend
Actual spend
Agreed voluntary
social spend* Level of spending for 2012/13 has not yet been determined
but is expected to be greater than 2010/11 levels.
** Indicative only - not to scale
Figure3.2:
Voluntarysocial
spendand
proposed
mandatorysocialpricesupport
spending
Source:Ofgem
2009andDarling
2009
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anobligationonthemajorenergysupplierstoachievecarbondioxidereductionsthrough
energyefficiencyinterventionsinthedomesticsector.Withintheoverallcarbonreduction
targetthereisafurtherrequirementthat40percentofthesavingsshouldbeachieved
throughworkondwellingsoccupiedbyaPriorityGrouphouseholdsinreceiptofmeans-
testedordisabilityrelatedbenefitsorwherethehouseholderorpartnerisaged70orover.Overtheperiod200811,energysuppliersaretoachievelifetimecarbonsavingsof185m
tonnesatanestimatedcostof3.2bn.Thisfigureincludesa20percentincreaseinthe
CERTprogrammeannouncedinSeptember2008.Sincemeasuresprovidedonbehalfofthe
PriorityGrouparegenerally100percentgrant-funded,theshareofspenddevotedtothese
householdsisintheregionof56percentoftotalspend,or1.8bnoverthethreeyearsof
theprogramme.
TheGovernmentproposestointroduceextensionofCERTtoalignwiththeendofthefirst
carbonbudgetperiod.Theextensionisestimatedtocostsome2.4billionintotal,ofwhich
1.3billionwillbeexpendedonbehalfofthePriorityGroup.Itisalsoproposedtocreatea
superPriorityGrouptoensurethatthemostvulnerablehouseholdsbenefitfromthis
programme.
CommunityEnergySavingsProgramme(CESP)
TheCommunityEnergySavingProgramme(CESP)isanewinitiativetotestthemeritsofan
area-based,whole-houseapproachtoenergyefficiency.Whileostensiblyacarbon-focused
programme,CESPhasanimplicitremittoaddressfuelpoverty.TheGovernmentsguidance
isfortheCESPto:
Identify100ofthemosteconomicallydisadvantagedcommunitiesinGreatBritain
Implementcomprehensiveenergyefficiencyprogrammesinthesecommunitiestobenefit90,000households
Developapartnershipinvolvingthelocalauthorityandcommunity-basedagenciestodelivertheprogrammes.
FundingfortheCESPinitiativeisprovidedthroughanewobligationonenergysuppliers
and,forthefirsttime,electricitygenerators,andcreatesaresourceworthintheregionof
350m.TheCESPschemeistooperatefromautumn2009overathree-yearperiod.
Incentivestogasnetworkcompaniestoextendgridconnections
Ofgemestimatesthat4.3mhouseholdsarenotconnectedtothegasnetwork,anditis
knownthattheriskoffuelpovertyisparticularlyhighinoff-gridcommunities(Ofgem
2008).Ofgemhasputinplaceincentivesforthelargegasnetworkstoprovidegrid
connectionstolow-incomeandvulnerablehouseholdsacrossGreatBritain.Itisanticipated
thatsome20,000householdsmaybenefitfromthisproposaland,subsequently,fromgrant-aidedinstallationofgas-firedcentralheating(Ofgem2010).
Otherfuelpovertyactivity
AlthoughtheUKgovernmentanddevolvedadministrationstogetherwiththeenergy
suppliersareresponsibleforthebulkofactivityonfuelpovertyintheUK,other
organisationsalsoplayanimportantrole,namely:
Localauthorities:inEngland,tacklingfuelpovertyformsoneofthenationalperformanceindicatorsthatlocalauthoritiescanchooseintheiragreementswith
centralgovernment.Onlyaroundaquarteroflocalauthoritieshaveadoptedthe
indicatoronfuelpoverty.Actionbylocalauthoritiestendstotaketheformof
promotingthetake-upofbenefitsandhelpingresidentstoaccessprogrammesprovidedbygovernmentandenergysuppliers.
Thirdsector: charitiesforolderpeople,togetherwithNationalEnergyAction,haveledthevoluntarysectorsactiononfuelpoverty,whichhasincludedcampaigns,
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raisingawarenessoffuelpovertyprogrammesanddeliveringadviceandbenefit
checks.Theirfocushastendedtobeonensuringsufficientpublicfundsareavailable
toeffectivelytacklefuelpoverty.
Otherstakeholders:publicly-fundedindependentorganisationsincludingtheEnergy
EfficiencyPartnershipforHomes,theEnergySavingTrustandConsumerFocushavebeenactiveinlobbyingforextraresourcestotacklefuelpovertyandprovidingadvice
onenergyefficiencytoconsumersandothers.
Summary
Thetablesbelowprovideasummaryoffutureandplannedexpenditurebygovernmentand
energysuppliersoncurrentprogrammesthatcontributetowardsreducingfuelpoverty.
Programmesfundedbygovernment
Programme Expenditure Plannedexpenditure(alreadyannounced)
2007/8 2008/9 2009/10 2010/11 2011/12 2012/13
WinterFuelPayment 2.1bn 2.7bn - - - -
ColdWeatherPayment 4m 209m - - - -
WarmFront(England) - 400m 374m 350m - -
EnergyAssistance
Package(Scotland) - - 51m - - -
WarmHomesScheme
(Wales) - - 25m 25m - -
WarmsHomesScheme
(NorthernIreland) - - 20m - - -
DecentHomesStandard 2bn - - - - -
(200811)
Programmesfundedbyenergysuppliers
Programme Expenditure
2007/8 2008/9 2009/10 2010/11 2011/12 2012/13
Voluntarysocialspend
(includingEnergyRebateScheme) - 157m 125m 150m(incl. - -
20-25mfor
EnergyRebate
Scheme)
Mandatorysocialpricesupport* - - - - Notyet 300m
decidedCarbonEmissionsReduction - 1.8bnonPriorityGroup(3.2bn - -
Target(CERT) intotal)(20082011)
CommunityEnergySavings - - 350m(20092012) -
Programme(CESP)
*AsproposedintheEnergyBill
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Themovingtargetthatisfuelpovertymakesquantifyingthelevelofresourcesneededto
eradicateitextremelydifficult.Asthegeneraleconomicclimateimprovesordeteriorates,
householdsmoveinoroutoffuelpovertyaphenomenondescribedaschurn.Volatileenergypricesalsomakeithardtopredicttheextenttowhichfuelpovertywillbeaproblem
inthefuture.
Inthehierarchyofprogrammestoaddressfuelpoverty,heatingandinsulationimprovements
aregenerallyconsideredtobethemostrationalandsustainablemeansofachievinga
permanentsolution.Thisisbecauseenergyefficiencyprogrammeshaveaone-offcostthat
deliverssustainedreductionsinenergyrequirements,or,morelikelyinthecaseoffuel-poor
households,ahigherlevelofwarmthandcomfort,whereasmeasurestoincreasehousehold
incomeortoprovidediscountsonenergybillsrequiresustainedfunding.Thisisnotto
suggestthatsupplementarymeasureswillnotberequired,butthatenergyefficiencywill
invariablybethemostrationalfirstphaseinanyfuelpovertystrategy.
Consequently,themostcompellingandauthoritativeresearchhasattemptedtoquantifythecostofensuringaffordablewarmthforallhouseholds.Anumberofresearchprojectshave
soughttoassesstheleveloffundingneededtoendfuelpovertythroughenergyefficiency
interventions.Typicallytheseanalyseshavefocusedonthemodelofheatingandinsulation
programmerequiredtoeffectivelyfuelpoverty-proofhouses.
Limitedworkhasbeencarriedoutonalternativeapproachestoaddressingfuelpoverty,that
is,increasinghouseholdincomesand/ortakingactiontoreduceenergycosts.These
approacheswouldtypicallyconsiderwhatadditionalfinancialresourceswererequiredto
deliveraffordablewarmthand/orthelevelofreductionrequiredinenergybillstoachieve
thissameobjective.
Therestofthissectionsummarisesanumberofstudiesthathavebeenconductedbyfuelpovertycampaigningbodiesandresearchers,whichexaminewhatresourcesareneededto
meetthestatutorytargetsthroughenergyefficiencyprogrammes.
Improvingenergyefficiencytoachievefuelpovertytargets
AnalysiscarriedoutbytheCentreforSustainableEnergyandtheAssociationforthe
ConservationofEnergyin2008foundthataone-offinvestmentof4.6bninenergysaving
measurestargetedatfuel-poorhouseholdscoulderadicatefuelpovertycompletelyin71per
centofhouseholdsinEngland(Prestonetal2008).Significantbenefitswouldalsobe
deliveredtotheremaining29percentofhouseholds,buttheywouldalsorequireadditional
financialsupportwhichwasestimatedatjustover1bnayeartotakethesehouseholdsout
offuelpovertyaswell.
However,theauthorsacknowledgethedifficultyinidentifyingfuel-poorhouseholdsand
suggestthatadoublingoftheenergyefficiencyinvestmentcostto9.2bnwouldbe
necessarytoaccountforproblemsintargetingtheprogrammeattherighthouseholds.
Theanalysiswasalsobasedontheestimatedincidenceoffuelpovertyin2006,whenthe
problemaffected2.5millionhouseholds.TheGovernmentscurrentprojectionsof4.6million
fuel-poorhouseholdsinEnglandisalmosttwicethenumberdiscussedinthisresearch,which
suggeststhatthefigurespresentedinthereportarelikelytounderestimatethecost
significantly.
Finally,theprogrammedescribedintheresearchonlyconsidersthelevelofexpenditure
requiredtoensurethathouseholdswouldhavetospendlessthan10percentoftheir
incometokeeptheirhomeatareasonabletemperature.However,itisclearthattheachievementswouldbeimmediatelyunderminedbyanysignificantupwardmovementin
energyprices.
4.Thecostoferadicatingfuelpoverty
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ImprovingSAPratings
ConsumerFocusrecentlyinvestigatedthecostofaprogrammedesignedtoimprovethe
StandardAssessmentProcedure(SAP)ratingofpropertiesoccupiedbyfuel-poorhouseholds
inEnglandtoSAP81(BandAorB)6 (ConsumerFocus2009).Theresearchindicatedthat
compliancewiththisstandard(oralowerstandardofBandCindicatingaSAPratingofbetween69and80wherethiswasnotfeasible)wouldeliminatefuelpovertyin83per
centoffuel-poorhouseholdsandbringtheaverageenergyefficiencyratingintheirhomes
uptoSAP71.
Thevisionsetoutinthestudy(whichincludesrenewableenergytechnologiesaswellas
energyefficiencymeasures)wouldrequireaseven-yearprogrammethatwouldcostinthe
regionof3bnperyear21bnintotal.Thisrepresentsaverageexpenditureperhousehold
of8,820iftheprogrammeisrestrictedtofuel-poorhouseholds.Thestudyalso
acknowledgesthataprogrammesuchasthiswouldnoteliminatefuelpovertyinall
householdsandsotherewouldstillbeaneedforhigherbenefitlevelsandsocialtariffsto
eliminatethisresidualfuelpovertyproblem.
AswiththeCentreforSustainableEnergy/AssociationfortheConservationofEnergyreport,thisstudyisbasedonasmallernumberoffuel-poorhouseholds(2.4millioninEngland)
thantheGovernmentsprojectionscurrentlyestimate.Theauthorsalsofailtoaddressthe
issueoftargetingandtheclearneedtoimprovemanymoredwellingsthantherearefuel-
poorhouseholdsinordertoensurecomprehensiveaccess.Thissuggeststhatthe21bn
figureisprobablyalsoanunderestimate.
Inherevidencetothe2009Environment,FoodandRuralAffairsSelectCommitteeinquiry
intoenergyefficiencyandfuelpoverty,DrBrendaBoardmanoftheEnvironmentalChange
InstitutesuggestedthatachievingaratingofSAP81for5millionfuel-poorhouseholdsby
2016wouldcost5bnayear.TheEnergySavingTrusthasestimatedanevenhighercostof
8bnperyearbetween2009and2016(Environment,FoodandRuralAffairsSelect
Committee2009).
Initsrecentinquiryintoenergyefficiencyandfuelpoverty,theEnvironment,FoodandRural
AffairsSelectCommitteeconcludedthataprogrammecosting4bnayearoversevenyears
wouldbeadequatetoraiseSAPratingsforpropertiesoccupiedbyfuel-poorhouseholdsto
SAP81(ibid).
Improvingthesocialhousingstock
Inarecentarticle,DrDavidJenkinsofHeriot-WattUniversityfocusedontheroleofthe
socialhousingsector,acrosstheUK,inachievingbothfuelpovertyandcarbonreduction
objectives(Jenkins2009).Hefocusesonsocialhousingbecauseoftheopportunitiesfor
economiesofscaleandtheprojectmanagementexperienceofsocialhousinglandlords.
However,theplansoutlinedinthearticlefailtotakeaccountofdifferencesinsocialhousing
stock,whichleadstohighlygeneralisedconclusionsaboutthecostoftheproposed
programme.Costsaremodelledontheassumptionthatpropertiesonagivenestateareall
ofonetype.CostestimatesrangefromtheexpenditurerequiredtoachieveCO2 savingsof
60percentacrossarangeofsmallflats,totheexpenditurerequiredtosavesimilarlevelsof
CO2 wherethehousingstockisrepresentedbyapre-1919detachedhouse.Thecostper
dwellingrangesfrom7,000inthefirstexampleto31,900inthesecond.Theamountof
overallexpenditureonthewholeprogrammerangesfrom3.9bnto17.5bn.Thislevelof
expenditurewouldeliminatefuelpovertyforonly550,000householdsperhapsonein
sevenofallfuel-poorhouseholdsinEngland.
6.SAPratingsgiveanindicationoftheenergyefficiencyofproperties.SAP81isequivalenttoanEnergyPerformanceCertificateBandBandwouldrepresentamoreambitiousprogrammeofworkthanthatproposedinthestudybyPrestonetal (2008).
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TheGovernmentview
AspartofitsevidencesubmissiontotherecentJudicialReviewbroughtbyFriendsofthe
EarthandHelptheAged,theGovernmentindicatedthatadditionalexpenditureinthe
regionof11.5bn,overandaboveexistingfuelpovertyfunding,wouldberequiredto
complywiththe2010targettoeradicatefuelpovertyforallvulnerablehouseholdsinEngland7.
GovernmentMinistershavealsosuggestedthatprogrammestoimprovetheenergy
efficiencyofallhousingstockinEnglandtoaSAP81ratingwouldcost50bn
(Environment,FoodandRuralAffairsSelectCommittee2009).
Summaryandconclusion
Accurateandconsistentestimatesofthecostofeliminatingfuelpovertyaredifficultto
establish.Theresearchcitedhereimpliesthatoverallexpendituremightrangebetween
9.2bn(supplementedbysupportforenergycosts)and64bn.Table4.1summarisesthe
costestimates.
Thewiderangeofcostestimatesillustratessomeofthedifficultiesresultingfromthe
changingnumbersandnatureoffuel-poorhouseholdsandproblemsassociatedwith
identifyingandassistingpeoplewhoarefuel-poor.
Atbest,spendingonfuelpovertyprogrammesthroughtheCERTPriorityGroup,Warm
Front,CESPandworkundertakentodelivertheThermalComfortelementoftheDecent
HomesStandardinEnglandwilltotalsome1.6bnin2010/11(althoughthisprobably
7.Seejudgementfromtheofficialreview,23October2008,atwww.eci.ox.ac.uk/research/energy/downloads/fpws-judgment.pdf
Table4.1:Summaryofenergyefficiencyprogrammecostestimates
Organisation Programme Coverage Timescale Cost Caveats
CentreforSustainable Energyefficiency Fuel-poorin Unclear 9.2bnone-off Basedonfigureof
Energy/Association measurestoensure Englandonly investmentplus 2.5mhouseholds.
fortheConservation requiredhousehold 1bnperyearon Wouldbe
ofEnergy energyspendof benefits/defrayed underminedby
10%orlessof energycosts increasedenergy
householdincome costs
ConsumerFocus AchieveSAP81for Fuel-poorin 7years 3bnperyear Neglectsadditional
fuel-poorproperties Englandonly (21bntotal) coststoovercome
8,820per targetingproblems.property Basedon2.4m
households
EnvironmentalChange AchieveSAP81for Fuel-pooronly, Unclear 5bnperyear
Institute(Brenda fuel-poorproperties UK-wide
Boardman)
EnergySavingTrust AchieveSAP81for Fuel-pooronly, 20092016 8bnperyear
fuel-poorproperties UK-wide (64bntotal)
EfraSelectCommittee AchieveSAP81for Fuel-poorin 7years 4bnperyear
fuel-poorproperties Englandonly (28bntotal)
DrDavidJenkins Unclear Socialhousing Unclear 3.917.5bn(Heriot-Watt only,UK-wide 7,00031,900
University) perproperty
Sources:Prestonetal (2008);ConsumerFocus(2009);Environment,FoodandRuralAffairsSelectCommittee(2009);
Jenkins(2009)
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representsanoverestimatesincesomeCERTandCESPresourceswillbeallocatedto
ScotlandandWales).Thisclearlyrepresentsasignificantshortfallcomparedwitheventhe
mostoptimisticcostestimatespresentedhere.
Thelargefiscaldeficitandpoliticalconsensusontheneedtoreducepublicspendingmeans
thattheindicatorsarenotgoodforincreasedexpenditureonasocialwelfareagenda.Ontheotherhand,thereremainsthedriveroftheWarmHomesandEnergyConservationActand
repeatedgovernmentcommitmentstothegoalofensuringthateveryhomeisadequately
andaffordablyheated.Perhapsthestrongestmotivethatwillcontinuetopromotefuel
povertyreductionpoliciesisthefactthatimprovedstandardsofdomesticenergyefficiency
arealsocentraltotheclimatechangeagenda.TheClimateChangeAct2008seeksto
legislateforreducedcarboninthesamewaythattheWarmHomesandEnergyConservation
Act2000legislatesforaffordablewarmth.
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Itisclearthatthecurrentfuelpovertystrategyisunlikelytodeliveronthefuelpoverty
targetsfor2010and2016/18.Thecurrentstrategywasdevisedatatimewhenenergy
priceswerefallingandbeforeclimatechangehadbecomesuchanimportantfeatureofthepolicylandscape.Nowthatthecontexthaschangedwithenergypricesontheriseand
newlow-carbontechnologiesonthehorizonitisnolongercapableofachievingthe
Governmentsgoalsonfuelpoverty.AradicalrethinkoftheUKsfuelpovertystrategyis
requiredanditisourrecommendationthatgovernmentcommissionsanindependentreview.
DECCispartwaythroughareviewofthefuelpovertystrategy,butthisisrelativelylimitedin
scopeandislikelytoresultinincrementalchangestothecurrentapproachratherthana
fundamentalrevisionofthestrategy.Afullreviewwouldneedtoreconsidertheassumptions
thatunderpinthecurrentstrategyandshouldlookatsomeoftheaspectsthataretakenfor
grantedincludingthewaythatfuelpovertyisdefined,theuseoftargetstodriveforward
progressandthefocusongovernmentandenergysupplycompaniesasthemajordelivery
agents.Wesetoutbelowsomeofthekeyaspectsthatshouldbeincludedinanypolicyreview.Of
course,itwilltaketimeforanewstrategytobedevelopedandimplemented,soinSection6
wesetoutsomemorespecificpolicyrecommendationsfortheinterimperiod.
Whichmeasures?
Itiswidelyrecognisedthatenergyefficiencymeasuresarethemostcost-effectiveand
sustainablewaytotacklefuelpovertyandthatideally,pricesupportand/orincomesupport
measuresshouldonlybeusedwhereenergyefficiencyoptionshavebeenexhaustedbutfuel
povertypersists.
Someintervieweesnotedthatthecurrent,target-drivenapproachtofuelpovertytendsto
drivepolicyresponsesintheoppositedirectionbyfocusingattentiononshort-termsolutionssuchasfinancialmeasuresratherthanlong-terminvestmentinenergyefficiency.Thisisalso
reflectedinthefailureofcurrentenergyefficiencyprogrammestoaddresshard-to-treatand
off-gridproperties.
Areviewofthefuelpovertystrategyshouldaddressthequestionofhowenergyefficiency
measurescanbeprioritisedtoensureamoresustainableapproach.Afullcost-benefit
analysissettingouthowlongthepay-backperiodwouldbefordifferenttypesof
investmentinenergyefficiencymeasuresshouldbecarriedouttoinformthisdecision.
Fuelpovertydefinition
Althoughsomepeoplethatweinterviewedforthisreportfeltthatthecurrentdefinitionof
fuelpovertywasadequate,othershighlightedanumberofproblemswithit.
First,thequestionofwhether10percentwasstillanappropriatecut-offpointwasraised.
Clearly,ifenergypricescontinuetoriseatafasterratethanincomelevels,moreandmore
peoplewillcrossthis10percentthresholdandbeclassedasfuelpoor.Ifenergypricesare
tocontinuerising(asexpected)thenperhapsconsiderationshouldbegiventoincreasing
thislimit,forexample,bymakingitproportionaltotheaveragespend.
Analternativeapproachwouldbetoretainthe10percentthreshold,butintroducedifferent
subgroupswithinthefuel-poorgrouptohelpdistinguishthemostvulnerable.Forexample,
thiscouldmeanidentifyingpeoplewhoareonthelowestincomes,peoplewholiveinhard-
to-treatpropertiesorpeoplewhoarethemostsusceptibletohealthproblemsasaresultof
livingincoldproperties.Itcouldalsomeanlookingatthevalueofapropertyandnotprioritisinghouseholdswhoareassetrich,aslongastheyarenotconsideredtobe
vulnerableforotherreasons.Thesehouseholdscouldbegivenadviceaboutusingthevalueof
theirpropertytoreducetheirriskoffuelpoverty,forexamplethroughequityreleaseschemes.
5.Rethinkingfuelpoverty
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Secondly,thecurrentformulationofthedefinitionasexpenditureonenergyasaproportion
ofincomewascalledintoquestion.Atthemoment,thisconstructionproducestheconfusing
outcomethat(statisticallyspeaking)investmentinsocialtariffstolowerenergycostsis10
timesmoreeffectiveatremovingpeoplefromfuelpovertythanactiontoincreasehousehold
income,eventhoughtotheindividualconcerneditmakesnodifferencetotheirbankbalance.TheimpactofthiseffectcanbeseenintheGovernmentsobservationthatclassing
theWinterFuelPaymentasincomeremoves200,000householdsintheUKfromfuel
poverty;whereassettingthevalueofthepaymentagainstenergybillswouldremove1.1
millionhouseholdsfromfuelpoverty(DECC2009).
Thiseffecthasbeenakeyfactorinpromotingactiontoreducefuelbillsthroughthe
voluntaryagreementwithenergysuppliersandthenthemandatorysocialpricesupport.As
wewillgoontoarguebelow,thereareanumberofreasonswhyincreasingtheemphasison
reducingbills(andthereforemakingenergycompaniesandultimatelyenergyconsumers
pay)isproblematic.
However,itshouldbenotedthattheGovernmenthasindicatedthatitdoesnotintendto
revisethecurrentdefinitionoffuelpoverty.
Useoftargets
Asalreadymentionedabove,thefuelpovertytargetsfor2010and2016/18havetendedto
promoteshort-termpolicysolutionsoverlong-term,moresustainableapproaches.
However,thereisalsoabroaderquestionaboutwhetheratargettoeradicatefuelpoverty
completely(asitiscurrentlydefined)isasensiblegoal.Thenumberofpeopleinfuelpoverty
willdependoneventsbeyondthedirectcontrolofgovernments,especiallywhenitcomesto
weatherpatternsandwholesaleoilandgasprices.Thismeansthatfuelpovertymeasures
wouldneedtobeindexedtothesekindsofphenomenatoensureitwastrulyeliminated.
Ontheotherhand,someintervieweesdidpointoutthattarget-settingwasausefulwayof
drivingforwardapolicyagenda.Theysuggestedthatevenifthe2010and2016/18targets
aremissed,greaterprogressonfuelpovertywillbemadethanifnocommitmenthadbeen
giveninthefirstplace.
Whoshouldpay?
Atatimewhenstringentpublicspendingcutsareloomingonthehorizon,theissueofwho
paysfortacklingfuelpovertyisaparticularlypertinentone.InSection3wedescribedthe
currentsplitinthedeliveryoffuelpovertyprogrammesbetweentax-fundedgovernment
programmesandprogrammesdeliveredbyenergysuppliersandultimatelypaidforbyenergy
consumers.Thecurrentdivisionofresponsibilityreflectsarecenttrendtowardsloadingmore
ofthecostsontoenergyconsumers.
Theinterviewswecarriedoutforthisreportrevealedastronglyheldconvictionthatinan
idealworld,fuelpovertywouldbeaddressedsolelythroughthetaxandbenefitssystem.This
viewwasheldbyintervieweesfromawidevarietyofbackgrounds,includingnon-
governmentalorganisationsandcampaignersaswellasrespondentsfromenergycompanies.
Themainreasonforthisisthatwhenmeasuresareappliedthroughenergycompanies,thecosts
arerecoveredinaregressivewayfromconsumers.Thatis,generallyspeaking,thecostsare
sharedequallybetweenallcustomers,regardlessoftheirlevelofincome,meaningthatlower
incomeconsumerspayagreaterproportion oftheirincomethanhigherincomeconsumers8.This
contrastswiththetaxandbenefitsystem,whereincometaxatleastisprogressive(higher
earnerspayalargershareoftheirincomeintaxthanlowerearnersdo)andgovernmentscan
usebenefitpaymentstodisproportionatelyincreasetheincomesofthepoorest.
8.Itisdifficulttoknowexactlyhowcostsarepassedonowingtotheplethoraofdifferenttariffsavailablefromenergycompaniesanddifferencesbetweenthedealsobtainedbycustomerswhofrequentlyswitchtariffsandthosewhostickwiththe
samedealforlongperiodsoftime.
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Itisclearthatenergycompanieshaveneitherthemeanstolevycostsinamoreprogressive
waynortheremittodothis.Usingthetaxationsysteminsteadwouldprovideamore
progressivewayofcollectingrevenue,andwouldensurethatthoseonhigherincomes
contributeproportionatelymoretowardsthecostsoftacklingfuelpoverty.
Intervieweesalsostressedthatfuelpovertyisasocialpolicychallengewhichshouldbeaddressedthroughgovernmentpolicyandexpenditure,justlikeothersocialpolicyissues.
Thisisparticularlytrueifgovernmentsetsitselfcleartargets,asithasforfuelpovertyit
mustthenalsomakesureithasthetoolstoachieveitsstatedgoals.Thecurrentapproach
doesnotappeartobemakingthisareality.
Areviewofthefuelpovertystrategyshouldconsiderseriouslythequestionofwhopaysfor
fuelpovertyprogrammes.Atthemoment,thecostsaresplitbetweentaxpayersandenergy
consumers.However,itmaybeappropriatetoconsiderothersourcesoffunding,particularly
inthecaseofprogrammestoimprovehousingquality.Schemesthatincreaseenergy
efficiencyandmicrogenerationcapacityforhouseholdscansometimesbeusedtoaddress
bothfuelpovertyandclimatechangeatthesametime.Inthiscasethefairestapproachis
forthosewhoareabletopaytocoverthecostsofanyimprovementstotheirowndwellingsbecausethisensuresthatcostsandbenefitsaccruetothesamehousehold.
Sincetheupfrontcostsofinstallingthesekindsofmeasurescanbelarge,anumberofways
ofraisingcapitaltoprovideloanstoindividualsarecurrentlybeingexploredbygovernment,
oppositionpartiesandindependentthinkers.Potentialsourcesoffundingincludeborrowing
bylocalauthorities,privatelyfundedgreeninvestmentbanks,greengovernmentbonds
andothersourcesofprivateinvestment,suchashigh-streetretailers.Theideawouldbethat
individualscouldrepayloansfromthesavingsontheirenergybillsgeneratedbyenergy
efficiencyandmicrogenerationmeasures(see,forexample,DECC2009e,LiberalDemocrats
2009andShapps2009).
Fuel-poorhouseholdswhocannotaffordtoheattheirhomessufficientlyatpresentwould
notbeabletobenefitfromthiskindofloanprogramme.Forthisgroup,theinstallationof
energyefficiencyormicrogenmeasureswouldenablethemtoheattheirhomestoamore
appropriatelevelwhilemaintainingthesamelevelofspendingonenergybills,hencethey
wouldhavewarmerhomesbutwouldnotseeanyfinancialsavings.Householdswithoutany
resourcesoverandabovewhatisbasicallysubsistencelevelcannotbeexpectedtoincur
substantialdebtforthispurpose.Forthisgroupofpeople,energyefficiencymeasuresneed
tobeprovidedfreeofcharge.Again,preferablytheseshouldbefundedbytaxpayersforthe
reasonscitedabove.
Oneareawheretheremightbescopeforusingnewfundingschemesisfordistrictheating
programmes.Thiswayofheatingdomesticpropertiesrequiresinvestmentininfrastructureat
alocallevelandwouldprobablybepaidforbylocalauthorities.Greenbondsmightbeonewayofraisingcapitalforthiskindofventure.
Whoshoulddeliverfuelpovertyprogrammes?
Atthemoment,fuelpovertyprogrammesaredeliveredprincipallybyoneofthreeagents:
energycompanies(asinthecaseofCERTandthevoluntarycommitment),government(as
inthecaseoftheWinterFuelPayment)orcontractors(suchaseaga,whichdeliversthe
WarmFrontprogramme).
Thereareanumberofproblemswithusingenergycompaniestodeliverfuelpoverty
programmes.Theseincludethefactthatcostsarepassedontocustomersinaregressive
way(asdescribedabove),thedifficultiescompaniesfaceinidentifyingwhichcustomersare
infuelpoverty,andalackoftrusttowardsenergycompanieswithregardtopricingand
tariffs,whichposesachallengeinensuringadequatetake-upofpricesupportmeasures.On
theotherhand,energycompaniesalreadyhavedirectrelationshipswithcustomers,which
canmakeiteasierforthemtodelivermeasuresdirectly.
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Summary
ThetimeisrightforaradicalrethinkoftheUKsfuelpovertystrategybecauseofthechangingcontextwithinwhichfuelpovertywillhavetobeaddressedoverthecoming
decade.
Athoroughreviewwouldalsopresentanopportunitytoaddresstheproblemswiththecurrentapproach.Thisincludestheneedtoprioritiseenergyefficiencymeasures,
theappropriateness(orotherwise)ofthefuelpovertydefinitionandtheregressive
effectsofpassingcoststoenergycompanies.
Areviewwouldalsoensurethatnewopportunitiesfortacklingfuelpovertyweremaximised,suchasthepossibilityofusingdifferentandmoreeffectivedeliveryagents
andutilisingnewsourcesofinformation.
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Anewfuelpovertystrategycannotbedesignedanddeliveredovernight.Fuelpovertyisa
pressingandgrowingproblemnow,andonethatwillrequirecontinuedeffortsintheinterim.
Inthissectionweoutlinehowtheexistingfuelpovertymeasuresshouldbetakenforwardintheshorttermandhowtheycouldbemodifiedinthemediumtermtomovetowardsamore
desirableapproachbasedontheargumentssetoutinSection5.
Government-fundedprogrammes
WinterFuelPaymentandColdWeatherPayment
ItiswidelyacknowledgedthattheWinterFuelPayment(WFP)isnotaneffectivewayof
tacklingfuelpoverty,asonly12percentofpeoplewhoreceiveitarethoughttobefuel-
poor9 (Environment,FoodandRuralAffairsSelectCommittee2009).However,theWFPis
aneffectivewayofincreasingtheincomesofpensionersusinganon-means-tested
mechanism,whichwillbenefitthoseonlowincomeswhofailtotakeuptheirentitlementto
PensionCredit.Infact,manyofourintervieweesarguedthattheWFPwasreallyintroduced
asawayofincreasingtheBasicStatePensionratherthanbeingprimarilymotivatedby
tacklingfuelpoverty(however,itshouldbenotedthatthepaymentamounthasincreased
dramaticallysincefirstintroducedinresponsetorisingdomesticenergycostsseeFigure
3.1).Inaddition,theWFPispopular,whichislikelytomakeitsremovalverychallenging
politically.
TheEnvironment,FoodandRuralAffairsSelectCommittee(2009)hasproposedthatthe
WFPshouldbemadetaxableandthattheentitlementshouldbestoppedaltogetherfor
higherratetaxpayers.Whilethisisanattractiveproposalinprinciple,theremaybesome
practicalbarriersthatwouldmakethisdifficultandcostlytoimplement,assuggestedbythe
Governmentsresponsetotherecommendation(DECC2009c).Itisdifficulttomakethe
WFPtaxablebecausetheDepartmentforWorkandPensionswouldnotbeabletotaxat
source,andevenifitcould,theindividualwouldneedtoestablishtheirtaxliabilitywithHer
MajestysRevenueandCustomsandwouldneedtomaketheefforttoclaimbacktax.
Stoppingthepaymentforhigher-ratetaxpayersalsoraisesdifficultquestions:wouldthe
WFPbepaidandthenclaimedbackattheendofthetaxyearifrecipientsfoundtheir
incomewasoverthethreshold,orwouldthedecisionaboutwhethertopaybebasedonthe
previousyearsincome?Thelatteroptioncouldbeproblematicforpeopleabouttoretire,
giventhattheirincomewouldbeabouttodrop,probablysubstantially.
Giventhesepracticalbarriers,itisdifficulttosuggesthowtheWFPsystemcouldbe
modifiedintheshorttermtoaddresstheproblemswithtargeting.
Inthelongerrun,theWFPneedstobereformedsothatfundingontacklingfuelpovertyisbettertargetedatthoseinneed.Onepossibilitywouldbetoreplaceitwithanewformof
benefitalongthelinesofHeatingAdditions,whichwerephasedoutinthe1980s.Heating
AdditionswerepaidtoSupplementaryBenefit(IncomeSupport)claimantswhometcertain
criteriarelatingtothevulnerabilityofmembersofthehouseholdandcharacteristicsofthe
dwelling.
WarmFront,EnergyAssistancePackage,HomeEnergyEfficiencySchemeand
WarmHomesScheme
WarmFrontisduetocometoanendin2011anditisnotyetclearwhethertheschemewill
beextendedbeyondthisdate.
NEAhasadvocatedtheintroductionofaNationalEnergyScheme,whichwouldtakeanarea-basedapproachtodeliverenergyefficiencyimprovementstoallhouseholds.Itwould
6.Nextsteps:towardsanewfuelpovertystrategy
9.However,thisfigureislikelytobeanunderestimateowingtorecentincreasesindomesticenergyprices.
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applyconsistentstandardsforenergyefficiencyacrossthehousingstockandwouldbe
fundedbymergingthebudgetsofallexistingenergyefficiencyschemes(includingamong
othersWarmFront,CERTandtheDecentHomesStandard).Themeasurescouldbe
offeredonanability-to-paybasis,sothatlow-incomeorvulnerablehouseholdsaregiven
financialassistance.Thekeyfeaturesoftheproposalarethatitisasingle,integratedarea-basedscheme,allowingopportunitiestoengagewithentirecommunities.(Formore
informationaboutthescheme,seeNEA2008.)
However,thepolicydirectioninthisarealookstobeheadinginthedirectionofproducing
(atleast)twoschemes.Iftherecentlyannouncedtrialsofpay-as-you-saveenergyefficiency
schemesprovesuccessful,aprogrammecouldberolledoutnationally.Thiswouldencourage
householdsthatareabletopaytoimprovetheenergyratingoftheirhomes.However,
peopleinfuelpovertywillnotbeabletobenefitfromtheseschemesandsothereisa
continuedneedforaprogrammethatwilldeliverthesemeasuresfreeofchargeforfuel-poor
households.
Ideally,thiswouldbeapublicly-fundedprogrammetargetedatthefuel-poor.Itmaytake
theformofacontinuedandexpandedWarmFrontprogramme(andtherelevantschemesinScotland,WalesandNorthernIreland),oritcouldtakeanarea-basedapproach.Learning
fromtheCESPprogrammeshouldbeusedtoinformthisdecision.Anewprogrammeshould
alsoincludemeasuresforhard-to-treatproperties,whicharecurrentlyexcludedfromthe
WarmFrontprogramme.
If,asaresultofeconomicconstraints,itisnotfeasibletoutilisepublicfundinginthe
mediumtermforthisprogramme,itmaybenecessarytosupplementpublicspendingwith
someformofsupplierobligationasaninterimarrangement.Again,thiscouldtakean
individualisedapproach(alongsimilarlinestothecurrentCERTprogramme,butwith100per
centofmeasuresgoingtoprioritygrouphouseholds)oritcouldbearea-based,again
dependingonhowsuccessfultheCESPprovestobe.TheGovernmentsHeatandEnergy
Management(HEM)StrategywillsetouttheformafutureSuppliersObligationmighttake.
Ifthedata-sharingtrialsaresuccessful,thiscouldprovidethemoststraightforwardmethod
ofidentifyingappropriaterecipients,particularlyifinformationfromCLGonhousing
conditionscouldbeincorporated.However,furtherlegislationwillberequiredtoextenddata
sharingtogroupsbeyondPensionCreditrecipients.
HousingHealthandSafetyRatingSystem(HHSRS)
TheHHSRSprovidesapotentialleverfordrivingimprovementsintheprivaterentedsector
inEnglandasectorthatiscurrentlyneglectedbymostfuelpovertyandenergyefficiency
programmesbecauseitisnotoriouslyhardtoreach.Betterenforcementofthestandards
couldhelpdriveimprovementstoproperties,butthiswouldhaveresourceimplicationsfor
localauthoritiesandmayrequireincentivesforlandlords.
Inthelongerterm,theUKgovernmentanddevolvedadministrationsshouldconsider
introducingmorestringentminimumenergyefficiencystandardsforrentalproperties,and
ensurethatthesestandardsareenforced,sothatonlythosemeetingadequateenergy
efficiencylevelscanbelet.Adequatenoticewouldhavetobegivensothatlandlordshad
thenecessarytimetomakeimprovementstotheirproperties.Theremayalsobeaneedto
makeloanand/orgrantschemesavailabletolandlordstoenablethemtomakethe
necessaryimprovements(seenextsection).Thesecouldbetaperedovertimetoencourage
earlytake-up.
Pay-as-you-save(PAYS)
TheGovernmenthasrecentlylaunchedatrialofapay-as-you-savescheme,theideabeingthathomeownerscanborrowmoneytopayforenergyefficiencymeasuresontheirproperty
andthenpaybacktheloanthroughthesavingsontheirenergybills.Fivepartnershave
beenselectedtoruntrials,includingasociallandlord,anenergysupplier,acitycouncil,a
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districtcouncilandaretailer(DECC2009e).TheConservativePartyhaspledgedtointroduce
asimilarschemeshoulditentergovernment,witha6,500loanavailabletoevery
household,whichwouldbefinancedbyhighstreetretailers.TheLiberalDemocratshavealso
proposedaschemeofgreenloansforenergyefficiencyandmicrogenerationmeasuresthat
wouldbepaidbackthroughutilitybills.Thereareanumberofoptionsforhowsuchaloanschemecouldbefinanced,sothe
Governmentsapproachofrunningtrialstoexplorethedifferentoptionsforhowtheloans
mightbefinanced,whomightdelivertheprogrammesandhowthemoneycanbepaidback
beforeplumpingforaparticularmodel,isasensibleone.
ExperiencetodatesuggeststhatprovidingaPAYSschemewillnotbesufficienttoelicitthe
necessarybehaviourchangefromindividuals,soalongsidetheintroductionofsucha
scheme,governmentshouldalsoannounceanintentiontointroduceminimumenergy
performancestandardsforallhomes,tobeintroducedataspecifieddateinthefuture,
perhaps2020,withtheaimofdrivingforwardimprovementsinhousingquality.Homes
wouldhavetomeetaminimumstandardbeforetheycouldbeboughtorsold.Sufficient
timeshouldbegiventoallowhomeownerstomakeanynecessaryimprovementstotheirpropertiesbeforethestandardscameintoforce.However,safeguardswouldalsoneedtobe
putinplacetoprotectvulnerablegroups,suchasolderpeopleseekingtoselltheir
propertiesinordertocovercostsforsocialcare.
Asdescribedabove,thereshouldbeaparallelprogrammetoprovidemeasuresfreeofcharge
tothoseinfuelpovertywhoarenotabletobenefitfromPAYS.
Programmesfundedbyenergysuppliers
Voluntarysocialspendandmandatorysocialpricesupport
Althoughinanidealworld,fuelpovertymeasureswouldbefundedthroughthetaxation
system,thelikelyrestrictionsonallpublicexpenditureoverthenextfewyearsmeanthatitwillbenecessarytocontinuesomeprogrammesthroughtheenergycompaniesintheshort
tomediumterm,eventhoughthismeanscostswillbepassedontocustomersinaregressive
way.Theintroductionofsocialpricesupporthasanumberofadvantagesovertheexisting
systemofsocialtariffs,mostnotablybecauseitcreatesaunifiedsystemacrossallenergy
suppliers,providingmoreclarityandconsistencyforvulnerableconsumers.
However,itremainsaregressivetoolandtotrytominimisetheimpactsofthisapproach,
Governmentshouldinvestigatewaystoensurethatcostsarepassedontocustomersinthe
leastregressivewaypossible.Onewaytodothismightbetodesignthebalancing
mechanismbetweenenergycompanies(toensurenocompanyismadetobeara
disproportionateshareofcostsofimplementingthescheme)onthebasisofunitsofenergy
soldratherthannumberofcustomers.Thisapproachwouldencouragesupplierstopassonthecostsonaper-unitbasisratherthanasafixedcostpercustomer.ResearchbytheCentre
forSustainableEnergyhasshownthatingeneral,peopleonlowerincomestendtouseless
energythanthoseonhigherincomes(Robertsetal2007),sopeopleonhigherincomes
wouldcontributemoretowardscostsleviedonaper-unitbasis.
However,somepeopleonthelowestincomesuseasmuchenergyasthoseinthehighest
incomedeciles,sothesepeoplewouldbedisadvantagedasaresultofaper-unitapproach.
Sincethisgroupofpeopleislikelytocoincidewiththefuel-poor,furtherresearchis
necessarytodetermineiflevyingcostsinthiswaywouldmakethembetterorworseoff,
oncethebillreductionshadbeentakenintoconsideration.
MostofthepeopleweinterviewedforthisprojectagreedthatPensionCreditrecipients
wouldmakeasuitablekernelgroupforsocialpricesupport,particularlyifdata-sharingtrialsprovesuccessful.Thisisbecausethereisagoodcorrelationbetweenthisgroupofpeopleand
peopleinfuelpoverty,itisarelativelystablegroup,whosecircumstancesremainrelatively
similarovertime,andtargetingthisgroupshouldhelptoreduceexcesswinterdeaths.
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However,althoughdata-matchingmayhelpimprovetargetingandtake-up,thetake-uprate
ofPensionCreditisonlyaround70to80percent,asmeasuredbyexpenditure(DWP
2009b).Therefore,usingitasabasisforprovidingthemandatedpricediscountsmeansthat
20to30percentofeligiblepensionerswillnotreceivethediscountbecausetheyhavenot
takenuptheCredit.GovernmentthereforeneedstocontinueitseffortstoimproveuptakeofPensionCredittomaximisethebenefitofthescheme.
ipprsintervieweesalsoraisedanumberofrisksassociatedwithmandatorysocialprice
support:
Movingawayfromsocialtariffstowardsarebatesystemmeanstherewillnolongerbeaguaranteethatrecipientsareonthelowestavailabletariff.
Theleveloftherebateisnotlinkedtoenergyprices,sothereisariskthatpricescouldrisebymorethantheleveloftherebate,inwhichcaserecipientswillbetipped
backintofuelpoverty.
Thereisaquestionaboutwhattheleveloftherebateshouldbe.Ifitissettoohigh,
thentheadditionalcosts(whichareultimatelybornebyallenergyconsumers)couldenduppushingcustomersonthemargin(butwhoarenoteligibleforrebates)into
fuelpoverty.
Thereshouldbescopetoincreasetheleveloftherebateinfutureasaprecautionagainst
largeenergypricerises.However,governmentshouldcommittomatchanyfutureincreased
spendingrequirementsimposedonenergysupplierswithanequalincreaseinpublicly-
fundedfuelpovertyprogrammestoensurethebalancebetweengovernment-andenergy
company-ledprogrammesdoesnottiltanyfurthertowardstheenergycompanies.
Finally,therewasaconcernamongsomeintervieweesthatcustomerswhowereeligiblefor
socialpricesupportbutwhoalreadybenefitedfromasocialtariffwouldbeexcludedfrom
receivingtherebate.Althoughenergycompaniesarguethatprovidingeithersocialtariffsor
arebate(butnotboth)allowsthemtospreadthe300mofsupport(thelevelofspending
for2013/14setoutintheEnergyBill)amongalargernumberofpeople,usingdata
providedbyDWPtoexcludesomepeoplefromreceivingtherebategoesagainstthespiritof
datasharingasallowedunderthePensionsAct2008.Wethereforesuggestthattherebate
createdbymandatorysocialpricesupportshouldbeofferedinadditiontothemeasures
alreadyofferedunderthevoluntaryagreements.
Itisenvisagedthat,overtime,spendingonsocialtariffswilldecreaseandbereplacedby
increasedspendingonrebatesthroughanexpandedkernelgroup(seeFigure3.2).Sowhile
thetotallevelofspendingfromenergycompaniesisexpectedtoremainthesame,agreater
proportionofitwillbespentonrebatesratherthanonsocialtariffs.Webroadlysupportth