The Long Cold Winter: Beating fuel poverty

8/14/2019 The Long Cold Winter: Beating fuel poverty

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TheLongCold

Winter:BeatingfuelpovertyByJennyBird,RonCampbellandKayteLawton

ipprandNEA

March 2010

ippr2010

InstituteforPublicPolicyResearchChallengingideas Changingpolicy


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ippr|TheLongColdWinter:Beatingfuelpoverty2

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


18/36


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,


19/36


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

The Long Cold Winter: Beating fuel poverty

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