Supplementary memorandum submitted by
Age Concern (EEFP 23a)
1. INTRODUCTION
1.1 Age Concern England (the National Council
on Ageing) brings together Age Concern organisations working at
a local level and 100 national bodies, including charities, professional
bodies and representational groups with an interest in older people
and ageing issues. Through our national information line, which
receives 170,000 telephone and postal enquiries a year, and the
information services offered by local Age Concern organisations,
we are in day to day contact with older people and their concerns.
1.2 Age Concern welcomes the opportunity
to respond to this inquiry into Energy Efficiency and Fuel Poverty.
This submission draws on the experience of our services, research
and polling we have undertaken on different aspects of fuel poverty
and our involvement in the Energy Efficiency Partnerships Fuel
Poverty Working Group. It focuses on the questions in the terms
of reference most relevant to our experience of tackling fuel
poverty.
1.3 Older people account for around half
of the more than five million UK households now living in fuel
poverty. This means that one in three pensioner households will
be in fuel poverty this winter. Age Concern welcomes the measures
to improve energy efficiency announced by the Government recently.
However, we believe this announcement failed in three crucial
respects.
— Although it included a welcome increase
in the Cold Weather Payment, it failed to provide the emergency
help needed by the pensioners and other vulnerable households
who will struggle to pay their energy bills this winter.
— It failed to address the fundamental
inequalities in the energy market that drive fuel poverty by forcing
poor people to pay more for their gas and electricity.
— By failing to tackle problems with
the Warm Front and CERT schemes, it did not do enough to ensure
that the help that is available will reach those who need it most.
1.4 The Government cannot insulate the population
from the effects of rising energy costs. However, it can—and
must—do more to prevent the poorest and most vulnerable
households from falling into fuel poverty.
2. THE 2010 TARGET
AND THE
GOVERNMENT'S
FUEL POVERTY
STRATEGY
2.1 It is now clear that the Government
will not meet its statutory target to eliminate fuel poverty among
vulnerable households by 2010. Progress has clearly been hindered
by recent rises in gas and electricity prices. However, the failure
to meet the target is, to a significant extent, the result of
government policy failures. The Government relied heavily on falling
energy prices to meet the target—while prices were falling,
it failed to take the necessary measures to improve energy efficiency
and reform the way the energy market operates. As a result, its
fuel poverty strategy is now in disarray. We hope that the creation
of the new Department for Energy and Climate Change will improve
the focus within government on tackling fuel poverty and provide
an opportunity for an urgent and fundamental review of the Government's
strategy.
3. JOINING UP
POLICY AND
INCOME MAXIMISATION
3.1 Measures to improve energy efficiency
and tackle fuel poverty are not effectively joined up within government.
For example, the CERT programme and the social assistance provided
by the energy companies to tackle fuel poverty are negotiated
separately and announced by different departments. An objective
to tackle fuel poverty should therefore be included in the CERT
scheme and changes made to the scheme earlier this year, which
reduced the target for reaching low income households from 40%
to 50%, should be reversed.
3.2 Improving benefit take-up has a crucial
role to play in tackling fuel poverty. The most recent estimates
show that up to £5 billion in benefits go unclaimed by older
people each year. For example, around one-third of eligible households
are failing to claim Pension Credit. They are missing out on an
average of nearly £1,500 a year—more than enough to
pay their gas and electricity bills for a year.
3. More needs to be done to ensure that
people benefiting under the CERT scheme, Warm Front and other
fuel poverty initiatives receive advice about claiming benefits.
The Energy Saving Trust should also ensure it has effective referral
arrangements in place to ensure that its clients can access advice
about benefit entitlements and support with claims. More broadly,
the Government should move to a system of paying income-related
benefits automatically so that those entitled do not have to navigate
the claims process—an idea that was supported by seven out
of ten older people in a recent poll conducted for Age Concern.[45]
In the meantime, short term measures including a single claims
line for all means-tested benefits and a high profile campaign
to boost take up this winter should be implemented as soon as
possible.
4. THE CONTRIBUTION
OF GOVERNMENT
AND THE
ENERGY INDUSTRY
4.1 Significant inequalities in the way
the energy market operates mean that the poorest customers often
pay more for their gas and electricity than wealthier households.
A good deal of attention has been focused recently on those who
pay for their energy using pre-payment meters (PPMs). The Business
and Enterprise Select Committee recently concluded that PPM customers
are being over-charged by £59 a year.[46]
4.2 Much less attention has been paid to
those who pay using standard forms of credit. This is a key issue
in terms of tackling fuel poverty—around 40% of customers
pay for their energy in this way, including the majority of older
people and those living in fuel poverty. The Business and Enterprise
Select Committee concluded that customers paying by standard credit
are being over-charged by £69 a year.[47]
4.3 The Government's recent announcement
stated that if the energy suppliers and the regulator fail to
reduce charges for PPM users, it will consult on legislation to
tackle unjustifiable differentials in tariffs—a threat it
also made in the Budget. However, the announcement said nothing
at all about the unjustifiably high prices being paid by those
using standard forms of credit. Ofgem will shortly publish the
results of its inquiry into the energy market. If it fails to
take the urgent action needed to address unfair price differentials,
the Government should use its powers to intervene in the market.
4.4 Social tariffs should provide a mechanism
for ensuring that the poorest and most vulnerable consumers pay
a fair price for their energy. However, they are currently making
a very limited contribution to tackling fuel poverty—only
around 540,000 households are on social tariffs, a fraction of
the more than five million households living in fuel poverty.
In addition, social tariffs are often more expensive than many
open-market tariffs and are insufficiently publicised.
4.5 Ofgem recently strengthened their guidance
to encourage the energy companies to make social tariffs the lowest
rate they offer. However, as at least two of the suppliers have
conceded, a voluntary approach will not deliver the desired outcome.
The Government should therefore legislate to introduce mandatory
social tariffs at the lowest rate offered by the supplier. Targets
should also be introduced to switch eligible customers to social
tariffs, with penalties for suppliers that fail to take action.
They should also be required to promote these tariffs more actively.
4.6 Age Concern welcomes the £74 million
in additional funding for Warm Front included in the Government's
recent announcement. Warm Front delivers significant benefits
to customers—it reduces energy bills by an average of £300
a year and delivers a customer satisfaction rate of 94%.[48]
However, the number of complaints received by Age Concern services
about the programme has soared to around 5,000 a year.[49]
4.7 The main problem identified is that
the maximum grant available under the scheme, which has been frozen
at £2,700 since 2005, is often not enough to undertake the
work needed.[50]
Although the programme is aimed at the poorest households, our
research shows that customers are being asked to pay top ups of
up to £2,000. Many are therefore unable to proceed with the
work, leaving them in fuel poverty and undermining efforts to
reduce carbon emissions. According to Eaga, who are responsible
for administering Warm Front, around 16,000 households who qualify
for help under the scheme have been unable to proceed for this
reason.[51]
4.8 Our research also highlighted the following
problems with the programme:
— Lengthy delays in carrying out the
work, leaving some older people without heating and hot water
during the winter. In some cases, the delays meant that the original
survey and grant award lapsed and the process had to begin again.
— Complaints about the quality of workmanship,
disturbance to the home and failure to leave the premises in good
condition.
— Confusing arrangements for sub-contracting—many
older people were concerned that local contractors, who might
be cheaper and may be known to them, were not used to carry out
the work.
— Inadequate information and consultation
with customers in planning the work.
4.9 While the additional funding for Warm
Front is welcome, it should be noted that it is not enough to
compensate for the cuts to the programme made in the Comprehensive
Spending Review.[52]
Additional funding should therefore be provided at the earliest
opportunity. It is disappointing that the Government's announcement
did not address the wider problems with the programme and that,
in particular, it failed to raise the maximum grant available
under the scheme. This decision looks just as short-sighted as
the decision to cut the programme in the first place and should
be rectified urgently.
4.10 Age Concern supports a levy on the
windfall gains made by the energy companies through the EU Emissions
Trading Scheme. Ofgem has estimated that the suppliers stand to
make £9 billion over the next few years by selling the permits
they are granted for reducing their carbon emissions under the
scheme. These gains are unearned and the case for returning them
to the consumer by using them to fund measures to tackle fuel
poverty is stronger than the argument for levying a windfall tax
on profits.
5. HARD TO
TREAT HOMES
5.1 Around five million households in Great
Britain are not connected to the gas network. Many of them—including
many older people living in rural areas—are reliant on domestic
heating oil or liquefied petroleum gas (LPG). This part of the
market is largely unregulated and customers typically pay around
£700 a year more for their energy. Ofgem estimates that around
220,000 fuel poor households are within 2 km of a gas main and
that connecting those using LPG to the network could reduce their
energy bills by half.[53]
5.2 Ofgem should be given responsibility
for regulating the market for domestic fuel for households not
connected to the gas network. It should also consider whether
more should be done to incentivise operators to connect those
within reach of a gas main. The Warm Front and CERT programmes
should target households not on the gas network.
6. DATA SHARING
6.1 Current legislation on data sharing
means that it is difficult for the energy companies to target
their social assistance expenditure on people living in fuel poverty.
Providing the companies with access to the personal data of those
claiming Pension Credit and other benefits would enable them to
target this money more effectively. A poll carried out by ICM
on behalf of Age Concern in April 2008 showed that the public
are split on whether personal data should be shared with the energy
companies for these purposes:
— 16 per cent (18% of those aged over
65) support personal data being passed directly to the energy
companies.
— 34 per cent (23% of those aged over
65) support data being shared via a third party such as Ofgem.
— 48 per cent (54% of those over 65)
say that personal data should not be shared at all for these purposes.
6.2 This poll was carried out following
a number of high profile cases where personal data had been mislaid—the
concerns it highlights are therefore not surprising. Given the
pressing importance of tackling fuel poverty, Age Concern welcomes
the inclusion of new powers in the Pensions Bill to permit the
sharing of data concerning low income pensioners and believe that
these powers should be extended to other vulnerable groups at
the earliest opportunity. This should be carried out via a third
party such as Ofgem and must provide significant benefits for
older people. These measures should be accompanied by moves to
restore public confidence in the handling of personal data.
7. THE WINTER
FUEL PAYMENT
7.1 Age Concern welcomes the increase in
the Winter Fuel Payment (WFP) announced in the Budget.[54]
However, this has been exceeded by this year's increases in the
cost of gas and electricity. When the WFP was first paid, the
£200 payment for 60-79 year olds covered more than a third
of the average energy bill. Even with the £50 increase for
60-79 year olds announced in the Budget, this year's WFP will
cover less than a fifth of the average energy bill.
7.2 We recognise that one-off payments do
not provide a long term solution to fuel poverty and that there
is a case for targeting the WFP on older people on low incomes.
However, with one in five pensioners living in poverty, the WFP
provides older people with a vital source of additional income.
It is also popular, simple to understand and is usually paid automatically
without the need to claim. With energy prices unlikely to fall
significantly in the foreseeable future and older people paying
an increasingly high proportion of their income to heat their
homes, we believe the Government should have included an emergency
payment of £100 for pensioners on income-related benefits
in its recent announcement. We also believe there is a good case
for extending the WFP to other vulnerable groups.
Age Concern
October 2008
45 See Flagship of flagging? published by Age
Concern in September 2008. The poll of 2,391 people over the age
of 60 was carried out by ICM in August 2008. Back
46
Energy prices, fuel poverty and Ofgem; Business and Enterprise
Committee, eleventh report of 2007-08, HC 293-I Back
47
Ibid Back
48
Warm Front annual report 2007-08 Back
49
Estimate based on complaints made via the Age Concern Information
Line and a survey of local Age Concerns. Back
50
The maximum grant is £4,000 for oil fired central heating
systems. Back
51
Evidence given to the Business and Enterprise Select Committee
by John Clough, Chief Executive of Eaga plc, 5 June 2008 Back
52
Warm Front funding was cut from £350 million a year in 2007-08
to £235 million a year in 2010-11 in the CSR. The Government's
recent announcement provides an additional £74 million in
funding over two years. Back
53
Ofgem evidence to the Business and Enterprise Select Committee Back
54
The Budget announced an increase of £50 in the Winter Fuel
Payment (to £250) for 60-79 year olds and £100 (to £400)
for over 80s. Back
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