Memorandum submitted by the National Audit
Office (FP 39)
INTRODUCTION
1. This memorandum has been prepared by
the National Audit Office (NAO) to help inform the House of Commons
Energy and Climate Change Committee's inquiry into fuel poverty.
It draws together findings from our previous work that we consider
relevant to the Committee's inquiry.
Fuel poverty policy and measures
2. The Warm Homes and Energy Conservation
Act (2000) requires the Government to ensure that, as far as reasonably
practicable, people do not live in fuel poverty. The UK Fuel Poverty
Strategy, issued in November 2001, established supporting targets
to eradicate fuel poverty across England, as far as reasonably
practicable, in vulnerable households by 2010 and in all households
by 2016. The Department of Energy and Climate Change is responsible
for achieving these targets.
3. We have produced three reports on programmes
and measures relevant to tackling fuel poverty: the Decent Homes
Programme 2010;[125]
the Warm Front Scheme in 2009;[126]
and programmes to reduce energy consumption in 2008.[127]
Below we summarise our examination of these measures that are
relevant to:
— progress against Government targets;
— the coherence of the Government's initiatives
on energy efficiency;
— the methods used to target assistance
at households which need it most; and
— support for households which are not
connected to the mains gas grid.
PROGRESS AGAINST
GOVERNMENT TARGETS
4. The main causes of fuel poverty are low
income, high energy prices, and poor housing stock that reduces
energy efficiency. The Government has established a range of polices
and programmes to address these causes, with each programme having
its own targets.
The Warm Front Scheme
5. The Warm Front Scheme, launched in 2000,
is a key programme of the Department of Energy and Climate Change
to tackle fuel poverty in England. It provides grants to improve
household energy efficiency for people in fuel poverty, defined
as households that need to spend more than 10% of their net income
on fuel to maintain an adequate heating regime, which is approximately
21°C in the main living room and 18°C in other occupied
rooms during daytime hours.
6. The NAO has reported twice on this Scheme.[128]
In our latest report in 2009, we found the Scheme had assisted
over 635,000 households between June 2005 and March 2008 and that
the installation of central heating systems and insulation in
homes had helped vulnerable people. Our report found, however,
that there were still 1.9 million vulnerable households living
in fuel poverty in private accommodation as at 2006. Our analysis
of the 2006 English House Condition Survey indicated the Scheme
is only available to approximately 43% of vulnerable households
(classified as families with children, the elderly or occupants
in long-term ill health) in fuel poverty, and 35% of all households
in fuel poverty.
7. The Scheme has had particular difficulty
in helping people out of fuel poverty who live in hard to treat
homes. For example, 43% of households identified as fuel poor
in 2005 lived in solid wall properties. Treating these households
is difficult and expensive, and some measures delivered under
the Scheme, such as cavity wall insulation, are not appropriate
for these type of properties.
8. The company contracted to deliver Warm
Front, eaga plc, has sought to improve its service to hard to
reach groups by developing relationships with a wide range of
organisations. This has increased the take up of grants amongst
some groups. For example, between June 2005 and March 2008, 17%
of assisted households were from black and minority ethnic groups,
but this group made up only 8% of vulnerable households in fuel
poverty in 2006. However, some other hard to reach groups are
not benefiting to the same extent. Rural households, for example,
made up 28% of vulnerable fuel poor households in 2006, but only
15% of households receiving assistance were in rural areas, partly
because the Scheme lacks a full range of measures to assist hard
to treat households, such as external wall insulation.
The Decent Homes Programme
9. The Decent Homes Programme was launched
in 2000 by the Department for Communities and Local Government
to improve the condition of homes for social housing tenants and
vulnerable households in non-decent private sector accommodation.
It aims to improve insulation and heating, and provide modern
facilities, through setting policy and exercising oversight of
local authorities and Registered Social Landlords. It also seeks
to encourage compliance by social landlords with standards relating
directly to fuel poverty. The Programme established the Decent
Home Standard (the Standard) as a minimum threshold below which
no property should fall. The Standard aims to make homes warm,
wind- and weather-tight, and with reasonably modern facilities
and a reasonable degree of thermal comfort with efficient heating
and effective insulation.
10. In 2000, the Department set a target
for all social housing managed by local authorities and Registered
Social Landlords to be decent by 2010. In 2002, it set a second
target for increasing the proportion of vulnerable households
in private sector accommodation who lived in decent homes to 70%
by 2010, and 75% by 2020.
11. The NAO found that as at April 2009,
86% of homes in the social sector were classed as decent compared
to 39% in April 2001, with the number of non-decent social households
having fallen approximately 1.1 million during the period. However,
the original target was that all social sector homes would be
decent by 2010. The Department estimates that 92% of social housing
will meet the standard by 2010, leaving 305,000 properties "non-decent".
It estimates that 100% decency will not be achieved until 2018-19,
eight years later than planned.
12. The Department had made progress in
improving private accommodation, with 68% of vulnerable households
in private sector accommodation living in decent homes as at April
2006, compared to 57% in 2001. The introduction of the more demanding
Housing Health and Safety Rating System in 2006, however, reduced
the number of households in decent homes from 68% to 61% in April
2007. The energy efficiency of private sector accommodation has
increased at a slower rate than in social housing stock.
Energy Efficiency
13. The Government has a target to improve
residential energy efficiency in England by at least 20% by 2010,
from a year 2000 baseline. The NAO found that from 2000 to 2004,
the latest year for which information was available at the time
of our 2008 report, the rate of improvement in energy efficiency
was 1.5% per year, and if the trend continued at the same rate
per year, by 2010 an improvement of around 15% would be achieved.
We assessed that energy efficiency improvements of around 2.4%
per year were required from 2004 onwards to reach the target.
14. The Department of Energy and Climate
Change has targets for energy suppliers to promote energy efficiency
measures to householders including insulation, low energy light-bulbs
and high-efficiency appliances and boilers. It aims to achieve
these by placing obligations on suppliers which require them to
promote household energy efficiency measures to consumers. Suppliers
can choose what mix of measures they promote. Suppliers meet the
costs, but can recover some or all of them from customers. The
current version of this obligation on suppliers is the Carbon
Emissions Reduction Target (CERT), which has been in place since
2008. A new version of the obligation, called The Household Energy
Supplier Obligation, is due to start in 2011 and run to 2020.
15. Previous versions of the obligation
on suppliers, which the NAO examined in its 2008 report,[129]
were the Energy Efficiency Commitment Phase 1 (2002-05) and the
Energy Efficiency Commitment Phase 2 (2005-08). In both phases
of the Energy Efficiency Commitment, suppliers met their targets.
The phase 1 target was to install or provide measures which would
result in an energy saving over the lifetimes of the measures
equivalent to 62 terawatt hours (TWh). By the end of phase 1,
suppliers had installed or provided measures equivalent to 86.8
TWh, exceeding the target by 40%. Suppliers also appeared at the
time of our report to have exceeded their targets for the second
phase, which concluded in March 2008, with provisional results
suggesting suppliers had installed or provided measures equivalent
to 185 TWh against a target of 130 TWh. Suppliers have relied
heavily on insulation measures to achieve their energy efficiency
targets. In the first phase 56% of target savings came from insulation
measures, 24% from energy efficient lighting, 11% from energy
efficient appliances and 9% from more efficient heating systems.
COHERENCE WITH
OTHER GOVERNMENT
INITIATIVES ON
ENERGY EFFICIENCY
16. There are a range of other Government
initiatives and programmes at local and national levels targeting
fuel poverty. There are some instances of cooperation between
initiatives, for example the coordination of the Warm Front Scheme
with CERT. Suppliers under CERT, who must direct at least 40%
of carbon savings to a priority group of low-income and elderly
consumers, have been working with eaga plc which delivers the
Warm Front Scheme. Through this cooperation, suppliers have contracted
with eaga to install insulation measures in households on their
behalf, and can count these measures towards their CERT targets.
The income received by eaga from the suppliers has been added
to the total Warm Front Scheme funding available. As a result
of its work with suppliers under CERT, eaga has reinvested £44.6
million between 2005 and 2008 back into the Scheme.
17. There is a risk of duplication of effort
between some schemes. For example, the Warm Zones project set
up by fuel poverty charities with the support of government in
2000 offers similar measures to those that Warm Front provides.
The Warm Zones project targets geographic areas with fuel poor
households and offers insulation measures from a wide range of
sources including energy companies, local authorities and Warm
Front.
18. Some funding has been transferred between
schemes. The Heating Rebate Scheme, launched in 2006-07, provides
£300 in vouchers to householders aged 60 or over who do not
have a working central heating system and are not eligible for
assistance under the Warm Front Scheme. As of March 2008, £23
million of Warm Front funding had been used to fund the £300
Heating Rebate Scheme, including £20 million (6% of total
Scheme funding) in 2007-08.
19. The NAO recommended in its 2009 report[130]
on the Warm Front Scheme that the Department of Energy and Climate
Change should make effective arrangements to enable work on the
different energy efficiency schemes to be coordinated.
THE METHODS
USED TO
TARGET ASSISTANCE
AT HOUSEHOLDS
WHICH NEED
IT MOST
20. Eligibility for the Warm Front Scheme
is based on receipt of benefits, which is used as a proxy for
households likely to be in fuel poverty. Reliance on benefits
may be a pragmatic, proxy measure to determine eligibility for
the Scheme, but the inclusion of benefits that are not means-tested
has led to households that are unlikely to be in fuel poverty
being able to claim grants, resulting in an inefficient targeting
of resources. Some non-means tested benefits, such as Disability
Living Allowance and Attendance Allowance, may not indicate whether
a household is likely to be fuel poor.[131]
The Committee of Public Accounts found in its 2009 report that
nearly 75% of households assisted by the Scheme were not in fuel
poverty. Some of the Scheme funding had supported households that
were not fuel poor and homes that were already relatively energy
efficient. Eighteen per cent of households that had received assistance
under the Scheme between June 2005 and March 2008 already had
a SAP[132]
(Standard Assessment Procedure) rating above 65, meaning they
were less likely to have been fuel poor.
21. We found in our 2008 report on the Warm
Front Scheme that it was only available to 35%[133]
of households most likely to be "fuel poor". One of
the reasons is that many people do not claim benefits to which
they are entitled. The Department for Work and Pensions has calculated,
for example, that at least a third of people eligible for pension
credit did not claim it in 2006-07. The Scheme has tried to account
for this effect through offering a benefit entitlement check to
all applicants, to determine whether they are eligible for additional
benefits they are not currently claiming, which may make them
eligible for the Scheme.
22. The Warm Front Scheme aims to help all
vulnerable groups who might suffer from the cold, which has blunted
its effectiveness in focusing on those in the worst cases of fuel
poverty. The Scheme was revised in 2003 to improve its targeting,
but this only added pension credit to the list of qualifying benefits.
Funds are therefore not necessarily focused on the most vulnerable
households.
23. The Committee of Public Accounts found
a lack of clarity on whether the Warm Front Scheme is intended
to improve energy efficiency or reduce fuel poverty. Energy efficiency
measures could be delivered through other programmes, enabling
the Scheme to focus on fuel poverty. The Committee recommended
that to better target grants to the fuel poor, the Department
should amend the Scheme eligibility rules to:
— exclude households which are already
energy efficient;
— focus efforts to help those in hard to
treat homes through the use of alternative technologies; and
— establish whether the £300 Heating
Rebate Scheme has helped vulnerable households to avoid falling
into fuel poverty.
24. Previous versions of the CERT have sought
to target vulnerable groups by requiring suppliers to undertake
50% of their installations within households most likely to face
fuel poverty. The policy has helped combat fuel poverty, but suppliers
have had to turn down demand from other householders in order
to keep to the required proportions. This has limited the total
energy savings achieved by the policy.
25. When the Department for Environment,
Food and Rural Affairs introduced the CERT in 2008, it set a target
to achieve lifetime carbon savings through the scheme of 154 million
tonnes of carbon dioxide. This target was subsequently increased
by 20% to 185 million tonnes in 2009, which is approximately double
the equivalent target set under the Energy Efficiency Commitment
Phase 2 (the previous version of CERT).[134]
The introduction of the new target under CERT was, however, accompanied
by a reduction in the target proportion of installations for priority
groups from 50 to 40%.
SUPPORT FOR
HOUSEHOLDS WHICH
ARE NOT
CONNECTED TO
THE MAINS
GAS GRID
26. There is a high incidence of fuel poverty
amongst households that are not connected to the mains gas grid,
and these households are classed as hard to treat. In its 2001
fuel poverty strategy, the Government made a commitment to deliver
mains gas to more fuel-poor households.
27. The NAO found that the average time
taken to complete jobs under the Warm Front Scheme for households
not connected to the mains gas grid is often longer. eaga has
found it difficult to find subcontractors to install oil heating
systems in rural areas where mains gas is not available, contributing
to rural households being more likely to wait longer for heating
to be installed.
28. When the cost of heating work provided
under the Warm Front Scheme exceeds the maximum grant, applicants
have to pay the difference to the installer before work can take
place. Households not connected to the mains grid are amongst
those more likely to be affected. For example customer contributions
are more likely to affect applicants in:
— hard to treat homes such as households
off the gas network. These homes made an average contribution
of £555 between June 2005 and March 2008 compared to an overall
average of £538; and
— in rural locations, some of which may
also be classified as hard to treat, which made contributions
averaging £869 during the same period, which was 62% higher
than the average.
29. The number of applicants asked to make
a contribution under the Warm Front Scheme increased from under
1 in 10 in 2005-06 to nearly 1 in 4 in 2007-08. As at October
2008, 6,076 households (4%) asked to contribute to the cost had
cancelled their application, and 14,326 households (10%) had not
progressed their application after being asked to make a contribution.
February 2010
125 C&AG's report The Decent Home Programme,
HC 212, Session 2009-10. Back
126
C&AG's report The Warm Front Scheme, HC 126, Session
2008-09. Back
127
C&AG's report Programmes to reduce household energy consumption,
HC 787, Session 2007-08. Back
128
C&AG's report Warm Front: Helping to Combat Fuel Poverty,
HC 769, Session 2002-03 and C&AG's report The Warm Front
Scheme, HC 126, Session 2008-09. Back
129
Programmes to reduce household energy consumption, HC 787,
Session 2007-08. Back
130
The Warm Front Scheme, HC 126, Session 2008-09. Back
131
Committee of Public Accounts, Thirty-ninth Report of Session 2008-09,
The Warm Front Scheme, HC350. Back
132
SAP is the Government's Standard Assessment Procedure for calculating
the energy performance of buildings. Back
133
English House Condition Survey 2006. Back
134
http://www.decc.gov.uk/en/content/cms/what_we_do/consumers/saving_energy/cert/cert.aspx Back
| 
