Memorandum submitted by Citizens Advice
(FP 47)
SUMMARY
Progress against Government targets
Government efforts to eradicate fuel poverty
have been derailed by spiraling fuel prices, revealing the inadequacy
of depending on low prices to tackle fuel poverty. Going forward,
any strategy must also be based on increasing the energy efficiency
of housing stock and ensuring that those most at risk of fuel
poverty receive a level of income which enables them to pay for
the energy that they use.
The definition of households in fuel poverty commonly
used—ie, those households where more than 10% of income
has to be spent on fuel for adequate heating
Citizens Advice considers that it is helpful
to retain a yardstick against which progress in addressing fuel
poverty can be measured as it helps to focus policymakers' minds
and can play an important part in ensuring that that policies
and programmes are coordinated around a clearly defined objective.
The coherence of the Government's initiatives
on energy efficiency & the methods used to target assistance
at households which need it most
The fragmented nature of energy efficiency programmes
means that it can be difficult for consumers to understand what
help is available. More holistic methods of addressing fuel poverty
offer cost-savings to companies as well as real benefits to consumers
by offering joined-up delivery of a range of measures intended
to improve energy efficiency standards, and permanently reduce
fuel bills. To create maximum benefit, such programmes must bring
together energy efficiency measures with initiatives addressing
people's level of income (eg through benefit entitlement checks).
Social tariffs and plans to put social price support
on a statutory footing
We question whether social tariffs are the most
appropriate or effective vehicle to tackle fuel poverty due to
their regressive nature. Nevertheless, we are pleased that the
government has included proposals in the Energy Bill to put social
price support on a statutory footing, which should help address
some shortcomings in the current system.
Clear direction should be given to make sure
that all groups living in fuel poverty (including those on low
income and disabled people), and not just older people, can benefit
from the statutory scheme.
Winter fuel payments and cold weather payments
There is a strong case for the winter fuel payment
to be better targeted at those most in need.
And, while cold weather payments are undoubtedly
welcome, relying on this erratic payment to help vulnerable groups
on low incomes to pay for their fuel bills each winter may not
be the best way to provide assistance.
Support for households which are not connected
to the mains gas grid
Households off the gas grid lose out in a number
of ways: they pay more for their fuel, are forced to buy in bulk
and may not be able to spread payments to help affordability concerns.
There is a compelling case for DECC to extend
Ofgem's regulatory oversight to cover customers who are off the
gas network to address these issues. There is also a strong rationale
for seeking to ensure that those off the gas grid should be among
the first to benefit from new energy efficiency programmes.
The Citizens Advice Bureaux (CAB) network is
the largest independent network of free advice centres in Europe,
providing advice from over 3,200 outlets throughout Wales,
England and Northern Ireland.
The Citizens Advice service provides free, independent,
confidential and impartial advice to everyone, about their rights
and responsibilities. It values diversity, promotes equality and
challenges discrimination. The service aims:
— to provide the advice people need for
the problems they face; and
— to improve the policies and practices
that affect people's lives.
In 2008-09 the CAB service in England and
Wales dealt with almost six million problems in total, including
1.9 million on debt. Of these, almost 83,000 were concerned
with fuel debt, which represents a 19% increase on the previous
year, and an increase of 82% since 2005-06.
Comparisons for fuel debt problems for specific
quarters in 2009-10 with the corresponding periods from the
previous year reveal a sharp increase, as shown in Table 1 below:
Table 1
FUEL DEBT PROBLEMS DEALT WITH BY CABX IN
ENGLAND AND WALES QUARTERLY COMPARISONS FROM 2008-09 TO 2009-10
| |
| | |
| Q1 | Q2
| Q3 | Q4 |
| |
| | |
| 2008-09 | 18,183 | 19,076
| 19,466 | 26,166 |
| 2009-10 | 27,855 | 26,381
| 25,748 | — |
| % increase on corresponding quarter from 2008-09 to 2009-10
| 53% | 38% | 32%
| — |
| |
| | |
| |
| | |
In addition to fuel debt problems, in 2008-09 the CAB
service dealt with almost 51,000 problems about a range of
other (non-debt) fuel matters. A summary of the increases in fuel
and fuel debt problems dealt with by bureaux in England and Wales
over the last five years is given in Chart 1 below:
Chart 1
Progress against Government targets
The Government has set laudable and challenging targets to
eradicate fuel poverty in England amongst vulnerable groups by
2010 and in all households by 2016. However, the scourge
of fuel poverty is increasing, with some estimates suggesting
that despite moderate price cuts there are now likely to be more
than five million fuel poor households.[143]
At their current, historically high, levels energy costs
are hitting vulnerable people and those on low incomes particularly
hard:
A CAB in Cornwall reported that their client, who lives with
her three dependent children in Local Authority housing, is struggling
to pay for her fuel usage. The only source of heating in the client's
house is a coal fire. The client receives income support and spends
up to £30 per week for the fuel, which represents nearly
half the client's income.
The medium-term prognosis for energy bills is bleak, with
Ofgem suggesting that over the next 10 years customers' energy
bills could rise anywhere between 13%-52% under a number of different
scenarios.[144] We
are concerned that the costs of facilitating the UK's transition
to a low carbon economy will not be shared equally, but will be
added to all customers' bills, placing a disproportionate burden
on those on low incomes and frustrating efforts to address fuel
poverty.
Government efforts to eradicate fuel poverty have been derailed
by spiralling fuel prices. It is possible to have some sympathy
for the plight of Government but, in a sense, this turn of events
has simply revealed the folly and inadequacy of tackling fuel
poverty largely through low prices which was an unsustainable
strategy, and one which left progress extremely vulnerable to
price fluctuations beyond its control. Going forward, any strategy
must also be based on:
— increasing the energy efficiency of the housing stock,
thereby reducing the impact of rising energy bills; and
— ensuring that those most at risk of fuel poverty receive
a level of income which enables them to pay for the energy that
they use.
The definition of households in fuel poverty
Citizens Advice considers that it is helpful to retain a
yardstick against which progress in addressing fuel poverty can
be measured as it helps to focus policymakers' minds and can play
an important part in ensuring that that policies and programmes
are coordinated around a clearly defined objective.
The coherence of the Government's initiative on energy efficiency
and the methods used to target assistance at households which
need it most
There are a number of measures provided by Government which
are intended to deliver energy efficiency measures, including
programmes such as Warm Front and the Carbon Emission Reduction
Target (CERT). Such programmes to improve energy efficiency and
reduce energy consumption cost some £2.6 billion a year.[145]
While this level of funding is large, the fragmented nature
of the programmes and the fact that they have been designed as
top-down solutions to individual problems means that it can be
difficult for consumers to understand what help is available and
navigate their way around (hence the need for assistance such
as the Home Heat Helpline). In addition, such programmes may not
always interact to deliver the best outcome for consumers. For
example, Government has now taken welcome action to address the
issue of shortfalls in Warm Front grants but—from a consumer
perspective—it would have seemed eminently sensible for
other energy efficiency programmes to step in to provide additional
funding.
More widely, while programmes such as Warm Front and CERT
may deliver real benefits to millions of households, they are
usually focused on delivering just one or two measures to households,
therefore requiring supplementary applications to different schemes,
repeat visits and additional work to tackle any remaining energy
efficiency shortcomings.
We recognise that government is currently piloting the delivery
of a more holistic method of addressing energy efficiency measures
under the Community Energy Saving Programme (CESP) which will
be delivered on a street by street basis. Although the programme
is small-scale, we consider that this approach may offer cost-savings
to companies as well as real benefits to consumers by offering
joined-up delivery of a range of measures intended to improve
energy efficiency standards, and permanently reduce fuel bills.
To create maximum benefit, such programmes must bring together
not just energy efficiency measures but also programmes to address
people's level of income (eg through benefit entitlement checks).
Unfortunately the current CESP pilot does not do this and in our
opinion this represents a major shortcoming.
We also think that the move to a more co-ordinated packaging
of assistance would bring benefits in terms of how assistance
is delivered or targeted. Under the current model, in order to
gain some assistance the individual in question in required to
put themselves forward and make an application to individual programmes,
meaning that some vulnerable people who may benefit from such
programmes miss out because they are not aware of them or because
they lack the skills or confidence to make an application.
Innovative ways to better target assistance available are
currently in the process of being trialled in the data sharing
pilot between the Department for Work and Pensions (DWP) and energy
suppliers. Depending on the outcome of the pilot, we would welcome
the exploration of other opportunities to share data and proactively
target assistance, provided that appropriate safeguards are put
in place.
Social tariffs and plans to put social price support on a statutory
footing
We question whether social tariffs are the most appropriate
or effective vehicle to tackle fuel poverty due to their regressive
nature. We consider that a strong case could be made for funds
to be redistributed via the tax and benefits system rather than
through fuel suppliers being compelled to offer social tariffs
which can differ in eligibility criteria and benefits delivered,
as well as failing to identify those who may be most in need of
assistance.
Nevertheless, we are pleased that the government has included
proposals in the Energy Bill currently before Parliament to put
social price support on a statutory footing. In our opinion this
should help address some of the shortcomings inherent in the current
system. Putting social price support on a statutory footing could
help to ensure that:
— Eligibility is based on objective factors, targeting
help at those most in need;
— Social tariffs are open to all those that meet eligibility
criteria, rather than only those fortunate enough to apply while
the social tariff is "open";
— People most in need of assistance receive a consistent
level of support, regardless of which supplier they are with;
— Consumers and their advisers are provided with clear
information about social tariffs; and
— All suppliers pay a fair and proportionate share of
the costs in offering social tariffs.
The details of the statutory scheme, such as the nature of
the benefit and eligibility criteria, will be set out in secondary
legislation after consultation during Summer 2010. Citizens Advice
considers that it is essential at this early stage that clear
direction is given to make sure that all groups living in fuel
poverty (including those on low income and disabled people), and
not just older people, can benefit. The following cases demonstrate
the difficulties currently experienced by deserving groups who
are ineligible for social tariffs:
A CAB in Kent reported a case in which their client, an unemployed
man over 50, is finding it extremely hard to survive on his benefit
income due to the high costs of fuel. As the client is in receipt
of jobseekers allowance and under 60 he is ineligible for
assistance. The client is therefore very worried about how he
will pay for his energy use and is at risk of illness through
not being able to keep warm enough.
A CAB in the West Midlands reported a case in which their
client, a single woman aged 61 who has been diagnosed with
cancer, receives an income which puts her just above the threshold
to receive pension credit guarantee. This means that although
she is struggling to pay her fuel bills, and spending approximately
16% of her income on heating, she is ineligible for her energy
supplier's social tariff.
WINTER FUEL
PAYMENTS AND
COLD WEATHER
PAYMENTS
Winter fuel payments
The Winter Fuel Payment (WFP) is highly valued by many pensioners.
However, it is important to note that the WFP is a very poorly
targeted benefit, with all pensioners—regardless of income—entitled
to it. The benefit cost more than £2.7 billion in 2008-09 yet
only 12% of the 2.9 million people receiving payments were
classed as living in fuel poverty. Moreover, many fuel poor households
did not qualify for this support.[146]
A CAB in South East Wales reported a case in which their
client, who has long term health problems and a disability, is
struggling to pay for heating costs. The client's only income
is means-tested benefits but as he is under the age of 60 years
he does not yet qualify for the Winter Fuel Payment. The client
now finds himself in the position of having to choose between
heating his home or eating, in other words he cannot afford to
do both.
With funding for fuel poverty and energy efficiency programmes
likely to be under increasing pressure going forward, it is difficult
to justify the status quo. We consider that the WFP should be
better targeted at those most in need. One way to do this which
would seem to create minimal administrative difficulties would
be to make the WFP taxable and end its payment to those subject
to higher rate tax. The savings generated (estimated to be £250 million
per annum) could be used to extend eligibility to the WFP to groups
most at risk of fuel poverty or to boost energy efficiency improvements
for fuel poor households.
Cold Weather Payments
The substantial increases in the Cold Weather Payment announced
in September 2008 (raised from £8.50 per week to
£25 per week) and continued for the current winter would
have gratefully received by eligible recipients. In 2008-09 8.4 million
separate payments were made, at a total cost of £210 million
while over £260 million has been committed to the scheme
so far this winter.[147]
The eligibility criteria for CWPs is more comprehensive and
provides a useful starting point for considering which groups
should receive assistance with their fuel bills. However, relying
on this erratic payment to help vulnerable groups on low incomes
to pay for their fuel bills each winter may not be the best way
to provide assistance. As the case below shows, it can be difficult
for eligible people to determine whether they will receive a payment,
meaning that they may be unwilling to use their heating during
very cold weather.
A CAB in Derbyshire reported that their client, a single man
living in private rented housing in receipt of income support,
came to bureau to enquire about cold weather payments in the week
commencing 21 December. The client had not been using his
heating because he was so worried about the size of his gas bills.
The client could not find out if the weather had been cold enough
to justify a cold weather payment. If it had been, the client
would put his heating on more. The CAB adviser found that there
was a lack of information about whether CWP had been triggered
and even government web sites provided information relating to
previous weeks.
The fact that payment of the CWP is based on temperature
and geography renders it difficult to disseminate simple and clear
messages to consumers. In our opinion there is, at the very least,
a need to reconsider how the cold weather payment is communicated
to eligible consumers in order to provide them with speedy and
reliable information about when they can expect top receive a
payment. More broadly, since payment is only made after
a sustained period of cold weather, the CWP, while welcome, may
fail to give people the confidence to heat their homes safe in
the knowledge that they will receive the financial assistance
to enable them to do so.
Support for households which are not connected to the mains
gas grid
There are approximately 4.3 million customers living
in rural areas who are not on the gas network. These people are
entirely dependent on electricity, domestic heating oil or liquefied
petroleum gas (LPG) for heating their homes and providing hot
water. These people lose out in a number of ways. Most obviously,
they have to pay significantly higher costs for their fuel. Estimates
from 2008 suggest that households off the gas network typically
had energy bills in the region of £1,700 per annum,
compared to £1,000 for those with gas mains connections.[148]
The problem of affordability for people living off the gas
network is particularly acute for those on low incomes. These
are exacerbated by the fact that domestic heating oil and LPG
suppliers often have minimum delivery amounts which necessitate
large lump-sum payments. Yet paying for bulk deliveries in advance
can be impossible for those on low incomes.
A CAB in Suffolk reported a case about their client and partner
who are both unemployed, and live with their four children aged
12, 10, 3 and 2 in a rented property which has an oil-based
heating system. The clients cannot afford to get their oil tank
filled because oil costs 41.8 pence per litre, and while
there is a discount if you order a minimum of 900 litres
this equates to £415, which is totally unaffordable for the
clients. The CAB adviser could only advise the clients to seek
charitable help for assistance with their fuel needs.
And whereas those connected to the gas network must be offered
a range of payment methods and budgeting schemes by their fuel
suppliers to spread the cost of their fuel, there is no requirement
for oil or LPG suppliers—who are unregulated—to do
the same. Nor do they offer social tariffs which can offer reduced
tariffs to their most vulnerable customers who may struggle to
pay for their fuel.
Ofgem's work on extending the gas network may offer some
solace to customers, though larger incentives should be introduced
to speed this work up. In addition, there would seem to be a strong
rationale for seeking to ensure that those off the gas grid should
be among the first to benefit from measures such as the Renewable
Heat Incentive (RHI) and Feed-In Tariffs (FIT).
In our opinion, fundamental regulatory reform is also required.
There is a compelling case for DECC to extend Ofgem's regulatory
oversight to cover customers who are off the gas network and who
therefore have to rely on domestic heating oil and LPG. As part
of this extended remit Ofgem should, as a matter of priority,
make sure that the protections and assistance currently provided
to customers on the gas network are also offered to those who
rely on heating oil or LPG.
143
Radical action needed to help millions who cannot afford their
energy bills, NEA, Press Release, 17 November 2009 Back
144
Project Discovery-Options for delivering secure and sustainable
energy supplies, Ofgem, February 2010 Back
145
Programmes to reduce household energy consumption, National
Audit Office, July 2008 Back
146
Energy efficiency and fuel poverty, Environment, Food and
Rural Affairs Committee, May 2009 Back
147
Cold Weather Payments-Standard Note SN/SP/696, House of
Commons Library, 22 January 2010 Back
148
Energy prices, fuel poverty and Ofgem, Business and Enterprise
Select Committee, July 2008 Back
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