Memorandum submitted by the National Right
to Fuel Campaign (FP 48)
The National Right to Fuel Campaign was established
in 1975 with the single aim of ensuring that every household was
able to afford adequate heat, light and power, to end fuel poverty
by securing a warm, dry, well-lit home for all, regardless of
income and location. Energy is vital to life, health and well-being
and not something that we can live without and remain part of
society.
The Campaign has a membership comprising voluntary
organisations, local authorities, trade unions, individuals, academics
and professionals in housing, social welfare and environmental
health and has taken a leading role in putting fuel poverty high
on the political agenda.
1. GENERAL COMMENTS
1.1 We continue to think that the Government
is complacent in its approach to fuel poverty. A single example
provides evidence to this effect with the increased level of winter
deaths during last winter, almost 50%, which was one of the coldest
on record for some time. (Source—The Poverty Site). The
implication is that not enough has been done to protect a vulnerable
group from the impacts of severe weather patterns. It is worth
noting that this only shows figures for one particular group of
vulnerable people.
1.2 Our own research undertaken a few years
back also indicated that the homes off low income households had
not had adequate energy efficiency investment to protect them
from falling into fuel poverty with the massive price increases
during the years 2007-09. (The Fall and Rise of Fuel Prices and
Fuel Poverty 2005) There is nothing to indicate that this situation
has much improved.
1.3 We have said it before and will continue
to repeat that there needs to be a huge step change in the approach
to energy efficiency investment in the homes of low income and
vulnerable households.
1.4 The creation of the Department of Energy
and Climate Change had led to a hope that there might be more
holistic thinking about resolving the problems of fuel poverty
and climate change. To date we have seen little evidence of this.
Fuel poor households will suffer the brunt of both the effects
of climate change, for example, see point about excess winter
deaths above. They will also suffer disproportionately from any
additional levies or increases to fuel prices resulting from climate
change initiatives.
1.5 At a recent NRFC Stakeholder Forum,
we discussed who should pay for the eradication of fuel poverty.
There was general consensus that the Government, through taxation,
should be the major contributor. Contributors to the discussion
mentioned the regressive impact of using fuel bills.
1.6 There is evidence of the level of concern
about this when even the representative from Ofgem, the regulator,
expressed worries about whether the fuel poor will get the benefits
from increased costs of environmental programmes and suggests
that there needs to be a more sophisticated approach to thinking
about these issues.
1.7 The Government will say that they are
pouring some £20 billion into their fuel poverty initiatives
but a very large percentage of this is comprised of the Winter
Fuel Payment which goes to all pensioners and is generally seen
as compensation for a lack of increase to pension rates in recent
years.
1.8 Although many commentators have mentioned
this in different contexts, there is a real irony that billions
of pounds can be found to bail out our banks, with the resulting
outrageous level of bonuses paid to bankers this winter, and yet
the Government is incapable of implementing an effective fuel
poverty eradication programme which, we would add, would help
with economic regeneration by providing jobs in the energy efficiency
investment sectors.
1.9 The Campaign has consistently argued
that, as a minimum, pensioners paying a higher rate of tax should
not receive the Winter Fuel Payment and, along with other organisations,
this payment should be taxed.
2. PROGRESS AGAINST
GOVERNMENT TARGETS
2.1 It is clear that that the Government
will not meet its 2010 target as we are already here and we continue
to see vulnerable households suffering fuel poverty.
2.2 We are also pessimistic about the Government
reaching its 2016 target in the light of the recent impact of
fuel prices and severe cold winter weather.
3. 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
3.1 The Campaign has long argued that the
amount of income used for the definition of fuel poverty should
exclude housing costs from the assessment of household income.
We are aware of considerable support for this position.
3.2 We have put the relevant extract in
Appendix 1 for ease of reference to the detail on this issue.
4. THE COHERENCE
OF THE
GOVERNMENT'S
INITIATIVES ON
ENERGY EFFICIENCY
4.1 We support the NEA's National Energy
Efficiency Scheme as there are clear gaps in current delivery
programmes which mean that households in fuel poverty may miss
out on energy efficiency investment. It is clear that, in order
to meet both fuel poverty and climate change targets, the Government
must oversee a step change in its approach to energy efficiency
investment and this proposal for a national energy efficiency
scheme works towards this.
4.2 Additionally, members of the Campaign
would advocate higher energy rating standards for existing housing
to ensure that all housing that has had energy efficiency improvements
is fuel poverty proofed for any future occupants.
5. THE METHODS
USED TO
TARGET ASSISTANCE
AT HOUSEHOLDS
WHICH NEED
IT MOST
5.1 The Campaign has cautiously accepted
the use of data sharing to target pensioner households in the
DWP pilot for fuel cost support. However, we still have reservations
about whether this should be extended given the Government track
record on security of data.
5.2 We provided our detailed comments on
this to the DWP in October 2009.
5.3 One concern worth mentioning here is
the potential for suppliers and their agents to misuse the data
for purposes other than that agreed. For example, anecdotal evidence
from research we are in the process of analysing shows that there
is still bad practice in doorstep selling so we are concerned
if data should be used for selling other services.
6. SOCIAL TARIFFS
AND PLANS
TO PUT
SOCIAL PRICE
SUPPORT ON
A STATUTORY
FOOTING
6.1 The Campaign is very supportive for
plans to put social prices support on a statutory footing.
6.2 However, we would argue strongly that
this should be available to all those eligible for the Cold Weather
Payment and all low income households with school age children.
This still excludes groups such as those with disabilities and
long term illnesses whose energy needs are as great or greater.
7. WINTER FUEL
PAYMENTS AND
COLD WEATHER
PAYMENTS
7.1 The Campaign thanks that, as a minimum,
eligibility for Winter Fuel Payment should be brought into line
with that for Cold Weather Payments.
7.2 We are still concerned that there are
many groups who will fall outside these criteria and will suffer
fuel poverty. Another finding in the research mentioned above
is that there is a group of householders who fall outside all
state support but who have real problems with their heating and
household energy costs. These are those whose income is just above
benefit eligibility and there is no support for these apparently
from any source.
8. SUPPORT FOR
HOUSEHOLDS WHICH
ARE NOT
CONNECTED TO
THE MAINS
GAS GRID
8.1 By establishing a national energy efficiency
scheme, there is more flexibility to deal with homes that are
off the gas grid and hard to treat homes.
8.2 Energy efficiency should be the priority
to ensure the minimum requirements for energy needs, aiming to
improve the home to a very high standard.
8.3 We would also argue that, as installation
costs come down and fuel prices rise, the case for using alternative
energy sources gets increasingly stronger and can, therefore,
be considered alongside traditional energy sources. Although we
have not done any cost calculations, we suggest that these should
be done to compare costs for extending the gas network and using
alternative energy sources such as solar and wind.
February 2010
APPENDIX 1
EXTRACT FROM SUBMISSION TO WORK AND PENSIONS
COMMITTEE, JUNE 2009
1. HOW DECC MEASURE/DEFINE
FUEL POVERTY
1.1.1 The National Right to Fuel Campaign
believes that the Government's definition of fuel poverty seriously
distorts both the number and distribution of households that are
truly fuel poor. We submit that the current official definition
omits many households least able to afford their fuel costs and,
consequently, that the UK fuel poverty strategy is being neither
targeted nor monitored adequately.
1.1.2 The definition of fuel poverty is
a crucially important issue, having implications for households
in fuel poverty, and for the Government in monitoring progress,
targeting resources and the delivery of targets.
1.1.3 Members of the National Right to Fuel
Steering Group have been addressing the problem of the current
definition of fuel poverty as they are concerned that household
in fuel poverty are excluded from fuel poverty programmes as they
do not fit the current criteria.
1.1.4 As part of this work, we held a workshop
on the fuel poverty definition which was attended by a number
of key figures with expertise in this field. One key outcome from
the session was that the majority of participants believed that
housing costs should be excluded from income in the main definition
of fuel poverty. This would result in the fuel poverty definition
being a fuel spend of more than 10% of income after housing costs.
1.2 THE DISTRIBUTION
OF FUEL
POVERTY
1.2.1 The Government's target definition
of fuel poverty is based on the full income of the household,
including their housing costs.[149]
The NRFC believes that the case for omitting net housing costs
from income in the definition of fuel poverty is largely self
evident.
1.2.2 In theory, income poverty can be measured
including net housing costs, as it can be argued that households
who own or rent properties that are above their incomes are taking
the cost benefits in better accommodation. However, DWP's Households
Below Average Income series (HBAI) recognises that this is
not always the case in practice and therefore measures income
both including and excluding housing costs.
1.2.3 Unlike income poverty, however, fuel
poverty is specific to the households existing home. The ability
of the household to afford the fuel costs necessary to achieve
satisfactory heating and other standardised energy usage in their
particular home is dependant on their disposable income after
housing costs. Households cannot spend their housing costs on
fuel, any more than they can spend their national and local taxes
on fuel. The Government's definition excludes all national and
local taxes from income, but includes all housing costs.
1.2.4 Excluding housing costs, while keeping
the same 10% of income threshold for fuel costs, would raise the
2006 estimate for fuel poverty from some 2.4 million (or 11.5%)
to over 4.4 million households (20.9%). However, the equivalent
of 10% of full income, before housing costs (BHC) is around 13.5%
of residual income, after housing costs (AHC), in that this thresholds
gives the same number of households in fuel poverty. To highlight
the distributional differences, the following analysis uses this
higher 13.5% thresholds as well as showing the figures for 10%
of residual income.
1.2.5 Figure 1 shows the overlap between
the household populations defined as fuel poor under each of these
definitions. One in three of the 2.4 million households who are
fuel poor on the comparable (13.5%) residual, AHC, definition
are not in fuel poverty on the full income definition and vice
versa.
Figure 1
VENN DIAGRAM SHOWING THE OVERLAP BETWEEN
DEFINITIONS, 2006
1.3 FUEL POVERTY
AND INCOME
POVERTY
1.3.1 HOUSEHOLDS
DEFINED AS
FUEL POOR
UNDER THE
COMPARABLE (13.5%) RESIDUAL
INCOME DEFINITION
ARE IN
SUBSTANTIALLY GREATER
INCOME POVERTY
THAN THOSE
CLASSED AS
FUEL POOR
UNDER THE
FULL INCOME
DEFINITION (TABLE
1). THE AVERAGE
EQUIVALISED INCOME,
AHC, OF ALL
HOUSEHOLDS DEEMED
TO BE
IN FUEL
POVERTY DROPS
BY NEARLY
25% FROM £9,896 TO
£7,460 AFTER EXCLUDING
HOUSING COSTS
AND RAISING
THE THRESHOLD
TO 13.5%. THE
PROPORTION OF
ALL HOUSEHOLDS
IN FUEL
POVERTY ALSO
IN INCOME
POVERTY (HAVING
EQUIVALISED INCOMES
OF UNDER
50% AND 60% OF
THE NATIONAL
MEDIAN) ALSO
INCREASES FROM
SOME 37% TO
60% AND FROM
50% TO 72% RESPECTIVELY.
1.3.2 Using 10% of residual income, the average
equivalised income (£9,161) is also lower than that for 10%
of full income, despite the former definition covering nearly
twice as many households. The proportion of fuel poor households
in income poverty (on both the 50% and 60% of median thresholds)
is also significantly higher.
Table 1
AVERAGE INCOME AND GENERAL POVERTY BY FUEL
POVERTY DEFINITION, 2006
Equivalised income AHC
| 10% of full income, BHC
| 13.5% of residual income, AHC
| 10% of residual income, AHC
|
| number | %
| number | % |
number | % |
Average income | £9,896
| | £7,460 |
| £9,161 | |
Under 50% of median | 890k
| 36.6 | 1,462k | 60.1
| 1,960k | 44.1 |
Under 60% of median | 1,224k
| 50.3 | 1,740k | 71.6
| 2,617k | 58.9 |
Total in fuel poverty | 2,432k
| 100.0 | 2,432k
| 100.0 | 4,441k
| 100.0 |
| |
| | | |
|
1.4 THE DISTRIBUTION
OF FUEL
POVERTY BY
TENURE
1.4.1 Figure 2 shows the number of households in fuel
poverty in each tenure under each definition in 2006. Under the
full income definition, the majority (52%) of all fuel poor households
are owners who own their homes outright. Despite being classed
as fuel poor, these owners often possess large amounts of housing
equity—an average of nearly £210,000 nationally and
over £320,000 in London. After excluding housing costs from
income, fuel poverty shifts dramatically away from such asset
rich owner occupiers to mortgagees and, particularly, to tenants
with no equity, renting from private or social landlords.
Figure 2
NUMBER OF HOUSEHOLDS IN FUEL POVERTY ON EACH DEFINITION
BY TENURE, 2006
1.4.2 Excluding housing costs also fundamentally changes
the distribution of the households groups classed as fuel poor.
With the 13.5% of residual income definition, the proportion of
all fuel poor households that include elderly members aged 60
years or more is reduced from 53% to 35%, while conversely the
proportion that includes dependent children (and no elderly residents)
increases from under 16% to 25%. Using the 10% threshold for residual
incomes, retains a greater proportion of elderly households (40%)
but also further increases the proportion of fuel poor households
with children (to 26%).
1.4.3 The shift from small elderly households to larger,
low income families bring in fuel poverty is further substantially
increased if, as well as excluding housing costs from income,
incomes are also equivalised. Equivalised incomes reflect the
common sense notion that larger households need a higher income
than smaller households to achieve a comparable standard of living.
It is a standard method for measuring income poverty and there
is a case for also using equivalised incomes in the definition
of fuel poverty.
1.5 THE DISTRIBUTION
OF FUEL
POVERTY BY
REGION
1.5.1 The changes in definition also have a dramatic
effect on the regional distribution of fuel poverty. London moves
from having the lowest proportion of households in fuel poverty
(8.3%) under the full income definition to having the highest
proportion (13.9%) when using 13.5% of residual incomes, after
housing costs. This is due to the Capital's higher gross housing
costs—in 2006 an annual average of £8,432 compared
to £6,255 for all households in England on low income (under
50% of the national median).[150]
On the 10% of residual income definition, London again has the
highest number, but fourth largest percentage of fuel poor households.
(See table next page)
1.5.2 The 10% of residual income definition of fuel poverty
has been adopted by the Greater London Authority and was the preferred
definition in the Mayor's Energy Strategy of February 2004.
1.6 COMMENT
1.6.1 The UK Fuel Poverty Strategy, 6th Annual Progress
Report, 2008 includes, for the first time, a brief analysis of
the effects of using incomes after housing costs in the definition
of fuel poverty. However, this is based on the 2004 EHCS dataset
rather than the current 2006 statistics, as reported elsewhere
in the Report, and the Report makes it clear that "There
is no intention to change the fuel poverty definition to an After
Housing Costs basis".
1.6.2 Despite the lead shown by the GLA and a number
of Beacon local authorities and despite having revised the definition
significantly in other ways, the Government appear unwilling to
consider a change in the income definition for fuel poverty. In
the past, ministers have argued that that this would be a distraction
from the task of alleviating the problem. However, in practice,
actual strategies tend not to be concerned with the detailed definition,
but with making housing generally `fuel poverty proof'. The different
distribution of fuel poverty would have implications for targeting,
but the basic way the programme is implemented need not necessarily
change as a result of adopting a definition based on incomes after
housing costs.
Table 2
GO REGIONS RANKED BY HIGHEST PERCENTAGE OF HOUSEHOLDS
IN FUEL POVERTY, 2006
10% of | In fuel
| 13.5% of | In fuel
| 10% of | In fuel
|
| full income | poverty
| residual | poverty
| residual | poverty
|
| BHC | |
| income | |
| income | |
|
| thou
| %
| | thou
| %
| | thou | %
|
North East | 179 | 16.4
| London | 428 | 13.9
| North East | 294 | 27.0
|
North West | 415 | 14.2
| North West | 393 | 13.5
| North West | 682 | 23.4
|
West Midlands | 304 |
13.7 | North East | 145
| 13.3 | Yorks & Humber |
490 | 22.8 |
East Midlands | 236 |
12.9 | East Midlands | 211
| 11.6 | London | 690
| 22.5 |
Yorks & Humber | 273
| 12.7 | South West | 250
| 11.3 | West Midlands | 471
| 21.3 |
South West | 256 | 11.6
| Yorks & Humber | 238 |
11.1 | East Midlands | 382
| 21.0 |
East of England | 224 |
9.7 | West Midlands | 234
| 10.5 | South West | 444
| 20.1 |
South East | 291 | 8.5
| South East | 352 | 10.2
| South East | 603 | 17.5
|
London | 254 | 8.3
| East of England | 181 | 7.8
| East of England | 385 | 16.6
|
England | 2,432
| 11.5 | England
| 2,432 | 11.5 |
England | 4,441 |
20.9 |
| |
| | | |
| | |
1.7 NUMBERS IN
FUEL POVERTY
1.7.1 When the extent of fuel poverty was first estimated
using data from the 1996 English House Condition Survey (EHCS),
the survey collected data on the actual fuel prices paid by households.
However, for the 2001 EHCS, the collection of fuel price data
was dropped from the survey and since that date fuel poverty has
been calculated using DTI/BERR/DECC data on the average regional
fuel prices for different tariff types.
1.7.2 Table 3 reproduces the 2006 DECC regional fuel
price data for the fairly typical Southern gas and electricity
regions. The Table shows the average fuel prices for all companies
in the region on which the calculations of fuel poverty are based,
but in addition shows that within each region and tariff type,
average prices also vary considerably depending on the particular
company used.
1.7.3 The NRFC believes that the use of these average
regional costs in measuring fuel poverty has the effect of seriously
under-estimating the scale of the problem. This is because there
is good evidence that lower income groups, at risk of fuel poverty,
particularly elderly households, are less inclined to regular
switch their fuel supplier and to be, in practice, on higher than
average tariffs.[151]
Table 3
AVERAGE UNIT COSTS (PENCE PER KWh) IN SOUTHERN FUEL REGIONS
| Standard Credit |
Direct debit | Prepayment
|
| Southern gas region |
| | |
| Largest | 2.84
| 2.52 | 2.86 |
| Average | 2.62 | 2.33
| 2.75 |
| Smallest | 2.28
| 2.13 | 2.37 |
| Southern electricity region |
| | |
| Largest | 11.94
| 11.94 | 14.36
|
| Average | 10.15 | 9.39
| 10.79 |
| Smallest | 9.67
| 8.61 | 8.97 |
| The range shows the average unit cost for all companies in the region, as well as the average cost for the companies with the largest and smallest average costs in the specified region.
| | | |
| |
| |
1.8 CONCLUSIONS
1.8.1 The definition is critically important to monitoring
progress and to determining the overall success of the Strategy
at the national and regional level. If, as the statistics suggest,
the current definition is not directed at those least able to
afford their fuel costs, it is difficult to see how progress in
alleviating fuel poverty can be adequately monitored and the future
success or otherwise of the UK Fuel Poverty Strategy can be properly
determined.
149
The Government also publishes statistics for the basic income
definition. This also includes housing costs, but omits housing
benefit, income support for mortgage interest (ISMI) and mortgage
payment protection insurance (MPPI) from income. Back
150
Average housing cost across all tenures, including owned outright. Back
151
See, for example, Ofgem, Switching Rates for Vulnerable Customers,
Summary Report, March 2008. Back
| 
