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Thoughts on the new Fuel Poverty Strategy consultation

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The Government published its Fuel Poverty Strategy Consultation on 21 July and it makes for interesting reading. There are new definitions, new targets, new demographics of those in fuel poverty – but no new programmes, yet… Our summary of the consultation document follows – peppered with things we like, things we question and a handful of things we’re really not sure about. Have a read and let us know what you think!

Defining fuel poverty

Government plans to adopt the Low Income High Costs definition of fuel poverty, casting aside the old “10% of income” definition. This has two implications:

  • Firstly, your income after energy costs has to be below the poverty line for you to enter into the possible fuel poor. Whilst this will focus efforts on the poorest in society, it also means that many people on low incomes but not the lowest incomes will no longer qualify as fuel poor.
  • High costs are dictated as “higher than typical” energy costs – these are a factor of the property you’re in, its level of energy efficiency, its heating fuel, your household size. They are NOT a factor of energy prices. If everyone’s paying the same energy prices, then – to be “higher than typical” – those other factors are the determinant. My concern here is that we are giving the energy companies a free pass to increase fuel prices without that showing any impact on the level of fuel poverty in this country. Typical energy prices could rise from £1300, to £1500, to £2000 per year, but there’s nothing in the new definition that questions whether a £2000 energy bill is socially acceptable or reflective of the true cost of the service provided. Whilst I’m a big fan of the Low Income High Costs definition, I worry that it abdicates any responsibility or duty on the energy companies to keep prices low.

Another aspect of the definition is consideration of the fuel poverty gap – that is, how much money would be needed to ensure that a household was able to afford adequate energy for their needs – and then the targeting of support to those with the biggest gap. There are some great statistics from DECC looking at the extent of the fuel poverty gap in different household and property types, and it makes sense to address the problem where is it most acute.

Where are the fuel poor?

FP MapPage 20 of the consultation features as map of fuel poverty which shows that it’s a dramatic issue in places like Cornwall, the Norfolk Coast, the North East, Cumbria, Lancashire and Yorkshire, with a couple of pockets in the Midlands and North London. The danger here is that it seems like fuel poverty is no longer a problem anywhere else. Take a borough like Hammersmith & Fulham though. It has 7% fuel poverty. Not much. But in a dense urban area, that translates to 7000 households – a big number. It’s important that absolute numbers of households are considered when local authorities are considering their strategies.

If fuel poverty does become recast as a largely rural problem (because lack of connection to the gas grid is a major indicator of fuel poverty), then how well equipped are rural local authorities to manage it? Do they have dedicated teams or individuals who can tackle the issue? Historically, it was often the urban centres that had local authorities with large energy advice teams; we need to make sure that smaller authorities are well-resourced if their responsibilities are going to grow.

From an urban perspective, electrically heated tower blocks count as off grid, so there may be more scope for improvements (and we’ve seen some great projects already).

Who are the fuel poor?

The consultation talks about the demographics of fuel poverty and marks a significant shift from our former perception that the majority of the fuel poor were older people. Now, the analysis of fuel poverty suggests that over 60s account for just 25% of the fuel poor, whilst families with children account for 45%. 34% of fuel poor households include someone with a long term disability or illness. Starkly: 80% of people living in fuel poverty who can work do so – ie, fuel poverty becomes associated with working families (hardworking?), often renting, in larger, older properties, off the gas grid.

Setting a target

Historically, we have had national targets to eradicate fuel poverty (as far as practically possible). Now, England is going its own way, changing its target to ensuring that as many fuel poor homes as is reasonably practicable achieve a minimum energy efficiency standard of Band C by 2030.

The wording of the target is woolly – how will we know if we’ve met it? How many households would this help?

My other issue is that people move. If you upgrade a property in 2015, and then the fuel poor household moves somewhere else, do you then have to upgrade their new place for it to count towards the statistics? I know it sounds like semantics, but if we’re genuinely trying to ensure that people on low incomes don’t face overly high energy costs, then we almost need to say, wholesale, that every home in England would be heading towards Band C by 2030. And that’s a whole different scale of programme….

Approaches to the challenge

FP EPCThe strategy focuses – importantly – on energy efficiency, but also on bill rebates, like the Warm Home Discount and the Winter Fuel Payment.

On energy efficiency: a big cheer from me! It’s long been obvious that the only way to genuinely reduce the impact of high energy costs is to improve the energy efficiency of the property. Incomes and energy prices vary, but energy efficiency is energy efficiency: once it’s done, it’s done.

On rebates: these are well and good in the short term but two thoughts:

  • What is the long term cost of providing rebates compared to the cost / benefit of improving energy efficiency? That is, if you provide rebates for 10 years, wouldn’t you have been better off improving the energy performance of the property in year 1?
  • How do energy bill rebates help to achieve the new target of improving energy efficiency to Band C by 2030? It seems that one of the pillars of the strategy doesn’t actually contribute to achieving the main goal. Perhaps I’m missing something – I’m happy to be enlightened! There is talk of a new type of energy rating which takes account of the impact of rebates, but rebates don’t insulate your walls.

The consultation suggests that the Warm Home Discount could be restructured to more accurately target those in fuel poverty. But it doesn’t propose any changes to the Winter Fuel Payment during this parliament – perhaps the most overtly political move in the document.

One note on the impact of energy efficiency on costs. Improving to Band C would bring bills to £1000 a year (at current prices). Band D bills would be about £1200 per year. Whilst these offer significant reductions if you’re starting at F or G, £1000 a year is still a lot of money if you’re below the poverty line. And if energy prices rise, well, that links back to my earlier worry about the removal of energy prices from the fuel poverty equation.

The consultation is strong on how action should be prioritised with a welcome emphasis on helping the most severely fuel poor first and reflecting vulnerability in policy decisions. There’s a separate call for evidence on park homes, developing regulation for the private rented sector (the subject of another consultation) and a need for research into new solid wall insulation products and improved heating controls.

One of the strongest points of the strategy is the links it makes to the health agenda. It’s been interesting to watch the migration of fuel poverty from being an energy / social justice issue into a public health issue.

Another interesting element is the discussion of fairer markets with more switching. As smart meters roll out, Government is talking about prioritising replacement of prepayment meters, though the consultation does point out that the majority of customers in debt are on standard credit rather than prepayment meters (perhaps because those on prepayment are self-disconnecting when their key runs out, rather than falling behind?).

My review overall: a mixed bag. The new definition and target seem to muddy the waters, but the emphasis on targeted interventions, energy efficiency and public health are very positive. The commitment to energy efficiency doesn’t give any indication of how things would be funded or managed – presumably we are looking to ECO and its successor programmes here, so the new phase of policy development for post-2017 needs to be very well thought through.

What do you think? Get in touch on Twitter: @LDNFuelPoverty or email liz.warren@se-2.co.uk with your thoughts.

 

 

 

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