Rethinking fuel poverty in the UK February 2012

1. Rethinking fuel poverty in the UKFebruary 2012 Donald Hirsch

2. Fuel poverty: three perspectives The poverty perspective • Problem: high fuel costs stress family budgets • Focus: low income households

3. Fuel poverty: three perspectives The health perspective • Problem: unaffordable fuel costs create cold homes • Focus: groups not heating houses properly

4. Fuel poverty: three perspectives The environmental perspective • Problem: poor housing stock uses fuel wastefully • Focus: thermally inefficient homes

5. Fuel poverty: three perspectives The poverty perspective The health perspective • CORE DRIVERS • HOUSEHOLD INCOME • FUEL EFFICIENCY OF HOMES The environmental perspective

6. An underlying concept Fuel poverty means living in “a household living on a lower income in a home which cannot be kept warm at reasonable cost” Warm Homes and Energy Conservation Act 2000

7. Key measurement issues • What is the threshold of low income? • What do we mean by reasonable cost? • How to combine these?

8. Current definition Fuel poverty = having to spend at least 10% of income on fuel to keep home warm

9. Current definition Problem 1: It doesn’t measure affordability Spending Total income/spending Available for non-fuel spending Needed for fuel Fuel poverty line (10% of income) Income

10. Current definition Problem 2: Why 10%? Should the threshold change with changing norms?

11. Current definition Problem 3: What is adequate warmth? Living room standard Average centrally heated homes Non-living room standard Risk of respiratory problems (where humidity not optimal) “no demonstrable risk” - WHO 16 17 18 19 20 21 22 23 24 DEGREES CENTIGRADE

12. Redefining fuel poverty –low income, unreasonable fuel costs Fuel costs* 60% median income High fuel costs *”Fuel costs”= required fuel spending Income Low Income

13. Redefining fuel poverty –low income, unreasonable fuel costs High fuel costs 60% median income after fuel costs Low income

14. Redefining fuel poverty –low income, unreasonable fuel costs High fuel costs 60% median income after fuel costs Median fuel costs Fuel poverty Low income

15. Issues arising • Do rising fuel prices cause “fuel poverty” to rise proportionately? • What level of fuel efficiency is taken as “reasonable”? • What are the actual consequences of fuel poverty, for material hardship and for health?

16. Consequences 1: fuel pre-empts family budget Risk of spending high proportion of income* on fuel Fuel poor Not fuel poor (old definition) Income poor Not income poor 60% 85% 5% 34% *At least 10% of disposable income (after housing costs)

17. Consequences 1: fuel pre-empts family budget Risk of spending high proportion of income* on fuel • Hardest hit: Lone parents • Low average family income • High priority on meeting family needs *At least 10% of disposable income (after housing costs)

18. Consequences 2: fuel spending low relative to need Risk of low fuel spending* as a % of requirement Fuel poor Not fuel poor (old definition) Income poor Not income poor 12% 43% 19% 46% *Below 40% of requirement to meet temperature norm

19. Consequences 2: fuel spending low relative to need Risk of low fuel spending* as a % of requirement • Hardest hit: Single people (pensioners and non-pensioners) • More likely to have high relative fuel costs • More likely to spend less than “need” *Below 40% of requirement to meet temperature norm

20. Conclusion: five key observations • Spending too little to heat an expensive home is not always linked to poverty (eg single pensioners) • Many families in poverty spend a high proportion of income on heating, regardless of fuel efficiency • Rising energy prices spread the problem • Targeting the housing stock will not always reach people in greatest need • Measures that target by income and housing efficiency may be best.

21. Centre for Research in Social PolicySchofield BuildingLoughborough UniversityLoughboroughLeicestershireLE11 3TUTelephone: +44 (0)1509 223372crsp@lboro.ac.ukwww.crsp.ac.ukwww.minimumincomestandard.org