Is the government prepared to talk about fuel poverty?

9th December, 2013

2,700 people die every year because they can't afford to heat their  home - and a key government measures for tackling the problem is about to be weakened. The government's fuel poverty programme is already in trouble - but are matters about to get worse?  

The Energy Company Obligation (ECO) requires energy providers to seek out and subsidise home insulation for low-income households. But the scheme is due to be rolled out slower than originally planned, according to this morning's Today programme, giving suppliers four years rather than two to achieve their targets. 

The move comes in response to public concern about rising energy bills. ECO is paid for through a levy on consumer bills -  so weakening ECO will decrease average household spend on energy. The measure isn't a perfect solution to fuel poverty, and has been widely criticised. But without it, the government's plans for tackling the problem look even shakier - and there's no sign it's thinking about ways to improve the situation. 

Missing fuel poverty targets - by a mile 

UK households pay some of the lowest gas and electricity prices in Europe. Yet fuel prices have been steadily increasing over the last ten years, far outstripping the price of other goods.

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As energy prices increase, more households tend to fall into fuel poverty. But what does that mean?

In the past, a household was considered to be in fuel poverty if it spent more than 10 per cent of its income on fuel costs. Under this definition, 4.5 million households in this country are currently in fuel poverty - or about 17 per cent of all UK households. 

Recently, the government changed the definition of fuel poverty. To be considered fuel poor, a household must now spend more than the UK median on its energy bill - and that expenditure must push it below the poverty line.  In effect, the change in definition lifted two million households out of fuel poverty at a stroke of the pen. 

The central point remains true, however: by either measure, the government is failing to tackle the issue. A few years ago, it set a target to eliminate fuel poverty among the country's most vulnerable households - those containing children, old people or people with disabilities for example - by 2010. It also aimed "as far as reasonably practicable" to eliminate it entirely by 2016. 

It's missing these targets by a considerable margin, as the following graph shows:

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Government spend on fuel poverty is falling 

So how hard is the government trying to catch up? It recently told Parliament's Energy and Climate Change Committee that its commitment to tackling fuel poverty has not waned. It said: 

"[Government] spending [on tackling fuel poverty] will, in fact, be higher in 2014/15 than it was in 2009/10."

Fuel poverty campaign group, Energy Bill Revolution, challenges this assessment, however. The group's analysis of official figures suggests government spend on fuel poverty will fall by 25 per cent between 2009/10 and 2014/15. 

The extra time energy companies have to roll out ECO makes this effect more dramatic because it pushes down government spend on reducing fuel poverty even further. Doubling the timeframe effectively cuts ECO's targets in half. This suggests government spend on fuel poverty will have fallen by 30 per cent between 2009/10 and 2014/15.

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Carbon Brief graph, based on Energy Bill Revolution's analysis of official figures. The graph compares how much the government spent on measures to tackle fuel poverty since 2009/10 with projections for how much will be spent over the next few years. 

Energy Bill Revolution's analysis currently suggests that 473 million will be spent tackling fuel poverty in England in 2013/13 and 2014/15. We have cut this figure in half to reflect the relaxation of targets under ECO. 

As the graph illustrates, the fall over the last few years is largely a result of decreasing spend on 'income support schemes' - grants to low-income households to help pay their bills. Between 2008 and 2010, the government 'topped up' the winter fuel payment - a tax free payment made to pensioners to help them meet winter heating bills. But the top-up came to an end in 2011. 

Fuel poverty groups were critical of the winter fuel payment cut in 2011. But generally they agree it makes a lot more sense to focus funds on home insulation, rather than just handing out grants to help people pay their bills. The UK's housing stock is amongst the least energy efficient in Europe - and insulating homes is the only way to have a long-lasting impact on energy bills. 

ECO isn't a good measure for tackling fuel poverty 

So are campaigners up in arms about the decision to relax the ECO's targets? In fact, it may not be a disaster for plans to tackle fuel poverty - simply because the measure isn't a very efficient. 

In a report released earlier this week, left-leaning thinktank IPPR, which has a long-running campaign on fuel poverty, concluded: 

"The elements of ECO that are focused on low-income households are very poor at targeting fuel poverty. This is because support is given to households that receive particular benefits or live in deprived areas, both of which are poor proxies of fuel poverty."  

IPPR says 80 per cent of spend under ECO is going to households that are not in fuel poverty at the moment. Hardly a resounding endorsement of its effectiveness. 

We need a measure that will do a better job 

Overall, fuel poverty campaigners appear to be stuck between a rock and a hard place at the moment. ECO doesn't appear to be tackling energy poverty efficiently, so a reform makes sense. But there doesn't appear to be any sign that the government is considering introducing anything better. 

The debate is not short of alternative ideas. 50 organisations from the End Fuel Poverty coalition will launch a campaign on Monday calling for the government to set minimum energy efficiency standards for all low-income households. 

IPPR and some academics also argue that an area-based approach - where local authorities effectively 'blitz' specific geographical areas with support for energy efficiency measures, is the better way to go. The approach would mean that funds can be more effectively focused on the households that really need it, by allowing households to be assessed on an individual basis. 

There's an interesting conversation to be had about what effective energy efficiency programmes should look like. The problem is, no-one seems sure that the government is prepared to join the discussion. 

Source: Carbon Brief

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