New Thinking Blog: There go 1 million fuel poor: How new measurements solve fuel poverty

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on Jul 25, 13 • posted by

New Thinking Blog: There go 1 million fuel poor: How new measurements solve fuel poverty

724There go 1 million fuel poor: How new measurements solve fuel poverty

Caroline Kuzemko & Tom Steward, IGov Team, 25th July 2013

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Last week our coalition government produced a policy review of fuel poverty – marking a departure both from previous methods of measuring who is fuel poor and from previous policies.  When Labour had come to power in 1997, although little else changed with regard to the direction of energy policy, attitudes towards fuel poverty did shift.  This became clear in 2003 when, as part of the White Paper, fuel poverty became one of the four central objectives of energy policy (see chapter 8 on ‘Energy and the Vulnerable’).  A commitment was made to ‘ensure that every home is adequately and affordably heated’ as well as to try and ensure, ‘as far as reasonably practicable’, that no household in Britain should be living in fuel poverty by 2016-2018.

Meeting this target was always going to be an ambitious task and it is one that has been severely complicated by the ongoing economic downturn, kick-started by the financial crisis of 2008.  It has also been made more difficult by rising and volatile fossil fuel prices, in particular since the mid 2000s, and to some extent by the UK becoming an importer of gas.  In 2003/4 households measured as fuel poor in England, measured as those whose energy bills constituted more than 10% of their monthly income, had hit a low of 1.2m, from 5.1m when Labour came to power.  From 2005, however, the number of fuel poor households had spiked back up to 4m in 2009 and, helped partly by improvements in energy efficiency, fell back to 3.2m in 2011, the last date for which energy poverty statistics were released.  If Scotland, Wales and Northern Ireland are included then there were 4.5m fuel poor in total in 2011.

Government has now, with one clever stroke, taken 1m English households out of fuel poverty – by redefining how it is measured.  The number of fuel poor households in 2010 has consequently dropped from 3.5m to 2.5m.  Interestingly, the report says nothing about fuel poverty statistics as measured for all of Britain.  Some of those that have dropped out of fuel poverty may well be medium to high-income households who spend a disproportionately high amount on gas and electricity, but many may not be.  The Fuel Poverty Action Group has remarked that new measures mask an escalating cold homes crisis.

The new measure, is considerably more complex than the old one. Rather than focussing simply on fuel costs as a proportion of income, to be deemed fuel poor a household must now meet two overlapping criteria. Firstly, it must have low income (LI). This is defined as being below the poverty line (60% below the median income), after accounting for costs of energy. Secondly, households must be considered to have high costs (HC) – meaning any household with above median bills. These two criteria form the Low-Income High-Cost (LIHC) measure of fuel poverty. The new measure is designed to capture not only numbers of households in fuel poverty, but also the ‘depth’ of the fuel poverty they face. This latter feature is particularly important owing to the new measure being dramatically less responsive to price rises (in terms of numbers of those in fuel poverty) than the old measure.

In addition to dramatic reductions of numbers of fuel poor, the move to the new measurement methodology is ‘useful’ because, by associating fuel poverty with poverty more broadly and lowering sensitivity to price rises, DECC can take less responsibility for alleviating the situation. The LIHC indicator does make sense to the extent that it focuses policymakers on vulnerable households, but it also makes solving the problem something that other Departments, and the housing associations, should also be responsible for.

In terms of what the coalition is now prepared to do about fuel poverty, Labour’s commitment to ensure that no household in Britain is living in fuel poverty appears to have disappeared off the radar. DECC has done this by dropping its legal commitment to eradicating fuel poverty where reasonably possible by 2016-18. In light of the new measure being based entirely on averages, and therefore relative to the entire population, eradication is in fact made impossible. However, it’s hard not to wonder if the new definition drove the need to drop the commitment to eradication, or if indeed the need to drop commitment to eradication helped shape the new definition.

To clarify its position on the problem of fuel poverty, DECC has released a document entitled ‘a framework for future action’, in which it highlights the need to focus on improving the energy efficiency of fuel poor homes, as accompanied by direct financial support. If such financial support were applied purely to facilitate transition to a lower-demand economy it could be considered both a positive, and plausible move. However, no such framing of ‘transition’ materialises. The document itself does little more than affirm that existing policies such as the Green Deal and ECO are ideally placed to deliver on this newly-framed understanding of required action on fuel poverty. Indeed, for a document entitled ‘framework for future action’, there seems to be limited focus on the future, and painfully little discussion of action at all.

Political wrangling and goal-post-moving aside, maybe we should be asking bigger questions? As James Granger of Fuel Poverty Action recently suggested: ‘Instead of re-thinking the definition of fuel poverty, we should start rethinking the fundamentals of our energy system that prioritises Big Six profits over people’s lives’ – and it’s hard not to agree with him. To increase revenues market actors, who have so much influence over how our energy system evolves going forward, have two choices – sell more, or charge more.  Neither are particularly akin to reducing fuel poverty.



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