Fuel Poverty

What is fuel poverty?

Fuel poverty is type of financial hardship in which households struggle to afford to heat their homes to comfortable, safe temperatures. Fuel poverty results from one or several factors – low income, high fuel costs, and energy inefficient homes. Fuel poor households worry about their energy bills, rack up debts to their suppliers, turn down thermostats and cope with cold living conditions.

Cold rooms aren’t just uncomfortable: they can exacerbate health problems and contribute to premature deaths. The government runs several social schemes to alleviate fuel poverty, including winter fuel payments and the warm home discount scheme.

To understand fuel poverty, and how these schemes can help if you’re experiencing it, read on:

What is the definition of fuel poverty?

In the past, a household was legally considered to be fuel poor if it had to spend more than 10% of its income on fuel to heat living spaces to an ‘adequate standard.’ An adequate standard is defined as 21°C in the main living room and 18°C in other inhabited rooms, including bedrooms.

This is still the definition that applies in Northern Ireland, Scotland, and Wales.

However, since 2013, England has used a different definition of fuel poverty—the so-called ‘low income, high cost’ model.

Under this definition, a household is categorised as fuel poor if it meets both of the following conditions:

• the amount of money it would need to spend to heat its home to a reasonable level is above the national median of energy spending
• if they spent that amount, their residual income would place them below the poverty line (typically defined as having incomes less than 60% of the median income)

This definition has been criticised because it is a relative measure of fuel poverty and may underestimate the true extent. For example, it has failed to account for rising fuel costs and falling incomes over the last decade, which have driven up rates of fuel poverty in the devolved nations.  In contrast, under the new definition, rates of official fuel poverty have remained flat in England.

How prevalent is fuel poverty?

In 2016, the last year for which full data is available, 11.1% of households – 2.55 million – in England were fuel poor. That’s an increase from the 11% that experienced fuel poverty in 2015.

In Scotland, which uses the older definition of fuel poverty,  649,000 households (26.5% of the total) were categorised as fuel poor in 2016.

In Wales, there were 291,000 households – 23% of all households – in fuel poverty. In Northern Ireland, 160,000 experienced fuel poverty, 22% of the total.

According to data from the fuel poverty charity National Energy Action (NEA), 82.1% of households in fuel poverty are considered vulnerable, meaning they have children, elderly members, or someone with a long-term illness or disability. Among household types, single parent families have the highest prevalence of fuel poverty, at 26.4%.

Fuel poverty is more common in rural areas than in urban areas. 14% of populations in rural villages, hamlets, and isolated dwellings are in fuel poverty, due to a combination of inefficient homes and the use of more expensive heating, including electricity.

Additionally, people from ethnic minority backgrounds were more likely to experience fuel poverty than white households, with 17% in fuel poverty compared to 10%.

Fuel poverty is also more prevalent among those who rent in the private rented sector, with 19.4% of rented households experiencing fuel poverty. They make up more than a third (35.4%) of all households in fuel poverty. In contrast, 13.8% of social tenants and 7.7% of owner-occupiers are fuel poor.

What is the fuel poverty gap?

Both definitions of fuel poverty allow the government and charities to assess not just the prevalence of fuel poverty but also its depth – the difference between a household’s average gas and electric bill and what it would have to be for the household to no longer be classified as fuel poor. This figure is known as the household’s fuel poverty gap.

In 2016, the average fuel poverty gap in England was £326 a year. This decreased 4.4% in real terms from 2015. The cumulative fuel poverty gap in England was £832 million.

However, rising energy costs led the Department for Business, Energy, and Industrial Strategy (BEIS) to forecast that the average fuel poverty gap would increase by 9% between 2016 and 2018, to £357.

The fuel poverty gap for those in rural areas was found to be double that in urban areas, at nearly £600 a year.

What causes fuel poverty?

Fuel poverty is caused by one, or several compounding factors:

• low incomes: Fuel poor households were more likely to be in poverty. In England, the median income of fuel poor households was £10,325, less than half the national median of £22,0017.
• high fuel costs: Fuel poor household are more likely to be overpaying for their energy, with median bills of £1,366, compared to the national median of £1,177. Households with elderly members and those on low incomes are less likely to compare energy and switch supplier and are thus more likely to be on expensive default tariffs, which can contribute to fuel poverty.
• energy inefficient homes: Fuel poor households are more likely to live in energy inefficient homes. Research has suggested that 90% of fuel poor homes are poorly insulated.

What is the impact of fuel poverty?

Cold temperatures can be hazardous for our health and even fatal, especially among the old, the very young, and those in poor health. Cold interior temperatures increase the likelihood, and severity, of colds and influenza, and exacerbate existing health conditions like asthma and other respiratory issues. Cold rooms also have a detrimental impact on mental health. Overall, fuel poverty is estimated to cost the National Health Service £3.6 million every day.

The UK experiences an average of 32,000 excess deaths each year in the winter. Of those, a tenth can directly be attributed to fuel poverty, according to the End Fuel Poverty Coalition.

What relief is there for fuel poverty?

The government runs a number of schemes to alleviate fuel poverty, delivering both immediate relief on energy bills for vulnerable populations and long-term savings by increasing the energy efficiency of homes. These include:

• Energy Company Obligation: requires energy suppliers to financially assist fuel poor households to improve the energy efficiency of their homes, for example by installing insulation, double-glazed windows, heating controls, and smart thermostats. Overall, the government has set a target of upgrading all fuel poor homes in England to an EPC rating of Band C by 2030
• winter fuel payments: provides those born on or before 5 November 1953 with £100 to £300 to help with their energy bills.
• warm home discount scheme: gives eligible households – those in receipt of certain benefits – a one-time discount on their energy bills each winter.
• cold weather payments: gives those on certain benefits £25 any time (between 1 November and 31 March) that the temperature falls below zero degrees Celsius for seven consecutive days.