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Rethinking fuel poverty in
the UK
February 2012
Donald Hirsch
Fuel poverty: three
perspectives
The poverty perspective
• Problem: high fuel costs stress family budgets
• Focus: low income households
Fuel poverty: three
perspectives
The health perspective
• Problem: unaffordable fuel costs create cold
homes
• Focus: groups not heating houses properly
Fuel poverty: three
perspectives
The environmental perspective
• Problem: poor housing stock uses fuel
wastefully
• Focus: thermally inefficient homes
Fuel poverty: three
perspectives
The poverty
perspective
CORE DRIVERS
• HOUSEHOLD
INCOME
• FUEL EFFICIENCY
OF HOMES
The environmental
perspective
The health
perspective
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
Key measurement issues
• What is the threshold of low income?
• What do we mean by reasonable cost?
• How to combine these?
Current definition
Fuel poverty =
having to spend at least 10% of income
on fuel to keep home warm
Current definition
Problem 1: It doesn’t measure affordability
Spending
Total
income/spending
Available for
non-fuel
spending
Needed for fuel
Income
Fuel poverty line
(10% of income)
Current definition
Problem 2:
Why 10%?
Should the threshold change with changing
norms?
Current definition
Problem 3:
What is adequate warmth?
Risk of
respiratory
problems
(where
humidity
not optimal)
15
16
Average Non-living
centrally room
heated standard
homes
Living
room
standard
“no demonstrable risk” - WHO
17
18
19
20
21
22
DEGREES CENTIGRADE
23
24
Redefining fuel poverty –
low income, unreasonable fuel costs
Fuel
costs*
60% median
income
High fuel costs
*”Fuel
costs”=
required
fuel
spending
Income
Low Income
Redefining fuel poverty –
low income, unreasonable fuel costs
High fuel
costs
60% median
income after
fuel costs
Low income
Redefining fuel poverty –
low income, unreasonable fuel costs
High fuel
costs
Median fuel costs
60% median
income after
fuel costs
Fuel poverty
Low income
Issues arising
1. Do rising fuel prices cause “fuel
poverty” to rise proportionately?
2. What level of fuel efficiency is taken as
“reasonable”?
3. What are the actual consequences of
fuel poverty, for material hardship and
for health?
Consequences 1: fuel
pre-empts family budget
Risk of spending high proportion of income* on fuel
Fuel poor
(old definition)
Income poor
Not income poor
Not fuel poor
60%
85%
34%
5
%
*At least 10% of disposable income (after housing costs)
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)
Consequences 2: fuel
spending low relative to need
Risk of low fuel spending* as a % of requirement
Fuel poor
(old definition)
Income poor
Not income poor
Not fuel poor
43%
12
%
46%
19
%
*Below 40% of requirement to meet temperature norm
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
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.
Centre for Research in Social Policy
Schofield Building
Loughborough University
Loughborough
Leicestershire
LE11 3TU
Telephone: +44 (0)1509 223372
[email protected]
www.crsp.ac.uk
www.minimumincomestandard.org