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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