Fuel poverty definition and causes

What is fuel poverty?

According the to the Fuel Poverty Research papers by National Children’s Bureau, (NCB fuel poverty research papers, undated) fuel poverty in England is measured by the Low Income High Costs definition. This considers a household to be in fuel poverty if it meets two factors:

• The fuel costs are above average (the national median level)

• That by spending this amount on fuel, individuals would receive a residual income below the official poverty line. Individuals therefore often do not spend this money on fuel, creating fuel poverty.

Fuel poverty is viewed as an interplay of three elements:

• 1. Cost of energy

• 2. Household income

• 3. Energy efficiency of the household

1. Cost of energy

The average annual cost of household energy bills has risen from £605 in 2004 to £1,306 in 2013. The Department of Energy and Climate Change has estimated that prices are set to rise between 12 and 30 per cent from 2013 – 2020, meaning the challenge of paying ever-increasing energy bills will continue.

Research from The Children’s Society (Williams N et al (2015) Show Some Warmth: Exposing the damaging impact of energy debt on children. The Children’s Society) shows that one in five families has been in energy debt, with the average level of energy debt up from £320 in 2005 to £431 in 201523. Families in debt report cutting down on heating and other essentials such as food.

Switching supplier can save consumers an average of £160 per year on their dual fuel bill. However, the rates of switching are persistently low due to lack of information and the belief that it is difficult to do. People who are in over £500 of energy debt are also unable to switch energy providers.

Fuel costs can vary depending on how people pay their bills – with those using pre-payment meters often facing higher costs than customers paying by direct debit. According to the Competition and Markets Authority (CMA), pre-payment customers pay on average 22% more than the cheapest direct debit deal. The Children’s Society study found that 30% of families have pre-payment meters.

Half of customers who go into debt are put on pre-payment meters which, for many, will inevitably mean an increase in bills.

1. Household income

Between 2010 and 2013, real wages fell by 2.2% on average every year. Those households at the lower end of the income spectrum were most affected by this.

The Joseph Rowntree Foundation Minimum Income Standard for the UK in 2014 report (Joseph Rowntree Foundation (2014) Minimum Income Standard for the UK in 2014) highlighted how the last six years have been tough for families:

• Cost of essential items increasing by 28%
• Average wages increasing by only 9%
• Minimum wage increasing by only 14%
• Government support to families (including child benefit, child tax credit) has been reduced.
  1. Energy efficiency

However, it is important to note that not everyone on low income is in fuel poverty. An example of this is those in social housing where although tenants are on low incomes, fuel poverty is proportionally lower because of a more energy efficient and modern housing supplied.

Fuel poverty can then be addressed by looking at energy efficiency measures. Making changes in energy efficiency can be arguably easier than making changes with income poverty.

Other vulnerability factors

Housing type

In addition to the often poor state of the housing stock in England, there is enormous pressure on housing in many parts of the country. Local authorities often struggle to combat homelessness and have to house families in accommodation such as Bed and Breakfasts, due to having more people to house than they have houses for. Social landlords or housing associations often have exceptionally long waiting lists. These temporary or emergency properties are unlikely to be energy efficient. Recent cuts to funding for social housing means fewer properties will be available.

Younger households are increasingly having to rent privately where the costs are significant higher than being housed by local authorities, who give priority to the elderly or people with health conditions. Currently 17% of all households and 23% of families live in privately rented accommodation.

Almost half of families living in privately rented accommodation are struggling with energy bills and over 10% cannot afford to keep warm. One in ten private-rented homes also have the lowest energy efficiency rating. Households living in privately rented accommodation have fuel poverty rates that are twice the national average due to a combination of factors. These include high cost of private rent, low energy efficiency, high rates of pre-payment meters, and poor state of housing.

The Energy Act 2011 aims to address the issue of poor quality housing stock in the private-rented sector. For example:

• From April 2016, private landlords will not be able to unreasonably refuse requests from tenants for consent to energy efficiency improvements.

• From 2018, all private rented properties must be brought up to a minimum energy efficiency standard rating. However, there is significant concern about how effective this new legislation will be.

Sadly, young parents and practitioners still fear there will be little incentive for landlords to act – in large part because they are not responsible for paying the energy bills for the properties they rent out. In addition, many organisations report tenants fearing eviction if they make requests to landlords or complain about their living conditions.

Disabled children and their families

A survey carried out by ‘Contact A Family’, a charity providing advice, information and support to UK families with disabled children, found that low income families with disabled children are particularly vulnerable. They often struggle to pay their energy bills due, in part, to the additional costs of caring for a disabled child. These could include heating a home for a child with particular needs or who is at home a lot of the time.

Many go without essentials and get into debt in order to pay for food, clothes and heating. One in five (21%) report going without heating, and 29% have taken out a loan to pay for essentials (with 39% cent of those loans being for food or heating). For families in paid employment, one in six (17%) state that they go without heating – and that rises to 32% for those without work. It is worth nothing that there are some schemes to support vulnerable families with their fuel costs. See section on Other Support.

Lack of education and information

Young parents tell us that what they need is better education and more information about what they can do to save money, cut their energy use and make their homes warmer and healthier. All the young parents spoken in the National Children’s Bureau Report on Fuel Poverty, wanted to learn how they could do this and how to make a difference to their lives.

Anecdotal evidence suggests that young parents and households headed by young people are less likely to access help that is offered in the form of advice and information. More research is needed to understand why this is, but practitioners interviewed for this report suggest it is due to a range of reasons including lack of time, not wanting to ask for help, having other priorities, and some prejudice towards young people from practitioners.

(Report on Fuel Poverty, undated, National Children’s Bureau)

Areas of support needed:

• How to read energy bills
• Understanding energy consumption
• Switching supplier – how to do this
• Quick, low cost or no-energy efficient measures households can undertake themselves