Following an independent review and a consultation a new definition of fuel poverty has been set out today to ensure support is targeted at those who need it most.
A household will be defined as ‘fuel poor’ if its:
- Total income is below the poverty line (taking into account energy costs); and
- Energy costs are higher than typical.
The decision to adopt a new definition follows positive responses to a consultation launched in September last year and an independent review of the current definition by Professor John Hills of the London School of Economics (LSE), published in March 2012. The current definition of a ‘fuel poor household’ is that a household would need to spend 10% of their income on energy a year.
Ministers have accepted independent expert advice that the current fuel poverty definition distorts our understanding of the problem as, at times, it can capture some rich households while overlooking others that are struggling with their energy costs.
Government has today introduced amendments to the Energy Bill to set a new target for fuel poverty. It is proposed that this will focus on ensuring that fuel poor households attain a certain standard of energy efficiency in their home by defining an average or a minimum standard for energy efficiency for fuel poor households.
Alongside this we have set out how the new definition will help us to shape fuel poverty policies to ensure that support is better targeted at households that need it the most.
Edward Davey, Secretary of State for Energy and Climate Change, said:
“I am determined to tackle the scourge of fuel poverty and help hard-pressed consumers across the country.
“In the past, action to tackle fuel poverty has been held back by how the problem has been defined. This made it difficult to deliver help to the people who need it most.
“The new definition, together with the amendment that we are making to the Energy Bill, will ensure a focus on the households that are at the heart of the fuel poverty problem. That’s those with both low incomes and high energy costs.
“Our new strategic framework sets out how we can use this new definition to target our resources in the most effective way.”
Greg Barker, Minister for Energy and Climate Change, added:
“We are doing all we can to help hardworking families and vulnerable people with the rising cost of living. That’s why the Chancellor announced the extension of the Warm Home Discount scheme to 2015/16, taking £320m off the nation’s energy bills.
“Despite the recent modest fall in the numbers of households in fuel poverty, there is still an unacceptably high number of people living in cold, damp, unhealthy conditions. That’s why we must take a new approach to fuel poverty, with energy efficiency at the heart.
“I am determined that we use new schemes like the Energy Company Obligation to target those who need support the most, and that’s what our new approach to fuel poverty will help to achieve.”
Notes for editors:
Read the Framework for Action document Following Royal Assent of the Bill, Government will use secondary legislation to set a new target, followed by a Strategy to implement this.
- The definition of fuel poverty that will be adopted finds a household to be fuel poor if it is below the income poverty threshold (i.e. has an income below 60% of the median once energy costs have been taken account of) and if it has energy costs that are higher than the typical (median) household. This new indicator of fuel poverty also includes a fuel poverty gap, which is the difference between a fuel poor household’s energy costs and what they would need to be in order for that household to no longer be fuel poor. This provides a measure of the depth of fuel poverty that a household is experiencing. See the Government response to the consultation.
- The Hills Review
- Explanation of new target vs. previous target. The current target, set out in the Warm Homes and Energy Conservation Act, is concerned with eradication. The conclusion of the Review was that fuel poverty was a long term, structural problem. A focus on eradication is therefore the wrong type of target to focus on given the nature of the problem. Instead we have proposed a target that will focus on improving the energy efficiency of the homes of the fuel poor, providing for a more sensible measure of progress in tackling the problem.
- Fuel Poverty is a devolved matter. The Hills Review only considered the situation for England, and the change to the definition applies to England only. The same applied to the amendments we have proposed in relation to the Warm Homes and Energy Conservation Act. The provisions of the Warm Homes and Energy Conservation Act as they apply to Wales remain unchanged. Scotland also has in place their own definition and legislation relating to fuel poverty. Northern Ireland also has its own approach.