Fuel Poverty needs a rethink

The cold weather this week has conveniently coincided with two other pieces of recent news. The first is that the continued rise in energy prices has been referred to OFGEM, and the second is the update of the fuel poverty statistics in Wales. The new estimate of fuel poverty in Wales, with calculations based on the 2008 living in Wales survey, is that there are 332,000 households in fuel poverty, or expressed as a percentage – 26 per cent of all households in Wales. This is almost double the amount of households calculated to be in fuel poverty in 2004, when between 11 and 14 per cent of households were in fuel poverty.

The reasons for this rise are obvious when one looks at how fuel poverty is defined. A household is in fuel poverty if it would be required to spend more than 10 per cent of its income on fuel in order to maintain an adequate heat (defined as 21C in a living room and 18C in other rooms). This means that the rise in fuel poverty can be explained by the rise in energy prices and the recession. Lower incomes and higher prices mean more fuel poverty. This also means that figures calculated using the 2008 survey are likely to be an under-estimate of the extent to which fuel poverty will affect us this winter with higher prices and a more uncertain economy.

Of course, having to spend more than 10 per cent of your income on fuel to stay warm does not necessarily mean that you will spent that amount of money.  Households react differently to cold weather. Some households will disregard the cost and simply turn the heating on in order to stay warm, whilst others will keep heating systems off or at low temperatures, choose to heat one room and stay cold in an effort to avoid a high bill. The choice of how to cope with cold weather clearly has implications for what effects fuel poverty has on people; high expenditure on fuel can lead to debt, or other essential goods being cut back, whilst cold houses in themselves will create and exasperate major health issues.

It also has implications for how policy makers respond to the issue. Currently the major efforts have been in installing energy efficiency measures and technologies in homes where possible. These have the effect of lowering bills for those who choose to stay warm, but have limited benefits for those who stay cold. Furthermore, despite over 100,000 households having received heating and insulation improvements under the fuel poverty strategy, the numbers of people in fuel poverty have risen not fallen largely because of factors outside of the Welsh Assembly Government’s control.

The Bevan Foundation has conducted further research into fuel poverty, and the final report will be published shortly.  We  calls for a rethink in how fuel poverty can be tackled, and hope the research will contribute to this rethink.