How is fuel poverty calculated?
In England “a household is defined as being in fuel poverty if it is on a low income and faces high energy costs”, according to the Department of Energy and Climate Change.
A household is considered by the government to be in fuel poverty if they meet both of the following requirements
- They are living in a property with a fuel poverty energy efficiency rating of band D or below
- When they spend the required amount to heat their home, they are left with a residual income below the poverty line
People are considered to be in poverty if their household income is 60 per cent lower than the median across the UK. That impacts about 13.4 million people, according to the Child Poverty Action Group.
So if a person’s home has a fuel poverty energy efficiency rating of band D or below, and their income falls below the poverty line, they are classified as ‘fuel poor’ according to the government’s indicator.
This way of calculating fuel poverty is known as the Low Income Low Energy Efficiency (LILEE) indicator.
It means, in theory, the government can figure out how many fuel-poor households there are and how badly affected each household is.
The government then works out the fuel poverty gap – or the amount a household would need to make up to not be classed as fuel poor. This tells them how much extra a household would need not to pay their energy bills.
To get a sense of the problem at a national level, the government then adds up the fuel poverty gap for each individual household to produce an overall estimate.
Because of the way this is calculated, fuel poor households might include those who aren’t traditionally considered poor, but are pushed into fuel poverty by their high energy requirements.
Others, who have relatively low incomes, might also have lower energy costs and not be considered fuel poor.
How many households in the UK are in fuel poverty?
An estimated 3.16 million households in England were defined as fuel poor in 2020, the most recent year for which statistics are available. This was 13.2 per cent of all households.
Amid a cost of living crisis, families face a sharp spike in energy costs, meaning those who have old gas boilers or cookers may not be able to afford to cook a hot meal or have a hot shower.
Food bank manager Charlotte Write wrote in the Big Issue: “Since the cost of living crisis has accelerated, items like instant noodles (which only require a kettle) or no-cook items like corned beef and spam have become much more popular. As guest Heidi says: ‘I have £1 left on the electric for the rest of the week. I need this to charge my girls’ tablets so they can do their school homework, I can’t put the oven on as well.’”
The charity National Energy Action has estimated that price rises in 2021 and April 2022 will lead to an increase in the number of households in fuel poverty of more than 50 per cent. This estimate does not take account of any further increases in prices in October 2022.
According to the House of Commons library, around 13 per cent of households in England were classed as fuel poor in the latest estimates. This compares to 25 per cent in Scotland, 12 per cent in Wales, and 18 per cent in Northern Ireland.
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What causes fuel poverty?
According to anti-poverty charity Turn2us, the key factors that contribute to fuel poverty are the energy efficiency of a home, the cost of energy bills, and household income.
Many people live in draughty homes and rely on heating systems that are old and inefficient. The heat escapes even when turned up to full, making it harder to bring down the total cost of bills.
Others face hardship because their income is low, or because they can’t rely on regular work.
People might also feel unsupported by the welfare system and struggle to access Universal Credit, which can have an impact on whether they can afford energy.
Those who find themselves in this situation might feel forced to prioritise buying food or other essentials and sacrifice energy bills.
Tackling the problem
So, how do we tackle fuel poverty? As part of the plan to combat the cost of living crisis, the government has announced that £150 council tax rebates will be given to homes in bands A to D. It is also set to offer a £400 discount on bills.
Plans also include a “temporary, targeted profits levy” — otherwise known as a windfall tax — on energy firms. The tax will have an investment allowance, acting as an incentive for energy companies to reinvest the profits they make.
Some people qualify for the Winter Fuel Payment to help them pay their heating bills. This is a one-off payment made to households that include someone over pension age.
Eight million pensioners, who receive the Winter Fuel Payment, many of whom are disproportionately impacted by the rise in energy prices, will receive a cost of living cash boost of £300.
But MPs and experts have warned that the government is not doing enough to tackle the surging costs of energy bills at a time of crisis.
Derek Mitchell, the chief executive of Citizens Advice Scotland, said the support was welcome, but emphasised that many will still struggle in coming months.
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He said: “Those on low incomes are still going to feel a significant squeeze on their household budgets and no one should be in any doubt about what that means – people choosing between feeding their children or keeping them warm,”
Labour’s shadow chancellor Rachel Reeves has criticised the Tories for failing to announce the windfall tax sooner, a policy that Labour had demanded for months.
Reeves also pointed out that the “buy now, pay later” energy discount scheme was “always destined for failure”.
“Let there be no doubt about who is winning the battle of ideas in Britain — it is the Labour party,” she said. “For months, it has been clear that more was necessary to help people bring their bills down. So what took this government so long?
“We pushed for the windfall tax. They’ve adopted it. We said the buy now pay later scheme was wrong. Now they’ve ditched it. This government is out of ideas, out of touch and out of time.”
People in financially secure households are being urged to ‘donate the rebate’, by giving away the £400 energy bill grant they’ll receive as part of Rishi Sunak’s cost of living crisis support package.
Tracey Molineux, who heads up supporter engagement at Turn2us, said that the government’s one-off £400 grant would not be enough to sustain families on the lowest incomes.
She said: “Every day, our helpline advisers hear from parents who are skipping meals to keep their children fed, or who are left sitting in the dark to save on energy costs.
“The government support is not a long-term solution and millions of families are still facing impossible choices between paying increasing food bills or keeping a roof over their heads.”
