Fuel Poverty and Government Policy

Fuel Poverty is reaching crisis point. That’s why the UK government is now legally obliged to do everything in its power to eliminate it by 2016. However, as Lani Shamash’s investigation shows, there are rising fears that government attempts to meet that target could, in fact, make the problem of fuel poverty worse.

According to Consumer Focus, today there are a staggering 5 million households are in fuel poverty. This means that for more than a quarter of the UK the cost of heating a home is more than 10% of the household income, and this figure is rising. But the Warm Homes and Energy Conservation Act 2000 means that the government has a legal obligation to do all that is ‘practically reasonable’ to eradicate fuel poverty by 2016.

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The government’s strategy to meet its target is made up of a £1.3 billion annual Energy Company Obligation (ECO) subsidy and the green deal, its carbon reduction policy which will refurbish homes, making them warmer and more energy efficient. Households will get energy efficiency works for free, with the upfront costs covered by a private sector provider, which will then recoup its costs through the resulting savings in household bills. However, experts from across the housing and energy market are warning that these policies could actually make fuel poverty worse for the most vulnerable people. A report by Camco for Transform UK warned that without additional support, the green deal and ECO will not only fail to meet the 2016 fuel poverty target but actually increase it to 9.1 million by 2016. This is because low income households will require a large if not full ECO subsidy,  yet the government has ring-fenced only 25 per cent of the £1.3 billion ECO pot for fuel poverty. Though, as a DECC spokesperson has said, ‘there are other state benefits like the winter fuel payment and the cold weather payment’ this nonetheless represents a massive drop in funding for the country’s most vulnerable.

Parliamentary campaigner at the Association for the Conservation of Energy (ACE), Louise Sunderland, says ‘we are going backwards without a doubt.’ ACE’s consultation response, written by Ms Sunderland, states: ‘Far from dwarfing these historical expenditure levels, affordable warmth is two thirds less. In our view, this represents the clearest possible indication the government has abdicated any serious attempt to meet its 2016 fuel poverty target.’ Director of Policy and Campaigns at Friends of the Earth, Craig Bennett, concurs: ‘The government seems to have abandoned any pretence of meeting its legal obligation to end fuel poverty by 2016,’ he says.

Meanwhile, social landlords (18% of whose tenants are in fuel poverty) will no longer have access to the affordable warmth pot, giving them a funding gap of £500 million. This is because the government has decided to prioritise the fuel poor in the private sector who have not been able to benefit from previous ‘decent homes’ schemes.

Jeremy Cape, investment director at 54,000-home Affinity Sutton, warns of a ‘triple whammy’ that will likely hit social tenants as welfare reforms begin to reduce household income, energy prices rise and available funding to combat fuel poverty drops. ‘This could lead to an increase in fuel poverty with few means of getting people [social tenants] out. We need a more flexible approach to ECO so that it’s about making the green deal work,’ he says.

The DECC’s own outcomes assessment of ECO and the green deal implies the government will fall massively short of its 2016 aim. It estimates ECO will help only 350,000 to 550,000 households to come out of fuel poverty (by 2022). With over 5 million fuel poor households in England it’s clear why many are warning that the government will fall catastrophically short of its 2016 target.

For Simon Osborne, green policy expert at consumer group Which?, it is ‘worrying’ that the government hasn’t assessed ECO’s impact on fuel poverty before 2022: ‘We think DECC needs to assess the risk that it will worsen fuel poverty in the meantime.’

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The dilemma is that increasing the amount of ECO being ring-fenced for the fuel poor would lead to a significant rise in fuel bills, a move which could lead to many more homes on the borderline being tipped into fuel poverty. As a result ACE wants the government to channel 98 per cent of ECO to vulnerable and low-income households for the first three or four years. The organisation is also calling for ‘a publicly funded scheme to eradicate fuel poverty’.

Camco’s Energy Bill Revolution Report for Transform UK, The Co-operative Group and Consumer Focus, states that by investing the cash from the £4 billion it raises in carbon tax revenues into energy efficiency measures, the government could bring nine out of ten homes out of fuel poverty.

Professor Hills assessment of the how ECO and the green deal will impact fuel poverty will be published in the coming weeks, and is no doubt awaited with nervous anticipation. If the fears explored are confirmed, the government’s flagship new green policy could have although unintentional, nevertheless deadly results.

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