Fuel Poverty in England: The Government's Plan for Action

General

The Fuel Poverty Implementation Plan, “Fuel Poverty in England: the Government’s Plan for Action”, setting out how the Government proposes to meet its statutory obligation to eradicate fuel poverty by 2016 and its own target to eradicate fuel poverty for vulnerable households in England by 2010, was published on 30 November 2004. This briefing considers the strategic value of the overall plan and examines the individual elements identified   as contributory factors in the reduction of fuel poverty.

The plan for action

NEA has previously questioned the Government’s view of just what constitutes a ‘plan’. The NEA view is that a plan or strategy should set out clearly how it is proposed to get from an undesirable starting point to the desired end. As a minimum a strategy should:

• Quantify the extent of the problem in an objective manner (this applies particularly to the definition)
• Identify the resources needed to resolve the problem
• Devise a structure by which these resources can be deployed in a methodical manner in pursuit of any objective
• Identify any specific objectives to address as a priority
• Develop a sound method of assessing progress against targets
• Recognise that fuel poverty will require continual monitoring and remedial action

The plan for action does not meet all of these criteria. Whilst it does consider all of the above aspects in isolation, and it does contain some very welcome innovations, it still lacks the methodical and structured form needed to address fuel poverty in a coherent manner. The plan is still a collection of largely freestanding policies and programmes that will certainly contribute to the reduction of fuel poverty whilst failing to deliver affordable warmth to all vulnerable households.

Defining and counting fuel-poor households

Data used in the plan suggest that in 2001 there were 1.7 million fuel-poor households in England of whom 1.4 million were vulnerable¹. These figures were based on the English House Condition Survey 2001 and subsequent modelling of energy price and household income movements suggests that figures for 2002 had reduced even further. Little account is taken of the effect of recent severe price hikes for both gas and electricity and there is little informed discussion of how future price increases might hinder fuel poverty objectives. The ‘base case scenario’ used in the plan assumes extremely complacently that further price and income movements will further reduce the number of vulnerable fuel-poor households to 1.1 million by 2010. This is of particular importance since virtually all other future assumptions about fuel poverty trends are predicated on this prices and incomes scenario. The implication appears to be that price increases above these projections will undermine the plan but there is no contingency planning for this potential development.

Despite assurances from the Government that fuel poverty would be eradicated on the basis of both the ‘full’ definition and the ‘basic’ definition of household income this commitment is ignored in the discussion².

Households refusing assistance

Based on findings from Warm Zones work it is assumed that around 1 in 5 households refuses assistance through energy efficiency measures. The Government is confident that this figure can be reduced to around 10% of households through:

• Reducing any perception of energy efficiency programmes as ‘charity’ and consequently removing any feeling of stigma associated with grant-aided programmes
• General awareness raising of the benefits of schemes
• Securing endorsement of the benefits of programmes from local individuals and agencies that occupy positions of trust within the community

Taken with the assumptions about energy prices, fuel poverty in vulnerable households would then be reduced to around 1 million households by 2010.

Fuel poverty in social housing

The plan simply recites the range of existing programmes to improve social housing such as the Decent Homes Standard and an expanded Energy Efficiency Commitment and assumes that other initiatives such as the Housing Health and Safety Rating System, improved Building Regulations and the Energy Performance of Buildings Directive will have a role in improving the social rented housing stock. The plan concludes that, on the basis of available information, the comparatively high energy efficiency standards in social housing and the level of future activity will ensure that ‘as far as reasonably practicable’ the eradication of fuel poverty for vulnerable households will be achieved. There is then a passing reference to the fact that there may be cases where properties comply with the Thermal Comfort criteria of the Decent Homes Standard but where the occupants are still fuel poor³. This is followed by an undertaking that ODPM and Defra will investigate this issue further.

Failure to improve on the current Thermal Comfort criteria despite a strong campaign by NEA and others will create a significant energy efficiency gap between different tenure groups. Having rejected an attempt to establish an energy efficiency rating of SAP 65 for social housing, this standard has been accepted as the energy efficiency target for private sector homes assisted through Warm Front. The Government must address the issue of those properties in the social sector that meet the Decent Homes Standard but that do not provide their occupants with affordable warmth.

Private sector housing

Vulnerable private sector households form the great majority of fuel-poor households. The Government estimates that 800,000 households in this sector will require assistance by 2010. A major factor in the incidence of fuel poverty in this sector is the high number of pensioners who own their own homes⁴. There will, however, be a separate issue of under-occupancy. The plan assumes that various elements of the Housing Act 2004 will impact favourably on fuel poverty without detailing how this will actually happen or the extent of the impact. Whilst the Housing Health and Safety Rating System will have some potential to identify homes posing a threat to health as a result of cold hazards there will need to be an effective means of policing the system. Licensing of Houses in Multiple Occupation may help raise the standards of this part of the housing sector but there are no energy efficiency specifications associated with the licensing regime.

This section of the plan assumes that the next phase of Warm Front, post –2005 will be the major programme in removing the remaining 550,000 vulnerable private sector householders from fuel poverty.

Gas network extension and consumer policy

It is intended that ten pathfinder projects to connect deprived communities to mains gas supplies should be completed in 2005-2006; households in these communities will also benefit from energy efficiency measures. The work of the Design and Demonstration Unit based in the Department of Trade and Industry has been focusing on connection to the mains gas network as a means of removing entire communities from fuel poverty.

However the examples cited in the plan for action are in Scotland and Wales and the sources quoted as potential funding mechanisms, including European sources, for a programme of mains gas connection are speculative and uncertain.

NEA has proposed a windfall tax on the UK Offshore gas and oil industries to fund a programme of gas network extensions and this suggestion has met with considerable interest in many quarters. The plan merely indicates that the Government will seek ways to replicate [network connections] on a larger scale and is investigating a range of funding sources.

The financial advantages of switching energy supplier and accessing cheaper tariffs are briefly discussed in the plan. Such actions will have, at best, a marginal impact on the cost of fuel for low-income households.

Warm Front

Significant changes are in preparation for Warm Front and all of the changes to the scheme can be endorsed by NEA. The changes include:

• Improved benefit health checks to identify those eligible for qualifying benefits but not claiming
• Ending the like-for-like boiler replacement that often militated against the most effective and economic option
• Setting a target SAP rating of 65 for all households receiving Warm Front assistance and providing an in-depth benefit entitlement check where the target cannot be reached
• Providing all eligible households with central heating
• Providing oil-fired central heating where other low carbon options are not feasible
• Examining alternative technology solutions for those properties not on the gas mains network
• Encouraging better scheme integration e.g. with Energy Efficiency Commitment
• Targeting scheme activity on areas of greatest fuel poverty and emphasis on assistance to rural households, single pensioner households and minority ethnic communities
• Higher grant maxima in response to possible additional measures
• Introducing a Warm Front account allowing a range of different measures to be provided over a period of time
• Allowing additional assistance for households who have already received grant assistance under the scheme

NEA also welcomes the fact that there will be no changes to the eligibility criteria for the scheme.

The Warm Front budget is to be increase by £140 million up to 2008. Funding for the coming year will be static with the annual Warm Front budget increasing to around £195 million in 2006-2007 and to around £245 million in 2007-2008⁵.

Engaging with stakeholders

General assurances are given of well-coordinated Government policies on fuel poverty, health, general poverty housing and regeneration and the continued involvement of existing stakeholder groups. More consultation and specially convened meetings and events are to be arranged. Interaction with local communities and networks to optimise communications with vulnerable families and individuals will be encouraged.

Potential barriers to the plan’s success

The Government suggests that the target may alter for reasons beyond their control such as significant changes in energy prices and economic downturn. Whilst it is easy to see how these might impact on the self-imposed priority target for vulnerable households the statutory obligation to eradicate fuel poverty by 2016 will remain. There is also the matter of the Energy White Paper commitment: ‘to ensure that every home is adequately and affordably heated’. Nevertheless the Government perceives possible threats to the success of the plan from:

• Economic downturn leads to increases fuel poverty
• Unexpectedly high energy price increases
• Shortage of energy efficiency products or installers
• Warm Front does not meet expectations
• Scheme integration is less effective than expected
• Supplementary programmes are ineffective
• Schemes cannot reach fuel-poor households

Risk management against failure will include:

• Creative solutions where failings are identified
• Maximum scheme integration
• Liaison with the energy efficiency industry and training agencies to ensure no shortfall in materials or workforce
• Stakeholder consultation
• Ensuring a smooth transition between different stages of Warm Front and the Energy Efficiency Commitment

Government policies and programmes contributing to the eradication of fuel poverty

This is perhaps the most disappointing section of the plan. Defra is the lead department for fuel poverty and DTI also has an important role to play, however the active involvement of a number of other departments is vital if the Government’s objectives are to be met.

The section on housing policies and programmes is simply a recitation of relevant initiatives without any attempt to quantify their individual impact, far less to identify revisions to these programmes that could improve their effectiveness. NEA believes that numerous opportunities to improve these programmes have been missed. For example, the thermal comfort element of the Decent Homes Standard could have been improved to virtually guarantee affordable warmth to a greater proportion of social tenants; energy efficiency criteria could have been introduced through private rented sector licensing schemes; and stronger guidance should have been provided to local authorities on the role of the Housing Health and Safety Rating System in addressing fuel poverty and affordable warmth. These omissions must be remedied by the Office of the Deputy Prime Minister if existing and future programmes are to reach their full potential in contributing to the eradication of fuel poverty.

There is virtually no discussion of the role of the Department for Work and Pensions other than through maximising benefit take up. This appears to suggest that there will be no income maintenance solution for those who cannot be removed from fuel poverty through energy efficiency measures. If Winter Fuel Payments can represent a significant factor in addressing fuel poverty for pensioner households then why not also for families with young children or with a family member who has a disability or long-term sickness?

NEA does not recognise the plan’s description of the Department of Health as an active and enthusiastic participant in the fuel poverty debate and in helping to develop solutions. NEA is aware of a number of excellent fuel poverty initiatives by local Primary Care Trusts and health authorities, however a major commitment from the department at policy level is still lacking despite the ‘widely documented’ links between cold homes and ill health and the clear potential of affordable warmth as a preventative health measure.

Conclusions

The plan contains some welcome developments in initiatives to tackle fuel poverty, particularly the revisions to Warm Front and the Government must take credit for this. There is, however, clearly much still to be done. In particular the need to address hard to treat properties and those off the mains gas network remains a significant challenge. Much work also remains to be done on optimising scheme integration and more effective targeting of programmes. Answers to questions such the new Warm Front grant maxima will emerge once the scheme management contracts have been let.

There is still considerable work to be done to ensure the full engagement of other Government departments in fuel poverty issues.

The plan nowhere addresses longer-term demographic factors such as the increasingly elderly population and any consequent impact on the number of households in fuel poverty.

¹ A household can be vulnerable on grounds of age (elderly or children under 16) or through disability or long-term illness.