Unit 1 Micro: Inequality - The Rise of Fuel Poverty

A new report headed up by Professor John Hills from the LSE highlights the growing risks of fuel poverty facing millions of people in the UK and especially those living in lower-income families. At present, the definition of fuel poverty based on whether a household needs to spend more than 10 per cent of its income each year on energy. But this measure has been criticised because it ignores the significant seasonal variation in energy bills and the financial distress that a really large bill can have on people with little or not savings to fall back on.

Professor Hills makes the case for a new measure - the ‘fuel poverty gap’ to be published. This takes account of the fact that lower income households generally pay more for gas and electricity because they are forced to use more expensive metres and can’t take advantage of discounts offered by online payment and direct debits. Many of the poorest people in this country do not have bank accounts.

The data finds that eight million people in England - 2.7 million households - both had low incomes and faced high energy costs in 2009. The number of households in fuel poverty has more than trebled since 2004 when 1.2 million families struggled to afford to heat their homes.

What can and what should the government do to address this important issue? There are three main factors causing fuel poverty - high energy prices, poorly insulated homes, and low incomes. UK energy prices are influenced heavily by what is happening to global oil and gas prices and the recession and fiscal austerity is causing real incomes to fall. Will investment in home insulation be sufficient to make an impact in every part of the UK?

The government does provide some financial assistance - not all of it is taken up by those with an entitlement:

1/ Community Energy Saving Programme (until end 2012/13) - local approach to make 90,000 low income homes energy efficient
2/ Winter Fuel Payments - £300 annual payments go to 9m households
3/ Cold Weather Payments - available to households on certain benefits in long periods of very cold weather (largely unused this year)

The BBC has these individual case studies This news video is also relevant: Families living in ‘fuel poverty’