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Independent review sets out scale of problems faced by fuel poor

Professor John Hills has published the interim report of his independent review of fuel poverty. This confirms how serious the problem of fuel poverty is:

Even if, at a conservative estimate, only a tenth of 'excess winter deaths' are due to fuel poverty, that means 2,700 people are dying each year in England and Wales, more than die on the roads. Beyond this are many other health problems and costs to the NHS from living in cold homes.

Households in or on the margins of poverty faced extra costs to keep warm above those for typical households with much higher incomes adding up to £1.1 billion in 2009, even before recent price increases.

People on low incomes and in the worst housing cannot afford essential investment to improve the energy efficiency of the whole housing stock and combat climate change.

The review, commissioned by the Department of Energy and Climate Change, was asked to look at the problem from first principles and to assess what this meant for the way it is measured. 

Hills review logoProfessor Hills, director of the Centre for Analysis of Social Exclusion at LSE, said: "The evidence presented in my interim report shows how serious the problem of fuel poverty is, increasing health risks and hardship for millions of people, and hampering urgent action to reduce energy waste and carbon emissions.

"This review confirms that the way in which the problem is currently described in law is correct: people are affected by fuel poverty if they are 'living on a lower income in a home which cannot be kept warm at reasonable cost ".

However, the report suggests that the way we have been measuring this problem has not always been helpful. For example, official statistics have implied that the problem was reduced by four-fifths in just seven years from 1996 to 2003, but has more than trebled since then. The report suggests an alternative way of measuring the structural problems at the heart of fuel poverty more directly.

Professor Hills said: "The way we have measured fuel poverty painted a false picture about how well we were addressing it. The underlying problems did not almost disappear in the early 2000s, but nor has progress entirely been reversed.

Looked at in the way we suggest, progress over the last thirteen years has been very limited. The number of households with high costs to keep warm and with low incomes fell only from 2.9 million to 2.7 million from 1996 to 2009 – and the number of people affected only from 5.1 to 4.8 million. At this rate of progress, things are hardly on track for the problem to be eradicated in just a few years."

The report suggests that between 2004 and 2009 the 'fuel poverty gap' for low-income households – the amount extra that those with badly insulated homes and poor heating systems would need to spend to keep warm – increased by 50 per cent in real terms as a result of rising fuel prices from £740 million to £1.1 billion, before the impact of the most recent price increases.

The report argues that measuring the phenomenon accurately is vital to the effort to solve the problem. It examines in detail both the way fuel poverty has been measured officially, and potential alternatives to it. Professor Hills will now be consulting on the analysis in the interim report before making recommendations in a final report next year, which will also discuss the effectiveness of different policy approaches to tackling the problem.

Copies of the interim report are available at: http://sticerd.lse.ac.uk/case/_new/publications/series.asp?prog=CR|


Notes to Editors

1. For further media enquiries contact LSE press office on 020 7955 7060 or at pressoffice@lse.ac.uk

2.. Technical enquiries about the content of the report may be addressed to:  hillsfuelpovertyreview@decc.gsi.gov.uk    

3.. Professor John Hills, Director of the Centre for Analysis of Social Exclusion (CASE) at the London School of Economics,  was appointed in March 2011 to conduct an independent review from first principles of the problems caused by fuel poverty and of the way it is measured. See www.decc.gov.uk/hillsfuelpovertyreview for additional background.

4.. The current definition of fuel poverty is based on a ratio of required spending to income: if a household would need to spend more than 10 per cent of its net income (before housing costs) to achieve adequate warmth, it is classed as fuel poor.  Using this definition, fuel poverty in England fell by four-fifths between 1996 and 2004 (from 5.1 million households to 1.2 million households) but has more than trebled since.  The latest official statistics, published in July 2011 and relating to 2009, found 4.0 million households to be fuel poor in England.

5. The possible alternative approach set out in the interim report would capture households where required spending is higher than the median (typical) level and where spending this amount would reduce household income to below the poverty line. The report finds that 2.7 million households were in this position in England in 2009, compared to 2.9 million households in 1996 and 2.8 million households in 2004. This alternative definition reflects the wording of the Warm Homes and Energy Conservation Act 2000 (WHECA), which states:

"A person is to be regarded as living "in fuel poverty" if he [sic] is a member of a household living on a lower income in a home which cannot be kept warm at reasonable cost."

6. WHECA also requires fuel poverty to be eradicated "as far as reasonably practicable" by 2016.

7. The proposed new indicator is supplemented by a 'fuel poverty gap' which is the difference between what fuel poor households would need to spend to keep warm and the median level. In England in 2009, the aggregate gap was £1.1 billion, with an average gap of £402 per household, compared to £740 million in total and £256 per household in 2004 (at 2009 prices). The gap shows how badly fuel poverty affects those households who experience it and how this is affected by changes in energy prices.

8.. A consultation lasting until Friday 18 November 2011 has opened. Following consideration of the responses received, Professor Hills will publish a final report. This report will focus on the implications for policy-making and delivery of its final recommendations on measurement.