The Department of Energy and Climate Change consider a household as being in ‘fuel poverty’ if it spends more than 10% of its income on energy in order to keep one room at 21 °C and the other rooms at 18 °C. As DECC, and this ‘Poverty‘ site make clear, fuel poverty has three causes:
- The cost of energy.
- The energy efficiency of the property (and therefore, the energy required to heat and power the home)
- Household income.
At the moment, popular focus immediately falls on item 1 – gas and electricity prices. But as I have mentioned before, it is hard to imagine that fuel prices are going to do anything other than rise in coming years. Artificially reducing the price of energy for vulnerable groups may seem like a smart idea, and may be an appropriate short term compassionate gesture. But ultimately reducing the cost of something encourages people to use more of it!
In a recession it is easy to blame the situation on item 3 – household income. Sadly, eliminating ‘poverty’ is something that is unlikely to be achieved in the near term. But although many ‘poor’ people are also in ‘fuel poverty’, that is not the whole story. As the 2007 – 2009 data below shows, the majority (60%) of ‘poor’ people (i.e. people n the bottom 20% of household income) are not in ‘fuel poverty’. So simply being ‘poor’ does not automatically cause ‘fuel poverty.’
The real culprit is item 2, the energy efficiency of houses. If people have modest incomes, but a house which leaks heat, then they will find themselves in fuel poverty. It’s like saying that people in leaky boats will find themselves wet.
It is the poor condition of UK housing that causes fuel poverty. In a modern well-insulated house, almost no heating is required except in the depths of winter. The responsibility for improving this stock falls on the owners of the houses: the government (i.e. us) in the case of public housing; private landlords in the case of rented housing; and owner occupiers.
The best use of government money is not in subsidising the cost of energy, or battling to eliminate poverty (noble though that cause may be). The best use of subsidies is to make it cheaper and easier to insulate the existing poorly-built housing stock. This subsidy will save individuals money, and reduce demand, which will save us all money and carbon emissions in the future.