Government seeks to move goalposts on what counts as ‘fuel poverty’

| September 18, 2012 | 0 Comments

By
Ed Monk

08:46 EST, 18 September 2012


|

09:08 EST, 18 September 2012


Temperature change: A different definition of 'fuel poverty' would reduce the numbers deemed to be struggling with gas and electricity bills.

Temperature change: A different definition of ‘fuel poverty’ would reduce the numbers deemed to be struggling with gas and electricity bills.

The Government is seeking change the definition of the key measure of ‘fuel poverty’ – with the effect that far fewer households could be deemed to be struggling with gas and electricity bills in the future.

The Department of Energy and Climate Change (DECC) wants to adopt proposals that would alter the definition of fuel poverty – currently regarded as occurring when a household spend 10 per cent or more of its income after tax on gas and electricity.

Under plans being put out for consultation the definition would change to mean instances where fuel costs were above average, and where household income is below the average poverty line, once housing and fuel costs and been taken into account.

The number of households regarded as fuel poor under the current definition began rising around 2004. In the period since, fuel bills have risen and incomes have stalled so the number of ‘fuel poor’ households rose from around one million in 2004 to around four million in 2010.

The DECC consultation document predicts that this number could hit 8.1million by 2016, but it warned that such forecasts are highly uncertain because of the difficulty in predicting the future direction of energy bills.

Applying the new measure for fuel poverty would cut the figure to 2.9million by 2016, DECC said.

The proposed changes are based on the recommendations of a review being conducted by Professor John Hills of the London School of Economics. Interested parties can responded to the consultation by 30 November.

In his review Prof. Hills concluded that the current definition of fuel poverty made the measure too sensitive to movements in gas and electricity bills, underestimating the problem when energy prices were low and overestimating it as energy prices increased.

DECC said that the current system needlessly classes many very wealthy people as fuel poor. It gave the example of the Queen who has to pay large sums to heat many residences, and so could be deemed to be in fuel poverty, but still has plenty of money to live on.

Additionally, the DECC said the current measure fails to take account of other bills a household may be facing, or how many people live in a house. 

Ed Davey, energy and climate change secretary, said: ‘With the number of people living in fuel poverty projected to rise, the time has come to go back to basics to ensure we are doing all we can.

‘This means defining and measuring fuel poverty in the right way and working up a new fuel poverty strategy so that we can target our available resources where they are needed most.’

A change to the definition is likely to bring criticism from campaign groups who have used rising fuel poverty figures as a check on energy suppliers who have applied price rises far above inflation in recent years.

However, Ann Robinson, director of consumer policy at utility switching company Uswitch, said: ‘We welcome the Government looking at the issue of fuel poverty and believe the definition can be improved.

‘I don’t think this lets suppliers off the hook, and could put more pressure on them because it will give a more accurate picture of those who really are in fuel poverty.’

William Baker, head of fuel poverty at Consumer Focus, said: ‘While we think the Hills Review makes some improvements to the current approach, there are aspects that need improving, for example its definition of ‘reasonable’ energy costs. 

‘We welcome the Government’s plans to produce a new strategy to tackle fuel poverty in the face of rising energy bills. The resources, scope and effectiveness of any Government strategy must reflect the severity of the problem as identified by Prof Hills.’

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