Fuel poverty policy is frozen, says parliamentary committee. Can the government fix it?
Energy is increasingly unaffordable for households on low incomes due to rising energy prices and poorly insulated homes, according to a report from a committee of MPs, out today. It calls on the government to stop the rot by ploughing money into energy efficiency measures.
Until recently, the government identified a household as being in fuel poverty if it spent more than a tenth of its income on energy. It set itself a target of as “as far as reasonably practical” eliminating fuel poverty by 2016. But energy prices are projected to keep rising, while government strategy on on fuel poverty isn’t due to be published until the end of the year.
Without action, it looks like the situation could worsen. Government consumer body Consumer Futures suggested in a committee evidence session that 6.2 million, or more than a quarter of the country’s households could be in fuel poverty by 2016.
Using energy efficiency to tackle fuel poverty
The Energy and Climate Change (ECC) Committee says the best way to tackle fuel poverty is to make target households more energy efficient. But it’s not convinced current efforts to achieve this goal are up to the task.
At the moment, the government’s main tool for increasing the efficiency of target homes is the Energy Company Obligation (ECO). It requires energy companies to seek out and subsidise low income householders who want their homes insulated.
But witnesses who appeared in front of the committee were critical of its level of ambition. Help the Aged pointed to the government’s estimate that 125,000 to 250,000 households will be taken out of fuel poverty as a result of ECO. It labelled these figures “very, very disappointing” – comparing them to the estimated figure of 6.2 million households in fuel poverty.
The committee concludes “resources for ECO are insufficient considering the scale of fuel poverty”. Energy companies are also sceptical about whether ECO will work – and extremely critical of how much it costs.
Paying through the taxpayer, not energy bills
There’s also the question of who will pay for fuel poverty policies.
As of this year, there is no government-funded energy efficiency scheme for the first time since 1978. Until recently, the government’s taxpayer-funded Warm Front scheme allowed householders to apply for grants to improve the insulation or heating of their home.
But that scheme was scrapped in January in favour of ECO, which is funded through levies on consumer energy bills instead. This has caused concern among campaigners. Consumer Futures explained in evidence to the committee:
“…the poorest households pay proportionately more when measures are added to utility bills. In the UK, the proportion of income spent on energy decreases as income increases”.
In other words, poorer people spend more of their income on energy, meaning they will suffer disproportionately when the government adds subsidies to energy bills. By adding levies to consumer energy bills the government is making the job of lifting people out of fuel poverty more difficult.
Recommendations
To protect vulnerable households from the impact of energy efficiency and other subsidies, the ECC committee recommends “shifting the emphasis from levies to taxation” – taking some of the charges out of energy bills and adding them to taxes instead. It’s worth noting here that it doesn’t suggest that green taxes should be scrapped, as the Daily Mail’s report on the committee’s research implies.
The committee’s suggestion chimes with the views of anti-poverty charity, the Joseph Rowntree Foundation (JRF). The organisation is calling for a large-scale rollout of targeted energy efficiency measures, funded through general taxation rather than levies on energy bills.
It’s not clear how the government will react to the suggestion. Energy minister, Ed Davey, told the committee that there were “big debates” in government about whether the green measures will be added to consumer energy bills or taxation – and the decision was made to add the measures to bills. But as the committee notes in its report, Davey didn’t explain what persuaded government to go for the latter course.
Getting going
The committee is most critical of the pace of change. The government recently published a ‘ framework for action‘ for tackling fuel poverty – but will not release a strategy until the end of the year. The committee says this is “unacceptably slow”, and warns it is imperative that the strategy is not delayed any further.
Can the government really hope to tackle fuel poverty while expecting people to pay for these measures through their bills? Unless the government acts effectively to ensure people cut their bills by using less energy, the committee’s report suggests there’s a real danger this approach could increase the number of people who have to choose between heating and eating.