Is your household in fuel poverty?

Credit: Andrey_Popov/Shutterstock.com

But where's the line between scraping to pay the gas bill and being in 'fuel poverty'?

And, whichever side of the line your household falls on, what is the Government doing to help?

What is 'fuel poverty'?

A household is considered to be fuel poor if it must spend more than 10% of its income on enough energy to heat the household to an adequate level.

By the end of 2011, 4.1 million households in England are expected to be in fuel poverty, according to official Government figures.

The number of fuel poor households in England fell by four fifths between 1996 and 2004, to 1.2 million households.

Since then, though, the number has more than trebled and, by some measures, far more than 4.1 million fall into the category.

In December 2011, for example, research commissioned by Uswitch suggested that 7 million UK households were fuel poor.

Is it a fair measure?

However, as the difficulty in measurement demonstrates, fuel poverty is an artificial measure to some extent.

We don't talk about 'shoe poverty' or 'pet poverty': when there's not enough money to go around it means that households can't afford many things of which fuel is, to some minds, just one.

However, the Hill Report, which we'll discuss further below, argued that, "the fact that people with high heating costs cannot maintain, for the same level of income, the same standard of living as others, is a [distinctive] concern" since that inequality affects more than the household's finances.

Nevertheless, the measure is a blunt instrument, failing to take account of a multitude of other factors most notably:

• minority groups within the classification and
• the definition of 'adequate' heating

In 2011, for example, Save the Children researchers found that 16.1% of households who are in fuel poverty are families with children aged under 16, up from 11.8% in 2003.

That fairly small proportion of households is likely to be feeling the effect of fuel poverty more than most.

The difficult definition of 'adequate' also has the potential to disguise many struggling households.

According to Uswitch research, 77% of households say they'll have to start rationing energy if energy prices increase again.

Just over half of those prepared to start cutting back on energy use said they'd be going without adequate heating to afford their bills while the smaller proportion, 39%, said they'd have to turn their heating off entirely.

Without actually paying more than 10% of income for energy, however, it's unlikely that these households 'going without' will be counted in fuel poverty statistics.

Not quite fuel poor

With that in mind, it's worth bearing in mind that many of the effects and solutions we'll go on to talk about apply to households that don't fall under the official measure of 'fuel poverty'.

For example, 20% of British households currently owe money to their energy supplier, according to a March 2011 survey.

On average, households in debt owed £126 for their gas or electricity bills and just one in ten said they owed less than they had the year before. These households may not technically be 'fuel poor' but they are often in need of debt advice (more information here).

In addition, lower income households are far more likely to have a prepayment meter or, on a standard tariff, to be unable to pay by direct debt. In addition, they are less likely to have an internet connection which would allow them to access the cheapest online rates.

Fuel poverty: the effects

2,700 people die in the UK each year as a result of fuel poverty, more than die in traffic accidents, according to October 2011's interim Fuel Poverty report, written by John Hills and commissioned by the Department of Energy and Climate Change (DECC).

The 2,700 figure is a conservative one, assuming that 10% of each year's 'excess winter deaths' are caused directly by fuel poverty.

Around a fifth of the UK's extra winter deaths are thought to be caused by cold home, the report found, so, in fact, fuel poverty is likely to be a significant contributing factor in 5,400 extra deaths.

The same report noted that cold homes trigger an immeasurable series of effects on illness and mental health.

The solutions

Reducing fuel costs

Citizens Advice Chief Executive Gillian Guy called the Hill Report, "yet another reminder that fuel costs just have to come down."

"It's horrifying that so many people are dying each year because they can't afford to heat their home," she said.

However, a reduction in energy costs looks unlikely.

External factors such as the crisis in Libya have significantly increased energy costs and despite Ofgem intervention households are likely to face even higher energy bills in the next few years as a result of measures to keep the UK's energy infrastructure up to scratch and make energy greener.

In addition, the number of households in fuel poverty could be in danger of rising even faster than expected as the Government struggles to afford a number of fuel benefits.

In 2010 the Treasury proposed cutting emergency cold weather payments - the benefit for vulnerable households following seven consecutive days of freezing weather - from £25 to £8.50.

Winter fuel payments - benefits of £125 and £400 a year per person - were also scaled back drastically.

And although the Government's 'Warm Front' scheme returned in April 2011, offering grants to pay for energy efficiency upgrades, the number of people actually able to receive those grants had fallen significantly in the interim.

'Get switching'

The final nail in the coffin is that there seems to be little appetite in Government for forcing energy companies to lower costs.

Instead, the Conservatives have chosen to focus on consumer choice and switching power, encouraging those on higher tariffs to switch energy provider to lower their bills and invest in fuel efficiency to make more savings.

The Hill report was sceptical, however, about the real effect of switching.

"The assumption that switching leads to lower prices does not always hold true," Hill wrote.

"Using figures from Ofgem and additional evidence gathered during an enquiry on the Ofgem Retail Review, the Committee showed that while approximately 60% of consumers who switched tariffs succeeded in reducing their bills, 40% were worse off."

The focus on 'switching first' has got some criticism elsewhere too. Energy Secretary Chris Huhne is still recovering from a Times interview in which he appeared to say that consumers were too lazy to pay less by switching energy supplier.

In the ill fated interview, the MP said that most spent more time choosing a "£25 toaster" than they ever would on their energy supplier.

But it's not that they're too lazy, Huhne clarified at the Lib Dem conference a few months ago, "it is just that consumers still think that they face the same bill whoever they go to."

"Britain privatised the energy companies but most consumers never noticed," he added.