Fuel Poverty UK: Where it Hits Hardest & How to Avoid It!
With Brexit on the horizon, rising bills and fuel poverty are a growing threat to families in the UK. National Energy Action, the national charity working to end fuel poverty, estimates that around 3.5 million UK households are fuel poor. That’s roughly 12.9% of all households. Protect yourself and your vulnerable loved ones from this widespread wave by understanding what fuel poverty is, what causes it and how to avoid it.
What does fuel poverty mean?
In the UK, households are considered fuel poor if they fall under the Low Income High Costs definition, which sets out the following formula: If a household’s "required fuel costs" exceed the national average, and after spending to meet those costs its leftover income falls below the official poverty line - at 60% of the national median income - then it is classed as fuel poor.
It's important to note here that "required fuel costs" refers to the cost of meeting a certain consumptive criterion that allows for a home that is warm, well-lit, has hot water and supports the running of appliances. The cost of this will vary depending on the composition of a household, i.e. the number of occupants, and fuel prices.
What's the rate of fuel poverty?
The latest data available (2017 data) from the Department for Business, Energy & Industrial strategy puts the fuel poverty rate at 10.9% of all households, with 2.532 million households coming under the Low Income High Costs definition. While more households are considered This represents a decrease of 0.2 percentage points on the 2016 rate.
Fuel poverty reached a peak in 2009, affecting 11.9% of all households. Since then the rate has fluctuated, reaching a low of 10.5% of all households in 2013-2014 and increasing sharply from 2015-2016.
How do you measure fuel poverty?
Fuel poverty in the United Kingdom is measured using the Low Income High Costs (LIHC) indicator, which is based on household incomes, household energy requirement and fuel prices. The LIHC is a dual indicator as it measures 2 things:
- The extent of fuel poverty: How many fuel poor homes there are in the UK; and
- The depth of fuel poverty: How affected fuel poor households are.
Depth of fuel poverty is measured by calculating a household's fuel poverty gap. This is the gap between "required fuel costs" and the income or energy cost threshold that would take a household out of fuel poverty. Essentially, it is a way of measuring concrete income or energy price figures (in GBP) that would need to be met in order for a given household to escape fuel poverty.
Based on a combination of income, energy requirements and energy prices, the Government groups households into one four categories: Low Income High Costs (LIHC), Low Income Low Costs (LILC), High Income Low Costs (HILC) and High Income High Costs (HIHC).
|Low Income High Costs||Yes||This includes some households which may not typically be defined as poor, but are nevertheless propelled into fuel poverty due to their high requirements for gas and electricity.|
|High Income High Costs||No||The homes in this category also have high energy costs, but due to their relatively high income, they‘re not defined as fuel poor.|
|High Income Low Costs||No||These are households that have high incomes and low needs for gas and electricity. As such, they are not considered to be fuel poor.|
|Low Income Low Costs||No||While it is recognised that households in this category have low incomes, they also have relatively low required energy costs, and so are not considered to be fuel poor.|
Fuel poverty and energy efficiency
The Fuel Poverty Energy Efficiency Rating (FPEER) is the official method of measuring a household’s energy efficiency. Given that heating a household to an adequate level of warmth is directly dependent on the energy efficiency of the home, those with a lower energy efficiency rating have a higher likelihood of being fuel poor. FPEER uses bands as a unit of measure, from Band A (most energy efficient) through to Band G (least energy efficient).
Why is the FPEER system so important? FPEER underpins the Government’s fuel poverty target. Band G rated households are the most severely impacted by fuel poverty, with an average fuel poverty gap of £1,482. The government's target ensures that as many fuel poor households move out of Band G and achieve a minimum rating of:
- Band C by 2030
- Band E by 2020
- Band D by 2025
Who is affected by fuel poverty?
There are several factors to consider when looking at individuals and households that make up the percentage of the population affected by fuel poverty. They are as follows: Income, demongraphics, housing, and energy supply.
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Income is one of the key contributors of fuel poverty. However, it cannot be taken in isolation. This is to say, income is a relative factor - it interacts with energy prices and required fuel costs. As such, it cannot be said that only households with low incomes can be defined as fuel poor.
Households that wouldn't typically be considered poor - i.e. their incomes are not particularly low - may be pushed into fuel poverty by high required fuel costs and high energy prices. Conversely, households with typically low incomes may escape fuel poverty through low energy prices and required costs.
That being said, households with low incomes and that experience unemployment are disproportionately affected by fuel poverty. Households with unemployment are four times more likely to fall into fuel poverty. In fact, 53% of fuel poor households are unemployed.
Region and Rurality
Rurality plays a huge role in fuel poverty. Homes in rural areas have a larger fuel poverty gap, and therefore a higher proportion of fuel poverty compared to those in semi-rural or urban areas. Consequently, rural areas have a much higher proportion of F or G Banded households. An explanation for this could be that more rurally-located homes are off the gas grid.
The table below demonstrates the fuel poverty regional divide in England. The worst affected regions are those that exceed a fuel poverty rate of 10%.
|Worst affected region||% of households affected by fuel poverty||Least affected region||% of households affected by fuel poverty|
|North East||11.8%||East Midlands||9.3%|
|Yorkshire and The Humber||10.6%||East||9.8%|
There was a considerable difference between ethnic minority households and white households living in fuel poverty in 2016 - 17.1% compared to 10.3% respectively. Ethnic minority households had an average fuel poverty gap of £329 whereas that of white households was at £326.
The proportion of households in fuel poverty compared to the average fuel poverty gap by ethnicity can be seen below:
Age of Construction and Wall Type
Older homes, (ie those built before 1945), tend to have higher fuel poverty rates when compared to newer homes. This is due to the considerable difference in energy efficiency levels, which is, in large part, a consequence of construction methods and materials.
More specifically, it’s down to the type of walls. Older homes tend to have uninsulated solid walls, as opposed to insulated cavity walls used in newer homes. Cavity walls have a gap between two walls, which can be filled with insulating materials to add a higher level of insulation. Solid walls, on the other hand, are just single walls with no space for insulation (they can still be insulated post-construction by adding a layer of insulation around them).
Why does the difference matter? Households with uninsulated solid walls have an average poverty gap of £433, whereas households with insulated cavity walls have an average poverty gap of just £220. To see what insulated cavity walls and uninsulated solid walls look like, Check out this short video clip.
Private vs Public Housing Sector
Rented (leasehold) homes make up 19.4% of UK households in fuel poverty. In fact, 57% of fuel poor households are rented. Homes that are bought (freehold) make up only 7.7% of UK households in fuel poverty.
In addition, types of tenure correlate with different fuel poverty gap averages. Private rented households have an average fuel poverty gap of £383; an owner occupied home has an average gap of £339; housing association tenancies have an average of £210; and local authority tenancies have an average gap of £205.
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The composition of the members in a given household also directly impact the risk of falling into fuel poverty. This is particularly true for single parents and homeowners with children.
- Single parents: This category of the current population have consistently seen the highest proportion of homes in fuel poverty.
- Children under 16: Around 1.15 million fuel poor households in 2016 had one or more children under 16 years old. This makes up 45.1 % of all fuel poor households.
4. Energy Supply
Connection to the Gas Grid
Households which are not connected to the gas grid are around 1.5 times more likely to be fuel poor compared to the national average.
Energy Payment Method
Households which pay for their gas and electricity by prepayment (i.e. using a prepayment meter) are shown to be more than twice as likely to be fuel poor compared to the national average. If you have a prepayment meter, you'll need to know how to read it, top it up and request a replacement.
Direct debit is by far the most common method of payment for both types of energy supply. Those who pay by direct debit have a lower risk of falling into fuel poverty, due in part to the lower costs associated with this payment method. Find out the other benefits of switching from prepayment to direct debit in our Switching to Direct Debit guide.
Let's recap on the high-risk factors that could pull you into fuel poverty:
- You have a low income
- You’re unemployed
- You live in the North East, West Midlands, North West or Yorkshire and the Humber
- You live in a rural area
- You’re from an ethnic minority household
- Your home was built before 1945
- Your home was built with solid uninsulated walls
- You’re a single parent
- You have a child under 16 years of age
- Your home is not connected to the gas grid
- You pay for your gas and electricity via a prepayment meter
Fuel Poverty Help
If paying your gas and electricity bills is an uphill battle, ensure you know what to expect if you don’t pay. This may even lead to a disconnection to your energy supply, although not necessarily. If you think you may miss a payment, contact your supplier to find out what options you have. Then find out about the various Government Schemes, Grants & Aid that could be available to you.
Your Supplier’s Energy Fund
If you think you may miss a payment, contact your supplier to find out what options you have. Many suppliers have their own charitable nonprofit organisation that helps customers who have problems paying their electricity and gas bills. Financial assistance can include grants for purchasing white goods or for boiler repairs. Find out what they can offer you to lighten your energy expenses.
The Winter Fuel Payment
You may be entitled to get anywhere from £100 to £300 in funding towards your gas and electric bills through the Winter Fuel Payments scheme. To qualify you must meet strict conditions, such as having been born before or on 5 November 1953. Note that there are other conditions to be aware of. Check out our Winter Fuel Payment Guide to find out what’s offered, whether you qualify and to claim for it.
The Cold Weather Payment
The Cold Weather Payment gives eligible people £25 for every seven day period in which the temperature falls to zero degrees Celsius or below. If you receive one of the government benefits listed in our Cold Weather Payment guide, you may be eligible. Find out if you qualify and how to receive these payments to stay nice and cosy for less.
Warm Home Discount
The Warm Home Discount scheme takes off up to £140 your electricity bill as a one-time discount. It’s a type of heating allowance UK wide. Do you receive Pension Credit or any other benefit listed in our Warm Home Discount guide? If so, you may be eligible to apply.
Pension Credit is one of the most widely available government aid schemes that help households with their energy bills to avoid fuel poverty. Find out how simple it is to qualify and obtain the Pension credit from our Pension Credit Scheme guide.
Fuel Direct Scheme
The Fuel Direct Scheme uses money from your benefit to pay your supplier directly. Find out from the government website what benefits can be used to pay your energy bills and who to contact to get it.
Vulnerable Relative at Risk of Fuel Poverty?
If you have a family member, friend or neighbour who is classed as a “vulnerable” energy consumer, there are a number of options for you to help them avoid falling into fuel poverty. These include:
- Changing the account holder's name to facilitate management of bills
- Changing the bank details to have somebody else pay the energy bills
- Lasting Power of Attorney if the vulnerable customer is unable to give consent for assistance
GOOD TO KNOW What is classed as poverty in the UK? According to the recent poverty facts from Fullfact.org, low income families are not necessarily defined as poor. Households which earn below the median income and which suffer from food insecurity while struggling to make ends meet are considered to be in relative poverty.
Welfare reform aims to increase the living wage to help the working poor, i.e. those below the poverty threshold. It targets at-risk sections of the current population such as single mothers and households with a family of four or more in absolute poverty or extreme poverty.
Cutting unemployment and the number of children in poverty are parallel government objectives. They both aim to reduce income inequality and the consequences of deprivation. This includes mitigating a diminishing standard of living, homelessness, hunger, malnutrition and inadequate sanitation facilities.
Child poverty has seen the greatest improvement owing to recent welfare reforms that have lowered poverty rates and higher wages in some business sectors.
4 Steps to Dodge Fuel Poverty
1. Get the Best Deal on Gas and Electricity
There are lots of deals offered by gas and electricity suppliers across the UK. Choosing the best energy supplier can be central to avoid or recover from fuel poverty. You'll be looking for the best electricity tariff, best gas tariff or the best dual tariff that helps you avoid fuel poverty.
Although you could spend a lot of time comparing rates of suppliers on your home computer, there is a much quicker and easier way to do this. You’ll want to use a cost comparison website that compares the best deals on the energy market. They can also offer advice on how to get the most of the supplier’s schemes based on your finances and your home’s energy efficiency rating.
2. Read your Meters and Statement Carefully
If you risk falling into fuel poverty, you’ll want to ensure that you’re billed accurately. Avoid estimated billing at all costs. If you have a standard non-smart meter, you’ll want to read your gas and electricity meters carefully before you submit any meter readings to your suppliers. If you're not sure what to read, compare what's on your meter display to the reading shown on your last energy bill.
Make sure you check out the following guides for everything you need to know about your meter and statements:
3. Get a Smart Meter
Climbing out of fuel poverty means thinking smart. If your energy suppliers always receives the most up to date meter reads, you will never get an estimated bill. That’s the key feature of a smart meter. As meter readings are automatically sent to the supplier, you get peace of mind knowing that you’ll be paying only for your usage; not a penny more.
Smart meters also help you stay in control of your energy usage. The result? You learn how to become more energy efficient at home and pay less energy bills. This means more money to cover other important costs for your family.
4. Be More Energy Efficient
Households pushed into fuel poverty tend to be less energy inefficient. If you don’t have the money to install insulated cavity walls, you can still create an energy efficient home by making your devices smart. This involves linking them up to your smart meter as well as a virtual voice assistant. Then you can create “Rules and Triggers” that determine when and how your devices should function. You’ll quickly see your energy usage drop, along with your bills.
- Turn heaters on when the temperature falls below 17 °C.
- Turn off all appliances once daily energy consumption reaches 10 kWh.
- Reduce Your Consumption
- Check the efficiency of your kitchen appliances
Avoid being another statistic of the fuel poverty wave sweeping the UK. Start by switching to a supplier that’s cheaper and that helps you create a smarter home. Energy efficiency is key to bringing your bills down. This is particularly true if you fall within an at-risk category that places you into the Low Income High Costs category! Refer to this guide regularly to get the help you need for you and your household members to stay cosy and safe at home.
UK & European Solutions Against Fuel Poverty
At present, there are just four countries within the European Union that have officially defined the term ‘fuel poverty’. These are: the United Kingdom; Ireland; France; and Cyprus, all of which have defined it differently. For those who have not yet officially given the concept a definition, however, the approach is much more generalistic.
In Austria, for example, all subcategories that fall under the umbrella of ‘poverty’ are treated equally, stating that all aspects of life, not just energy, are relevant to the improvement of quality of life. On the other side of the spectrum, the UK targets each individual type of poverty, with catered aid that specifically supports those in certain domains of need.
It’s difficult to identify exactly just how many people are living in fuel poverty in Great Britain due to the fragmented way in which it is measured. According to the most recent statistics released by the English, Scottish and Welsh governments, roughly 3.3 million people are living in some form of fuel poverty across mainland Britain.
Individually, this represents around 10% of England, 30.7% of Scotland and 23% of Wales. Given the average national wage of £27,777, dual fuel energy bills, costing an average of £1,135, represent around 5.1% of earnings.
Unlike many other European countries, social tariffs don’t exist, strictly speaking; however, aid is provided in other capacities such as seasonal monetary discounts and debt clearance schemes. These are targeted at those that have officially recognised financial difficulties and special personal circumstances.
Plans for the future
Following the 2017 snap election, Theresa May pledged to place a cap on standard variable tariffs, seeing most benefit by up to £100, which was part of her plan to ‘support working families’. However, as of yet, there has not been any specific mention of a course on which the nation will tackle fuel poverty.
According to the 2016 report from the ONPE - the French National Observatory for Energy Poverty - more than 8% of French people, amounting to around 12 million, have serious difficulties in paying their gas and electricity bills. The average national energy bill in France amounts to around €1,600 (£1,430), which is 26% higher than in the UK.
Special tariffs exist in France for those who meet the requirements for a reduction in unit rate. This reduction can amount to up to €185 (£165) per year, depending on the specific household circumstances.
Future plans, 2018: Energy vouchers
In 2018, France plans to phase out social tariffs, to be replaced by ‘energy vouchers’. This is a simple discount-based scheme in which households will be automatically allocated a lump-sum-discount on their energy bills following their tax declaration. Vouchers will be issued based on a variety of household criteria and will be provided up to €227 (£202) per year.
Solidarity Fund For Housing
The ‘Solidarity Fund for Housing’ was set up in each French constituency (département) to provide financial support in the form of loans, grants and guarantees, to those with scarce resources with regards to fulfilling their household financial obligations (bills, rent, etc.). This support is allocated according to the varied criteria of each constituency.
From 1st November to 31st March, energy suppliers are not able to cut a customer’s connection to their electricity, even if they have not paid their bills.
According to the ‘Association of Environmental Sciences’, 11% of Spanish households (around 5 million people) found themselves struggling to maintain their home at a suitable temperature in 2016. Although we have the idea of Spain being a rather desirable climate, winter in some parts of the country are just as harsh as in the UK, if not more so.
Temperatures in the north of the country have been recorded as low as -32 degrees celsius. Also, cold isn’t the only issue that faces Spanish households: air conditioning is essential to many households in southern and central regions of the country, where common summer temperatures exceed 40 degrees celsius.
The Bono Social
The bono social is the main preventative measure adopted by vulnerable Spanish households in subsidising their energy bills. A discount amounting to between 25-40% will be taken from the final electricity bill, but does not apply to gas or any other kind of heating fuel.
No connection cuts for the vulnerable
For households in a particular state of vulnerability, of which that are assisted by local government social services, electricity connections are not allowed to be cut ‘under any circumstance’.
In 2015, Portugal had an at-risk-of-poverty rate of 46.1%, before any economic aid. Despite being known for its beauty and lavish tourist retreats, such as the Algarve and Lisbon, Portugal has some of the lowest wages in Europe. Couple this with having the 5th most expensive electricity prices in the continent, it’s perhaps no surprise that portuguese households are struggling to pay their bills.
According to Eurostat data, if you take into account the national average wage, Portugal has the highest energy bills in Europe. On average, around 6% of the average family’s earnings go towards paying energy bills.
Thankfully, Portugal have employed quite extensive discounts in the form of social energy tariffs. These tariffs can result in a discount of up to 33.8% on electricity bills and 31.2% on gas.
At present, only 5% of Portuguese households have access to the social gas tariff. This is partly due to the tiny size of the distribution network, preventing it from reaching a large amount of homes across the country. This means that many residents are forced into buying alternate fuels such as butane and propane. This is much more expensive and, of course, does not come with the social tariff.
According to the EU-SILC (European Union Statistics on Income and Living Conditions), 3% of people (268,000) in Austria are being affected by fuel poverty. In a 2012 Statistik Austria Report, it was reported that the average monthly energy expenditure in the country was around €137 (£122), which represents around 4.7% of all earnings.
The deregulation of the energy market was the first step towards countering the overinflated prices offered by national monopolies. However, more rigid regulatory attempts have been needed to prevent vulnerable customers from having their connections cut by suppliers. The “Grundversorgung”, or primary care in English, gives all customers the right to a prepayment meter in place of their standard direct debit meter should they fault on their bills. This makes payment much more easily manageable and prevents any cumulative debt.
No national financial relief
As of yet, Austria have not yet implemented any kind of state-provided financial aid for families struggling with their energy bills. This is largely due to fuel poverty not having been officially recognised as an independent form of poverty. As such, current solutions are generally provided by aid organisations and private institutions that rarely see any kind of intervention from the local authorities.
Energy poverty affects between 5-20% of Italian households. Like Portugal, many of us in the UK have the idea of Italy being a lavish, fashion paradise and holiday destination; however, Italy has suffered from some of the worst economic setbacks in Europe and currently has a large percentage of its population struggling in all areas of the poverty spectrum.
To alleviate energy poverty, the Government launched a discount tariff in 2009 that was meant to help families to pay for their energy bills. There are currently three kinds of discounts available. These are: for electricity customers with low incomes; for gas customers with low incomes; and for electricity customers with special medical conditions. These 3 discounts can be accumulated.
This discount is directly applied to your energy bill each month as a deduction of 8.33%. This can reach up to €165 (£147.50) per year for electricity and €266 (£238) for gas, depending on individual circumstances. There is no apparent cap on this discount, but the scheme is currently not very well known, which could have potentially freed a significant portion of available funding. Less than half the possible beneficiaries in Italy are currently benefiting from this scheme.
21% of Belgian households are affected by energy poverty. Despite being the home of the European Union, many families across Belgium are struggling with the worldwide price hikes on energy.
Set by the Government, this social rate is a preferential tariff that corresponds with the lowest commercial price on the market. Like most social tariffs, this one also requires customers to meet certain criteria in order to benefit from its reduced rate.
Statute of Protected Customer
Anyone who has accumulated any kind of debt with their gas and/or electricity supplier can request the status of ‘protected customer’ after receiving a notice of default from their supplier. If the statute is granted, the customer’s contract will be temporarily suspended. The customer can then benefit from the preferential ‘social rate’. Once the accumulated debt has been paid off, this protective measure will be removed. The previously suspended contract will then be resumed. If the debt alleviation process takes more than six months, the customer will lose his or her right to the preferential rate. The case will then be passed on to the distribution network, who will then enforce further fees.
Anyone who is having difficulties paying their energy bills can submit a support request to the Public centre for Social Welfare, which will be evaluated based on various eligibility criteria. Successful applicants will receive remedial or preventative support in the form of bill payment.
Non EU responses to fuel poverty
Due to the differing approaches adopted by each country, this document aims to give a comparison of the solutions offered through a selection of these nations. In addition, to gain a broader perspective on the issue, we have also added non-european nations, Turkey and Japan, to the study.
Uniformly identifying a poverty rate can cause great complications in terms of fuel poverty due to the extremely high income inequality in Turkey. Distinguishing certain regions as the poorest shows us where perhaps the largest amount of fuel poverty exists, such as in Western Marmara and South-Eastern Anatolia. We can also see, for example, that in places like Bursa, Ankara and Kocaeli, low income households are spending in excess of 10% of their earnings on gas alone.
Unlike many of the abovementioned European examples, energy poverty is not comprehensively tackled in Turkey. There are, however, a few regional initiatives to act against it in certain capacities. In certain provinces that have a high poverty rate, a small discount of 0.65% is applied to energy bills in the hope that it will alleviate a part of the region's energy poverty. Another such aid platform is through The Ministry of Energy and Natural Resources, which distributes coal to the households of poor families to assist in heating costs.
13.9% of Japanese people live in fuel poverty. Japan is one of the most advanced countries, technologically, worldwide and is also, perhaps subsequently, one of the highest consumers of electricity.
Social tariffs like within much of Europe don’t exist, strictly speaking; however, tariffs do exist that cater to 3 different levels of consumption. Lower levels of consumption are set at a lower unit rate due to the assumed lower usage of those with lower incomes. This information comes from the explanation for this decision from the Agency for Natural Resources and Energy, Ministry of Economy.
Due to the above, we could perhaps assume that tariff regulators have already acknowledged the existence and potential of fuel poverty; however, there is much controversial discussion as to whether this system is actually effective or not. This rigid categorisation is not always effective and punishes those low income families that are forced into using a lot of energy.
Many believe that the vague definition for fuel poverty needs to be rethought and a restructure is needed of the complex electricity tariffs that are in current circulation.
Public Assistance System
Although social tariffs don’t really exist, there is a method through which families in-need can sought help from the authorities. The Public Assistance System supports households that are having difficulty paying for their energy bills. This support varies throughout each region and is subject to a number of eligibility criteria.