Fuel Poverty UK: Where it Hits Hardest & How to Avoid It!
Rising bills and fuel poverty are a growing threat to families in the UK. 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 (2019 data) from the Department for Business, Energy & Industrial strategy puts the fuel poverty rate at 13.4% of all households, with 3.18 million households coming under the Low Income High Costs definition. This represents a decrease of 1.6 percentage points on the 2018 rate.
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).
Fuel Poverty Categories
Low Income High Costs
Fuel poor? 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
Fuel poor? 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
Fuel poor? 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
Fuel poor? Yes
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.
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 2019. Ethnic minority households had an average fuel poverty gap of £324 whereas that of white households was at £337.
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).
Private vs Public Housing Sector
Privately rented homes make up 26.8% of UK households in fuel poverty. Homes that are bought (freehold) make up 7.8% of UK households in fuel poverty.
If you're a landlord, find out your boiler cover obligations by checking out our dedicated Boiler Cover for Landlords guide.
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 at 28%
4. Energy Supply
Connection to the Gas Grid
18.2% of households which are not connected to the gas grid are fuel poor compared to 12.7% who are connected.
Energy Payment Method
Households which pay for their gas and electricity by prepayment (i.e. using a prepayment meter) are shown to be the most likely to be fuel poor compared to the national average, at 29%. 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
- 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. 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.
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.
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
- Turn heaters on only 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!