Briefing Paper on the Fuel Poverty Definition

1. Background to Definition

1.1 Fuel poverty was first defined in the UK in 1991 by Dr Brenda Boardman. She wrote in her book Fuel Poverty about households who were defined as poor and unable to obtain an adequate level of energy services, particularly warmth, for 10 per cent of their income.

1.2 The definition was based on the Family Expenditure Survey (FES) of the time (1988) which showed that “households in the lower three income deciles spent, on average, 10% of their income (not including Housing Benefit or Income Support for Mortgage Interest) on fuel for all household uses”. The book states that: “The average household spent 5.1% on fuel in 1988, so that a family in the lowest income quintile spent more than twice the median, as a proportion of income. In an analysis of the 1977 FES, two DHSS economists took twice the median as the point at which disproportionate expenditure begins to occur with the basic necessities of food, housing and fuel (Isherwood and Hancock 1979, p5), and, by implication, undue financial hardship”.

1.3 Today the Living Costs and Food Survey shows under Family Spending for 2015 that the national yearly average expenditure on fuel is £1,211.60 against an average income of £26,300 which gives an average expenditure of 4.6%. This is still in line with the reasoning of Dr Boardman and others in the 1980s.

2. Defining Fuel Poverty in Scotland

The Scottish definition of fuel poverty is set out in the Fuel Poverty Statement and states that: “A household is in fuel poverty if, in order to maintain a satisfactory heating regime, it would be required to spend more than 10% of its income (including Housing Benefit or Income Support for Mortgage Interest (ISMI)) on all household fuel use”. This definition includes Housing Benefit or ISMI in the calculation of income and so is said to be ‘before housing costs’. The Statement said that figures would also be published ‘after housing costs’ ie after deducting Housing Benefit or ISMI from the calculation of income. However, to establish progress against the statutory target, the definition using ‘income before housing costs’ would be used. This would allow, it was said, for a comparison between the Scottish definition and the one used in the UK Households Below Average Income (HBAI) statistics.
Dr Boardman among others had assumed the calculation of fuel poverty after the deduction of housing costs from income. The Fuel Poverty Statement was later adopted by the new Scottish Government,

3. Reviewing the Definition

3.1 In 2015, the Scottish Government issued an analysis paper on Fuel Poverty and Poverty. It concluded: “The analysis presented in this briefing paper demonstrated that while those living in income poverty have a very high risk of experiencing fuel poverty (around 9 out of 10 do), the opposite is not necessarily true. Large proportion of fuel poor households are unlikely to be living in income poverty: 58% of all fuel poor households or around 542,000 households, are unlikely to be classified as poor in terms of the measure of relative poverty BHC [Before Housing Costs]. Therefore fuel poverty should not be seen as a subset of income poverty”. The supposition was therefore that the current definition does not serve well in terms of targeting assistance, particularly when budgets are tight and the Government is obligated to end all fuel poverty.

3.2 The Scottish Government set up two working groups to examine rural fuel poverty and the fuel poverty strategy respectively. Among the Strategic Working Group’s recommendations was the following: ‘Review the current definition of fuel poverty and establish a policy objective and monitoring programme that addresses all four causes (see 4.2) of fuel poverty’. The Scottish Government is currently taking forward this action.

4. Main Causes of Fuel Poverty

4.1 Fuel poverty has been for many years widely recognised as being caused by three main factors:
• The high price of domestic energy.
• The poor energy efficiency of the home and a lack of or inefficient heating system.
• Low disposable income.

4.2 The Strategic Working Group has proposed that householder behaviour be recognised as a fourth influencing factor.

4.3 There are representatives within the Scottish Government and the Scottish Parliament who have stated their view that the Scottish Government has no influence over fuel price and so is unable to address a problem over which it does not have complete control and so should only be held to account on improving energy efficiency.

4.3.1 However, through the Scotland Act, the Scottish Government’s tax powers are increasing and there is increased devolution of social security benefits. Substantial funding to mitigate the effects of high energy prices are also being devolved to the Scottish Government such as the Winter Fuel Payment, Warm Home Discount and Cold Weather Payments. The Scottish Government has also been vocal and active in increasing the use of renewables, community energy and more recently of district heating.

5. Underpinning Assumptions of the Definition

There is an argument that says that the 10% definition is still relevant but that some of the underpinning assumptions are worthy of review.

5.1 Household Income
Income is presently calculated for the householder and their spouse. Income from any another working adult(s) in the household is therefore excluded.

5.2 Vulnerability
At present a ‘vulnerable person’ is anyone over the age of 60, irrespective of health or any other impairment, and who could still be in employment.

5.3 Heating Regime
The heating regime considered to be healthy is set at 21°C for the living area and 18°C for the remaining rooms for a period of 9 hours per day for 5 days per week and for 16 hours over the remaining 2 days and with two hours being in the morning and seven in the evening. However, for those classed as vulnerable, the heating regime is set at 23°C in the living area and 18°C in the other rooms for 16 hours per day 7 days a week. The temperatures are based on work done by the World Health Organisation (WHO) some 30-40 years ago. Some argue it should now be reviewed.

March 2017