The Hills Fuel Poverty Review

October 2011: Professor John Hill’s interim  report ‘Fuel Poverty: The Problem and its measurement’ was published last week and is an independent review, commissioned by the Government, “to take a fresh look at the fuel poverty target and definition”.
The document presents a very thoughtful and comprehensive approach to the issue of fuel poverty and sets out  at the very beginning that the evidence taken for the review shows that fuel poverty is a “distinct – and serious – problem.”

The report looks at the problems associated with the current definition (listed on pages 13 and 14) which defines a household as being in fuel poverty if it would need to spend more than 10 per cent of its income to achieve an ‘adequate’ level of warmth through the year and on other energy costs. As an example, a key issue includes the fact that the 10 per cent figure “is derived from an original calculation that in 1988 the median household spent 5 per cent of its net income on fuel, and that twice this ration might be taken as ‘unreasonable'”

As a result of these shortcomings, the report goes on to consider six other potential ways of measuring fuel poverty. The first of these is key to London which is to look at the costs of energy to a household ‘after housing costs’ are taken into consideration rather than on ‘full income’,  as is currently the case with the present definition. Taking this route, the report states that the “higher housing costs in London mean that this region accounts for a higher proportion of households identified under this indicator.” [page 123]. (see here for further details on this issue).

Though each of the six new approaches have advantages, there are also problems associated with them. Hence, the final indicator opted for by the Hills Review team (as set out in Chapter 7 of the report) is a combination of two of the six approaches called the ‘Low Income – High Costs’ indicator and – importantly for  London – it uses an after houses cost measure of income.

The result of using such a definition results in the number of fuel poor households in England falling from around 4 million under the current definition, to 2.7m. Much of the press coverage around the report highlighted how such a result was politically convenient to the Government, however, the new indicator highlights that there remains both a significant and stable number of fuel poor households in England which has not been reduced, despite the wide number of energy efficiency programmes in operation over the past decade (CERT, CESP, Warm Front, Decent Homes etc), and that the target set out in the Warm Homes and Energy Conservation Act 2000, to eradicate fuel poverty as far as reasonably practicable, is far from being achieved. Additionally, Prof Hill highlights that much more needs to be done by Government tackle the  ‘scandalous’ level of Excess Winter Deaths (EWD) of around 2,700 each year as a result of fuel poverty, as set out in the report.

The interim report has been released for consultation with a final report to be presented to DECC around January which will then be published more widely shortly after this. This final report will also provide potential policy proposals from the Hill team.

An additional issue, not touched on in the report, is the introduction by Government of the Affordable Rent Model as a new mechanism to fund the building of new social housing. The result of such a policy will increase rents to social tenants – especially in London – when signing new contracts with their provider (as highlighted earlier this year  in the London Assembly’s report ‘The Affordable Rent Model and its implications for London’) which in turn will have implications on the number of fuel poor in London as a result of the new indicator taking into account housing costs.

No regional breakdown of this revised number of fuel poor is provided in the interim report – to find out if this shift to increasing the number of fuel poor in London actually happens under the newly defined indicator –  but hopefully will be in the final study…

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