Estimates suggest that 15% of the UK’s 28 million homes live in fuel poverty, that’s 4.2 million households. The government and charities don’t agree on the definition of fuel poverty, but there are probably 10 million people living in a developed country that struggle to afford to heat their homes each winter and must decide between heating and eating.
The energy price cap is currently £1,717 per year for the average house. Average household earnings are £34k, which equate to take a home pay of £27k, meaning the average energy spend is 6% of income. This is well below the ‘10% of income’ definition of fuel poverty that charities use.
A family living on benefits have an cap of £22k, which pushes this number to 8%. People only receiving a state pension get just over £11k a year which would be 15% of income (hence the outcry about removing the £200 winter fuel payments).
Averages hide the real picture. There are many homes where the spend is well above the price cap, and many where the income is below the average.
If the 4.2m homes in fuel poverty spend an average of 12% of their income on fuel, reducing this burden to below the charity’s 10% definition would require reducing bills by about £300 per year each, a total cost of £1.2bn.
Issues with fuel poverty also extend well beyond a difficult decision on the thermostat, the same homes often have long term debt and health issues to contend with.
In the long run increases in energy costs are likely to rise faster than average incomes, so this problem isn’t going away.
A social tariff could help, and discussions on this are underway. This would redistribute money from those above the fuel poverty line to those below it. Total energy bills are about £48bn so redistributing £1.2bn would mean about 3% or £50 added to bills.
But, should energy bills be a mechanism for solving societal issues?
