Fuel poverty Madrid, 10 December 2014 Brenda Boardman Emeritus Fellow Brief intro to fuel poverty Main challenge: how to raise capital without affecting running costs

Energy is an unusual commodity Want energy services: warmth, cold food, lit rooms Obtained by converting energy (gas or electricity) in a piece of capital equipment: central heating boiler, fridge, light bulb Energy services are cheap if the equipment is energy efficient Fuels cannot be substituted – cannot burn gas in a light bulb New equipment and insulation require capital Poor have no capital, no savings – it has to be someone else’s money Electricity and gas are not like peas and carrots Economists often get it wrong The role of capital is crucial

Symptoms of fuel poverty – not the causes High level of fuel debts Supply of gas or electricity cut off by the utility (disconnection) Cold homes, illness and deaths in winter Only heating part of the home during the winter In Europe, fuel poverty and energy poverty are the same thing Do not confuse symptoms – to do with insufficient money for running costs - with causes May 2, 2018 Presentation title, edit in header and footer (view menu)

} { Affordable warmth 10% of income for all energy services Energy efficiency of the dwelling 24 hour mean internal temperature of 18°C (+ other energy services) Affordable warmth = opposite of fuel poverty Really about ee – need poorest to be in most ee

Policy choices, fuel poverty and climate change Three components of fuel poverty Additional income enables the poor to use more energy in their energy inefficient homes. Good as quick Fuel price rises cause greater deprivation, so make fuel poverty worse Stress capital expenditure is the synergy, coincidence of need = tackling the worst homes is vital for both One-off expenditure and permanent = energy efficiency EE is the solution Not doing more on incomes, though can debate Winter Fuel Payments (£3bn pa going mainly to non-fuel poor) NB Benefit Entitlement checks should not just ‘identify’ that a household is eligible for more grants, it should make sure they receive them (lots of forms are long and complicated. Help is required) Winter Fuel Payments should be translated into pensions policy, as not fuel poverty policy

Identifying the fuel poor Have low income AND energy inefficient home Most proxies are inadequate; Social characteristics (eg age) Income level (receipt of means-tested welfare payments) Energy efficiency of the home (audit) Have to combine the last two, on an address-specific basis What does not work (1)

Who are the vulnerable? 72% of UK households contain a vulnerable person Young Elderly Sick Disabled Used in European definition of energy poverty Unhelpful word, unless very tightly defined, eg only under 5 years, or over 75 years, even so - Neither income nor energy efficiency included What does not work (2)

Political choices Different definitions of income favour pensioners OR families, unlikely to do both Disposable income, after paying the rent, favours families Adjusting income for the size of the household, favours families

Income + housing Low income High income Energy inefficient housing Fuel poverty results from a combination of low income and energy inefficient housing. Schematic, actual housing stock ie 25% most energy efficient are the top quartile of the stock, not some theoretical number Colour = severity, red approx >20% of income Those in most severe fp are in worst housing Energy efficient housing

Defining fuel poverty vs identifying fuel poor Fuel poor are the poorest people in the least energy efficient homes Lot of options for definition OK for modelling, often useless on the doorstep Monitoring and delivery are two very different tasks Start with how to identify, eg Individual properties Areas of deprivation Who gets a 100% grant? Need modelling to identify scale of the problem, but if cannot identify, so money is not spent / spent on the wrong people, that does not help. May 2, 2018 Presentation title, edit in header and footer (view menu)

Minimum housing standards Scale of upgrade needed, based on England. Bands from the Energy Performance Certificate, G is worst, A best From F or G to Band C/ B / A SAP along X axis is from 0 (worst) to 100 (best) = Standard Assessment Procedure, Grey = approx distribution of the English housing stock SAP 81 = level required to take 83% of fuel poor out of fuel poverty at 2009 fuel prices (Consumer Focus report) Minimum standards essential to get worst housing improved

Effect of tenure and grant size Are you giving grants to poor people, even when they have rich landlords? Or are you making the rich landlord improve the property? How do you protect the poor tenant from a rent increase? Are you improving a few properties to a high standard? Or are you improving more properties to a lower standard?

Raising the money for grants Is this from general taxation, via The Treasury? Progressive, as poor often pay no tax Or is it being funded by the utilities, via all customers? Regressive, as fuel poor have to contribute, whether or not they benefit How quickly will you upgrade all fuel poor homes? To what standard? So, what is the budget?

Résumé Fuel poor are difficult to find Need comprehensive policies on incomes and housing Define Budget Timescale Focus on delivery, rather than definition

Thank you Brenda.Boardman@ouce.ox.ac.uk