Stephen Hunsaker digs into the data on fuel poverty in England, highlighting that it is concentrated among certain demographics and regions – particularly young households and those in the middle of the country.
As the UK waits for the new government’s first budget, the controversies have already begun. The announcement made by Chancellor Rachel Reeves in July to cut Winter Fuel Payment to all but the poorest pensioners has sparked a row, which rumbled on during Labour party conference. But just how bad is fuel poverty in England? And what impact might this change have on levels of fuel poverty?
The winter fuel payment was introduced in 1997 by then Chancellor Gordon Brown as a universal payment to pensioners ranging from £200 to £300 (after a row about a miserly state pension increase due to low inflation), depending on age. Currently, more than 11 million pensioners in England and Wales receive these annual payments.
The proposed cut to winter fuel payments will reduce the number of pensioner recipients from 11 million to only those who receive pension credit, around 1.5 million. Advocacy groups are concerned that the lack of any means testing for those who do not receive pension credit but are still poor will put some pensioners at risk this winter.
However, households with pension-age members currently have some of the lowest rates of fuel poverty, with the fuel poverty rate for those over 75 at 11.4%. According to the Department of Energy Security & Net Zero (DESNZ), of households that receive Winter Fuel Payment, 10.3% are classified as fuel poor. This is below the national rate of 13%.
In England the age group that is suffering the most from fuel poverty is in fact at the opposite end of the spectrum. A quarter of young households – where the oldest person in the household is between the age of 16-24 – face fuel poverty. (I focus here on England, as the data is patchier for Scotland, Wales and Northern Ireland and each uses their own methodology, making comparison tricky.)
Looking back, in 2010, the share of households in England that were considered fuel poor – that is, unable to adequately heat their home – was at 22%. This rate consistently fell for nearly a decade before plateauing in 2019, and it has remained at 13% since then.
However, another measure – the fuel poverty gap, or the reduction needed in fuel costs for a household to no longer be in fuel poverty – tells a slightly different story. The fuel poverty gap measure can be more sensitive to fluctuations in fuel costs and therefore fuel poverty levels. The fuel poverty gap, unlike the share of households considered fuel-poor, saw an uptick in 2021 which continued until 2023. This was due to skyrocketing energy prices brought about by the war in Ukraine.
However, while the fuel poverty gap did increase it did not return to levels seen in 2010. Additionally, DESNZ’s projections show it falling in 2024 for the first time since 2020.
However, this doesn’t capture the stark differences in levels of fuel poverty across different regions in England. The Southeast, London, and East have the lowest rates of fuel poverty, averaging around 10%. In contrast, the Midlands and Yorkshire have some of the highest rates, with the West Midlands experiencing double the rate of the Southeast.
This has not always been the case. A review of time series data shows that the rise in fuel poverty in the West Midlands started in 2018 after significant drops in 2014. Why this occurred requires further research. Meanwhile, London had the highest rate of any region in 2017 before seeing a rapid decline. The Northeast, which had the highest rates in 2010, now has the fourth-lowest.
How, then, might the change in eligibility for the Winter Fuel Payment affect levels of fuel poverty in England? DESNZ has recently released projections of what fuel poverty levels will look like in 2024, and also how the eligibility change might affect those levels. The department projects that both measures will fall in 2024, with the projection for the share of fuel poverty to fall to 12.7% and the fuel poverty gap to fall to £1.203 billion, down 9%.
And the Winter Fuel Payment eligibility changes are projected to have very little impact on this, with fuel poverty projected to remain unchanged. Even the more sensitive measure of the fuel poverty gap is only projected to be less than 1% higher due to the change.
Nevertheless, when compared to its neighbours using figures from Eurostat the UK as a whole does not fare especially well when it comes to fuel poverty. While the fuel poverty rate is similar to France (11%) and well below that of Spain and Portugal, the UK experiences fuel poverty well above levels in most northern European countries. These are colder – and in some cases poorer – countries so this reflects energy prices but also the energy efficiency of their housing stocks.
Fuel poverty is higher in the UK than in many of its counterparts in Europe. But in England at least the issue is concentrated among certain demographics and regions, particularly young households and those in the middle of England. While only a small snapshot of the issue, one conclusion that might be drawn from this is that cutting universal fuel payments and instead targeting lower-income pensioner households might be a sensible, if politically difficult, decision in the fiscal circumstances.
As my colleague, Jonathan Portes, recently wrote, ‘means-testing the winter fuel payment is a relatively minor tweak to a pension system that, while far from perfect, is broadly working, has boosted pensioner incomes and reduced poverty.’
These projections showing that the share of those considered fuel poor will remain effectively unchanged and even the more sensitive measure, the fuel poverty gap, only seeing a less than 1% increase, give us a clearer idea of the ramifications that the Winter Fuel Payment eligibility changes will have on pensioners.
By Stephen Hunsaker, researcher, UK in a Changing Europe.