Fuel Poverty in the UK 2022 Re January 28, 2022

Fuel Poverty in the UK 2022

Fuel-poverty

Many people across the country are struggling financially with the current cost of living crisis. Heartrending stories that document the struggle faced by many dominate the media, and many families across the country are faced with the impossible choice between heating and eating. The term “fuel poverty” is often thrown around in these stories, but we know people are often unsure what that means and the definition is often different for many. However, there are in fact specific measures for what constitutes fuel poverty, even if the issues and causes around it are often hotly debated.

We’ll take a look at this difficult issue, try to delve a little below the headlines, and hopefully provide a little information beyond soundbites that might be useful when it comes to first getting the facts, and secondly, signposting the help available if you or someone you know is affected.

What is fuel poverty?

The general public perception is that fuel poverty is not being able to afford to keep your home warm. While this definition is not completely wrong, the actual definition of fuel poverty relates to households that must spend a high proportion of their household income to keep their home at a reasonable temperature.

To be more precise, fuel poverty is affected by three key elements; a household’s income, their fuel costs and their energy consumption – which in turn can be affected by the energy efficiency of their home.

This explanation is not to be confused with the ‘fuel poverty gap’ which is the reduction in fuel bills needed to take a fuel-poor household out of fuel poverty. In other words, the cut in energy costs that would lift them out of fuel poverty. According to UK Government figures, in 2018 the mean average fuel poverty gap was £334, an increase on 2017’s average of £328. Source: Annual Fuel Poverty Statistics Report, 2021 (2019 data).

So what causes fuel poverty in the UK?

The 3 key factors that contribute to fuel poverty are the energy efficiency of a home, the cost of energy bills (fuel prices), and household income.

The home’s energy efficiency

If the home is not energy-efficient (i.e. not insulated as it should be or uses old inefficient appliances such as boilers or electric heaters) then more energy will be wasted, meaning households will have to spend more to keep their home warm.

According to the Energy saving Trust “Heating and hot water account for over half [55%] of what you spend in a year on energy bills, so an efficient boiler makes a big difference.”

To put this into perspective, if you have an old, non-condensing boiler that has an efficiency rating of 85% (which would be a C-rated energy efficient boiler), for every £1 you spend on energy to heat your home, 15p of that £1 is being wasted. To put that into context, new boilers can run with as much as 99% heat efficiency!

While 15p may not seem like much, in fact for every £100 that you spend on energy to start with, you’d lose £15. So it adds up! Over the years that would become £30 (at 70% efficiency), and £50 (at 50% efficiency) – all lost simply due to a boiler operating at low efficiency, which adds up. If you’re looking for ways to maximise the energy efficiency of your boiler, be sure to check out our blog on the subject.

Besides, a poorly insulated home suffers from poor heat retention and your boiler needs to work harder to keep the house at a comfortable temperature.

Fuel prices/cost of energy bills

It’s fair to say that these are playing a major role in fuel poverty in the current climate.

Gas prices have risen to a record high in Europe due to a recovery in global demand as the world recovers from the Covid-19 pandemic and economies worldwide reopen and tighter supplies. This is increasing the cost of heating homes and pushing up electricity prices. The current geopolitical situation on the borders of Ukraine and Russia is further exacerbating the cost of gas in particular.

Despite the energy price caps introduced by Ofgem, the energy market regulator, households around the UK saw an increase in energy bills last year. The energy price cap (that’s the maximum the customers can be charged per unit) went up on the 1st of October 2021 from £1,138 to £1,277, that’s a £139 increase per year.

The market highs will lead to one of the most expensive winter energy bills in the past 10 years and is estimated to drive an extra half a million Brits into fuel poverty.

Ofgem adjusts the price cap twice a year based on the latest estimated costs of supplying energy.

The energy regulator, Ofgem, said last month that default energy tariffs would climb by 12.5% on average until July. The further rise of the energy markets since then means it is expected to raise energy bills again from April 2022.

Even fixed-rate energy deals are becoming more expensive; many one-to-two year deals are now priced above default tariffs in anticipation of rising costs in the future.

Household income

Changes to someone’s earnings, benefits and housing costs all affect total their household income.

The Government’s report says “In 2018, a household is classed as low-income if their equivalised income (less tax and National Insurance), once they’ve paid their housing and fuel costs is less than £13,925 (60 percent of median income for all households)”

Generally, lower-income households are likely to spend a higher portion of their budget on fuel, and as a result, the leftover income is low enough to place the household below the poverty line.

Will energy prices rise further in 2022 UK?

Energy prices are set to rise even further in 2022 – potentially pushing up your bill by hundreds of pounds. It’s all down to the raising of the energy price cap, meant to protect householders.

The UK Government’s energy price cap is due to be revised by Ofgem, the industry regulator, in February, with the increase put onto customers’ bills from April.

The consultancy Cornwall Insight is forecasting that the price cap for summer 2022 will rise from its current £1,277 to approximately £1,865 per year (this is an increase of just under 50% which is around £588 extra per household.)

Cornwall Insight also predicts that energy bills could spike to £2,240 a year at the following quarterly revaluation in August 2022 without a significant fall in energy prices globally.

Alex Belsham-Harris, of Citizens Advice, said its advisers were already seeing people facing the “desperate choice between heating and eating”.

He said with energy bills set to soar this problem is only set to get worse. “With major hikes to energy bills from April and other costs of living rising, the quickest and easiest way for the government to provide direct support for those hardest hit will be through the benefits system.

“Right now the energy price cap is providing households with much-needed protection from rocketing energy bills. It’s also buying time for the Government to put in place measures to limit the financial pain of increased bills.”

In July 2022, Jonathan Brearley, Ofgem’s Chief Executive, revealed to the MPs that the households’ energy bills will rise faster this winter than previously forecast by the energy regulator, Ofgem.

Jonathan Brearley said in late May that a typical household would pay £800 a year more from October. But, while giving evidence to MPs, he said it was “clear” that estimate for winter bills now looked too low.

The original figure was used by ministers when deciding how much to pay in direct assistance this winter.

One industry analyst has predicted a rise of more than £1,200 a year in October. Cornwall Insight said that the typical domestic customer was likely to pay £3,244 a year from October, then £3,363 a year from January.

The typical bill at present is about £2,000 a year. In itself, this was a rise of £700 a year in April, compared with the previous six months.

Who’s affected by fuel poverty?

What percentage of UK households are in fuel poverty?

In 2018, 10.3% of households in England (that’s 2.40 million households) were in fuel poverty, according to the Government’s report. Meanwhile, 25% of households in Scotland (619,000 households), 12% in Wales (155,000 households) and 18% in Northern Ireland (131,000 households) are classified as fuel poor.

Fuel poverty by area

The regions that are worst-affected by fuel poverty

The region that is worst-affected by fuel poverty is Scotland with 619,000 households (which accounts for 25% of the Scottish households) living in fuel poverty. Followed by Northern Ireland with 131,000 households (this accounts for 18%), lastly North West England which has the highest majority of fuel poverty at 12.1%.

The areas that are worst-affected by fuel poverty

Households living in the North West had the highest percentage of fuel poor households in 2018 while the West Midlands had the highest average gap.

The 10 local authorities that are worst-affected by fuel poverty

End Fuel Poverty Coalition Index suggests that the 10 worst local authorities that are worst-affected by fuel poverty are;

  1. Barking and Dagenham
  2. Stoke-on-Trent
  3. Newham
  4. Waltham Forest
  5. Kingston upon Hull
  6. Sandwell
  7. Wolverhampton
  8. Birmingham
  9. Manchester
  10. Norwich

The 10 local authorities that are least-affected by fuel poverty

On the other hand, these are the top 10 local authorities that are least affected according to the End Fuel Poverty Coalition Index;

  1. Bracknell Forest
  2. Runnymede
  3. East Hampshire
  4. Torridge
  5. South Hams
  6. Hart
  7. Wokingham
  8. Fareham
  9. Surrey Heath
  10. Spelthorne

Fuel poverty stats

The Office of National Statistics (ONS) estimate that 28,300 excess winter deaths occurred in England and Wales during the winter of 2019 to 2020 – 19.6% higher than the previous year. The National Energy Action Charity (NEA) estimated that 8,500 deaths were due to living in cold homes (fuel poverty) – which is almost 20% higher than the previous winter.

Who’s likely to be particularly hard-hit by fuel poverty?

The elderly and young families are most likely to be hard-hit by fuel poverty.

Public Health England identified the following groups who are more vulnerable to health problems associated with cold homes and/or who may have less contact with health services include:

  • people with cardiovascular conditions 
  • people with respiratory conditions (in particular, chronic obstructive pulmonary disease (COPD) and childhood asthma) 
  • people with mental health conditions 
  • people with disabilities 
  • older people (65 and older)
  • young children (under 5) 
  • pregnant women 
  • people on a low income 
  • people who have attended hospital due to a fall 
  • people who move in and out of homelessness 
  • people with addictions
  • recent immigrants and asylum seekers

No one should be forced to choose between eating or heating

With the cost of living at its highest level in a decade, this winter some may have to make the difficult decision between choosing to keep food on the table or heat their homes.

Money Saving Expert founder Martin Lewis said the Government must intervene now to avoid a crisis. He told the PA news agency: “This year is going to be a very tough year for many people.

“The energy price crisis needs substantial intervention from the Government.

“We are going to see a minimum 50% increase in energy prices in the system and that is unsustainable for many.”

The customer champion said: “We need to look at what we can do now and how we can protect those people who will need to choose between heating and eating.

“There are already some who are having to make that choice”.

What help is available for fuel-poor households?

The Cost-of-Living Payment

This is a one-off payment which will be automatically paid to low-income households. 

Who can claim the Cost-of-Living Payments?

Low-income households who receive Universal Credit, income-based Jobseekers Allowance, income-related Employment and Support Allowance, Income Support, working tax credit, child tax credit and pension credit.

How much are the Cost-of-Living Payments?

The cost-of-living payment total is £650. It will come in two instalments. The first instalment is £326 and will be paid for most people between 14 and 31 July.

The second, of £324, will be paid in the autumn.

Those on tax credits will have to wait longer, as the first payment will be in the autumn and the second instalment during the winter.

How to claim the Cost-of-Living Payments?

The payments will be paid automatically into bank accounts – usually marked “DWP Cost of Living”.

Winter Fuel Payments

Who can claim Winter Fuel Payments?

Winter Fuel Payment is available for senior citizens who were born on or before 26 September 1955.

How much are Winter Fuel Payments?

Winter Fuel Payments could range between £100 and £300 to help pay for the heating bills.

How to claim Winter Fuel Payments?

Senior citizens will get Winter Fuel Payments automatically which means they don’t need to claim if they’re eligible and either;

  • get the State Pension
  • get another social security benefit (not Housing Benefit, Council Tax Reduction, Child Benefit or Universal Credit)

If they don’t get either of these or live abroad, they’ll need to make a claim.

Read the Government’s Winter Fuel Payments page for more information.

Cold Weather Payment

Who can claim Cold Weather Payment?

You may get a Cold Weather Payment if you’re getting certain benefits or Support for Mortgage Interest. (Click on the link to find out more).

How much is the Cold Weather Payment?

Cold Weather Payment is £25 for each 7 day period of very cold weather between the 1st November and the 31st March.

After each period of very cold weather in your area, you should get a payment within 14 working days. It’s paid into the same bank or building society account as your benefit payments.

How to claim the Cold Weather Payment?

You do not need to apply. If you’re eligible to get a Cold Weather Payment, you’ll be paid it automatically.

Warm Home Discount Scheme

Who can claim the Warm Home Discount Scheme?

There are 2 ways to qualify for the Warm Home Discount Scheme:

How you apply for the Warm Home Discount Scheme depends on how you qualify for the discount.

How much is the Warm Home Discount Scheme Payment?

You could get £140 off your electricity bill for winter 2021 to 2022 under the Warm Home Discount Scheme.

The money is not paid to you – it’s a one-off discount on your electricity bill, between October and March. You may be able to get a discount on your gas bill instead if your supplier provides you with both gas and electricity. Contact your supplier to find out.

Fuel poverty charities

The 3 biggest fuel poverty charities are;

  • End Fuel Poverty – they aim to influence the Government and other bodies to take action to end fuel poverty and thereby improve people’s health and quality of life as well as seeking to reduce the cost of living, create jobs and negate carbon emissions in the process.

  • National Energy Action (NEA) – the national fuel poverty charity, working to ensure that everyone in England, Wales and Northern Ireland is warm and safe at home. It began almost 40 years ago when students at Durham University established a group of volunteers to install loft insulation in the homes of elderly local people. Nowadays, National Energy Action (NEA), employs over 70 staff across England, Wales and Northern Ireland. They also work closely with their sister charity Energy Action Scotland.
  • Turn2us is a national charity providing practical help to people who are struggling financially. On their site, you can find a Benefits Calculator and Grant Search which can be useful. They also award their own grants from the Turn2us Elizabeth Finn Fund, the Turn2us Response Fund, and the Turn2us Edinburgh Trust.

Tips to fight poverty at home

While the Government and charity schemes might be able to help there are some things that you could do at home to help bring the heating bill down such as minimising draughts, among other things. Take a look at our “5 ways to save money on your heating bill blog” to find out more about this.

Energy price cap 2022 - Government updates

On the 3rd February 2022, the Government announced their plans to ease the cost of living pressures after a record 54% rise to the energy price cap. 

Chancellor Rishi Sunak announced that there will be a £200 discount on all electricity bills from October 2022 (this will later be repaid) and a £150 council tax rebate for those in bands A to D.

Write a comment
Your email address will not be published.