Fuel poverty in the UK

How does fuel poverty vary across the UK?

Fuel poverty rates vary across the nations of the UK and cannot be directly compared due to differences in methodology. In the latest estimates, around 13% of households in England were classed as fuel poor, 25% in Scotland, 12% in Wales, and 18% in Northern Ireland. In all nations fuel poverty rates have either been relatively stable or falling in recent years. However, a lack of data for some areas makes identifying trends challenging).

Projections of fuel poverty in England

The latest estimates of fuel poverty in England are for 2020. In February 2022 the Government projects that fuel poverty will continue to decline in England in 2021 and 2022 despite very large increases in prices. This is due to a number of different factors including how fuel poverty is defined in England, a lag between when prices rise and when they are included in estimates and the impact of the energy bill rebates.

The charity National Energy Action has estimated that price rises in 2021 and April 2022 will lead to an increase in the number of households in fuel poverty (under a different definition) of more than 50%. This estimate does not take account of any further increases in prices in October 2022.

Definition of fuel poverty in England

In England a household in a property with an energy efficiency rating of C or better (around half of dwellings) cannot be defined as being in fuel poverty, regardless of their income or the level of energy prices. In 2020 2.6 million households in England were in the lowest two income deciles (10% groups), but were not deemed to be in fuel poverty because their property had a rating of C or better.

The definition in England also means that energy rebates, such as the Warm Home Discount, are treated as if they improved the energy efficiency of a dwelling. This reduces the numbers deemed to be in fuel poverty without the added benefits of actually improving energy efficiency such as reducing greenhouse gas emissions, cutting reliance on fossil fuel imports and providing green jobs.

What is fuel poverty?

In general, fuel poverty relates to households that must spend a high proportion of their household income to keep their home at a reasonable temperature. Fuel poverty is affected by three key factors: a household’s income, their fuel costs, and their energy consumption (which in turn is affected by the energy efficiency of the dwelling).

Fuel poverty is a devolved policy area and is defined and measured differently in different parts of the UK.

What is being done to address fuel poverty?

There are both national and devolved policies for addressing the drivers of fuel poverty. Fuel poverty can be alleviated by improving a households income (and their ability to pay bills), reducing their fuel costs, and reducing their energy consumption by improving energy efficiency.

• To improve a households ability to pay, there are payments and discounts available to certain eligible customers known as the Winter Fuel Payment, Warm Homes Discount, and Cold Weather payments, designed to help potentially vulnerable customers more easily pay their bills.
• In February 2022 the Government announced a package of support to help households with rising energy bills, including a £200 upfront discount on bills in October 2022 (paid for by customers in £40 installments over the following five years), a £150 Council Tax rebate for around 80% of households in England, £144 million in discretionary funding for local authorities and £715 milion. for the devolved administrations  
• To help control fuel costs, the UK Government introduced an energy price cap which protects customers on variable tariffs from price rises for the six month duration that each cap lasts for. There can however be large changes when the cap is revised. The summer (April to October) 2022 price cap will be 54% or almost £700 a year higher than the previous cap and many commentators expect a further large incraese in October 2022 in the order of 30-50%.
• Energy efficiency is supported through the Energy Company Obligation, which requires energy suppliers to install energy effificiency measures in fuel poor, vulnerable or low income homes. Each nation also has its own schemes to alleviate fuel poverty.

The Library briefing paper Energy price rises and the Energy Bills Rebate looks at recent changes in the price cap and measures to help with bills. The paper Domestic energy prices looks at how and why energy prices have changed. 

Further measures

Several stakeholders have recommended that Governments do more on fuel povety, pointing to wider potential benefits such as for health from avoiding cold homes, and decarbonisation from more energy efficient homes.

New Fuel Poverty Strategies have been published in Wales and England in 2021. Scotland has published a draft new fuel poverty strategy with the final strategy expected, and Northern Ireland is also expected to update its strategy.

The Covid-19 pandemic has caused widespread financial hardship. Many consumer groups argue that the pandemic has worsened fuel poverty and more needs to be done. Various policies from the UK and devolved Government have intended to help households financially through the pandemic, including with specific support for energy bills.