Note of Meeting of Scottish Fuel Poverty Forum

30 May 2008 – Annex B

Review of Fuel Poverty

Presentation to Scottish Fuel Poverty Forum

30 May 2008

Need for review

• The Scottish Government is committed to ensuring, so far as reasonably practicable, that people are not living in fuel poverty in Scotland by November 2016.

• Prognosis not good. Numbers of fuel poor increasing, and nature of Programmes to tackle it has changed.

• Time to take stock of what has been achieved and what changes to Programmes required to achieve the target.

Definition of fuel poverty

• A household is in fuel poverty if, in order to maintain a satisfactory heating regime, it would be required to spend more than 10% of its income (including Housing Benefit or Income support for Mortgage Interest) on all household fuel use. 2002 Scottish Fuel Poverty Statement

• 10% rule – at margin, incomes have to rise 10 times the rate of fuel prices to prevent fuel poverty

Extent of fuel poverty• Increasing proportion of households, and

likely to continue rising with fuel price rises

• 543,000 households in 2005/06 (23.5%)

• 173,000 households (7.5%) in extreme fuel poverty, over 20% of income

1996 2002 2003/42004/5 2005/60

5

10

15

20

25

30

35

40

Survey year

Per

cent

age

Higher rate than England

23.5% vs. 7% of households, even though Scottish homes more energy efficient (55-59 vs.48 using SAP). Why?

• Satisfactory heating defined as warmer for pensioners in Scotland than England

• Higher proportion of pensioners and long term sick

• More rural households – off gas grid, hard to insulate homes

• Longer heating season with colder climate & higher windspeeds

Determinants of fuel poverty

Reduction in fuel poverty between 1996 and 2002 attributable to:

• Household incomes (50%)

• Fuel prices (35%)

• Energy efficiency of housing (15%)

First two largely reserved, third devolved.

Fuel price increases

• 30% real rise in gas prices and 20% real rise in electricity prices between May 2005 and May 2006

Fuel Price Indices adjusted for inflation

0

50

100

150

2002 2003 2004 2005 2006 2007

Gas Electricity

Impacts of various changes on fuel poverty levels

• If all housing attains NHER 7 would reduce rate from 23.5% to 18.2%

• If all housing attains NHER 10, would reduce rate to 10.0%

• To eliminate fuel poverty, total personal incomes in Scotland would have to rise by £3-3.5 billion per annum (c.5%)

Central Heating and Warm Deal Programmes

Achievements:

• CHP: Installed 97,000 central heating systems and spent £300m

• Warm Deal: Installed insulation measures in 280,000 houses and spent £80m

• Warmer homes, lower fuel bills and carbon savings

Central Heating and Warm Deal Programmes

Issues:

• CHP not well targeted at the fuel poor

• Switch from first time systems to replacements

• Insulation measures under both CHP and Warm Deal not well integrated with CERT – displacing fuel companies?

Central Heating: Private Sector Installations

Changing Programme:

0

2000

4000

60008000

10000

12000

14000

16000

Prv

iate

Sec

tor H

ouse

hold

s Pension CreditReplacements

Over 80sReplacements

Main ProgrammeReplacements

First Time Systems

Switch from First Time Systems to Replacements

• First time systems fallen from 91% to 7%

• Less carbon and fuel bill savings from replacements

0%

20%

40%

60%

80%

100%

Pension CreditReplacements

Over 80sReplacements

Main ProgrammeReplacements

First Time Systems

Proportion of Households by Age that is Fuel Poor

• Half those eligible for Central Heating are not fuel poor

• Quarter of all fuel poor households are not eligible for Central Heating as under 60

25

51

11

48

62

0

10

20

30

40

50

60

70

All ages All over 60s < 60 60-79 80+

Perc

en

tag

e

of

Pri

vate

Secto

r H

ou

seh

old

s

Relationship between Fuel Poverty and Household Income

• Closer correlation between low incomes and fuel poverty than between age and fuel poverty

• ¾ in the bottom two deciles of income are fuel poor

77

15

57

6

88

32

94

47

0

10

20

30

40

50

60

70

80

90

100

Allages,low

income

Allages,

not lowincome

<60, lowincome

<60 notlow

income

60-79,low

income

60-79,not lowincome

80+, lowincome

80+, notlow

income

Pe

rce

nta

ge

of

Pri

va

te S

ec

tor

Ho

us

eh

old

s

Synergy with other Government policies?

• One Government purpose

• Solidarity – tackling poverty

• Cohesion – effective rural delivery

• Housing Repairs and Improvements – owner responsibility

• Sustainability – concerted action required, work with energy companies not in competition

Conclusions

Review concludes:• Fuel Poverty a growing problem • Challenge to meet the 2016 target• Current programmes have achieved a lot,

but becoming less effective

Leaves hanging the question for the Forum - How to use resources more effectively going forward?