As Derek Likorish approaches the end of more than six years as chair of the government’s Fuel Poverty Advisory Group for England, he finds time for some reflection on the past and thoughts on the future
I took up the role of chair of the Fuel Poverty Advisory Group (FPAG) for England in 2007, at the same time the world’s economy went into reverse, gas and electricity prices began to increase dramatically, decarbonisation policy costs were regressively added to bills (to be circa £9billion per annum by 2020) and the government realising energy costs are going to destroy political futures all manner of unhelpful political point scoring kicks off. Meanwhile, successive governments having failed to grasp the nettle means there are currently some 2.3 million fuel poor households in England alone.
The only real long term sustainable solution to alleviating fuel poverty is to establish a properly funded programme that insulates all the homes affected and ensures an efficient heating system is installed. This will take about £3 billion per annum over six years and while some will proclaim that the parlous state of government finances will preclude such progress, I profoundly disagree.
This is about political will driven by a robust understanding of the benefits case. For example, fuel poverty can severely affect people’s health – because those affected often under-heat their homes. Cold homes burden the NHS, and the cost is estimated at £1.36 billion per annum . It is also a known contributor to the 25,000 ‘excess winter deaths’ per year in England and Wales and as the ageing population increases so will the risks and cost.
The government has carbon reduction targets related to household carbon emissions it must achieve, yet fuel poor households are typically very inefficient, older dwellings, meaning they are needlessly wasting energy and increasing emissions.
The majority of fuel poverty alleviation funding is spent through the Winter Fuel Payment, Cold Weather Payment, and Warm Homes Discount, which provide essential financial relief for many in the form of cash payments or a directly targeted energy bill rebate. Some £2.6 billion per annum is spent in this way but, as essential as it is – and it must continue – it does not address the long-term fuel poverty challenge, which requires energy efficiency measures.
The recently published National Infrastructure Plan (2014 briefly mentions domestic energy efficiency but not fuel poverty, yet investing in domestic energy efficiency meets many of the requirements the Treasury considers when valuing infrastructure expenditure. For example: immediate and long term macro-economic benefits; increasing the capacity and resilience of the economy; reducing environmental impacts; and linked benefits with other forms of infrastructure (such as the NHS) – all points FPAG has made in previous annual reports and related recommendations.
Government should value energy efficiency as a national infrastructure priority, and allocate some of the £100 billion public infrastructure spend over the next parliament and beyond to domestic energy efficiency, initially targeting the fuel poor, through a locally delivered area-based approach.
FPAG has long argued the case for a properly funded programme based on a robust strategy with targets and we are, at last, getting there. With the legal requirement in the Energy Bill for a future government, within six months following a general election, to declare its fuel poverty plan for the five year parliamentary period ahead to support a soon to be declared enduring long-term target is a major step forward.
In respect of the fuel poverty target, the current coalition government’s proposal (recently consulted upon) is for an EPC band C by 2030 for as many fuel poverty households as reasonably practical in England. FPAG sought EPC band C by 2025. The challenge for my successor, with what is to be a reformed FPAG with a greater legitimacy to hold the government to account, is to make it happen and seek to bring the 2030 date forward. It sounds simple enough, but alignment on funding, political will and what ‘reasonably practical’ means will determine success or otherwise.
Finally, as I prepare to exit my virtual office it is ironic we have oil at around $50 a barrel, an improved economic horizon, and our gas and electricity costing us £3 billion a year more than it should because some suppliers purchased their forward wholesale energy at relatively high prices to mitigate the risk of a price freeze through to 2017.
I do hope the CMA referral produces some profound recommendations that will stop the political scrap, provide transparency for consumers and give a view as to how long term decarbonisation should be paid for. Fuel poor consumers are not average and typically use less energy than the average, policy design and regulatory oversight must not neglect this fundamental issue and point of consumer equity.