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26 Oct 2016

Low Income High Costs and the new politics of fuel poverty in England

Low Income High Costs and the new politics of fuel poverty in England

Our latest guest blog post is written by Dr Lucie Middlemiss from the University of Leeds, in which she provides a critique of the new fuel poverty definition in England.

This week, a paper that I have written on the ‘new politics of fuel poverty’ is out in the journal Critical Social Policy. I thought readers might be interested to hear the arguments I am making about the Low Income High Costs indicator (LIHC) and the way it has been introduced in England. In the paper I set out to critically analyse the new ‘politics’ of fuel poverty in England. This means I analysed all the documents that the UK government produced around with the introduction of LIHC, to understand how they redefine the problem of fuel poverty in England and with what consequences.

For those unfamiliar with the new politics, its key features are:

  • A change in indicator from counting households that spend more than 10% of their income on fuel, to counting low-income households who have high energy needs (LIHC). This halved the numbers of households that count as fuel poor.
  • New targets to eradicate the most energy inefficient dwellings by 2030. This replaced the target to eradicate fuel poverty altogether by 2016.

In my work I have found the new politics to be problematic for three key reasons:

  1. LIHC makes energy efficiency the problem and the only solution to fuel poverty

The new indicator (LIHC) identifies a specific population as being fuel poor: low income households (low income) with high modelled energy needs (high costs). As households with high modelled energy needs tend to be energy-inefficient, energy efficiency is highly prioritised in this central indicator, and indeed in subsidiary indicators. It is also at the fore of other instruments of LIHC policy, with new targets for fuel poverty based on raising energy efficiency standards. As a result households are only considered fuel poor under LIHC if it is possible to reduce their fuel poverty by increasing their energy efficiency. As such LIHC redefines the ‘real problem’ of fuel poverty as inefficient homes, and positions energy efficiency as the only solution to fuel poverty.

So what’s the problem with focusing on energy efficiency? In some ways this makes a lot of sense. After all, we know that many fuel poor homes are poorly insulated or rely on inefficient appliances. Investing in energy efficiency is cost-effective, certainly in the long term and sometimes in the short term. Energy efficiency investments result in long term savings: the benefits of insulating a house remain for many years. There are also substantial environmental benefits to be had from energy efficiency.

The trouble is that such a strong focus on energy efficiency distracts from other problems that cause fuel poverty, such as having a low or unreliable income, or failures in the energy market. If we just think of this as an energy efficiency issue, we can ignore income poor households living in energy efficient homes. This does not mean, however, that such households are able to afford the energy services that they need. If in a ‘low income low cost’ household, members suffer health and social consequences as a result of being unable to access energy services, this household still faces a fuel poverty problem.

I also argue, that focusing only on energy efficiency allows us to forget how other policies impact on the fuel poor: the way we organise our energy markets, and the policies of austerity, both of which have important and detrimental impacts on the poorest households in the UK.

  1. A focus on the ‘most vulnerable’ means we are leaving some to fend for themselves

One of the key shifts in politics under LIHC, is that it defines fuel poverty as a problem that cannot be eradicated, and sets the indicator accordingly. Previous targets to eradicate fuel poverty by 2016 were about to be missed when this problem was redefined. Instead the new emphasis is to target the ‘most vulnerable’. The most vulnerable includes people with the largest fuel poverty gaps (the secondary indicator under LIHC which measures the difference between what people can afford and what they need), and people with physical needs for warmth (older people, disabled people and families with young children). Note that while physical vulnerability is mentioned frequently in the documentation, it is only represented by one subsidiary indicator (numbers of children living in fuel poverty). As such, it is difficult to see how these groups will be protected.

The emphasis on the ‘most vulnerable’ here is symptomatic of austerity policy in the UK, which has resulted in cuts to many public services and benefit entitlements in recent years. Given the new politics of fuel poverty under LIHC is a far reaching one (with overall targets set for 2030) this amounts to austerity being written into policy in the long term, irrespective of change of government or economic circumstances. Further, the new politics implies that we should accept that some households can be left in the cold, despite the clear disparity between what they need and what they can afford. Accepting that some people will not be helped is both morally problematic, and likely to have adverse consequences for health services and social care budgets.

The notion of prioritising the ‘most vulnerable’ is not currently evident in energy-oriented policy. The winter fuel payment (paid to anyone over 60), with a budget of £2.12 billion in 2013-14, and funded by general taxation, is extremely poorly targeted, with an estimated 10% of recipients being fuel poor under LIHC. This budget amounts to one and a half times the money set aside for energy efficiency under ECO (£1.3 billion, funded through energy bills, about 25% of which is targeted at the fuel poor). The lack of targeting of the winter fuel payment is not questioned in this new politics, likely because recipients are key voters for the incumbent government.

  1. LIHC hides the impact that the energy market has on the fuel poor

The LIHC indicator itself is based on averages (average modelled costs and average household income) and as such it is a stable measure, and overall numbers are unlikely to ever change dramatically. This fits well with the definition of fuel poverty as a problem which cannot be eradicated. It also hides the impact of energy prices on fuel poverty, ignoring some massive changes in the market in recent years. For instance, between 2005 and 2011 energy prices to households doubled, and consumption of energy reduced by 24%. In the documentation on LIHC, the 10% indicator is much criticised for overplaying the significance of price changes. I argue that the new LIHC indicator hides any impact of price changes on the fuel poor.

The energy market in the UK has peculiarities that affect the fuel poor, and that are left untouched by this new politics. For instance, many fuel poor households pay higher tariffs because of their methods of payment (pre-payment meters). The assumption that the energy market can reduce the cost of energy for the fuel poor, by allowing competition also does not hold. The fuel poor are often prevented from switching supplier because of energy debt, or through fear of uncertainty. These challenges remain in the new politics.

So what future for the fuel poor in the UK? To me the future looks rather bleak. While ECO funding has been refocussed on the fuel poor, it will always be limited by equity considerations, given that it is funded through energy bills. In addition the focus on energy efficiency in this field distracts from the massive impacts of austerity on this demographic (low income households). One of the motivations for me in this work is to allow other nations to learn from our mistakes in England. We are often considered a ‘leader’ in fuel poverty policy, but the new politics of fuel poverty does not offer an ideal solution. The prioritisation of a single indicator (LIHC), and emphasis on the underfunded policy area of energy efficiency as a solution, is not likely to have a substantive impact on the lives of the fuel poor in England between now and 2030.

For a pre-print version of the full paper see:

For the full academic paper see: