A new definition of fuel poverty in Scotland: review of recent evidence

Chapter 9 Summary of key conclusions

Ways of defining fuel poverty

9.1. There is a growing need to reframe how fuel poverty is defined in Scotland, with greater prominence being accorded to issues of energy injustice and inequality. Over and above the classic metrics of income and required energy cost, therefore, a new definition should capture the lived experiences of people affected by fuel poverty, especially those for whom energy costs incur enduring hardship and adversity.

9.2. In that context, a new definition should reflect a balanced combination of objective and consensus-based metrics. These are likely to point towards a greater diversity of causes and consequences, and hence a wider range of potential tools for alleviating fuel poverty than has hitherto been acknowledged.

Vulnerability and fuel poverty

9.3. The Panel did not consider it appropriate that the term 'vulnerability' should be used as a synonym for prevalence, in the manner it has routinely been used in the European Union.

9.4. However, it saw an important role for the convention of vulnerability being conceptualised in a capabilities framework. This gave special status to people who, for example, had only limited opportunities to develop problem-solving skills around tariff-switching, or who were not confident in making application for support, or who were not able to manage (often very complex) control panels and heating systems. However the term 'vulnerable' was not considered to be especially apt in describing this group, and an alternative term was thought advisable in future, not least of all because the assistance this group might require was rather more specific than the term 'vulnerable' implied.

9.5. The most appropriate use of the term 'vulnerability' was thought to be related to health risks, such that people most likely to experience the adverse health and mental wellbeing outcomes associated with fuel poverty were deemed to be vulnerable.

9.6. The Panel thought that, in the context of an increasingly healthy and active older population, age per se is not a particularly useful criterion for classifying people as vulnerable to cold-related health impacts. In the absence of any long-term ill health or disability, the Panel took the view that age should not become a proxy for vulnerability, until a much older age than is presently used as a threshold in Scotland (which is 60 years). A threshold nearer 75 to 80 years might be more appropriate.

9.7. Precisely whose health was most likely to be vulnerable, and how vulnerabilities might be prioritised in terms of Scotland's future fuel poverty strategies remained a matter for debate. The recent (2015) NICE Guidelines for England (which deal with health risks associated with living in cold homes), and the Scottish Public Health Network's 2016 Guidance on this matter, were thought to be useful potential starting points for further refinement of the term.

9.8. Given multiple uncertainties in this regard, the Panel recommended that a small independent group of Scottish public health experts be invited to develop a specific list of health and disability categories, as well as age bands, which would satisfactorily encompass the term " vulnerable to the adverse health and wellbeing impacts of living in fuel poverty". This matter was beyond the scope of the present Panel's expertise.

The current UK definitions of fuel poverty

9.9. Regarding the two most commonly used definitions of fuel poverty, there are strengths to be found in both the current Scottish definition (based on Boardman) and the current English definition (based on Hills).

9.10. However, Boardman's definition does not confine fuel poverty to households on lower incomes and as such it does not align with Section 95 of the Housing (Scotland) Act which indicated that: 'a person lives in fuel poverty if that person is a member of a household with a low income living in a home which cannot be kept warm at a reasonable cost'. At present, more than half of people deemed to be in fuel poverty have incomes above the poverty threshold (60% of median Scottish income).

9.11. In a similar fashion, the Hills LIHC indicator excludes many households from being considered fuel poor, despite the fact that they may be on very low incomes indeed. There are likely to be practical forms of assistance which could significantly reduce the burdens arising from their energy bills. Where the meaning and significance of being fuel poor are a consideration, the burdens associated with their energy costs support the view that this group should remain an integral part of those deemed to be in fuel poverty.

9.12. Further to the last point, the LIHC's use of a floating median renders it largely insensitive to changes in fuel price, except through second-tier scrutiny of changes in the fuel poverty gap. This makes the measure somewhat more challenging in terms of public engagement and understanding.

9.13. These core drawbacks alone point to the need for a different definition in Scotland.

9.14. However, an additional and salient drawback with both of the conventional options lay in the fact that neither of these definitions currently bears a substantive relationship to how fuel poverty programmes are delivered on the ground.

9.15. The Panel accepted emerging consensus around the idea that "an affordable heating regime" is only one aspect of a healthy indoor climate; aspects of ventilation, condensation, mould growth and damp were also essential components.

9.16. The Panel had concerns about the use of inaccurate proxies for estimating fuel poverty - whether for national prevalence data or on the doorstep. Wherever possible in the medium-term, efforts to replace these with more accurate data (particularly regarding income and energy costs) were strongly supported.

Indoor temperatures

9.17. Temperature should remain the metric used to define what constitutes 'a ' satisfactory heating regime'. Thermal comfort lacks objectivity and is not associated with a concern for protecting human health.

9.18. Among non-vulnerable households, the 21 ºC threshold for living rooms should be retained, and also the 18 ºC threshold for all other occupied rooms.

9.19. Among vulnerable households, the 23 ºC threshold for living rooms should be retained too, but the 18 ºC threshold for all other occupied rooms should be raised to 20 ºC in order to more fully meet WHO recommendations associated with vulnerability.

Poverty, affordability and fuel poverty

9.20. While low income (relative to that of others in the same society) provides a starting point for identifying those most in need, the whole evolution of conceptual thinking about poverty leads towards a definition based more on consensual deprivation approaches which focus on societal norms about what people need and should not have to do without. Good candidates for measuring poverty are, therefore: the consensual material deprivation index approach exemplified by PSE; the Minimum Income Standards ( MIS) approach to setting household budgets.

9.21. For practical reasons to do with the availability of suitable survey data as well as potential application 'on the doorstep', the second of these ( MIS) is likely to be the front runner for implementation.

9.22. We believe that there may be merit in combining measures based on residual income with ratio measures, and that in general income should be measured after housing costs.

Fuel poverty and adverse outcomes

9.23. The ways in which households may respond to situations of fuel poverty, some of which are similar to responses to problems of housing unaffordability, suggest a number of possible adverse outcomes which might be a basis for investigating the relative effectiveness of particular fuel poverty measures in highlighting the pressing 'hardship' problems that policy and practice ought to be most concerned with.

9.24. Both the classic Boardman definition, and the LIHC indicator, are relatively weakly related to these adverse outcomes associated with fuel poverty.

9.25. Ways of improving these two definitions are identified; using after housing cost income seems particularly useful.

9.26. However, a better measure of income for this purpose would appear to be based on the Minimum Income Standards approach ( MIS). While a good case can be made for using Material Deprivation as a basis for monitoring Fuel Poverty, at national level, we do not see it as appropriate for use 'on the doorstep'.

9.27. The Panel's central recommendation favours a 90% of MIS threshold on residual income, with a secondary criterion being the ratio of fuel costs to income after housing costs set at 10% ( AHC). It also recommends the inclusion within MIS of significant markups for disability/long term illness and for remote rural cost of living factors.

9.28. Hence, in terms of a revised definition of fuel poverty in Scotland, the Panel proposes the following for scrutiny and comment:

Households in Scotland are in fuel poverty if:

• they need to spend more than 10% of their AHC income on heating and electricity in order to attain a healthy indoor environment that is commensurate with their vulnerability status; and
• if these housing and fuel costs were deducted, they would have less than 90% of Scotland's Minimum Income Standard as their residual income from which to pay for all the other core necessities commensurate with a decent standard of living.

9.29. Translating this into a lay definition, we propose the following:

Households should be able to afford the heating and electricity needed for a decent quality of life. Once a household has paid for its housing, it is in fuel poverty if it needs more than 10% of its remaining income to pay for its energy needs, and if this then leaves the household in poverty.

Demographic and geographic profiles

9.30. Broadly speaking, any decision on who is included or excluded from being classified as in fuel poverty may need to be informed by additional evidence concerning potential impacts on different groups of concern to different stakeholders. This may have a bearing on policy programme design issues going beyond the definition of fuel poverty itself.

9.31. Adopting a Minimum Income Standard approach to how fuel poverty is defined has consequences for the demographic and geographic profile of where fuel poverty is most likely to be found.

9.32. However, adopting a Minimum Income Standard approach does not alter the prevalence rate of fuel poverty when this is compared with the rate derived from a classic Boardman definition. Under both the current Boardman definition and the Panel's preferred MIS2 option, approximately one-third of all Scottish households are experiencing fuel poverty.

9.33. As with most conventional definitions of fuel poverty which rely on after housing cost calculations, prevalence shifts away from older owner occupiers, and towards younger people, particularly lone parents, and private renters.

9.34. Both the preferred approach and the Boardman option yield a high prevalence among households where someone is living with a long term illness or disability.

9.35. Under a definition guided by Minimum Income Standards, people living in very energy efficient homes ( SAPs of A to C) can often be classified as fuel poor, given the extent to which even the most basic energy bill (based on standing charges) constitutes a significant financial burden.

9.36. Fuel poverty is substantially higher in rural Scotland under Boardman, but differences are smaller using any of the alternative definitions. Higher fuel costs and higher living costs in rural areas are offset by lower housing costs and lower rates of worklessness. However, all options suggest that remote rural areas have markedly higher rates of fuel poverty than other areas.

9.37. The preferred option can be used to generate a severity metric, akin to that of the LIHC's gap. This, in turn, could be used to generate severity bands, akin to those used in Boardman. Publication of data on the demography and geography of the gap is likely to be an essential supplement to prevalence data, indicating where and for whom fuel poverty is at its most extreme.