The UK has a very serious problem with fuel poverty (when a household has to spent more than 10% of its income on fuel bills). Six million UK households live in fuel poverty – up from 2,500,000 in 2001. This is despite the previous government spending over £20 billion on programmes that were supposed to reduce fuel poverty. The UK winter death rate is much higher than the summer death rate, so each winter many people die because of cold. The need to move to low carbon energy will make both gas and electricity substantially more expensive. The cost of infrastructure needed for this journey has been estimated at £200 billion by the energy regulator Ofgem.
There are two main causes of UK fuel poverty:
- Firstly, the UK has a much more unequal society than many other European countries.
- Secondly, most existing buildings are very energy inefficient.
To avoid making inequality even worse, the budget deficit should be decreased by raising direct taxes, such as income tax, rather than indirect taxes, such as VAT. The coalition government’s first budget put VAT up to 20%. Some of the cost of low carbon energy infrastructure should be raised through taxes rather than through fuel bills. To improve buildings, there should be less political emphasis on new buildings and much more on the existing stock. The EU’s Energy Performance of Buildings Directive has been revamped and improved this year, so that when a building is substantially renovated, it will have to meet quite high energy standards. This is based on the German approach. Even better would be the Swedish approach. In Sweden, high efficiency standards have to be met when a building is renovated, sold or rented out.
However much is done on improving buildings, some people will still need extra money to enable them to keep warm. Labour introduced the Winter Fuel Payment – £250 a year for the over 60s, rising to £400 for the over 80s. This is a universal benefit, so everyone of that age gets it, whatever their level of income or wealth. Universal benefits have a value – means testing inevitably leads to some people who should get the benefit not doing so, either because they do not apply or because of bureaucratic errors. However, reductions in welfare payments are inevitable. David Cameron promised before the election that winter fuel payments would remain. The Liberal Democrats also said that they would remain, but would be reformed: payable only to those over 65 but extended also to the disabled. The coalition agreement promised to “protect key benefits for older people such as the winter fuel payment”, but does not rule out reform.
The National Pensioners Convention general secretary was quoted in the Independent yesterday as saying:
“The winter death rate amongst older people is a national scandal and getting worse. Last winter over 36,700 pensioners died of cold-related illnesses – a staggering 13 pensioners every hour. Yet the Government is now considering taking the winter fuel allowance away from millions of households which will only make matters worse.”
She is right that the current situation is a national scandal, but wrong to say that reform can only make matters worse. People on low incomes should certainly continue to receive winter fuel payments. So should those who live off the gas grid, as heating with electricity or oil is more expensive. Payments should be extended to the disabled. However, there is no good reason why well-off people should receive benefits just because they reach a certain age.
The minister in charge of this area is a Lib Dem, Steve Webb. For a time in opposition he was responsible for energy and environment (the Lib Dems combined these two areas before Labour brought energy and climate change together) and he is very knowledgeable, and committed to protecting the poor and vulnerable. He should press ahead and reform winter fuel payments in the way outlined in his party’s manifesto.
The Labour Party will oppose this – that is, after all, what the Opposition is supposed to do. However, a more effective line of opposition than arguing for rich pensioners to continue to receive benefits would be for Labour to press for much more effective regulation and proper enforcement. Labour’s manifesto said that it would regulate the private rented sector to require higher energy efficiency standards. This should be done. The coalition – or at least the Conservative part of it – appears nervous of talk about regulation. The Department of Energy and Climate Change, run by Lib Dem Chris Huhne, should make this a priority.