25 November 2011

I discussed fuel poverty in the Shiver quietly:fuel poverty post and wondered about the wisdom of the cut in the winter fuel allowance at this time of rising fuel prices. The other day the Commons debated a motion from the DUP which inter alia urged the Tory Libdem government to reconsider its decision to reduce the allowance (Hansard 22 November 2011 column 182). The debate explored the issues well.

The government claimed convincingly the cut in the allowance was what the predecessor Labour government had planned and, less convincingly, that it had a range of effective policies to tackle fuel poverty. All six Cornwall MPs voted against the DUP motion, that is in effect supported the reduction in the winter fuel allowance.

An important point in the debate was that the current winter fuel allowance was paid universally to people over sixty whatever their financial position; but devising any targeted needs-based allowance that actually reaches the people for whom it is intended is difficult. The advantage of universal benefits is that they have an effective reach and targeted benefits tend not to. While targeted means more for those in need, universal, which gives to those who do not need it, helps to bind us all in social solidarity, national cohesion, and removes any stigma from the benefit. There is no easy solution but I support the needs-based targeting of the winter fuel allowance. While we try to get to that – and tackle fuel costs – I think the allowance should be paid universally to the elderly at the uncut rates.

Fuel poverty in Cornwall
Meanwhile here are some statistics about the distribution of fuel poverty in Cornwall.

The average proportion of households in fuel poverty by Cornwall constituency in 2009 (the latest year for which figures are available): Truro and Falmouth 22.0 percent of households, Camborne and Redruth 23.2, South East Cornwall 23.9, St Austell and Newquay 24.1, St Ives 28.4, North Cornwall 32.8. There were about 60 000 households in Cornwall in fuel poverty in 2009 according to these figures; the rise in fuel prices has probably increased that.

Of course, there is significant variation across Cornwall, ranging in the subwards (lower layer super output areas, LSOAS) from 7.7 percent to 48.1 percent.

The statistics are on the Department of energy and climate change website here. They are organised in various geographical areas including the six constituencies and 327 subwards in Cornwall.

Broken promise
There is another issue too. The May 2010 election manifesto of the Conservatives said, “We will protect pensioners’ benefits and concessions and this includes … the winter fuel allowance”. The Tory Libdem coalition program for government said, “We will protect … the winter fuel allowance”. Reducing the allowance is not protecting it and candidly nor would needs-based targeting be.

Fuel poverty definition
A household is described as in fuel poverty if it has to spend more than ten percent of its income on fuel to maintain satisfactory levels of warmth.

The Tory Libdem government has decided that for this winter, 2011/12, the winter fuel payments to the elderly will be £200 and £300 for people over sixty and over eighty (see here for details). Since 2008/09 they have been one-off payments of £250 and £400. There is an argument that the higher levels for the last three years were temporary but I think most people will see what has happened as a de facto reduction. There are also cold weather payments if the temperature very much drops.

Is this reduction a wise policy at this time when fuel prices are very high?

An interim report Fuel poverty: its problem and its measurement on the question in England has just been published. The final report comes out in January 2012. This interim one looks at the evidence there is on questions like: Is fuel poverty a distinct problem or part of the problem of poverty generally? How many excess deaths are there in winter and how many of those are due to fuel poverty? Is the current definition of fuel poverty sound and can a better definition based on low income and high costs be had? The measurement of fuel poverty is problematic.

The interim report is a capital study and presents the evidence well.

Some snippets from the report: not having access to the gas grid increases energy costs – relevant to many in Cornwall; people on low incomes are least likely to be on the cheaper tariffs; fuel poverty and cold homes might adversely affect school attainment; largely preventable excess winter deaths in England run at around 25 000 each winter of which about a fifth may be due to cold homes (page 10) and an unsure number to fuel poverty. In Cornwall there are about 300 excess winter deaths each year.

It is important generally to look at the evidence and base policy on it, though evidence is not always clear cut. Fortunately the evidence here tells us very much about the nature and scope of the issue. How we should respond to it is a political judgement based on what we wish to achieve and how we are best likely to achieve it. I not think that the winter fuel payment in its present form is the right response. It is based on age and goes to some people who do not need it. If we wish to help people mitigate the known and suspected adverse effects of cold homes by indirectly subsidising their fuel costs, targeting those with the lowest incomes and the highest fuel costs strikes me as a better immediate approach; it would enable, within the overall cost of the present scheme, higher and more realistic payments to be made to those targeted households.

However, the Tory Libdem government is floundering on fuel costs and there is a danger that it will see a new way of measuring the problem as an end in itself and easier than tackling more difficult elements. The costs are increasing and will probably continue to increase and this will push more people into fuel poverty at a time of static wages, rising unemployment, high inflation, and little or no growth in the economy. We need to reduce fuel costs by ensuring there is a more extensive program to make all homes thermally efficient: the Tory Libdem government suspended the Warm Front scheme between December 2010 and April 2011 and then reintroduced it with less funds and more restricted eligibility. We should ensure by legislation if necessary that the poor can access the cheapest tariffs. We need also to explore the feasibility of regulating fuel costs ( we do it for fares on the private railways) but I don’t think the Tory-Libdems are up for that. More patches for policies, I suppose, and shiver quietly.

Here is a House of Commons debate on energy prices 19 October 2011

The current cold weather is a good time to recall that the Labour government has done much to help pensioners pay the accompanying high fuel bills, notably with the winter fuel payment introduced by Labour in 1997.

Every household with a person or couple over sixty gets £250 as a winter fuel payment. People of eighty and over get more. Of course, this doesn’t pay the whole fuel bill but it certainly helps; and of course some are more in need than others. Cornwall is far from being the coldest place in Britain in winter but about 131 000 winter fuel payments are made in Cornwall and Scillies (Hansard 27 November 2007, columns 333W-334W). Those payments are for the year 2006/07 and the number will have increased by now – I think my headline figure is an understatement. More needs to be done about the price of fuel and how to make it affordable to those on low incomes, but the fuel payment is a capital practical policy.

The Conservatives have refused to guarantee its continuance should they form a government: Hansard 4 June 2008 column 841. Let me repeat that: the Conservatives have not guaranteed to keep the winter fuel payment.

The elderly in Cornwall have much to thank Labour for. Free bus travel and shorter waiting times in the NHS, state spending on pensioners up 50 percent in real terms since 1997 (Hansard 4 June 2008 column 844), effectively a single pension of £124 a week and £189 a week for a couple (standard minimum guarantee of pension credit), a promise to restore the link between earnings and pensions.

There is still much to do. A scandalously large amount goes unclaimed in benefits and it is urgent to simplify the system and get more necessary money to people who rightfully are entitled to it. The delay in linking pensions and earnings is disappointingly far off: 2012 at the earliest under present government plans. We need a national, rational, and coherent energy policy that minimises gigantic leaps in domestic fuel prices.

Labour has made many mistakes and has not always understood the impact on the poor and vulnerable of their policies such as the abolition of 10p tax rate. Too often poor men’s reasons have not been heard. Its response to its own culpability and to that of the well-heeled for the present economic recession is seriously inadequate. Jerusalem is not yet. Perhaps we never reach Jerusalem. But look what Labour has done that is good. Read the first four paragraphs again. People in Cornwall are being helped, their lives are made better, they and their needs are recognised, not theoretically, not generally, but in minute particulars that count and in that everyday world in which most of us live.


The original paragraph immediately around the the Arnold and Blake quotations are rewarding reading and I have linked immediately below to accessible online books.

Jerusalem is not yet: Matthew Arnold A French Eton original page 112-113 in the online book

Minute particulars: William Blake Jerusalem original page 55: 60-63 in the prophetic book online (this is not the poem)

Poor men’s reasons are not heard: Thomas Fuller (1654-1734) Gnomologia (Proverb 3897)

The energy supply statement from Ofgem on 6 October sets out the facts about the differential rates for the various ways of paying for fuel and they do not tell a simple story about unfairness to the poor.

Paying by prepayment meter is about £118 a year more on average than paying by direct debit and paying quarterly by cash or cheque is about £80 a year on average dearer. For more than four million households in rural places, including villages in Cornwall, mains gas is not available and they lack the reduced rates that come with competitive dual fuel tariffs, paying about £55 a year more than if they had access to dual fuel deals. These figures depend on the level of fuel consumption which varies among households.

Of course prepayment and quarterly arrangements cost the companies more to collect and administer than direct debit payments but the differential is greater than that and although the report says the differential in prepayment charges are cost-justified I think the figures suggest a small premium is paid by customers.

It is a commonplace of concern that the poor and the fuel-poor (those who spend more than ten percent of their income on domestic fuel) are using prepayment meters and quarterly payments and are thus paying more for their fuel and energy than the well-heeled paying by direct debits. The Ofgem report is clear that this simple picture is misleading.

Not everyone who pays by the higher rate methods is poor and not everyone who has no access to mains gas is poor, but many are. Not all the poor/fuel-poor pay by the dearer methods but certainly they are concentrated in there; for example the quarterly payment method is the most common payment method among the fuel-poor and just over half of prepayment meter customers are in the bottom two social groups, D and E.

A blanket reduction of the dearer tariffs, removing the unjustified premiums, will help the poor/fuel-poor but also help others on those arrangements. A little has been done but much more is required to target fair, and even subsidised, charges on the poor/fuel-poor. Ofgem is holding a consultation until 1 December 2008 about its report and I hope people and groups in Cornwall will respond and advocate definite help for people who plainly need it: the aim should be to reduce prices for the poor.

The Ofgem report helpfully distinguishes between those who are poor/fuel-poor and vulnerable customers who also include those who are sick or disabled and who also need help in accessing the best financial deals.

These price differentials and barriers should have been tackled definitively so far as they impact upon the poor and vulnerable a long time ago. Better late than never, I suppose. If all goes well next year should be a little warmer and cheaper for many in Cornwall. The Labour government’s winter fuel payment will help people (though it is not targeted on the poor), as will, eventually, lagging; but high prices need more than revised tariffs, winter fuel payments, and lagging, and the government appears unimaginatively unable or unwilling to help.