Briefing Note: The Updated Fuel Poverty Strategy

12/02/2021

Sustainable Warmth – Protecting Vulnerable Households in England

AgilityEco welcomes the publication of the Government’s updated Fuel Poverty Strategy as well as its response to the consultation. The publication is not before time – the consultation closed in September 2019. We support the move to a new definition of fuel poverty which will better allow progress on improving the energy efficiency of homes to be reflected in the way fuel poverty is measured.

We are also pleased to see that the Government’s intention to focus on more intensive improvements to the worst homes will be backed up by an Energy Company Obligation that increases to £1bn a year from April 2022, and funding for low-income households off the gas grid via Home Upgrade Grants, with initially £150m in 2021/22, which is expected to rise significantly thereafter.

Alongside a commitment to significantly ratchet up the pressure on landlords to improve the energy efficiency of private rented homes, and new funding for social housing retrofit, these commitments should combine to deliver positive change and bring us a step closer to ending fuel poverty, as we called for in our 2019 manifesto “From Obligation to Opportunity”.

In More Detail

Government has confirmed it will move away from the Low Income High Costs (LIHC) definition of fuel poverty. That is a relative indicator which has not allowed Government to reduce the overall number of households in fuel poverty despite action taken. The new indicator will be Low Income Low Energy Efficiency (LILEE). It will capture households that have a residual income below the poverty line (after accounting for fuel costs) and live in a home that has an energy efficiency rating below Band C. Consequently, the numbers recorded as in fuel poverty will fall as the energy efficiency rating of the homes of low-income households reaches Band C. The Warm Home Discount will continue to have an important role to play and will be expanded to provide rebates to 3 million households, as the LILEE “FPEER” definition takes account of the rebates given.

The updated strategy confirms four guiding principles for tackling fuel poverty:

  • ‘worst first’: prioritising upgrades to the least efficient homes;
  • cost-effectiveness: seeking the best return from investment;
  • vulnerability: identifying those households most at risk from cold homes;
  • sustainability: ensuring fuel poverty policies are aligned with the need to reach net zero.

The new approach to measuring fuel poverty, the focus on tackling the worst homes first and the aim of improving homes through the installation of multiple measures, will combine to require substantial increases in the average cost of improving homes.

It is therefore encouraging to see this being recognised in an increase in the value of ECO from £640m a year to £1bn a year from 2022-2026. We are also pleased that a commitment has been made to introduce the Home Upgrade Grant (HUG) as a successor to the Green Homes Grant, with £150m in 2021/22. This is expected to rise significantly in the following years, in line with previous statements and the Conservative Manifesto commitment of £2.5bn. The Government has also committed to exploring where delivery is at lower-than-expected levels, as we have seen in the Green Homes Grant Voucher Scheme.

The strategy repeats the proposal first set out in the autumn 2020 consultation on improving the energy performance of privately rented homes that the minimum EPC rating for homes in the private sector should be increased to Band C by 2030 (subject to some caveats). It is also proposed to significantly increase the cap on the required landlord investment – from £3,500 to £10,000. These changes are due to be supported by greater enforcement and the strategy announces that the Housing Health and Safety Rating System is to be reviewed. The review will look at the latest evidence on cold homes and this could give local authorities greater enforcement powers over energy inefficient homes, especially in the private rented sector.

The strategy commits Government to better sharing of data to identify those in fuel poverty, including health data. Although the changes to the definition of fuel poverty are likely to create an immediate increase in the number of households defined as fuel poor, the strategy recognises that there are important questions regarding households that fall outside the definition. It cites an example of a low-income household living in an A-C rated home who would not be classed as fuel poor under the LILEE definition and would therefore not qualify for energy efficiency improvements, but are deemed to be at risk based on their health or age. It commits to assessing whether other forms of support may be appropriate, such as the potential need for boiler repair or replacement in the event of a crisis. We believe there is a strong case for doing so and will be making that case to Government. Our ECHO programme is now in its fourth year of offering emergency boiler support on a repair-first basis for vulnerable and at-risk customers, and demand for this service is currently at an all-time high.  We look forward to working with BEIS on this issue and believe it is important that support is not confined too narrowly.

In the context of low-income households that are vulnerable to the cold, we were delighted to see a positive case study reference to the excellent Warm Homes Oldham team, and we’re proud to note that AgilityEco managed the installation of the first-time central heating system highlighted in the case study.

We anticipate that now the updated Fuel Poverty Strategy is out, we can soon look forward to consultations on the long-term future of ECO and the Warm Home Discount. We will share our thoughts with you on these as they emerge but please don’t hesitate to let us know if you have questions or queries with which we can help.