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3 Fuel Poverty

46. The term 'Fuel Poverty' refers to the situation where a household cannot afford to heat their home to an adequate level. The Scottish Government uses the following definition of fuel poverty as set out in the Scottish Fuel Poverty Statement ( FPS) ¹⁵ published in 2002:

"A household is in fuel poverty if it would be required to spend more than 10% of its income (including Housing Benefit or Income Support for Mortgage Interest) on all household fuel use."

Furthermore 'Extreme Fuel Poverty' can be defined as a household having to spend more than 20% of its income on fuel.

47. The concept of fuel poverty is based on a theoretical calculation of how much it would cost to heat a dwelling according to a specified regime (See foot notes 15, 16 and 17). Also 'income' is net of council taxes (See paragraph 117 for additional notes on fuel poverty). For a more detailed description of the definition of fuel poverty and analysis of previous years' SHCS fuel poverty statistics see the Fuel Poverty Statement, the SHCS 2002 Fuel Poverty in Scotland Report ¹⁶ and the SHCS Fuel Poverty Report 2003/4 ¹⁷. A technical note on the calculation of Fuel Poverty figures using SHCS data can be found on the SHCS website ¹⁸.

48. Figure 6 and Table 19 show that from 1996 to 2002 the number of fuel poor households in Scotland fell substantially from around 36% to 13% ¹⁹. In 2003/4, 15.4% of households (350,000) were assessed as fuel poor, and, in 2004/5, 18.2% of households (419,000) were estimated to be in fuel poverty. In 2005/6, 23.5% households (543,000) were found to be fuel poor and this figure increased to 24.6% of households (569,000 in 2007). This is not a statistically significant increase over the 2005/6 estimate.

49. In each of the five survey years there were a number of cases where it was not possible to determine fuel poverty status. These have been reapportioned pro-rata between the two categories (or three categories in the case of extreme fuel poverty) as was discussed in the 2004/5 SHCS Key Findings Report ²⁰. 37 'missing' cases were reapportioned in 2007.

50. A small methodological change was introduced for 2007 processing. Previously, households with negative annual household income after council tax deduction were removed from the fuel poverty calculations but reapportioned as described in paragraph 49 above. However, these households should have been included in the fuel poor since they had negative income. However, it is also likely that their annual income was incorrectly calculated. Therefore, for example, if annual household income was collected as £200 per year, we have made the assumption that that was in fact weekly income and multiplied it by 52. For household incomes above £700 but still below the council tax, we have assumed that the income was in fact monthly and multiplied it by 12. This has the paradoxical effects of raising the average annual household income but increasing the number of low income households included in the fuel poverty calculations. This change increased fuel poverty by 0.2% in 2007.

51. Further detailed analysis of households with very low annual incomes is required on a case by case basis to ensure that their incomes have not been underestimated. While the investigation work so far has increased fuel poverty (by 0.2%), it may be that the annual household incomes of some households whose annual household income is just above the council tax level will more likely be monthly incomes and so need to be multiplied by 12. This may result in a concomitant reduction in fuel poverty. Again these households will have to be investigated on a case-by-case basis and will take some time.

Figure 6: Households in Fuel Poverty 1996-2007 (% and CIs)

Table 19: Fuel Poverty and Extreme Fuel Poverty 1996-2007 (000s, % and CIs)

52. Following a fall between 1996 and 2002, the number and proportion of households in fuel poverty has subsequently increased. Changes in fuel prices were an important factor in both the reduction in numbers in fuel poverty between 1996 and 2002 and in the subsequent increase. At the time of the 2002 survey it was estimated that of the 26% fall in fuel poverty between 1996 and 2002 ²¹, 9 percentage points was due to the fall in fuel prices over the period, 4 to improved energy efficiency and 13 to real increases in incomes.

53. Because of the small sample sizes in the 2004/5, 2005/6 and 2007 surveys, the precision of any estimates of the effect of improved energy efficiency measures will be poor as will estimates of the offset of those improvements against the impact of fuel price increases.

54. The survey found that there was about a 10% increase in household incomes between May 2006 and July 2007. Over the same period, the average cost of all fuels rose by about 4% and standing charges by about 17%. In comparison, the rises over the previous year - between May 2005 and May 2006 - were 16% for standing charges and 21.4 % for fuel costs. The exact rise in fuel costs depends on the proportion of each of the fuels and the relevant charges for each supplier -which can change between suppliers for a household over the year. There has also been an improvement in NHER over the year. This highlights the interaction between fuel price increases, income increases and improvements in energy efficiency in the calculation of fuel poverty.

55. 7% of households (172,000) were also estimated to be in extreme fuel poverty, i.e. having to spend in excess of 20% of their income on fuel. Just under a third of those in fuel poverty are in extreme fuel poverty (Table 19).

56. People living in tenements are least likely to and those living in detached houses most likely to experience fuel poverty. A third of households in detached houses are fuel poor compared with 19% of tenement dwelling households (Table 22).

57. Those with 'poor' NHER scores are more likely than those with higher NHER scores to be fuel poor. Older smaller and single pensioner households are more likely to experience fuel poverty than any other household type. 91% of those with a household income of less than £100 per week are fuel poor. The rate of fuel poverty is higher in rural areas than in urban areas (Table 22 and Figure 7).

58. Those living in private sector dwellings are twice as likely as those in social sector dwellings to experience extreme fuel poverty (Table 23). 9% of those in private sector dwellings are in extreme fuel poverty compared to only 4% of those in social-sector dwellings.

59. Households living in older dwellings are more likely to experience fuel poverty with around 3 in 10 households living in dwellings built before 1919 being fuel poor compared to around 1 in 10 of those living in dwellings built after 1982. This is at least in part related to the greater energy efficiency of dwellings built after 1982 as discussed in paragraph 35.

60. Households with partial central heating or no central heating are around twice as likely to suffer fuel poverty as those with full central heating. Around a fifth of gas users are fuel poor compared to around a third of electricity users and around 45% of users of oil and 'other fuels'. Furthermore those who use oil or 'other fuel type' (not gas or electricity) are around three times more likely to experience extreme fuel poverty than gas users (Table 22).

61. Households in dwellings with lower energy efficiency are more likely to be fuel poor. Households living in dwellings rated 'moderate' or 'poor' are respectively around 2 and 4 times more likely to experience fuel poverty than those with a 'good' rating. Furthermore those with a 'poor' NHER score are more than 10 times as likely to experience extreme fuel poverty as those with a 'good' rating, with just over a quarter of such households in extreme fuel poverty (Table 22 and Figure 7).

Figure 7: Households in fuel poverty by tenure, NHER band, household type, household income and urban/rural (%)

Table 20: Fuel Poverty by dwelling characteristics (000s)

Table 21: Fuel Poverty by household characteristics (000s)

Table 22: Fuel poverty by dwellings characteristics (Row %)

Table 23: Fuel Poverty by household characteristics (Row %)

62. Over 50% of single pensioner households (190,000) and around two fifths of older smaller households ²³ (151,000) were fuel poor, making them more likely than other household types to experience fuel poverty. 17% of single pensioner households and 13% of older smaller households experienced extreme fuel poverty. 27% of single adult households (96,000) were also in fuel poverty. Family and non-pensioner couple households were least likely to be fuel poor (Tables 21 and 23 and Figure 7).

63. Fuel poverty is, of course, highly correlated with income. The likelihood of experiencing fuel poverty increases as household income decreases. Almost all, 91%, of those in the lowest income band (less than £100 per week) are fuel poor. More than two thirds of households (62,000) in this income band experience extreme fuel poverty compared with around 1,000 households in the top three income bands together and 17% of households (76,000) in the second lowest income band (Tables 21 and 23 and Figure 7).

64. 35% of households living in dwellings in council tax band G are fuel poor compared with around a quarter of those in band A-F, probably because the dwellings are more likely to be larger, less energy efficient houses (Tables 21 and 23).

65. Rural households are more susceptible to fuel poverty than urban households. 37% of those in rural areas suffer fuel poverty compared with just over a fifth of urban households. 16% of rural households are in extreme fuel poverty, making extreme fuel poverty three times as likely for a rural household than for an urban household (Table 20 and 22 and Figure 7).

66. Likewise, those not on the gas grid are also around three times as likely to be in extreme fuel poverty as those who are on the gas grid. Around 38% of those households in dwellings not on the gas grid are fuel poor compared with 24% of those who are (Tables 20 and 22).

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