While the average price of gas peaked back in August 2022, prices remain high and, unsurprisingly, so do rates of fuel poverty.
Recent years have seen high fuel prices and the cost of living crisis more generally increase fuel poverty which still affects millions of households nationally.
Currently, UK households spend about £130 a month on energy according to government regulator Ofgem. That said, Ofgem’s price cap, which acts as a ceiling to protect households from excess bills, will rise by around 10% in October with energy instability remaining an issue.
Aside from high gas prices, factors like home insulation, income levels and energy needs can all shape how likely fuel poverty is to occur.
Despite this, there are many ways the UK can lower fuel poverty. Along with stabilising prices through more energy self-reliance, the government could introduce new measures such as fresh support for poorly insulated homes.
Today’s guide will provide a comprehensive overview of what fuel poverty is, how many households are affected, the primary causes and potential solutions!
Using key stats, we’ll explore these topics in a way that is both informative and relevant to what households are experiencing in 2024. First, let’s define fuel poverty and look at how it’s measured.
What is Fuel Poverty and How Is It Measured?
Note: It’s important to consider how ideal temperatures can vary for different individuals. For example, the room temperature requirements for a newborn baby are particularly important to lowering the danger of Sudden infant death syndrome or SIDS.
Whether for newborns or those with health conditions, you can turn to sources like Citizen Advice, the National Energy Foundation and the World Health Organisation for advice on ideal room temperature for different individuals and rooms.
Fuel poverty is when a household must spend a significant percentage of their total income just to keep warm.
High prices and financial strain leave many households in the unacceptable and hazardous position of choosing between warmth and meeting other needs, like nutrition or electricity use.
Some households with financial struggles can end up struggling to meet several needs at once, only adding to the difficulties of fuel poverty.
While we’ve provided a broad definition above, there are more precise ways of defining and measuring fuel poverty.
In the image below you can see the areas most impacted by fuel poverty in the UK (image courtesy of Heatable).
England Fuel Poverty Definition
In England, the Warm Homes and Energy Conservation Act 2000 considers fuel poverty to cover low-income households that can’t heat their home affordably.
The 2021 Fuel Poverty Strategy, however, offers a clearer definition with the Low-Income Low Energy Efficiency Indicator or LILEE Indicator.
Using this measure, households are considered in fuel poverty when:
- They are in Fuel Poverty Energy Efficiency Ratings D through G
- The property has residual income under the poverty line after modelled energy costs and housing costs are deducted
Wales Fuel Poverty Definition
The Welsh government defines fuel poverty through the 2021 Tackling Fuel Poverty Plan. The document covers the Welsh government’s plan to fight fuel poverty over the 14 years from 2021 through 2035.
The Tackling Fuel Poverty Plan measures fuel poverty as:
- At Risk of Fuel Poverty – Households spending over 8% but under 10% of their income on home heating
- Fuel Poverty – Households that spend over 10% of their income on home heating
- Severe Fuel Poverty – Households spending more than 20% of their income on home heating
Scotland Fuel Poverty Definition
The 2019 Fuel Poverty Act defines fuel poverty and extreme fuel poverty in Scotland while providing realistic goals for a 21-year period.
A Scottish household is considered to be in fuel poverty if:
- The households need over 10% of their adjusted net income for adequate heating*
- And they cannot keep up an acceptable living standard with their adjusted income after deducting certain costs *
*This includes deducting their fuel expenses, any childcare costs and any disability or care needs benefits received.
Extreme fuel poverty covers households that a) spend over 20% of their income on fuel costs and b) meet additional conditions.
As for point two, a household’s income must be considered after housing costs are deducted and if the household cannot maintain an acceptable living standard with the remaining income.
The Fuel Poverty Act also lays out the goals of keeping fuel poverty levels at no more than 5% and extreme fuel poverty at no more than 1% by 2040.
Northern Ireland Fuel Poverty Definition
There isn’t a full legal definition of fuel poverty in Northern Ireland, however, the Affordable Warmth Scheme provides a useful summary.
According to the scheme, a household is in fuel poverty if more than 10% of income goes toward home heating, assuming all domestic fuel use is considered.
The Belfast City Council points to the World Health Organisation (WHO) for defining adequate household warmth in a Public Consultant document.
According to the WHO, adequate household warmth is defined as:
- 21°C for a living room*
- 18°C for other used rooms*
*These are broad definitions, however, specific advice can differ, especially for certain individuals including newborn babies and those with specific health conditions. Therefore, it’s especially important to use the correct room temperature for vulnerable individuals such as newborns.
All in all, how fuel poverty is defined can differ from region to region and likewise so can its frequency. This can be affected by how different areas of the UK define fuel poverty, though other factors can play a big role too.
How Frequent is Fuel Poverty?
Fuel poverty is a widespread issue in the UK, affecting some 5.6 million households according to National Energy Action (NEA) data.
Considering the scale of fuel poverty along with its serious, in some cases lethal nature, more government action is essential to improve living standards nationwide.
By enacting new laws and policies, the government can reduce fuel poverty in the short term and prevent it from increasing in the future.
Data for England
Government data from February shows that around 3.17 million English households or 13% of the total are in fuel poverty. The cited report measured fuel poverty in England through the Low Income Low Energy Efficiency Indicator.
Fuel poverty charity National Energy Action or NEA also recently provided data for many regions across England.
Here’s a breakdown of NEA’s regional data for England:
- North West – 465,325 households (14.4%)
- North East – 172,828 households (14.4%)
- Yorkshire and the Humber – 418,084 households (17.5%)
- West Midlands – 441,693 households (17.8%)
- East Midlands – 289,735 households (14.2%)
- East of England – 384,406 households (13.2%)
- South West – 286,641 households (11.4%)
- South East – 331,687 households (8.6%)
- London – 403,807 households (11.5%)
Scotland
In Scotland, fuel poverty affects nearly a third of the population according to the first annual report from the Scottish Fuel Poverty Advisory Panel.
The report noted the following fuel poverty increases from 2019 to 2022:
- Fuel Poverty rose from 24.6% to 31%
- Extreme fuel poverty went up from 12.4% to 18.5%
Wales
Shockingly, up to 45% of Welsh households are in fuel poverty according to the most recent government estimates, making Wales the worst affected region in the UK. Estimates also suggest that about 8% of Wales is experiencing extreme fuel poverty.
Northern Ireland
The equivalent figure for Northern Ireland is 41%, according to National Energy Action. This is almost double the fuel poverty rate in 2016 when a House Condition Survey found the figure was 22%.
Causes of Fuel Poverty in the UK
Note: Here we focus on the main factors directly affecting households, though fuel poverty is also influenced by wider-ranging causes including the international price of gas.
With fuel poverty affecting millions of households nationwide, why one property enters fuel property can differ from another depending on the main financial stressors involved.
As a result, the government and local authorities need to consider a range of causes to properly tackle fuel poverty, such as household income, energy prices, energy consumption levels and insulation levels.
Household Income
Unsurprisingly, how likely a household is to experience fuel poverty is significantly linked to their combined income.
Along with affecting a household’s ability to meet fuel costs, low income can make it harder to upgrade a property’s energy efficiency (e.g. wall insulation, new appliances, etc.).
In fact, 46% of low-income households in England also have a low energy efficiency rating according to government statistics.
That said, in recent years, rising energy prices have pushed up the number of households affected by fuel poverty. As a result, ‘low income’ becomes more of a relative term when energy prices increase.
Energy Prices for the Consumer
The past few years have seen energy prices rise and fall including a surge through much of 2021 and 2022.
While gas prices have come down since then, Statista data from earlier this year show gas prices remain 50% higher than in June 2018.
The sum total of household gas spending in the UK saw a 174% increase between 2020 and 2022, also according to Statista, increasing from £11.58 billion to £20.22 billion. This figure reached £24.89 billion in 2023.
The past few years have highlighted how much changing energy prices can affect households often as the result of international causes with the UK obtaining much of its energy from abroad.
A clear indicator of changing energy costs is the energy price cap, which is a price ceiling set by government regulator Ofgem every three months.
The purpose of this ceiling is to limit what households can be charged for gas and electricity. That said, the price cap is an average that’s affected by factors like the type of tariff a household is on, energy usage and location.
As a result, when market energy prices go up, so can the price cap. For example, while the energy price call fell earlier in the year, Ofgem’s energy price cap will increase by about 10% from October.
Energy Consumption
Households are more at risk of entering fuel poverty when they have low income and high energy demand.
The size of a household can also affect energy needs by increasing the frequency and scale of home heating needs (e.g. the number of rooms that need heating or how much of the day).
A property’s energy efficiency also plays a key role in how much energy is needed for adequate home heating. After all, a household would need to keep their radiators on for longer to heat up their home if it’s poorly insulated.
Household Energy Efficiency
While the link between household efficiency and fuel poverty mostly comes down to how well a property can keep the heat in, other forms of energy efficiency can also make a difference.
For instance, a household with inefficient appliances will face a higher cost of living, increasing their risk of falling into fuel poverty. Either way, understanding the UK’s energy efficiency rating system is a helpful place to start.
The EPC Rating System
The Energy Performance Certificate or EPC rating system is the primary way of measuring household energy efficiency in the UK.
Some key takeaways from the EPC rating system:
- This system features efficiency ratings ranging from A to G
- Households with an EPC rating of A, B or C are considered efficient
- A property is considered inefficient with an EPC rating of D, E, F or G
The Energy Bills Tracker from Rightmove finds that around 55% of UK homes have an EPC rating of D or less. As you’d imagine, energy efficiency affects heating and electricity bills alike.
Rightmove also finds that efficiency affects household energy bills as follows:
- The average C-rated home pays around x3 that of an A-rated home
- The average D-rated home pays more than x2 that of a B-rated home
- The average E-rated home pays almost twice that of a C-rated home
How energy efficiency is measured for official purposes (e.g. to decide whether a property is eligible for a grant) can vary. It’s important to keep this in mind if applying for home energy efficiency support.
What Affects Energy Efficiency
How well a property is insulated plays a significant, direct role in the cost of home heating, though thermal efficiency, on the whole, is also shaped by how efficient a property’s boiler and radiators are.
Some potential factors in a household’s thermal efficiency include:
- Efficiency of boiler
- Wall insulation
- Loft insulation
- The type of windows installed (e.g. single-glazed or double-glazed)
- Efficiency of radiators
Beyond thermal efficiency, overall household efficiency is also influenced by
- Ventilation levels
- How efficient the light is
- Efficiency of household appliances
While the EPC rating system is very informative and often used for official purposes, all factors in household efficiency should be taken into account.
After all, even if a factor in household efficiency isn’t part of measuring the EPC rating, it can still have a meaningful impact on energy bills.
The General Cost of Living
Since 2021, the UK has endured a cost of living crisis that has affected a range of services, goods and household bills alike.
Along with high fuel bills, increased living costs all around make it harder for households to afford adequate heating.
Statista data shows that UK transport services rose by about one-fifth between early 2019 and the second quarter of 2024.
While the economy usually sees some inflation year-on-year (except during recessions), inflation in the early 2020s was unusually high.
Food Foundation also reports that the annual inflation rate* for food and non-alcoholic beverages grew from 4.4% in January 2022 to a peak of 19.2% in March 2023.
While food and non-alcohol beverages inflation has fallen sharply it still remains relatively high at 7%. Ultimately with the cost of living crisis still ongoing, a range of long-lasting price hikes continue to play a role in UK fuel poverty.
*This figure is based specifically on the annual consumer price index inflation rate based on data from the Office for National Statistics.
Potential Solutions and Future Plans
Reducing fuel poverty means tackling the primary causes affecting households while also improving the UK’s approach to energy.
Ongoing Efforts
The ECO4 scheme is one of the primary UK financial support schemes for low-efficiency households.
ECO4 can support low-efficiency households (i.e. those with an EPC rating of D through G) so they can afford energy efficiency upgrades.
This scheme can support:
- New heating measures like solar panels or an air source heat pump
- New insulation measures to better keep the heat in
- Or/and new smart heating control installation
Other notable schemes include the Home Upgrade Grant, Northern Ireland’s Affordable Warmth Scheme and the Warmer Homes Scotland programme.
Contact your local council if unsure about your eligibility for any local or national home heating or energy efficiency support schemes.
The 2010s saw some initial progress in the fight against fuel poverty, with the rate dropping from 22.1% to 13.4% throughout the decade according to Government statistics.
However, fuel poverty began to increase again largely as a result of the early 2020s energy crisis. As a result, more action is needed to support households experiencing fuel poverty and to prevent a rise in fuel poverty in a future energy crisis.
Reducing And Preventing Future Fuel Poverty
New energy efficiency schemes working alongside current ones (e.g. ECO4) extended into the future can help limit fuel poverty in the years ahead.
How effective these schemes are over time will partly depend on their capacity to adapt as the nature and causes of fuel poverty change.
In recent years, rising gas prices have led to an increase in fuel poverty. However, declining prices in the year ahead would suddenly make household insulation and home heating systems more important considerations.
Outside of direct household support, the government can fight fuel poverty by increasing the UK’s energy self-reliance.
With more electricity coming from home and fewer imports, this will make UK energy prices less vulnerable to wider market changes.
The government is targeting 100% clean and affordable electricity by 2030 as part of a wider vision to lower the nation’s carbon footprint while improving energy self-reliance.
Naturally, more energy self-reliance will help stabilise energy prices, benefiting the consumer with fewer hikes in their heating bills
Further, it’s important not to overlook reducing wealth inequality and the cost of efficient heating technology as ways to reduce fuel poverty.
Summary of UK Fuel Poverty
Fuel poverty continues to affect nearly 1 in 5 households throughout the UK, with some regions more impacted than others.
While progress has been made, it is paramount that the government preserves at least a majority of the current schemes designed to support homes in fuel poverty while introducing new measures.
Improved energy self-reliance will also be key to stabilising energy prices in the long term and reducing peaks in fuel poverty figures years from now.
References:
- https://www.gov.uk/government/news/fuel-poverty-has-not-fallen-to-any-meaningful-extent-in-5-years
- https://heatable.co.uk/boiler-advice/fuel-poverty-in-uk
- https://commonslibrary.parliament.uk/research-briefings/cbp-8730
- https://assets.publishing.service.gov.uk/media/65ccecba1d939500129466a9/annual-fuel-poverty-statistics-report-2024.pdf
- https://www.statista.com/statistics/295545/number-of-households-in-the-uk/