Friday, 31 July 2015

Report warns retrofit levy could have a ‘regressive impact’ on poor households

ECO subsidy threat to low-income tenants

Money raised from energy bills to subsidise the government’s national retrofit programme could exacerbate fuel poverty for thousands of low-income households, an independent report has warned.

In the interim results of a review into fuel poverty commissioned by the Department of Energy and Climate Change, Professor John Hills said the forthcoming energy company obligation – ECO – would have to be carefully designed to avoid having a ‘regressive impact’ on the poorest households in England and Wales.

The design of ECO, which is a levy taken from consumers’ fuel bills by energy companies to tackle fuel poverty and subsidise energy efficiency measures in the government’s £7 billion a year green deal retrofit scheme, will be unveiled at the end of the month.

Last week Inside Housing reported that DECC was planning to exclude social landlords from accessing the fuel poverty element of the multibillion pound ECO subsidy – despite social tenants making up 17 per cent of the fuel poor (see box, below).

Professor Hills’ interim report showed that ECO could lead to an increase in energy prices for the poorest households if it is not distributed fairly.

He warned fuel poverty could be worsened as a ‘distributional consequence’ of carbon cutting efforts, and argued low-income households need ‘higher levels’ of ECO.

Professor Hills, who also wrote the influential 2007 review of social housing, said the way ECO resources are split between measures directly benefiting the fuel poor and carbon reduction measures would be ‘crucial for the net effect of the policy package on distribution and on fuel poverty’.

The review also found that the scale of fuel poverty, which the government must eradicate by 2016, has been underestimated previously.

It showed that even at a ‘conservative estimate’, 2,700 people die every year in England and Wales as a result of fuel poverty – more than die on the roads.

Professor Hills said: ‘The way we have measured fuel poverty painted a false picture about how well we were addressing it… Things are hardly on track for the problem to be eradicated in just a few years.’

In numbers: fuel poverty

4 million - households in England in fuel poverty in 2009

2.7 million - households with high fuel costs and low incomes in 2009, down from 2.9 million in 1996

2,700 - deaths each year as a result of fuel poverty in England and Wales

Source: DECC; Professor John Hills

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