Will the Budget boost fuel poverty?
Unintended consequences or not, Budget cuts for the very poorest will boost fuel poverty and undermine efforts to tackle climate change. Households in fuel poverty are already concentrated among exactly those families where the cuts will hit hardest. Worse, DWP Minister Steve Webb has not ruled out cuts in weekly Cold Weather payments this autumn. Media reports put Winter Fuel Allowance in the frame. Yet regressive Budgets sustain the high energy use of the most well off, widening the fuel divide between the poor and well-off.
The more unequal our society, the more remote are our CO2 reduction targets. Yet yesterday’s IFS report shows that the very poorest families with children lose more from the June Budget than any other group – facing a 5% cut in their total income. Yet the lowest third of households by income account for over 90% of those in fuel poverty in England.
Rising energy prices drove an extra half million households into fuel poverty in the UK in a single year in 2007. The June Budget cuts looks set to accelerate this trend. Of the four million fuel poor households in total, most (3.25 million) are defined as “vulnerable households”, one that contains the elderly, children or somebody who is disabled or long term sick. A household is said to be in fuel poverty if it needs to spend more than 10% of its income on fuel to maintain a satisfactory heating regime (21 degrees for the main living area, and 18 degrees for other rooms). Fuel poverty figures are rising due to the overall effect of energy price rises since 2004, which far outweighed the impact of increasing incomes and energy efficiency. Now, a new driver will be cuts in household income, with regressive cuts signalling further upward pressure on the fuel poor.
The Spirit Level warns that “Governments may be unable to make big enough cuts in carbon emissions without also reducing inequality.” The bottom 10% of households spend less than half as much (£12.90) a week on fuel 2008 as the top 10% spend, at £28.70 a week. Overall, households in the UK spend £20 billion on energy each year, mostly on electricity and gas, and account for 27% all energy consumed.
Rising inequality matters in the fight against climate change. The reforms announced in the June 2010 Budget disproportionately affect the income and spending of the poor and those groups that are most reliant on benefits, namely the single unemployed, lone parents and zero-earner couples. There are further cuts to come in the CSR and benefits that are specifically aimed at preventing fuel poverty do not appear to be protected. While the Coalition has pledged to maintain winter fuel payments, there has been significant media speculation as to whether their total value may fall. In addition, the Government has yet to confirm what the level of cold weather payments (the additional payments provided those on low incomes during exceptionally cold weeks in winter) will be this year.
All this contrasts sharply with the lack of attention paid to significant tax avoidance or to taxes on the extremely wealthy (as well as the income tax break for those on the middle band).