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Back to wartime measures in the battle against the scourge of fuel poverty

ImageWith increasing pressure on public sector finances venture capital could be one way to kick start a drive to bring the UK’s homes up to high standards of energy efficiency

In 2000 there were some 3.7m households in Britain living in fuel poverty. Of which 2.8m were in England. Today, the best estimate is that there are over 5m households who need to spend over 10 per cent of their disposable income buying fuel to keep warm in winter.

This is an unacceptable social problem, especially in one of the richest countries in the world. And a real barrier to achieving climate change goals.

Radical steps need to be taken to reverse, then eliminate, this shameful trend. In this column, I will propose what needs to be done to eliminate the problem altogether—so that it becomes as irrelevant as in every other western European country outside the British Isles.

In 2000 the government passed the Warm Homes & Energy Conservation Act. Its objective was clear. In the words of the 2001 Labour election manifesto, “by 2010 no vulnerable household in the UK need risk ill-health due to a cold home”.

Downward pressure on fuel prices

Such confidence was not surprising. The numbers of households in fuel poverty was dropping rapidly, down to just over 1m. That mirrored increases in overall affluence, the creation of the Warm Front programme, and improving low-income housing. The designation of a priority group within the energy-efficiency programme mandated from the energy companies also helped alleviate the problem. And, above all, there was downward pressure on fuel prices.

But, around the middle of the decade, fuel prices started to rise until the numbers affected matched, then surpassed, those recorded when the legal commitment began.

Throughout, the government’s official watchdog, the Fuel Poverty Advisory Group, has continued to warn about the absence of resources to address the problem. The government responded by altering their Warm Front programme. It increased both the overall budget, and the amount to be spent per household.

But quarts are still being pushed into pint pots. Last year the number of homes improved under Warm Front was 233,594. This year it is 215,000. Next financial year the numbers are due to drop by more than half, to just 91,100.

The FPAG has been told that since 2000 government programmes may have eliminated as few as 400,000, certainly no more than 800,000, households from fuel poverty.

Eligibility for Warm Front is limited to those on passport benefits This is not synonymous with those actually in fuel poverty (although in covers many who may be on the cusp). The House of Commons Public Accounts Committee managed to parody some tentative concerns expressed by the National Audit Office, to produce headlines which maintained that only one-third of those helped by the programme were in real fuel poverty at the time. Undoubtedly an over-statement. But demonstrating that targeting of help this way, rather than via F and G ratings, is at best imprecise.

Hope that the slack might be taken up by the programmes mandated from the energy companies are proving equally illusory. Social equity requires that half the present Carbon Emissions Reduction Target (CERT) activity must be in the “priority group”. There has been a growing tendency in many circles to describe the priority group activity as if it is synonymous with eliminating fuel poverty.

Every political party acknowledges that over the next few years public expenditure will be under enormous pressure. Every political party acknowledges that price signals are a very important way of alerting householders to Act on CO2. Every political party acknowledges that the most cost-effective carbon savings can be realised by improving vastly the energy efficiency of the building stock.

To achieve this, there is a growing political consensus that the easiest way for this circle to be squared is to allow improvements to be made, via loans incurred by borrowing against the value of the building. The necessary investments are funded by venture capital. With the capital being repaid with help from the lower fuel bills that then ensue.

The underlying presumption is that “pay as you save” can only be pertinent for those able to fund such interest payments themselves. It is, if the relevant debt is the responsibility of the householder. But what if the government itself was to become the debt-payer for households in true fuel poverty?

This obviates the need for government to finance the initial capital to improve the homes of those in fuel poverty. It simply finds the money to meet the interest payments. Following precisely the same pattern that followed for so many new schools, roads or hospitals.

The first such scheme on these lines was the Lend Lease arrangements set up with president Roosevelt in 1941, to provide the munitions to fight Hitler. Without this financing few historians think that war could have been won.

Climatologists tell us we have a similar war on our hands to combat global warming. We cannot begin to address this enemy if we are constrained by knowing how much energy price rises damage social equity.

Embracing Lend Lease when fuel poverty-proofing houses should ensure that we do achieve the objective of the 2000 Warm Homes Act. Because only by eliminating fuel poverty first can we truly create a low-carbon future that is truly socially equitable.

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