Revised Measurement of Fuel Poverty
Summary
Department of Energy & Climate Change (DECC) released revised figures for fuel poverty in August 2013. Along with these figures the DECC detailed the new methodology being used for the definition of fuel poverty.
The previous definition of fuel poverty (10% of income spent on household fuel) has been changed to a new measurement called Low Income High Cost (LIHC). This has been introduced to address increasing concerns about the validity of the old measure.
Differences
The old measure defined a household to be in fuel poverty when the household spent more than 10% of its income on keeping warm, defined as maintaining living room at or above 21°, and other rooms to be at or above 18° on average.
The new measure uses the following thresholds:

Households have fuel costs that are above average (the national median level).

Whether, after fuel costs, residual income would be below the poverty line (Below 60% of the household median income).
How income and energy bills are estimated have also changed.
Income -Previously income was calculated before housing costs (e.g. mortgage, rent) the revised LIHC measure calculates it after housing costs. Income is then equivalised, to reflect the fact that different types of households (e.g. lone pensioner, family with 2 children etc) have different spending requirements.
Fuel Bills -The old fuel poverty indicator estimated fuel bills using a range of factors including insulation, type of household (terrace, flat) and heating type, among others; in the main this has remained the same.
The method of estimating consumption has been slightly amended to include a number of factors including the economic circumstances of people that live in the home (for example if they are unemployed or at home for longer periods of the day).
Fuel Poverty Gap
One of the biggest differences with this new measure is the introduction of a new indicator the “fuel poverty
gap”; this is presented both as an aggregated total and a mean value. This new indicator relates to the fuel poverty experienced by each household.
The fuel poverty gap for a particular household is the difference between the household’s required fuel costs and what these costs would need to be for them not to be in fuel poverty. For example on the graph below
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although House B has higher fuel bills it has a smaller fuel poverty gap due to its higher income, whereas
Household A has lower fuel costs but a far lower income which means the gap is larger.
Fig 1. the bottom left quadrant represents fuel poverty while the blue arrows show the new measure fuel poverty gap.
Figure 2. Comparison of national level fuel poverty between 2003-2011
Old Measure (Blue Line) LIHC measure (Red Line).
% of Households in Fuel Poverty
20,0
18,0
16,0
14,0
12,0
10,0
8,0
6,0
4,0
2,0
0,0
2003 2004 2005 2006 2007 2008
This graph highlights the volatility of the previous measure.
2009
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2010 2011
10%
LIHC

In terms of a trend over the last 10 years, the old and new measure show very different pictures. The previous fuel poverty measure showed a rising trend, the new measure shows fuel poverty relatively steady and falling slightly in recent years.
Impact of differences on the results
The first major difference is that fewer households are defined as being in fuel poverty. One reason for this is omitting people classed as HIHC (high income high cost) and a smaller number of people classed as low income low cost (LILC).
Another difference (evident in Fig 2) is that under the new measure fuel poverty rates are relatively constant.
This could be due to both thresholds using an average, and not an absoulte value, causing any national increase or decrease in income or fuel prices to have a relative effect for individual households.
For example in Fig 3 when fuel prices rise 10%, so does House A’s, under the old measure this increase may have meant House A now spends over 10% on fuel and becomes fuel poor, but in the new measure as all increases in price are relative, House A becomes no closer to fuel poverty even though A may be spending a higher percentage of income on fuel bills.
Under the new measure a household moves out of fuel poverty when the household income increases faster the national average (change or job / increase of salary) or for fuel consumtion to decrease (new insulation or moving house).
Fig 3. Visual representation of increasing fuel prices
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Fig 4. Fuel poverty gap over the last 9 years.
Average fuel poverty gap (£): Real Terms
500
450
400
350
300
250
200
150
100
50
-
Average fuel poverty gap
(£): Real Terms
2003 2004 2005 2006 2007 2008 2009 2010 2011
When analysing the new data, strong focus on the poverty gap would be recommended. Looking at the recent trends shows a small decrease in fuel poverty over the 9 years. Although looking at the poverty gap figures, the gap is increasing. These results show us that a small number of people are escaping fuel poverty although most in fuel poverty and getting deeper and deeper into the LIHC quadrant.
Fuel poverty in West Sussex
Fig 5. West Sussex and England comparison under the LIHC definition
LIHC
12,0%
10,0%
8,0%
6,0%
LIHC
4,0%
2,0%
0,0%
England West Sussex
As with previous years West Sussex has a lower level of fuel poverty than the national average. At local authority level this ranges from 5% in Crawley to above 8.5% in Chichester and Worthing. Areas with higher proportions of single person households and older people have higher levels of fuel poverty.
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Fig 6 Percentage of people living alone (right axis) against percentage of fuel poor households (left axis)
10,0% 40,0%
9,0%
8,0%
7,0%
6,0%
5,0%
4,0%
3,0%
2,0%
1,0%
0,0%
35,0%
30,0%
25,0%
20,0%
15,0%
10,0%
5,0%
0,0%
LIHC
Single person households
9,0%
8,0%
7,0%
6,0%
5,0%
4,0%
3,0%
2,0%
1,0%
0,0%
Fig 8. Average age (right axis) to Fuel poverty (left axis) comparison.
10,0% 50
45
40
35
30
25
20
5
0
15
10
% of households in fuel poverty
(LIHC)
Average age
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Fig 9. LIHC LSOA fuel poverty map for 2011
Fig 10. Old 10% LSOA fuel poverty map for 2011
The two maps (Figs 9 and 10) show just how the different the old and new measures are at neighbourhood level. Although the overall level of fuel poverty is lower using the new measures, it should be noted that the
geographic pattern remains very similar.
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Ryan Walkley
JSNA Data and Research Intern
Public health
Ryan.Walkley@westsussex.gov.uk
For more information on the new system visit: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/226985/fuel_poverty_repor t_2013.pdf
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