Insights ¦ Closing the fuel poverty gap: A plan for targeted energy support

Key Take Aways

1. Persistent Crisis: Britain faces a sustained affordability crisis, with household energy bills over £700 higher than winter 2021 levels, affecting up to 6.1 million households in fuel poverty.
2. Widening Gap: The fuel poverty gap has nearly doubled since 2020, now averaging over £400 in England, reflecting the deepening severity of the crisis.
3. Support Expiry Risk: The current Warm Home Discount (WHD) is due to expire in April 2026, risking significant increases in bills for vulnerable households.
4. Income Link: Income remains the strongest predictor of energy stress; 72% of those spending over 10% of net income on energy live below the poverty line.
5. Vulnerable Groups: Disabled and older households face higher average energy costs and are more likely to experience fuel poverty.
6. Exclusion Issues: Existing support schemes miss around 2.5 million fuel-poor households, particularly those outside the welfare system.
7. Support Models Assessed: Three bill support models were analysed—unit-rate discounts, fixed payments, and rising block tariffs—with fixed payments offering the best efficiency and impact.
8. Fixed Payment Impact: A £400 fixed payment could lift 930,000 households out of fuel poverty for a lower cost (£2.4bn) than equivalent discounts.
9. Tariff Risks: Rising block tariffs could increase bills for low-income and disabled households, with 10 million potentially facing an average £381 annual increase.
10. Fair Funding: Tax-funded schemes are more progressive, whereas funding via billpayers could create unfair burdens and regressivity.
11. Data Integration Needs: Effective targeting will require reliable data matching across government, suppliers, and healthcare to include those beyond current welfare data.
12. Policy Recommendations: Policymakers are urged to extend existing support and develop a new, comprehensive, income and vulnerability-based support system by 2027/28.

Key Statistics

• Household energy bills remain over £700 (73%) above winter 2021 levels.
• Up to 6.1 million UK households are in fuel poverty.
• Fuel poverty gap in England has increased to £407, up from £223 in 2020.
• 72% of households spending over 10% of net income on energy are below the poverty line.
• Disabled households pay £86–£97 more annually for energy.
• WHD currently supports 6.1 million households (up from 3.4 million in 2023/24).
• WHD rebate (£150) is significantly below the average fuel poverty gap (£400+).
• Approximately 2.2 million fuel-poor households are excluded from WHD support.
• A £400 fixed payment could lift 930,000 households out of fuel poverty for £2.4bn.
• Rising block tariffs could increase bills for around 10 million households.
• Current support lifts fewer than 5% of households out of fuel poverty.
• Proposed new schemes may cost between £0.8bn and £4.1bn depending on design.

Key Discussion Points

• The UK’s energy affordability crisis has deepened post-gas crisis, with current support mechanisms proving inadequate.
• Existing schemes fail to reach many fuel-poor households, especially those outside traditional welfare channels.
• Effective targeting should consider income, disability, age, and specific energy needs.
• WHD expiry in 2026 creates urgency for reform and long-term policy planning.
• Fixed, income-linked payments are more cost-effective than other models like unit-rate discounts or rising tariffs.
• Rising block tariffs may unintentionally increase costs for vulnerable groups.
• Funding through general taxation is fairer than adding costs to all billpayers.
• Enhanced data integration is vital to reach vulnerable households outside of benefits systems.
• Broader eligibility criteria are needed to support disabled and older households effectively.
• New pricing models must be paired with protections to prevent digital and financial exclusion.
• Social prescribing via healthcare channels could help identify and support vulnerable individuals not captured by DWP data.
• A two-phase approach is proposed: extend current support temporarily and introduce a robust, automatic, targeted scheme by 2027/28.

Document Description

This article provides an in-depth policy analysis and proposal addressing the UK’s fuel poverty crisis. It assesses the limitations of the current Warm Home Discount and explores three alternative models of targeted energy support. The report recommends a move towards income and vulnerability-based fixed payments, supported by tax funding and enhanced data sharing across public and private sectors. It emphasises the urgency of reform ahead of the 2026 support cliff edge, calling for a comprehensive and equitable support infrastructure to be in place by 2027/28.