The economy-wide impacts of different approaches to addressing fuel poverty: the importance of where, when and how public funds are spent

Depending on the metrics and measurement used, at least 3.6 million UK households currently live in fuel poverty (i). This presents a public policy challenge in terms of reducing both fuel poverty and energy demand in ways that are positive for the wider economy, that support employment and income generation, and do not introduce price pressures which further affect the cost of living and doing business.

Within the Energy Demand Research Centre (EDRC), the Equity theme has explored the impact of different ways of using of a £9 billion public funding pot, aimed at closing the fuel poverty gap on an annual basis between 2025 and 2030(ii). This figure was arrived at in the following way. The fuel poverty gap is defined by ONS (iii) as the amount of money a household needs to no longer be considered as living in fuel poverty. This amount was estimated by DESNZ (iv) at £417 for 2023, the last year for which an estimate is available. If £417 is allocated to help 3.6 million households for the 6 years between 2025 and 2030, the total pot required is £9 billion.

We used an economy-wide model to simulate scenarios where this public funding pot is

(a) channelled as a direct energy bill support to 3.6 million UK households in fuel poverty under the English definition or

(b) used to fund basic energy efficiency measures for as many homes as possible.