The introduction of means testing for Winter Fuel Payments and potential scrapping of the Household Support Fund have significant implications for vulnerable households across the UK. Here at the Centre for Sustainable Energy (CSE), we’re closely monitoring recent developments in energy support policies.

From next month, the annual Winter Fuel Payment, worth between £100 and £300, will only be available to those on pension credit or other means-tested benefits. This shift marks a substantial change in how the government approaches energy support for older people.

A brief history of winter fuel payments

Introduced by the Labour Government in 1997, Winter Fuel Payments (WFP) were designed to help older people meet the costs of heating their homes during colder months. Unlike many targeted support schemes, these payments have been distributed universally to pensioners, effectively boosting the national state pension, which is fairly low in other comparison to European countries.

CSE, along with other organisations advocating for those in fuel poverty, has long critiqued the broad-brush nature of this approach. While well-intentioned, the universal application of Winter Fuel Payments has meant that support hasn’t always reached those most in need.

The targeting dilemma of efficiency vs accessibility

Our research highlights the complexities of the current system:

• Only 12% of Winter Fuel Payment recipients are fuel poor, according to CSE’s 2015 report for Citizens Advice examining energy tariff options for consumers in vulnerable situations.  
• While this is an old study only 12% of pensioners are currently fuel poor according to the 2023 LILEE statistics from DESNZ. 

We need more targeted support. However, the transition to means-testing brings its own challenges.

How do people spend the Winter Fuel Payment? 

A study by the Institute for Fiscal Studies (IFS) from 2011 found that, on average, 41% of the Winter Fuel Payment is spent on heating, which is a fairly high proportion considering there is no obligation to do so, but this leaves 59% of the payment not being used for its intended purpose.

Given the cost-of-living crisis you’d expect the proportion being spent on fuel to have increased significantly, but we know that there are many households who spend the money on consumer goods or donate the payment to charities to redistribute to the fuel poor.

Here at CSE, our Surviving Winter Fund projects rely on these donations and it may be an unintended consequence that cutting the WFP brings these projects to a close.  

Unintended consequences and concerns

So, if the Winter Fuel Payment is poorly targeted at the fuel poor, then why the controversy? Last year the government spent over £2Bn on the Winter Fuel Payments as part of its cost-of-living support for pensioners.  Over 11 million pensioners got the payment last year. The previous Conservative Government made a promise to keep the triple lock on pensions and the Winter Fuel Payment has long been seen as a top-up to pensions.

Cutting it represents around a 2.7% reduction in a pensioner households’ income. There’s concern that labour won’t meet their manifesto commitment to also keep the triple lock on pensions.

CSE’s stance on balancing efficiency and protection

In numerous reports and policy consultation responses we’ve argued for means testing of the Winter Fuel Payment. This means it’s better targeted and frees up funding which should be spent on insulation to provide a long-term solution to the misery caused by cold homes. 

But…

We do think that the government needs to take steps to protect those who need the payment and are missing out. There are two main categories of household that we are concerned about:

1. Those not claiming passport benefits. The government estimates that there are 880,000 pensioners who are eligible for pensioners credit but aren’t claiming it. This is a passport benefit that opens up eligibility to other measures like the Winter Fuel Payment. It’s critical that more is done to fund energy advice services for the fuel poor that check people’s benefit status and sign them up to benefits like pensioners credit.
2. Those who just miss out. The Guardian has reported that while 1.3 million households across England and Wales will continue to receive their winter fuel payments around 130,000 people would miss out because they are up to £500 a year over the threshold for receiving pension credit. The government needs to look at additional measures to protect these households. One of our key policy asks is for the introduction of a well targeted social tariff to address the long-term affordability issue associated with the ongoing cost of living crisis.

What could the government do with the money it saves?

 According to the government there’s a £22Bn black hole in public finances. So, the £1.61Bn saved is very unlikely to be spent on energy measures. But if it were to be, then it’s critical that Labour makes good on the promises in its Local Power Plan to provide £400m a year in low interest loans to communities to develop and build community-owned projects, alongside £600m a year in grants to local authorities. If there’s any money left insulate, insulate, insulate.