Saturday, 22 October 2011

The Queen slides towards poverty

As reported in the FT, with the recent hikes in electricity and gas costs, the Queen is now approaching "fuel poverty", defined as spending 10% or more of your income on energy supply. For the coming financial year the royal household is forecast to spend 8.2% of it's income from the government on energy bills and this assumes no further price rises.

This inevitably leads to a debate of whether poverty should be defined in relative terms or absolute terms. I think that everyone would agree that the Queen is not 'poor' by any sensible definition. Indeed recently, the current definition of 'fuel poverty' has been under review. The report in question offers a number proposals that involve switching from the straight 10% proportion of income to a measures that look at incomes after fuel costs in relation to the 'poverty line' (60% of median income) but also considers the proportion of income spent on energy and the quality of housing. I think it's worth noting that the warm homes and energy conservation act 2000 set out to "eradicate fuel poverty as far as reasonable practical" by 2016, this is going to be extremely difficult with a relative measure linked to median income. Whether such a target can be achieved is likely to be more down to changes in income distribution rather than considerations of fuel expenditure.

The current measure of fuel poverty effectively picks out people, like the Queen, who have large amounts of (typically old) housing relative to their income. I think this is interesting in itself particularly in the light of the report from intergenerational foundation on the distribution of housing across UK society, which has been received with a lot of hostility. The fuel poverty review only considers income in its calculation of poverty and not assets. I think this is an important factor when you consider that the bulk of the measures to alleviate fuel poverty have involved giving income related grants to improve the energy efficiency of a house. Should a person with a low income but in possession of large old house worth a significant amount of money get a state hand-out to do it up, but a person with a moderate income paying a large mortgage on a small house get nothing? On the face of it, those households in older houses that are bigger than they need would do well to exchange house with people with enough income to afford the modernisation and improvements in energy efficiency. At the same time those leaving old larger houses would improve their income by freeing up capital and reducing their outgoings on property heating and maintenance.

1 comment:

  1. "which has been received with a lot of hostility"

    LOL! I'd describe it as "Home-Owner-Ist shit-storm from Hell", myself.