Nine million will live in 'fuel poverty' in the next four years

Report calls for a new strategy to reduce heating costs for poor, focusing on more efficient homes

Almost nine million people will live in fuel poverty in the next four years despite ministerial pledges to eradicate it by 2016, a Government-commissioned report has warned.

The author of the report, Professor John Hills, warned that official plans to fight fuel poverty are failing. "The Government should set out a renewed and ambitious strategy for tackling fuel poverty," he said.

The existing definition of a household in fuel poverty is one which spends more than 10 per cent of its income on energy.

But Professor Hills, director of the Centre for Analysis of Social Exclusion at the London School of Economics, says the definition is misleading as it excludes some people whose incomes are so low they are reduced to spending only minuscule amounts of money on fuel. Proportionally they are not considered in fuel poverty.

He has set out a new way to measure fuel poverty, putting the focus on people with low incomes and high energy costs. Professor Hills said: "There is no doubt that fuel poverty is a serious national problem – increasing hardship, contributing to winter deaths and other health problems, and blocking policies to combat climate change. But the official measure has fed complacency at times and gloom about the impact of policies at others."

Under the new measurement, nearly eight million people in England – 2.7 million households – were in fuel poverty in 2009. By 2016 the figure will be close to three million households, or nine million people, Professor Hills warned.

He also measured "the fuel poverty gap", which takes account of the fact that lower income households generally pay more for gas and electricity because they are forced to use more expensive meters and can't take advantage of discounts offered by online payment and direct debits. The households affected face costs to keep warm that add up to £1.1 billion more than middle- or higher-income people with typical costs, Professor Hills estimates.

He warned that the total that people on low incomes need to spend to escape fuel poverty will rise to £1.7bn by 2016. It will mean fuel-poor households will face costs nearly £600-a-year higher on average than better-off households with typical costs.

Professor Hills said improving the energy efficiency of homes of struggling people can make a substantial difference. But he warned that current government plans will only reduce the problem by a 10th by 2016.

"Our analysis shows that improving the housing of those at risk is the most cost-effective way of tackling the problem, cutting energy waste, with large long-term benefits to society as a whole. We need a renewed and ambitious strategy to do this," Professor Hills said.

Caroline Flint, shadow Energy Secretary, said the report should cause alarm in Government: "Unless ministers change course, 200,000 more people are set to be in fuel poverty in the next four years and millions of families will be pushed into even deeper fuel poverty."

Derek Lickorish, chairman of the Government's Fuel Poverty Advisory Group, said the report does not go far enough: "Slicing and dicing the definition of fuel poverty does nothing to reduce how many people are struggling to keep warm and pay their energy bills. A radical strategy, with much higher funding, is desperately needed if the Government is to stand any chance of ending the scandal of fuel poverty."

Energy Secretary Edward Davey said: "The Government remains committed to doing all it can to tackle fuel poverty and make sure that the help available reaches those who need it most."

But Michelle Mitchell, charity director general of Age UK, said: "The Government must make a major investment to improve housing stock. We want to see fuel-poor households prioritised in this programme."

Badly burned: Fuel poverty gap

Professor Hills says poorer households generally pay more for gas and electricity. How big is the annual gap?

*An average energy-user who pays their bills online by direct debit pays £1,094 a year

* For someone not online, but who pays bills monthly by direct debt, bills are £66 higher

* If they use a pre-payment meter, bills are £148 higher

* If they pay quarterly by cash or by cheque, their bills are £158 higher

Source: uSwitch