Fuel poverty in the UK and policies to alleviate it in 2026
Kristina Stipetic analyses the causes and effects fuel poverty in the UK, as well as policies to address it in 2026.
Kristina Stipetic
Research Analyst
Kristina Stipetic
Research Analyst
December, the holiday season for humans, has passed and in its place: January, the holiday season for mould. Hot cocoa may warm the soul, but it’s only a temporary respite against the bitterness of a drafty home, and drafty homes are the reality this year for 3.17 million English families living in fuel poverty. Today we’ll take a look at the prevalence, causes, and consequences of fuel poverty, but we won’t leave you out in the cold. We’ll also share some good news in the form of short and long-term strategies to warm the country.
Fuel poverty is defined differently across the UK. In the devolved nations, fuel poverty is measured using “10%” metric, which, roughly speaking, counts a household as fuel-poor if it uses 10% or more of its income to maintain adequate temperature. There are slight differences in methodology, meaning they are not directly comparable, but roughly speaking,
- 179,000 (24%) households in Northern Ireland were fuel poor in 2021
- 830,000 (33%) households are fuel poor in Scotland in 2025, and
- 340,000 (25%) households were fuel poor Wales in 2024.
In England, a household is considered fuel poor when it meets the Low Income, Low Energy Efficiency (LILEE) threshold, where low income is defined as poverty level after fuel costs and low efficiency is defined as housing with an EPC rating of D or below. By this measure, 3.17 million (13%) households were fuel-poor in 2023. However, this may underestimate the hardship that households actually face. If we use a similar “10%” metric to Scotland, Wales and Northern Ireland, 36.4% of English households would be considered fuel poor.
As we can see from the map below, the distribution of fuel poverty across England is highly varied, affecting around 20% of households in Stoke-on-Trent, Birmingham and Coventry compared with only 4.6% of households in the City of London.
Consequences
Living in a cold, damp home has wide ranging consequences for every demographic, both in the short and long-term. In the winter of 2020/21 UCL estimated that 6,300 excess winter deaths were directly attributable to fuel poverty, a number that is higher than the Northern European average. The elderly, whose pre-existing conditions can be exacerbated by cold homes, are disproportionately vulnerable.
In the medium term, cold homes are more hospitable to viruses. The increased burden of illness puts a strain on local health services, which can have a compounding effect on the health of the community. Mental health, too, can worsen. Mothers living in fuel poverty were found to be 64% more likely to suffer from depression.
When it comes to long-term consequences, children growing up in cold and damp homes are at risk of a lifetime of negative effects. Lung development can be hindered by mould and dust, contributing to an estimated 10-15% of new cases of childhood asthma. The increased burden of seasonal illness leads to more school days missed, putting children in fuel poverty at an educational disadvantage which can affect their career opportunities. As we see, fuel poverty and child poverty deeply intertwined and both are key indicators of the high cost of living, as we explored in our 2022 Cost of Living Index. We plan to release an updated version of this index in February 2026, so stay tuned.
Causes
What causes fuel poverty? Besides general poverty and low incomes, high energy costs and inefficiently-heated housing are big contributing factors. An inefficient home costs more to heat, and the UK’s housing stock is some of the least efficient in Europe. Energy Performance Certificates (EPCs), which range from A (best) to G (worst), are a major component of LILEE. 650,000 homes in England and Wales are rated EPC D or below, representing 40% of domestic properties. Like fuel poverty, the prevalence of inefficient dwellings is unevenly distributed.
What is being done?
Tackling fuel poverty requires both short and long-term strategies, as the literal ill effects are both short and long term. This winter sees the return of the winter fuel payment benefit which pays eligible Britons between £100-300 to help with heating bills. Another immediate benefit was announced in the 2025 November budget – the removal of the Energy Company Obligation (ECO) and the Renewables Obligation (RO) levies. Axing these is estimated to reduce a household’s energy bill by £150/year. The ECO was previously used to fund the Great British Insulation Scheme (GBIS), a long-term strategy to help people get free or cheaper insulation for their homes, thereby increasing energy efficiency. However, the scheme suffered from systemic failures and is due to end in March 2026.
Luckily, GBIS was not the only long-term strategy. The Warm Homes plan was introduced in the November 2024 budget and expanded this summer. £13.2 billion will be invested to help people increase the energy efficiency of their homes and thereby reduce energy bills over the long term. It introduces a number of different channels including grants and streamlined planning permissions. The Warm Homes Local Grant is a fully-funded grant for low-income residents, both homeowners and renters, to upgrade aspects of their homes towards energy efficiency. The grants are distributed through local and combined authorities who are also taking charge to publicise them, for example, Wyre Forest Council have created a very informative breakdown of what the grant is, who is eligible, and what to expect from the home inspection process to help local residents understand the programme. In places where the grant is already oversubscribed, it may be useful to allow residents to register their interest so that adequate funding can be distributed in the next round.
Tackling the price
That’s good news for improving efficiency, but what about the cost of energy? Unlike many European countries, the UK does not have a publicly-owned energy company. 70% of British households get their energy from 5 major companies, three of which are wholly foreign-owned. This means that paid benefits such as the winter fuel allowance largely do not stay in the country, but are siphoned overseas. It also means that British customers are not well-protected from shocks to the energy supply, such as when Russia invaded Ukraine in 2022. That may change soon.
In their 2023 manifesto, the Labour Party promised to create Great British Energy (GBE), a publicly-owned clean energy company headquartered in Aberdeen. The Great British Energy Act received Royal Ascent in May 2025 and has already committed to supporting 1,000 local and community-led projects in Scotland, Wales and Northern Ireland. The new GBE Supply Chain Fund, slated to open for applications this month, will award up to £300 million of grant funding for offshore wind and network investment.
Councils leading the way
Many councils have found innovative and cost-effective ways to tackle fuel poverty. Leicestershire County Council has partnered with Solar Together to assist residents to buy solar panels at a reduced rate through group-buying, which will reduce their energy costs over the long term. Other places, such as Belfast City Council and Monmouthshire County Council, have created comprehensive guides to help residents with all aspects of the cost of living, including energy costs. Finally, the North East Combined Authority launched the Warm Homes Taskforce in Oct 2025 to develop a strategy to improve poor quality housing, especially in the private rented sector. The taskforce aims to build an evidence base, share best practices at the national level, and support skills development among construction workers to ensure the rollout of building improvements happens smoothly.
So as we lose yet another Saturday to mould cleaning, let us nurture hope that things won’t always be like this. Upgrades to individual dwellings will lead to permanent reductions in fuel costs, meaning we’ll be freed up to buy something besides wool socks for one another in future Christmases. Meanwhile, GBE and council-led projects can help the UK become more energy independent while also contributing directly to inclusive growth through job opportunities. In the meantime, let’s put on our rubber gloves, get the bleach, and start scrubbing.
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