Winter fuel payments or cold weather payments?

19 October 2010

The £200 winter fuel payment (WFP) paid universally to older people does increase fuel expenditure among older households, but does not protect all older households from the impact of very cold weather, according to new research published by the Institute for Fiscal Studies and funded by the Nuffield Foundation. 

Heat or eat?
Some households containing someone over the age of 60 spend less on food during unseasonably cold weather - suggesting that they face the so-called "heat or eat trade-off". This is evident only among the poorest quarter of older households and only when the temperature is substantially lower than would be expected (i.e. when there is a month where the average temperature is more than about 2 degrees Celsius lower than normal for that time of year). This suggests that the WFP, in conjunction with other government policies, does not fully protect all older households from the impact of very cold weather. 

Is the WFP actually spend on fuel?
The IFS research suggests that recipients spend more of the Winter Fuel Payment on household fuel than they spend of other income: households with someone aged 60 or more spend on average a little less than 3p of each additional pound of income on fuel, but when that additional income is provided through the WFP this rises to between 20p and 63p. This discrepancy could indicate that the name of the benefit (possibly combined with the fact that it is paid in November or December) has some persuasive influence on how it is spent.

Is the WFP a successful policy?
The researchers argue that the degree to which the WFP has been successful depends on its objective.  If the aim of the payment is to encourage older individuals (regardless of their income) to increase their fuel consumption, then it seems to be a reasonably successful (albeit expensive) policy. If the aim is to reduce hardship among those most likely to struggle with paying their winter fuel bills, then the policy is poorly targeted and a great deal more expensive than necessary. 

What is the winter fuel payment? 
The winter fuel payment (WFP) is a non-taxable and non-means tested benefit paid, usually in November or December, to all households where one member is older than the female state pension age (currently between 60 and 61 and rising). The payment is usually worth £200 to households where the oldest person is aged less than 80 and £300 where the oldest person is aged 80 or over, but has been supplemented by additional "one-off" payments of £50 and £100 respectively for the past three years. Total expenditure on the WFP in 2010-11 is forecast to be £2.7 billion, and is due to fall to £2.1billion in 2011-12 unless the "one-off" supplements are continued. 

Further information
The full observation is available on the IFS website

For information on the Nuffield Foundation funded project, see the project page.