Cold Society? Improving the UK’s strategy for coping with the cold Monday March 4th, 2013!British Library Conference Centre!

!!James Lloyd!Director !Strategic Society Centre!

Excess winter deaths !Excess winter mortality!ONS standard definition: December to March!Number of deaths in this period minus average of preceding and following period!Around 25,000 excess winter deaths a year in England and Wales!Fluctuations year to year!Excess winter deaths are preventable!

Who dies because of the cold? !2011-12: ! !!10,700 men and 13,300 women!!For 2010-11: !Age 0-64: !3,630 deaths!Age 65-74: !3,050 deaths!Age 75-84: !7,350 deaths!Age 85+: ! !12,040 deaths!!

Why do people die?

!ONS data: !!Respiratory diseases: ! ! ! ! ! !10,110!Circulatory diseases ! ! ! ! ! !6,850!Dementia and Alzheimer’s disease:!4,110!Injury and poisoning: ! ! ! ! ! !500!!!

Who is at risk? !DH Cold Weather Plan identifies those who are: !!•  Over 75 years old;!•  Otherwise ‘frail’ older people;!•  Have pre-existing chronic medical conditions such as heart disease, stroke

or transient ischaemic attack (TIA), asthma, chronic obstructive pulmonary disease (COPD) or diabetes; mental ill-health that reduces individual’s ability to self-care; dementia; !

•  Assessed as being at risk of, or has had, recurrent falls; !•  Housebound or otherwise low mobility; !•  Living in deprived circumstances; !•  Living in houses with mould; !•  Fuel-poor (needing to spend 10% or more of household income on heating

the home); !•  Older people who live alone and do not have additional social services

support. !!!

Excess winter deaths in context

!Prevalence varies among countries: typically lower in Scandinavia!!Link with income or socio-economic characteristics is inconclusive: age, health and housing factors can be more important.!!!

Cost of cold to the Exchequer !DH 2009 estimate using historic data: £850 million annual cost to the NHS in England of cold-related conditions.!Age UK 2012 updated estimate: £1.36 billion. !

Context: cost of an older person staying in hospital for one week is estimated to be £1,750–£2,100. !!!

Which government departments are involved? !Four implement relevant policies:!!Department for Communities and Local Government!Department for Energy and Climate Change!Department of Health!Department for Work and Pensions!!However, no department has cross-departmental coordinating or leading role.!!!!

How are these problems framed in policy debate? !An income poverty problem – “people don’t have enough money to stay warm”;!A fuel poverty problem – “poor home insulation and rising energy costs push people into poverty or causing them to ‘under-consume’ heating”;!A home insulation problem – “people get cold because of poor quality housing”;!A public health problem – “people don’t know how to stay healthy or warm in cold weather”;!

How are the problems framed? !A behavioural problem – “people get cold because they are afraid to turn the heating on, don’t wrap themselves up, and other poor behavioural responses to the cold”;!An energy market competition problem – “there isn’t enough competition in the energy market to ensure affordable heating for households”;!A consumer behaviour problem – “people don’t shop around for the cheapest energy tariffs so end up becoming cold”.!!!

What have policy interventions focused on? !Affordability of heating!– Winter Fuel Payments (DWP);!– Cold Weather Payments (DWP);!

Changing household and public services behaviour in response to the cold!– The Cold Weather Plan (DH);!

General public health interventions!– Seasonal flu vaccination programme (DH);!– Public Health Outcomes Framework (DH, DCLG);!

What policy interventions have been deployed? !Home insulation!– The Green Deal (DECC);!– Energy Company Obligation (DECC);!– Code for Sustainable Homes (DCLG);!– Warm Front Programme (DECC);!– Home Energy Conservation Act (DCLG);!

Generalised attempts to address the effects of the cold:!– Warm Homes, Healthy People funds (DH).!

But the scandal of excess winter deaths continues !Is government policy in this area effective or targeted?!!What is the scope for more joined-up policy interventions and choices?!

© Institute for Fiscal Studies

Cash by Any Other Name? Evidence on Labelling from the UK Winter Fuel Payment Cormac O’Dea, IFS

Co-authors: Tim Beatty, University of Minnesota Laura Blow, IFS Thomas Crossley, IFS and University of Cambridge

Funded by the Nuffield Foundation

The Winter Fuel Payment: background

•  Winter Fuel Payment (WFP) is a non-means tested benefit paid to all households where at least one member is at or older than the female State Pension Age

•  Introduced in 1997; cash value fairly constant after 2000 •  Rates (2012/13):

–  Aged 60-79: £200 –  Aged 80+: £300 –  Rates are per household (no difference for singles and couples)

•  Payments are made in one lump sum, generally in November or December

•  Take up is very high (over 90%)

© Institute for Fiscal Studies

Research question of IFS report

•  Many cash transfers are labelled: –  Child benefit, Winter Fuel Payment

•  Standard economic models don’t consider that labelling of such benefits should have no effect on how they are spent

•  Behavioural economics is a branch of economics that considers ‘non-standard’ influences on consumer behaviour

•  This paper provides evidence from the UK Winter Fuel Payment (WFP) on the behavioural effect of labelling a transfer

•  Before this paper: no strong evidence on whether labelling a benefit can influence spending behaviour

© Institute for Fiscal Studies

Research question

Do recipients of the Winter Fuel Payment treat it differently than they would a non-labelled benefit?

© Institute for Fiscal Studies

Research method: Regression Discontinuity Design

© Institute for Fiscal Studies

Research method: Regression Discontinuity Design

© Institute for Fiscal Studies

Age

Spending on fuel

60 0

• Use those just below 60 to estimate counterfactual for those just above

Results

•  We find a substantial and robust labelling effect •  If there was no labelling effect an average household would

spend around 3% of the Winter Fuel Payment on fuel •  We estimate an additional labelling effect of 38% (with a

confidence interval of between 12% to 63%) •  Point estimate implies 41% of the WFP is spent on fuel •  Households treat the Winter Fuel Payment differently than they

would other non-labelled cash –  Labelling matters! –  We were surprised

•  Labels on benefits could perhaps be a useful tool for governments

© Institute for Fiscal Studies

Does this mean that the WFP is a success?

•  Not necessarily.... •  ...unless the objective to get all pensioners (regardless of

income) to spend more on fuel –  Would this be a sensible objective? –  Is there any evidence that (richer) pensioners are underspending on

fuel in winter?

•  Key question to ask with respect to Excess Winter Mortality is whether the £2bn WFP could be more effectively deployed on other policies?

© Institute for Fiscal Studies

A related piece of work

•  Do households face a “heat or eat” trade-off? •  Are some older households forced to cut back on food spending

when there are unusually cold periods of time? •  Some evidence of this:

–  But only the poorest households (those in the bottom quartile) at the coldest times (in about one winter month in 40)

© Institute for Fiscal Studies

Does this mean that the WFP is a success?

•  Not necessarily.... •  ...unless the objective to get all pensioners (regardless of

income) to spend more on fuel –  Would this be a sensible objective? –  Is there any evidence that (richer) pensioners are underspending on

fuel in winter?

•  Key question to ask with respect to Excess Winter Mortality is whether the £2bn WFP could be more effectively deployed on other policies?

•  Could a more targeted approach (with respect to income and/or with respect to temperature) be more sensible? –  Through Pension Credit

–  The Cold Weather Payments –  Through something else?

© Institute for Fiscal Studies

Improving the UK’s strategy for coping with the cold:

The energy perspective

Reg Platt

March 2013

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Average dual fuel bill (£)

Committee on Climate Change 2012

A challenging context: Energy bills are rising

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2004 2011 (weather adjusted) 2020

Average dual fuel bill (£)

Committee on Climate Change 2012

A challenging context: Energy bills are rising

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2020 - without energy efficiency measures

2020 - with energy efficiency measures)

Average dual fuel bill (£)

Committee on Climate Change 2012

A challenging context: Energy bills are rising

3 potential policy responses

1.  Tariff/market reform 2.  Cash transfers (i.e. Winter Fuel Payments) 3.  Energy efficiency improvements

3 potential policy responses

1.  Tariff/market reform –  Older people and vulnerable groups tend to switch less and not

be on cheapest tariffs, i.e. direct debit/online –  Government is implementing IPPR’s recommendation to limit

the number of tariffs suppliers can offer •  Platt 2012 The True Cost of Energy

–  Collective switching is a useful innovation but with limited scope to reduce bills

–  Wider action to increase competition also needed

3 potential policy responses

1.  Tariff/market reform 2.  Cash transfers (i.e. Winter Fuel Payments) 3.  Energy efficiency improvements

Energy efficiency policy: Green Deal:

•  Households install energy efficiency measures at no up-front cost and pay for them through a levy on their energy bills.

•  Levy attached to property rather than householder.

Energy Company Obligation: •  Energy companies provide subsidies to support

installation of high cost energy efficiency measures for all households and any type of measure for fuel poor.

•  Results in increases to energy bills.

Energy efficiency policy: Green Deal:

•  Confidence in policy to deliver is low

Energy Company Obligation: •  Funding provision is woefully inadequate.

–  Just 125,000 to 250,000 households removed from fuel poverty by 2023

•  Millions who don’t receive measures pushed further into fuel poverty. Outcomes worse if costs are high.

•  Targeting of provision is very poor

Energy efficiency policy:

Platt et al (2012) Energy efficiency, who pays and who benefits

Priorities for reform and joining up policy to reduce fuel poverty, winter

deaths and cold-related illness: •  Increase funding for energy efficiency •  Improve targeting of resources, i.e. identifying at-risk

households •  Reduce the costs of policy delivery / remove policy costs

from energy bills

!!James Lloyd!Director !Strategic Society Centre!

What do we want to achieve? !Excess winter deaths!1.  Lowest prevalence among comparable

countries!2.  Eliminate completely!

Cold-related illness!1.  Reduce prevalence!2.  Eliminate cost to the NHS!

How? !Household behaviour: changes in cold-related behaviour!Household cold weather responses!Home insulation!Cost of heating!!All focused on high-risk groups.!

Winter Fuel Payments !Much maligned: cost the Exchequer £2 billion+ each year!!But, identifiable and measurable effect on fuel expenditure. !!Focused on changing household behaviour and reducing cost of heating!!Evidence: WFPs are effective in increasing pensioner expenditure on fuel.!!Labelling cash payments = behavioural economics intervention.!

Winter Fuel Payments !What would scrapping WFPs do to pensioner expenditure on fuel?!!What would be the public health effect of scrapping WFPs?!!Would means testing WFPs be significantly different?!

Winter Fuel Payments !Other alternatives: reconfigure WFPs!!Change age threshold !Change value for different age groups!Convert to taxable income!Target by health condition!Reclassify as part of State Pension for public accounting purposes!!

Winter Fuel Payments !Other alternatives: get more VFM from WFP system!!Annual public health campaign to coincide with payment!Change name!Rolling opt-in programme as ‘soft-conditionality’ to change behaviour and collect information!!!!

Other policy interventions

!Household behaviour!Cold weather responses!Home insulation!Reducing the cost of energy!!

Improved targeting !Clinical Commissioning Groups (CCGs) + Health and Wellbeing Boards (HWBs) potential role in targeting at risk groups for:!!Green Deal assessments!Tariff switching support!Information and awareness campaigns!Other measures!!

Other measures

!CCGs and HWBs target at risk groups with: !!Automatic tariff switching!Free home insulation under the Energy Company Obligation!Free energy during Level 3 and 4 Cold Weather spells!!

Conclusion

!Significant scope for improved targeting + joined up policy!!WFPs could have improved role!Need to join up HWBs with energy market and energy efficiency policy!!

Are excess winter deaths and cold-related illness a problem of public health, low incomes, fuel poverty, poor home insulation or human behaviour?!!Is government policy in this area effective or targeted?!!As the biggest item of public spending in this area, what proportion of Winter Fuel Payments is spent on keeping warm? What would be the effect of scrapping Winter Fuel Payments on household fuel spending?!!What is the scope for more joined-up policy interventions and choices?!!

!!!!Strategic Society Centre!32-36 Loman St!London!SE1 0EH!www.strategicsociety.org.uk!info@strategicsociety.org.uk!Twitter: @__SSC!