Human Resources Committee on June 17th, 2008

[Prof. David Gordon]

The definition of fuel poverty is fairly non-contentious, in that families should not have to spend disproportionate amounts of their resources to adequately heat their homes. The contentious bit is how that is measured. It was done based on some work a very long time ago, in the 1970s, by an academic called Brenda Boardman. She identified that families who spent more than 10% of their income on fuel tended to also be income poor. That has been taken as the definition ever since, although it is reworked as better data comes forth.

However, the measurement isn't based on the actual amount people spend. It's based on how much they would need to spend to adequately heat their homes, given the energy efficiency of their homes and the average fuel prices in the area of the country in which they live. So it's quite a complex calculation. How well it works is a matter of some considerable debate.

It overlaps to a reasonable extent with the poor elderly in terms of income, but it has a much greater rural bias. So in city areas like London, where there are high housing costs, people often have high incomes in order to pay for their housing. But because that's not taken into account in the definition, they appear to not be fuel poor, whereas we know from objective social scientific measures that they often have difficulties heating their homes. So my personal belief is that the idea of fuel poverty is very important, particularly in a cold country.

The current way fuel poverty is measured in the U.K. has caused difficulties in both targeting those in greatest need and in the government meeting those targets. The policies the government is pursuing of identifying vulnerable populations and improving the energy efficiency of their homes is good in terms of also reducing carbon dioxide emissions from people's homes. But the amount of money invested in tackling fuel poverty has been woefully inadequate in trying to eradicate it. The government is not only not going to eradicate it; fuel poverty is likely to increase by 2010.

[The Vice-Chair, Liberal, Michael Savage]

Thank you very much.

We will move to Mr. Brown. You have three minutes left.

[Gord Brown, Conservative, Leeds—Grenville, ON]

Thank you, Mr. Chair.

Thanks to the witnesses for joining us today from the U.K.

I'd like to explore this fuel poverty issue more with Professor Gordon. Who is likely to be fuel poor? What solutions do you have to offer? What kind of impact do you think additional fuel taxes might have on fuel poverty?

[Prof. David Gordon]

The people likely to be fuel-poor are those who have very low incomes and those who live in older dwellings, particularly houses built before 1919, or in housing that is in disrepair and has not been modernized. You get two overlapping groups: the poor in terms of income, and those who are in housing that is substandard and inadequate. That is quite a large group of households.

There are also effects.... Obviously it's warmer in the middle of a city than in the rural areas. What you tend to get is a group of people in rural small towns and villages in poor housing on the periphery of those towns, but also people living in the inner cities who are very income poor. That's particularly the case among the elderly, those over 75; large families, those with many children; and also people who are unemployed.

There are very high rates of poverty among the unemployed, and it's particularly a problem for single young women who are unemployed. This group is not recognized by governments in many of the policies. Single women in general--lone-woman households--tend to have high rates of fuel poverty. Normally the policy is targeted to elderly single women over 75, but younger single women, particularly those in the 19- to 29-year age range also suffer from very high rates of fuel poverty.

[Gord Brown, Conservative, Leeds—Grenville, ON]

I'd like to get Peter Kenway in for a moment, if possible.

He mentioned there was significant impact on poverty in the U.K. starting with some of the policies of the Labour government, but then it had run out of steam. Maybe we could hear a little on why it ran out of steam.

[The Vice-Chair, Liberal, Michael Savage]

Dr. Kenway, I'm going to ask for a fairly quick answer on that one. We have about 30 seconds or so.

[Dr. Peter Kenway]

In answer to that, the main policy involving tax credits is a major labour market intervention. It essentially favours adults with children relative to adults without. Also, arguably one of its criticisms is the subsidy to employers as well as employees.

One thing we notice is that while the number of children taken out of poverty has gone up quite substantially, the number of children who seem to need support from the state to escape poverty has also gone up. To sum it up in a sentence, I think the difficulty is that after a while the policy starts to undermine itself. It's a good tactic, but it's not adequate as a strategy.

[The Vice-Chair, Liberal, Michael Savage]

Thank you very much.

We're going to move to a second round of questions.

Members are aware of this, but for the benefit of the 30 million Canadians who will be watching this at home, these gentlemen are not officials from the government of the U.K.; they are observers and experts giving us their expert opinion on what's been happening on poverty in the U.K. We do hope to have officials from the U.K. and from the poverty program in the fall.

We'll move to the second round. We'll go to Mr. Cuzner for five minutes.

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

I want to say on behalf of the committee how fortunate we are to have these two gentlemen. On behalf of CPAC, I'd like to express my thanks, because this is sweeps week, and I know our numbers will go through the ceiling.

Gentlemen, the focus of poverty reduction has been through employment. Could you give us an overview of where the unemployment rate was and where it is now? We've certainly seen that here in Canada it was at 12% ten years ago, and we're down to about 6.5%, so the yardsticks have been moved. Could you give us a profile of your own situation?

[The Vice-Chair, Liberal, Michael Savage]

Who wants to go first?

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

That's since first coming up with the strategy in 1999.

[Dr. Peter Kenway]

This time I'll have a go at it first; save David for a change.

I think it's very important that you look at not only what is counted officially as unemployment, even if you take the ILO measure. Unemployment has fallen substantially. However, the number of people who are economically inactive has fallen much more slowly; indeed, it's a much larger number. These are people who are basically lone parents or who are entitled to disability benefits but who nevertheless indicate that they would like to work.

The figures I have to hand are the opposite of your unemployment ones: they're the employment ones. And the employment rate rose from, I believe, just under 73% in 1997, when Mr. Blair's government came to office, to about 74% pretty quickly. Since then, in the remaining eight years, it's still never risen by more than a percent. It is fluctuating between 74% and 75%. I can't remember the number off the top of my head, but I can say comfortably that several million people have indicated that they would like to work.

So you have people who want to respond to the government strategy, but at some level, I think, you have to say that we just don't, at the moment, have the number of jobs that people want.

[Prof. David Gordon]

Perhaps I can also respond to that.

Unemployment has fallen tremendously since the early nineties, when it was over 3 million. It fell to half a million and it's now at about 800,000. That's using consistent definitions, and of course it depends on the definitions.

For all intents and purposes, the unemployment figures of 3% to 4% show full employment. But that only tells part of the story. There has been tremendous growth in the number of people working, and in many parts of the U.K. there are labour market shortages. Britain, like Ireland, has absorbed several million migrant workers from Poland and the former eastern European countries that are part of the European Union. I think in Ireland, one in ten people working now are from Poland or the Baltic States.

That really does tell part of the story, because there are many people who, although not officially unemployed, have become disillusioned. They're not unemployed; they're not seeking work. As well, there has been a tremendous growth in the number of people on sickness benefits, who possibly, if there were suitable jobs for them, would want to take those jobs up. Or at least that's what the government believes. However—

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

Mr. Gordon, I appreciate that; I'd just like to get one other question in, if I might.

I'd like to go back to heating costs and the rebates for seniors in need. Are these distributed per country? Does it vary from country to country, or is it a U.K. template that's used? What mechanism do you use? Do seniors put in a claim afterward, or is it just a list that you take the supplement from?

I'm just wondering how you administer that bit of relief for those seniors.

[Prof. David Gordon]

A large part of the relief comes through the pension system. It goes to all seniors as a payment just before Christmas. That's universal. Then there's more targeted relief for seniors claiming various benefits where there are supplements to those benefits. So that does vary a little bit with different programs as well.

Most of the variation comes in the applications needed and in who gets improvements to their dwelling. There's not much variation in the cash payments that are made direct to people that they can spend on fuel, but evidence shows that those households often have higher priorities. They still remain living in cold dwellings and use the money to buy food and pay for other expenses.

So there are hypothecated improvements to improve the warmth of the house. The cash payment is meant to be used to help meet the costs of heating, but it's often used for other things that are of greater priority to those elderly people.

[The Vice-Chair, Liberal, Michael Savage]

Thank you very much.

We're going to move back to the Conservatives for five minutes, to Mr. Mike Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I want to start by following up on a question that one of my colleagues was asking regarding fuel tax. We have talked a little bit about the concept of fuel poverty. Here in Canada there are some people who are musing about a new tax on carbon, a new tax on fuel that would impact home heating fuel, for example. It has not been very well articulated yet, but we're trying to determine what the impact of it would be.

Maybe you could speak to that a little bit. Are there some perhaps unintended consequences that we might be wary of in terms of that type of discussion, specifically upon some of the low-income people we're talking about here?

[The Vice-Chair, Liberal, Michael Savage]

Who wants to take that one? Professor Gordon?

[Prof. David Gordon]

I'm at a slight difficulty here, because we recently did some work for the government on what the likely distributional effect would be if the government brought in an individual carbon level of six tonnes per person and then made people buy carbon credits above that. Our material hasn't been released, so I have to respect its confidentiality.

There are a number of problems and bad distributional effects of bringing in fuel tax, particularly flat rate taxes. If it is not progressive, then obviously it impacts more as a portion of income on the poor who need to use that fuel than on richer people, who may often use a lot more fuel but can afford to pay it. Particularly there is a group in the middle, who are often the very poorest but close to the poverty line. With some groups, particularly those living in rural areas, if it's on transport and heating oil, which can be more expensive than gas and often than electricity to heat the house in the U.K., you will have to look carefully at who will be winners and losers.

There are always winners and losers, and it is quite complex. I'm not sure the Canadian and U.K. situations are comparable enough to begin to guess who would be the winners and losers in Canada, but within the U.K. there are certainly some impacts that you would want to look at closely before pursuing those policies.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Did Mr. Kenway want to comment on that at all?

[Dr. Peter Kenway]

Let me add very briefly that from an economic perspective you might want to introduce that type of thing to seek to incentivize people to use less and make more efficient use of energy.

What we have to recognize, though, and perhaps this is where having a comprehensive anti-poverty strategy comes in, is that if we going to do this, we have to be prepared to find other ways of compensating those on low incomes for this system, which might make very good sense from the point of view of society as a whole. People are suffering, as you will know, substantial real impacts on their real incomes as a result of fuel and food increases at the moment. In some sense, the tax is just another issue on the top of that.

I think one has to perhaps look again at certain questions, which David Gordon has spoken about—the value of benefits and so forth, but also perhaps the value of income taxes to people at the bottom—to see whether there are ways. If one's going to be radical in that fashion with carbon taxes, I think you have to do these other things as well to make sure that those at the bottom do not suffer in any sense disproportionately.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Moving to a different area here, I'm curious about the numbers. You had a lot of focus on lone-parent families. Can you maybe tell me what percentage of children in the U.K. would live in lone-parent families? Do you have any idea of that?

[Dr. Peter Kenway]

The answer to that is a quarter. A quarter of children now live in lone-parent families. This has been the result of a very long, steady rise, from I think about 10% back in the late 1970s.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

In terms of some of things you've talked about, one of the things that has been discussed is this concept of more income support being needed.

I've referred many times here to a study by a fellow named John Richards, who is a former provincial cabinet minister here in Canada who has done a study talking about the unintended consequences of increasing accessibility to welfare, almost in terms of its impact in increasing poverty. Actually, he more spoke of some of the cuts that have been made to the welfare system in some provinces in our country by various governments of different stripes and the impact those cuts in the welfare role had in actually decreasing poverty. What he referred to was this idea that for people who were able to work, once it was harder for them to get welfare, it encouraged them to go out and find work that was actually better than what they were receiving on welfare. In fact, the welfare dollars that they were receiving basically locked them into poverty in a sense; therefore, this concept of welfare had this unintended consequence of increasing poverty.

Can you maybe speak to that a little bit in terms of the potential unintended consequence of going down that road for that other 50% you were talking about?

[The Vice-Chair, Liberal, Michael Savage]

Gentlemen, I'm going to have to get you to hold your thoughts on that. We're well over time. There will be more time to come back to that perhaps in our next round, but I'm going to try to stick to the time limits as much as possible.

We're going to move to the Bloc, and Monsieur Lessard, for five minutes.