Is there a "heat or eat" trade-off in the UK? - IFS series of reports into cost of fuel for households & poor elderly
The IFS (Institute for Fiscal Studies) has released three reports today covering fuel poverty -
Is there a "heat or eat" trade-off in the UK?
In this research, funded by the Nuffield Foundation, we merge detailed household level expenditure data from older households with historical local weather information. We then test for a heat or eat trade off: do households cut back on food spending to finance the additional cost of keeping warm during cold shocks? We find evidence that the poorest of older households are unable to smooth spending over the worst temperature shocks. Statistically significant reductions in food spending are observed in response to temperatures two or more standard deviations colder than expected (which occur about one winter month in forty) and reductions in food expenditure are considerably larger in poorer households.
Two papers published today by the IFS and funded by the Nuffield Foundation show that: Households receiving the winter fuel payment are almost 14 times as likely to spend the money on fuel than would have been the case had their incomes been increased in other ways; But in very cold weather it remains the case that the poorest pensioners cut back on spending on food to finance the additional cost of heating their homes.
Cash by any other name? Evidence on labelling from the UK Winter Fuel Payment
Standard economic theory implies that the labelling of cash transfers or cash-equivalents (e.g. child benefits, food stamps) should have no effect on spending patterns. The empirical literature to date does not contradict this proposition. We study the UK Winter Fuel Payment (WFP), a cash transfer to older households. Exploiting sharp eligibility criteria in a regression discontinuity design, we find robust evidence of a behavioural effect of the labelling. On average households spend 41% of the WFP on fuel. If the payment was treated as cash, we would expect households to spend approximately 3% of the payment on fuel.


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