Key findings

Lessons from other policy approaches: learnings can be drawn from food insecurity and housing policy approaches. In the case of food insecurity, a cash-first approach is increasingly being taken by the Scottish Government and there are some early signs that this approach is having a positive impact on reducing food insecurity. However, flexibility is important, especially in rural areas where the costs of food and transport are higher. In the context of housing, a flexible approach is also shown to be appropriate. The Scottish choices allowance for direct payment of the Universal Credit housing element to a landlord has been shown to simplify money management and reduce money worries for those in receipt.
Advantages of cash-first: in terms of income-based, or cash-first, approaches respondents to the Panel’s call for evidence emphasised the dignity, choice and flexibility afforded by these approaches. Cash-first approaches are seen as giving people agency and serve to recognise that people are best placed to know what is right for them. In addition, a cash-first approach can reduce stigma and can build trust and engagement in wider support services.
Disadvantages of cash-first: in terms of the disadvantages of a cash-first approach, respondents highlighted that it is substantially less effective at reducing fuel poverty as technically defined through the Scottish definition of fuel poverty because additional income is often absorbed by existing debt or urgent costs, without improving energy security or home warmth.
Evidence on labelling effects: there is evidence that, despite being a cash payment with no obligation to spend in a certain way, there can be a labelling effect. Studies from Beatty et al and Paulo Santo Morais, found substantial labelling effects for the Winter Fuel Payment. Beatty et al’s 2014 study pooled data from The Living Costs and Food Survey and found that households spent an average of 47% of the Winter Fuel Payment on household fuel. More recent research using data from the UK Household Longitudinal Survey (UKHLS) (2009-2017) found that WFP-eligible households increase their annual fuel spending by 6.40 per cent on average, compared to the ineligible group, with the strongest effects observed among recipients with health conditions.
Advantages of money off energy bills: in terms of reducing what is spent on energy via money off energy bills as a method of fuel poverty support, respondents viewed this approach as more effectively tackling fuel poverty since funds are guaranteed to be used for energy costs. Furthermore, the approach was seen as reducing stress and decision-making/administration burden for households.
Disadvantages of money off energy bills: however, in terms of disadvantages money off energy bills was seen as limiting flexibility for households to address other urgent needs. In addition, there is a risk that payments may be absorbed by existing debt rather than addressing current consumption needs. It is also a one-off method of support, where ongoing is needed.
Distinct approach to fuel poverty: most respondents felt that there was a need for a distinct approach to fuel poverty. The reasons given for this primarily related to the existence of fuel poverty’s distinct drivers and the fact that they cannot be addressed through income measures alone. The long and short-term implications of not having adequate funds to pay for energy were emphasised, including the risk of self-rationing, energy debt, and impacts on health and wellbeing.
The need to focus on energy efficiency investment: there were also a number of other important points raised in the literature and call for evidence responses which the Panel may wish to reflect on. Turner et al at the Energy Demand Research Centre at the University of Strathclyde have carried out modelling to understand the relative benefits of public spending on direct bill support. Their findings show that policy focus needs to shift from transitory direct bill support to delivering the more sustained benefits of energy efficiency investment. Some respondents to the call for evidence also discussed the effectiveness of reducing the amount that households spend on energy through improvements to energy efficiency and clean heating. Energy efficiency measures are a long-term solution, whereas income or bill support provide important but ultimately short-term relief.
Minimum Income Guarantee and a social tariff: two complementary approaches to tackling fuel poverty were discussed by respondents. The case for a Minimum Income Guarantee was laid out by Citizens Advice Scotland, who argued that this approach would be effective through increasing incomes as well as reducing energy costs through a social tariff. The Scottish Federation of Housing Associations, too, discussed the need for a social tariff.
Energy debt: all the respondents who responded to the Panel’s questions on energy debt felt that this debt should be managed differently to energy bill support. Where energy bill support is used to pay off energy debt, rather than support current energy consumption, it undermines the purpose of the policy. It was felt that energy debt should be managed through a separate, dedicated programme.
Fuel poverty calculation: there were calls amongst some respondents for a review of the methodology behind the fuel poverty calculation. Energy Action Scotland (EAS) highlighted that the metric was developed with an intrinsic assumption that energy prices would be relatively flat, which has not been the case. EAS also highlighted the fact that energy debt is not directly captured in the fuel poverty calculation and there is no factoring of the additional costs of repaying debt reflected in the fuel poverty definition. Finally, IPPR Scotland argue that the 10% energy threshold does not add any insight into households’ financial challenges not already captured by the MIS90 threshold.