Initial Advice to Scottish Government

2. Protect those Suffering Fuel Poverty, and those at Risk of Entering Fuel Poverty, from its Long-term Effects

There is consensus across governments, the business and third sector, that the unprecedented energy costs are causing a national crisis. Systems and processes designed for a “different” world do not work in the current one.

The Scottish Government, in its 2022-23 Programme for Government¹⁸ has, or has committed to, taking several steps in immediate response to the energy crisis: doubling the Fuel Insecurity Fund to £20 million in 2022-23 to support vulnerable households who are self-rationing or at risk of self-disconnection, and confirming that both the Scottish Child Payment will increase to £25 per week per eligible child and that the Winter Heating Payment, providing a £50 annual payment to around 400,000 low income households, will be introduced before the end of the year.

Immediate action

Recommendation 5 – adopt the Fuel Insecurity Fund model in the design of future funds to support the vulnerable

The Scottish Government’s commitment to doubling the Fuel Insecurity Fund is very welcome. The panel recognises this as a simple, responsive and well-established fund enabling those with acute and immediate needs to benefit quickly from assistance as the weather gets colder. It has heard that this is a measure worth maintaining, and replicating the format of, in the design of future funds.

Recommendation 6 – adopt the Warm Homes Prescription model as a policy initiative

There are opportunities, too, for more joined up initiatives across the health, education, welfare and advice sectors to benefit those in fuel poverty by using existing mechanisms. The Warm Homes Prescription model is an example of this. The model seeks to tackle cold-related diseases and increase household warmth in tandem and follows two main modes of operation. First, General Practitioners and other medical professionals fast-track referrals to energy advice services, organisations or councils with the capacity to support energy efficiency measures. Qualifying residence will receive home visits and where relevant, interventions, including debt advice, temporary heating, property insulation and energy systems upgrades. Alternatively, the incidence of cold-related disease can be used as an eligibility criterion for accessing targeted support directly. In both cases, there are health benefits from increased home efficiency, with the potential for reductions in fuel bills through reduced fuel use. If existing referral mechanisms are used this could be implemented ahead of the coldest weather conditions this winter.

Medium term action

Recommendation 7 – increase the policy ambition and funding for energy efficiency in homes and introduce stricter standards for new build properties

Future security from fuel poverty lies in having an energy efficient housing stock. [One of the four drivers of fuel poverty is poor energy efficiency of the home]. There is homogeneity between net zero, and poverty and inequality (including health and wellbeing) policies, and the reduction of fuel poverty. Energy efficient housing, enabling every household to live in a warm home they can afford to heat, is part of Scotland’s Housing to 2040 vision and plan.¹⁹ There is a danger that in the very necessary response to the current crisis, and through addressing immediate need, the objective of releasing current, and future generations, from the debt cycle associated with fuel poverty is obscured. Namely, debt becomes unmanageable; governments need to fund writing off these debts or intervene in the market to cap prices; energy prices remain, or become, unmanageable, and debt rises above the means of those suffering fuel poverty to clear it, allowing the cycle to begin again.

In this context, it is essential not to lose sight of the potential to allocate short term funding to energy efficiency for long-term gains.

The Panel has heard from Housing Associations about some of the particular challenges in rural Scotland of increasing the energy efficiency of existing housing stock and developing new housing. The supply chain and skills’ shortages – a current feature of the national landscape – are amplified for rural communities. Support is needed to develop their supply chain and skills capacity for the long-term.

Again, in the context of rural Scotland, the Panel has heard that the current funding structures do not necessarily recognise local conditions where, for example, the housing condition and off-grid heating systems, dictate a different response. A more place-based model of funding would free up Housing Associations to direct and manage energy efficiency measures more effectively.

The Panel recommends that the Scottish Government increases ambition and funding to consider whether more can be done to accelerate the current efforts around creating a more energy efficient housing stock. This includes increasing both the efficiency of existing housing stock and reviewing whether energy standards for new build properties are rigorous enough – particularly in the private sector. In the medium-term, this will necessitate a review of the budget level needed to sustain and potentially upscale the Warm Homes Programme. The Panel has also heard evidence that the mechanisms by which the funding is accessed could be significantly simplified. The Panel has heard concerns about the private rental sector’s ability and, at times, willingness, to address household energy efficiency.

Considering in particular the private rental sector, is there more which could be done to incentivise energy efficiency measures – possibly, extending measures introduced through the EPC ratings?²⁰ The Panel’s view is that further thought and analysis is required here to reflect and embed the cost of living impacts on existing policy objectives.

Recommendation 8 – fund research into definitions and modelling of advanced heating requirements

Calculations for fuel poverty capture the ability to pay by exposing the relationship between income and the amount which needs to be spent to heat the home to an acceptable standard. The disparate drivers of fuel poverty make it difficult to calculate. Whereas the fuel poverty projections provide a national picture of the numbers of households in fuel poverty, what they do not tell us are the likely number of households who do not heat enough for their needs because of self-rationing or disconnection. The Panel has repeatedly heard examples of increased incidences of energy rationing and so it is essential that fuel poverty policies target these households.

The Panel recommends that the funding of initiatives to define and model the distribution of households with advanced heating requirements, who are unable to meet them, should be strongly supported. Households with advanced heating requirements are those which have higher than average heating needs (e.g. due to chronic ill health²¹) and would benefit from priority help with energy efficiency measures. Such an approach would help to capture households who significantly ration their energy consumption, and therefore increase the transparency of these households within standard fuel poverty metrics.