Initial Advice to Scottish Government

Fuel Poverty drivers

Historic data suggests that energy usage is inelastic – energy is used, regardless of price, because it is difficult to store and, more importantly, fundamental to the functioning of society. However, what we are increasingly seeing today are those with the least means often rationing their energy use to the point that it is harmful to their health and wellbeing.

Energy and money advice is therefore essential to mitigate the fuel poverty drivers of high energy prices, how energy is used in the home and low household income. Creating optimal energy efficiency in homes, as well as incentivising energy efficient behaviours, mitigates the fuel poverty driver of poor energy efficiency of the home.

Tackling these four drivers of fuel poverty requires a holistic approach to energy policy and one developed in consultation with, and leadership from, the UK Government which has certain policy and fiscal levers not available to the Scottish Government.

Panel engagement and early findings

The Panel, within its membership has a wide range of academic, consultancy, third sector and lived experience of fuel poverty. Building on its own knowledge and understanding, the Panel has prioritised engagement with advice agencies, energy companies and regulators. It has heard first-hand about the experiences of those suffering fuel poverty, the front line challenges in supporting them, and where intervention or policy change could provide some additional mitigation.

Although the Panel is in the early stages of its engagement, it is already hearing some deeply troubling stories and experiences from those working on the front line. There is a strong sense of foreboding, bordering on despair about the coming winter months, given how much people were, and are, already struggling. This is in spite of the UK Government’s support packages. Energy advocacy and wider support services alike note that they can barely keep up with the exponential increase in demand. With support beyond April now in limbo, the sense of foreboding will be even more acute.

The Panel is hearing that, even before many households turn on their heating and feel the full effects of winter consumption at increased rates, advice agencies are seeing peak winter levels of demand for their services because of unaffordable energy prices. There is a strong sense that even the April price cap rise has yet to bite. This makes the prospect of winter, and the temperature-driven increases in energy consumption it will bring, along with the combined effect of both the April and October price rises, even more alarming. There is already evidence of people self-disconnecting, rationing and, in some isolated incidents, being disconnected by their supplier or seeking alternative fuel sources that may prove dangerous without appropriate, well maintained infrastructure. In addition, all vulnerable customer support groups, whom the Panel engaged with, have reported many in their client base saying that they will not use their heating this winter. This will impact health – both mental and physical – with a real threat to human life. We already know that those suffering socio-economic disadvantage, and are in debt, are more likely to suffer suicide.⁷ We also know that household debt is escalating and that energy costs play a significant part in this.⁸ There is a realistic possibility of above average excess winter deaths. The inflationary and employment pressures of rising energy prices will not only affect those who are already fuel poor but a whole new demographic will become fuel poor with the October price rise and, potentially, when the Energy Price Guarantee is removed in April 2023.

The Panel is focussed on fuel poverty effects on households, and the individuals who form them. However, the Panel also recognise related issues around the cost of living, inflation, and economic recession, which will impact businesses. Low household income is one of the drivers of fuel poverty. If businesses fail and unemployment rises this will clearly increase levels of fuel poverty. Businesses, and the premises they occupy, also provide accessible warmth for those unable to heat, and who are therefore displaced from their homes.

The Panel has heard from a number of organisations who have highlighted how uncertain the nature of third sector funding is, and that the short-term funding approach can lead to short-term decision making. The Panel has heard about escalating levels of need and support with one third sector organisation facing a doubling of the number of households presenting for help, and a more than doubling of the time taken to provide a material level of support. The Panel therefore welcomes the Scottish Government’s Programme for Government (A Stronger More Resilient Scotland – Programme for Government, 2022-2023) and its commitment to provide £1.2 million of additional resources to advice organisations, supporting them to help households in difficulty, and to help households and businesses access advice and support on energy efficiency. This, along with the public information campaign to highlight help and support, including energy efficiency measures, is a move which the Panel would certainly have recommended had the Programme for

Government not made this commitment. The Panel also welcomes the measures to support household incomes and those who have fallen into debt, particularly the commitment to double the Fuel Insecurity Fund to £20 million in 2022-23, and increase winter fuel payments for the vulnerable, as well as the First Minister’s more recent announcement doubling the winter child poverty bridging payments.⁹

The Panel also welcomes the Poverty and Inequality Commission’s Cost of Living Crisis advice and the tangible steps it recommends to mitigate the fuel poverty drivers of poor energy efficiency of the home; high energy costs and low household income.

Recommendations: immediate and medium

Beyond commitments already made, the Panel are offering some initial recommendations on immediate action which the Scottish Government can take in the short-term during the remainder of this financial year. The emphasis of these is to ensure that:

• the extent of fuel poverty is fully understood
• existing programmes and relationships work as effectively as possible
• preparation for the medium/longer term.

Medium-term recommendations are looking to the next two financial years, the original timeframe for the Energy Price Guarantee, and as energy market reforms and Local Energy Strategies emerge. These will require more robust and proactive solutions.