Strategy Review and Recommendations
In offering its reflections on the Strategy, the SFPAP has set out each recommendation along with a short narrative and rationale.
Strategy – review and interim update
Recommendation 1 – The SFPAP recommends that the Scottish Government should complete its required 5-year review8 of the Strategy by the dissolution of this parliament in May 2026.
The SFPAP recognises that a full review of the Strategy before the end of this parliament will require a significant amount of work. However, the Energy Strategy and Just Transition Plan and the Heat in Buildings Strategy, both critical to the delivery of the 2040 fuel poverty targets, will be embedded early in the review period (2024-2026) and this will help to expedite this review process.
This full review should contextualise the Strategy within the National Performance Framework and the Sustainable Development Goals to root it within Scotland’s national outcomes9. The National Outcomes, set out in the National Performance Framework, are currently under review10. Consultation on these will inform the National Outcomes the Scottish Government works towards for the subsequent five years. The convergence of the revised national outcomes and full Strategy review timelines therefore offers an opportunity to ensure that national outcomes and Strategy (fuel poverty) outcomes are aligned.
The SFPAP notes the findings of the 2018 interim Equality Impact Assessment11 undertaken in developing the Fuel Poverty Strategy and Bill. We welcome this analysis as part of the Scottish Government’s efforts to ensure the Strategy has a positive impact on protected groups and individuals. There is, however, no single variable that identifies all fuel poor households12. Instead, fuel poverty is an intersectional issue13 where multiple coalescing points of vulnerability determine a household’s risk of fuel poverty. As such, we recommend that enhanced impact assessments are done at each Strategy review to ensure the Strategy maintains a focus on the changing profile of poverty and vulnerability over time. It is, for example, very likely that during the fuel poverty targets’ twenty-year lifespan, there will be shifts in the population profile as new groups experiencing poverty and vulnerability emerge (e.g., new refugee groups).
Recommendation 2 – The SFPAP supports the Scottish Government’s intention to complete an interim
update to the Strategy this year. The SFPAP advises the Scottish Government to include a strategic delivery plan in this update.
There is a consensus that an update to the Strategy is needed during 2023 to recognise and adapt to the exponential rise in fuel poverty rates. This update should also provide a benchmark from which to build an outcomes-based evaluation and monitoring framework (see Recommendation 15). This will provide a mechanism to demonstrate the Scottish Government’s progress towards meeting the 2040 fuel poverty targets. It will also support understanding of what is/what is not working and enable plans to evolve where additional or different policy levers are identified.
The Strategy update should include:
- a strategic delivery plan setting out the pathway to achieving the fuel poverty targets. This plan should clearly articulate the policies which will contribute to meeting fuel poverty targets and the activities which flow from these policies to
tackle fuel poverty, including:➢when they will deliver (priorities and milestones).➢ how much they will contribute to meeting the targets (impact).
➢ who has responsibility for their delivery (ownership).
➢ the amount of investment needed (cost and resources).
➢ the extent of the dependency on unknown technologies/solutions, yet to be identified, which will close the gap between the plan and the statutory targets (future enablers/dependencies).
➢ what arrangements and controls will be put in place for tracking the progress in delivering on the strategic delivery plan (governance of the plan). - how the Scottish Government will address the tension between (a) the tactical support needed for those suffering fuel poverty now and (b) the strategic approach needed to prevent (i) those in fuel poverty remaining fuel poor and (ii) others at risk of falling into fuel poverty in the future from becoming fuel poor. In essence, the Scottish Government should outline how the Strategy addresses and balances both immediate fuel poverty needs with the target of eradicating fuel poverty by 2040.
- how the Scottish Government will work in partnership to deliver on the fuel poverty targets working collaboratively with other administrations as well as other public, private and third sector organisations.
- how the Scottish Government will consult on its update to the Strategy.
The policy landscape
Recommendation 3 – As part of the Strategy update, SFPAP recommends that the Scottish Government adopt an outcomes-centred approach which underpins the strategic vision of eradicating fuel poverty – enabling a clear line of sight between the vision and the actions needed to realise it.
Outcomes which will lead to the achievement of the vision should be clearly articulated14 . It is difficult to envisage how an effective evaluation and monitoring framework can be created without clear outcomes15 (see Recommendation 15). A thread should run between the vision – to eradicate fuel poverty – the outcomes (i.e., what a fuel poverty-free Scotland will look like) and the actions (in the strategic plan) which will tackle the drivers of fuel poverty and deliver the outcomes.
Recommendation 4 – As part of the Strategy update, SFPAP recommends that the Scottish Government map the high-level policy landscape for those policies directly supporting the delivery of fuel poverty targets – those which fall both within devolved competence and those which are reserved.
The fuel poverty landscape is complex covering both devolved (e.g., fuel poverty policy itself) and reserved policy (e.g., energy markets). Clear policy mapping would bring transparency to what the Scottish Government is able to deliver directly in working towards fuel poverty targets (where it has ownership of policy, stakeholder relationships, regulatory powers, and budget) and where it will need to influence the UK Government to deliver. This picture, in conjunction with clear information on which policy levers will be most impactful on the path to achieving the 2040 fuel poverty targets, would help to make clear the priority activity for the Scottish Government. As the Fuel Poverty Strategy spans a range of Scottish Government policies, policy mapping would also help shed light on accountability for creating the governance arrangements needed for assurance that the Strategy will deliver (see Recommendation 2, above).
The complexity of the fuel poverty policy landscape can also make it difficult to understand where the deployment of resources is being used to greatest effect in the journey towards the eradication of fuel poverty and achievement of a net zero Scotland. Mapping the resource allocation to policies would clarify the level of resources needed to meet the fuel poverty targets and where funding gaps are most detrimental.
Greater transparency, facilitated by a fuel poverty policy mapping, would also help to uphold the fuel poverty principles, set out in the Heat in Buildings Strategy16 . The Scottish Government has clearly signalled that where there are related fuel poverty policies, a “no detriment principle” should be applied.17 Reducing the cost of energy and energy consumption needs, for example, are principles which need to be embedded across relevant Scottish Government policies.
Fuel Poverty Targets
Recommendation 5 – The SFPAP advises the Scottish Government to set out and test the relative impact of the drivers of fuel poverty in achieving both the interim – 2030 and 2035 – and the 2040 statutory fuel poverty targets in its Strategy update.
The assumptions made by the Scottish Government on energy consumption, energy pricing, and net household income to achieve the fuel poverty targets need to be clearly articulated and understood.
As the Strategy was developed when fuel poverty rates were decreasing, and fuel poverty rates have increased significantly in the interim, the assumptions made in delivering the targets need to be tested to understand how activity needs to “step up” or change. The energy crisis has shown how high energy prices drive fuel poverty with the systemic inflationary impact affecting domestic heating costs and household income. Falling wholesale prices will lower domestic energy prices from their current record highs18. However, even with reducing prices, prices in July-September 2023 will still be more than 60% higher than in winter 2021/2219 .
Understanding the relative impact of the fuel poverty drivers20 will help the Scottish Government to prioritise and focus its fuel poverty strategic delivery plan. The Scottish Government should test the fuel poverty targets using different modelling scenarios to develop a view on future energy prices, alongside changing energy demand, in the context of decarbonisation up to 2040. Modelling the overall bill, a household pays for energy (or would pay if it could afford to do so to maintain optimal household heat levels and other electrical services too) using forecast data to understand potential impact on target delivery, will help identify the most impactful policies and strategic priorities. Weighting the relative impacts of the fuel poverty drivers through time, with a variety of assumptions – such as changes to energy prices, demand, and progress on decarbonisation measures (heating, hot water, transport) – would be complex, but it would help substantiate the sufficiency of delivery activity and would bring an evidential base to what is/is not working on the path to 2040.21
Fuel Poverty vulnerability and research
Recommendation 6 – In updating the Strategy, the SFPAP advises that the Scottish Government maximise the potential to work with the SFPAP in 2023/2422 to increase the understanding of fuel poverty through the creation of a joint research plan. This plan, with supporting funding, will facilitate the building of a holistic, national
evidence base which will provide consistent and robust fuel poverty data over the lifetime of the targets.
The SFPAP recognises that there is already a large body of evidence on fuel poverty issues and outcomes (including the official statistics provided by the annual Scottish House Condition Survey). Furthermore, the Scottish Fuel Poverty definition is
ambitious in its reach. However, there remains an opportunity to build a more holistic national evidence base by drawing together existing research while also establishing a research programme which helps to create a more “real time” picture of fuel
poverty. For example, there is a need for research to build, and keep current, a holistic view of fuel poverty in Scotland. This could include:
➢ Working with energy companies’ data23 to identify those who ration their fuel usage24.
➢ Building a knowledge base to best ensure that the experience of – and challenges faced by – Scotland’s rural and islands households are fully considered in fuel poverty reduction efforts (including the possible introduction of a social tariff).
➢ Modelling demographic groups who might become fuel poor, based on projected demographic shifts to 2040. It is important to recognise that people can move in and out of fuel poverty. Without this recognition, there is a risk that fuel poverty is not eradicated. Modelling on demographic groups, who might become fuel poor would help to mitigate this risk. In addition, to help inform the Strategy’s priorities and make it impactful through to 2040, a longitudinal lived-experience research project could:
➢ help to identify trends through time: the profile of those living in fuel poverty is not static. The fuel poor demographic is affected by changes in the wider environment as well as their own individual circumstances and there are those who move in and out of fuel poverty.
➢ build a better picture of the health impacts and consequences of fuel/extreme fuel poverty.
➢ help to build a picture of fuel consumption through time across Scottish households with different heating regimes and the capacity to break this down by regions.
Funding and Investment
Recommendation 7 – The SFPAP advises that the Strategy update should review the investment needed to improve the energy efficiency of homes and develop an accelerated rolling 5-year programme with measurable outcomes.
Improving the energy efficiency of homes is one of the policy levers to tackle fuel poverty which is within the Scottish Government’s devolved powers. The Scottish Government has established a new agency, Heat and Energy Efficiency Scotland, to lead and coordinate heat decarbonisation in Scotland. The Heat in Buildings Strategy sets out the vision for future heat in buildings including actions to help address fuel poverty. How the £1.8 billion of capital funding for heat and energy efficiency improvement in buildings across Scotland, which the Scottish Government has committed in the lifetime of this parliament, is deployed to best effect is a key question in tackling fuel poverty. SFPAP, in its previous advice to Ministers, recommended that there should be an increase in the policy ambition and funding for energy efficiency in homes. The Panel understands that there was an underspend in investment in 2022/2325 , and in these circumstances, we believe that improved deployment and governance of funds is needed along with a capability mapping of the recommended energy efficiency rolling programmes to underpin their delivery. SFPAP advise that the Scottish Government should commit to re-invest any underspend from current schemes and recognise that as energy efficiency projects are often multi-year, complex investments, year-by-year budgeting creates significant constraints.
Partnership and collaboration
Recommendation 8 – The SFPAP advise that the Strategy update should consider a capability mapping and how sector-wide organisations and NGOs committed to tackling fuel poverty – across housing, energy, and advice sectors – can be leveraged to support the delivery of fuel poverty targets.
Existing key delivery partners should be identified to harness their fuel poverty commitments and capabilities, enabling a holistic approach to accelerate progress. This could be achieved through the development of a more nuanced delivery programme to supplement national schemes and the Local Authority role by leveraging sector and NGO capabilities. For example, working with all social housing providers to establish a commitment and clear programme to tackle fuel poverty and meet net zero, with appropriate funding; adopting the plan from the Existing Homes Alliance for a Just Transition in Rural Areas, and developing the partnerships between Home Energy Scotland and local energy advice agencies to create a network of comprehensive advice and delivery services across Scotland.
Recommendation 9 – The SFPAP recommend that the Strategy update should explore the value in building on the Scottish Government’s Energy and Anti-Poverty Summits to create effective collaboration and a partnership approach to support delivery of the Fuel Poverty Strategy.
The former First Minister’s Energy Summits and the current First Minister’s Anti-Poverty Summit drew together key, cross-sectoral voices from the public, private, and third sectors. This group has the potential to form a useful and influential partnership/collaborative to support the Scottish Government in delivering its strategic plan. It could also help to develop cross-sectoral solutions outwith the energy sector regulatory framework to address key challenges as they emerge. There are several existing, well-trailed and challenging fuel poverty issues for which this group would be well-placed to offer and test solutions:
Pre-payment meters
The Spring Budget26 promised alignment for pre-payment energy charges with those of direct debit from July 2023. This will be delivered in the short-term through the Energy Price Guarantee, with Ofgem commissioning a report on how to permanently end the “prepayment penalty”. It is currently unclear whether this means that those n pre-payment meters will have access to the same tariff range as those paying by direct debit.
Issues with pre-payment meters are also far wider than those of equitable tariffs alone – they include debt, self-disconnection, forced installation27 and rationing. For those using pre-payment meters who are in fuel poverty, debt write off can temporarily alleviate, off-set, or mitigate the effect of fuel poverty, but often cannot move them out of it. In topping up their meter, those in fuel debt will normally see their top-up immediately reduced as suppliers seek to recoup the debt by an agreed amount28 . Debt write-off, while very helpful, cannot move people permanently out of fuel poverty. A workable, cross-sector solution is needed which identifies how support and interventions can more effectively provide for and target those with historic debt.
Price Cap Consumption assumptions
The SFPAP, among others, is concerned that Ofgem’s price cap calculation does not adequately recognise costs either of heating a home with electricity, or the average costs for those who rely on unregulated fuels. It therefore fails to recognise the fuel cost consumption for those living off-gas grid. There is also an undesirable volatility in the current method of calculating the cost cap – the quarterly cycle means significant rises in April – reflecting the previous Winter quarter’s use – whereas the previous six-monthly approach went some way to smoothing increased consumption over the coldest months29 . Offering a cross-sectoral view to Ofgem on how the price cap could more fairly reflect the challenges of those off-gas grid is an issue which the Energy Summit partnership/collaborative would be well-placed to do.
Voluntary Priority protocol
In the SFPAP’s recommendations to Ministers in October 202230 , the SFPAP highlighted the advantages to creating a voluntary priority protocol between Scottish Government, advice agencies, and energy suppliers to achieve the best outcomes for those struggling with energy bill payments and debt. This cross-sectoral group would be ideally placed to create and participate in this protocol.
Social Tariff
This cross-sectoral group could play an important role in helping the Scottish Government to develop social tariff models to influence UK Government thinking on these. Consideration could also be given to whether there should be a Scotland-specific social tariff and whether this might better serve the needs of those suffering fuel poverty in Scotland (see also Recommendation 12, below).
Advice and advocacy
Recommendation 10 – The SFPAP advises that the structural importance of advice and advocacy in tackling fuel poverty needs greater emphasis in the Strategy update. The Panel reiterates its October recommendations and suggests that these are built into the plan for delivering the Strategy to give the advice and advocacy sector stability.
In its advice to Minsters (October 2022), the Panel made several recommendations to support the advice sector in responding to energy advice needs both now and in the future. These were that advice agencies should be supported by both short and longer-term funding commitments; ongoing public information campaigns; the brokering of a voluntary priority protocol between government advice agencies and suppliers (as mentioned above); and reviewing the design of energy advice services, including their funding model, to inform funding and policy decisions for the future with attention to long-term investment and stability.
A structural review of support for the advice sector is particularly important to ensure that it has the capacity and resources to support Scottish Government’s work to achieve the 2040 fuel poverty targets.
Energy Market Reforms
Recommendation 11 – The SFPAP advises that the Strategy update should bring a stronger focus to the opportunities which the Scottish Government has to influence the UK Government on energy market reform to protect low-income households.
The SFPAP recognises the huge opportunity to reduce fuel poverty, and help achieve the 2040 targets, enabled by the potential, highly complex changes in the energy system in the next decade and beyond31 (embodied, for example, by the current Review of Electricity Market Arrangements). From a just transition perspective, the Scottish Government has an important role in acting as a voice for low income and vulnerable households to ensure that the changes are inclusive and reduce, rather than further embed, fuel poverty.
The Scottish Government also has an important role in energy market reform given Scotland’s existing and future renewables’ potential. The Strategy update should bring a stronger focus to the opportunities which the Scottish Government has to influence UK Government action. As part of this, the Scottish Government should ensure that it has sufficient resources in place internally to build and enable its important influencing role. Another way of leveraging Scottish Government’s influence would be to use the Energy and Anti-Poverty Summit participants to develop a positive working relationship with the Department for Energy Security and Net Zero and Ofgem. For its part, the SFPAP will assist the Scottish Government in making joint representations to the Department of Energy Security and Net Zero and Ofgem – and other key stakeholders – including through the SFPAP Chair’s membership of the REMA End-user Forum.
Protecting Vulnerable Households
Recommendation 12 – The SFPAP recommends that the Strategy update should bring a stronger focus to the opportunities which the Scottish Government has to influence the UK Government on social tariffs.
A mechanism is needed to ensure affordable energy for low-income households between the long-term change to the energy system (decarbonisation) offering the possibility of future stable and affordable energy prices and immediate short-term interventions to mitigate energy market price volatility for the vulnerable (Warm Homes Discount etc.). A structural change in the energy pricing or energy support for vulnerable households is needed. This structural mechanism could be provided through the development of a social tariff but must not be restricted to those in receipt of income-related benefits. As the SFPAP recommended in its advice to Ministers in 2022 and noted above (see Recommendation 9), the Scottish Government can play an active advocacy role in its establishment32 .
Calls for social tariffs are gaining traction and they have long been advocated by the third sector (including in a recent report uncovering the extent of fuel poverty in rural Scotland)33 . The UK Government signalled their intention to consider social tariff as a means of consumer protection in the Autumn Budget 202234 . There is an opportunity for the Scottish Government to take a lead here and to develop thinking on, as well as advocacy for, a model which will work for Scotland. For example, just as the Scottish Government has committed to urging the UK Government to review the levy funding for the Warm Homes Discount, it could also be championing social tariff across the whole of the UK, working to get Ofgem’s and others buy-in.
Recommendation 13 – The SFPAP recommend that the Strategy update should include a focus on analysis and identifying eligibility criteria when crisis support is provided. This would enable an assessment of the key Fuel Insecurity Fund, alongside other central and local funds, to identify potential gaps in the targeting of energy cost and managing energy debt financial support.
The requirement to balance immediate fuel poverty needs and the eradication of fuel poverty by 2040 has already been noted. Analysing the eligibility criteria for all financial support packages to identify potential gaps in the targeting of financial support, alongside the continuation of the Fuel Insecurity Fund and investment in advice agencies, is needed. The Scottish Government’s welcome uplift to the Fuel Insecurity Fund and the leadership it has shown here can be used as a springboard from which common eligibility standards are defined and deployed to ensure that consistent levels of support are made available to deliver optimal outcomes. This will indicate how the Fuel Insecurity Fund as well as other funds can be most effectively deployed and how they will help to meet the outcomes of the Strategy. If, for example, funding is used mostly to fund debt-write off, there is a risk that public
money is in effect transferred to energy companies’ balance sheets.
An approach to pre-payment meter debt (noted above) and Warm Homes Prescription model (noted below) could be usefully developed and funded through the Fuel Insecurity Fund.
Recommendation 14 – The SFPAP recommend that the Strategy update should set out an approach to improving health outcomes for those suffering fuel poverty, such as implementing the Warm Homes Prescription model.
The Strategy update should make stronger links to health outcomes (this would be facilitated by mapping the fuel poverty landscape and longitudinal studies (see Recommendations 4 and 6 above). One example of a model worth consideration is the Warm Homes Prescription model, which was also referenced in the SFPAP’s previous advice to Minsters (October 2022). The model seeks to tackle cold-related diseases and increase household warmth in tandem by (1) allowing medical practitioners and professionals to make referrals to energy advice services, organisations, or councils with the capacity to support energy efficiency measures and/or (2) establishing the incidence of cold-related disease as an eligibility criterion for accessing targeted support directly. This initiative is reflective of opportunities for joined up working across relevant sectors to benefit those in fuel poverty by using
existing or extended mechanisms. The appointment of the previous Cabinet Secretary for Net Zero, Energy and Transport to the health brief presents an opportunity for more joined-up thinking about fuel poverty and health outcomes.
Monitoring and evaluation
Recommendation 15 – The SFPAP advise the Scottish Government that, in consultation with the SFPAP, an outcomes-based monitoring and evaluation framework should be created in 2023/24 as part of the work to update the Strategy.
In its advice35 to the Scottish Government in October, the SFPAP emphasised the need for an outcomes-based monitoring and evaluation framework for the Fuel Poverty Strategy, and for the need to set the baseline measurements for the Strategy. The Strategy itself references a commitment to develop, working with SFPAP, an “effective outcomes-focused monitoring and evaluation framework for this strategy”. This will be enabled by the recommended outcome-centred approach which begins with the articulation of clear outcomes (see Recommendation 2 above).
It is important that the Strategy is credible and provides a plausible route to achieving the 2040 vision to eradicate fuel poverty. The Strategy update offers the opportunity to do this. The outcomes-based evaluation and monitoring framework could be developed at the same time as the Strategy update is drafted. This outcomes-based evaluation and monitoring framework is critical if SFPAP are to fulfil their statutory duty36 of advising Scottish Ministers on their progress towards meeting the fuel poverty targets. It is the SFPAP’s view that the framework should be developed by March 2024.