Low Income Winter Heating Assistance (LIWHA): consultation

Section 5 – Proposals for Low Income Winter Heating Assistance

5.1 Low Income Winter Heating Assistance – Overview

Under our proposed new benefit, everyone who would currently be eligible to receive CWP if the average temperature in their area were zero or below for 7 days (i.e. everyone in receipt of a qualifying benefit) would receive a single £50 each year during the winter. Our intention, subject to agreement with the UK Government is that this payment will be tax free. This would remove the dependence of the payment on changing weather conditions and on a limited number of, often remote, weather stations to monitor them. This would offer recipients greater dependability and may provide the opportunity to target more households that are at risk of fuel poverty.

Based on estimations of eligible claimants, LIWHA will make an estimated payment of £20 million annually to around 400,000 eligible people. In developing this proposal, the Scottish Government has considered the UK Government’s approach and has decided that the UK approach does not offer sufficient flexibilities, nor does it reflect the Scottish Government’s principles or the need to reduce fuel poverty in Scotland more effectively.

To remain consistent with the terminology used by Section 30 of the Social Security (Scotland) Act 2018, under which regulations will be brought to introduce this replacement benefit and to reduce the risk of confusion between benefits being delivered by both UK and Scottish Governments, we intend to refer to our replacement as Low Income Winter Heating Assistance (LIWHA).

Question 1. Do you agree or disagree with the proposal to replace Cold Weather Payment with a new benefit whose eligibility is based solely on receipt of a low income benefit and not on reaching a specific temperature for a period of time?

Question 2. If you disagreed, please could you explain why?

Question 3. Do you agree or disagree that this approach is an effective way for the Scottish Government to tackle winter heating costs for people on low incomes?

Question 4. If you disagreed, please could you explain why?

Question 5. Do you agree or disagree with the proposal to name the replacement for Cold Weather Payment (CWP) in Scotland “Low Income Winter Heating Assistance” (LIWHA)?

Question 6. If you disagreed, please could you explain why?

5.2 Removal of ‘Cold Spell’ triggers and ‘Lump Sum’ payment

CWP was ostensibly designed to address fuel poverty as the payment is intended to help those most vulnerable to the health risks of staying in a cold home to pay for additional heating when the weather is at its coldest. However the sporadic nature of these payments, and the difficulty recipients have in anticipating them, has meant that although it may have an impact on the lived experience of fuel poverty, it has made little impact on overall fuel poverty rates to date. Although it is difficult to quantify the impact the introduction a new benefit like this would have on reducing the fuel poverty rate in Scottish households, data from the Scottish House Condition Survey 2018 showed that, 34% of households receiving CWP were fuel poor. If the weather dependent criterion is removed this would rise to 44% (Source: SCHS 2018).

Individual weather stations currently used to measure the temperature for different areas in Scotland, are limited in number and often cover large geographical areas (figure 1) within which the weather and temperature can vary significantly. Stakeholders have previously highlighted that some weather stations are located in areas that do not reflect the general climate or weather of all of the postcodes that they are linked too. For example, some weather stations situated in coastal areas or at a lower altitudes determine CWP triggers for homes located further inland or on higher ground. The strict requirement for eligibility to be dependent on an areas actual or forecasted temperature being measured at or below zero degrees Celsius for seven consecutive days does not take account of wind chill or temperature variation within a region. We also know that many will find it very cold when temperatures are measured as being slightly above freezing. This has led to individuals expecting a payment to be made, but not receiving one.

By removing the weather dependence of this payment we will provide greater security and stability in payments. Our Experience Panel survey showed that many felt that the requirement for seven consecutive days below freezing was too strict and that it made it difficult to plan, discouraging some from putting their heating on when needed.

It is our intention that this new benefit will provide additional assurance to vulnerable people that assistance will be provided to help maintain a safe temperature at home during the winter, reducing the health risks due to living in cold environments. It will also have a positive impact on disabled children, children under five and children living in low income households. Evidence has shown that living in a cold home can have a negative impact on health, educational attainment, emotional wellbeing and resilience. LIWHA will provide a financial boost to the family income of these most vulnerable children.

Question 7. Do you agree or disagree with the proposal to remove the requirement for a ‘cold spell’ to be identified in order for a client to receive a payment?

Question 8. If you disagreed, please could you explain why?

Question 9. Do you agree or disagree with the proposal to have a one off, annual payment for LIWHA?

Question 10. If you disagreed, please could you explain why?

5.3 Qualifying Benefits

Although we intend to remove completely the reliance on variable weather conditions and location to determine an individual’s eligibility, we do not intend to make significant changes to the qualifying benefits which establish entitlement to CWP. This will ensure that people in financial need continue to receive support with minimal disruption.

Therefore, those clients who are currently eligible for CWP due to being in receipt of, and meeting one of the qualifying conditions of, the existing reserved benefits will automatically be eligible for a LIWHA payment.

This includes clients in receipt of Pension Credit, Income Support, income-based Jobseekers Allowance, income-related Employment and Support Allowance, Universal Credit and Support for Mortgage Interest. Additional qualifying criteria for some of the low income benefits will also need to be satisfied in relation to disability premiums paid to the client or a disabled child in their household (full overview of qualifying benefits and conditions are shown in Table 1).

We are taking this approach as there tends to be an overlap of the eligibility criteria for CWP and households who are in fuel poverty and extreme fuel poverty. A household in fuel poverty is one that, in order to maintain a satisfactory heating regime and meet their reasonable fuel needs has total fuel costs more than 10% of the household’s adjusted net income (after housing costs), and after deducting fuel costs, benefits received for a care need or disability and childcare costs, the household’s remaining adjusted net income is insufficient to maintain an acceptable standard of living. The remaining adjusted net income must be at least 90% of the UK Minimum Income Standard (MIS) to be considered an acceptable standard of living, with an additional amount added for households in remote rural, remote small town and island areas. Extreme fuel poverty follows the same definition with the exception that a household would have to spend more than 20% (rather than 10%) of its adjusted net income (after housing costs) on total fuel costs to maintain a satisfactory heating regime and meet their reasonable fuel needs.

Due to this overlap between the current eligibility for CWP and those households who have need for enhanced heating regimes (those who are likely to have higher heating costs), it can be assumed that a guaranteed payment each winter would have the effect of reducing the fuel poverty rates in those households.

Eligibility for CWPs is linked to entitlement to a number of reserved DWP benefits. Therefore we rely on DWP to provide the data required to identify eligible clients. This is drawn from a number of different DWP technical systems. Making significant changes to the qualifying criteria would increase the technical complexity of identifying clients and therefore impact on the delivery timetable we have set out. Agreement with DWP would be needed for them to undertake the necessary development work. This would also create a risk that clients are not paid correctly or on time. Therefore our approach will allow us to offer more consistency and dependability to this payment whilst ensuring there is no gap in the provision of assistance for those who had previously received CWP.

Question 11.Do you agree or disagree that our approach to identifying eligibility should be through the use of qualifying benefits?

Question 12. If you disagreed, please could you explain why?

Question 13. Do you agree or disagree with the proposal to retain the current qualifying benefits to indicate eligibility for this new payment?

Question 14. If you disagreed, please could you explain why?

Question 15. Do you agree or disagree that the eligibility criteria for the LIWHA are clear?

Question 16. If you disagreed, please could you explain why?

5.4 Amount of Payment

The current CWP rate of £25 is relatively low and payments are sporadic so it has made little impact on overall fuel poverty rates to date. There has also been a general decrease in the number of payments of CWP made in Scotland over recent winters with table 4 below showing a general downward trend (until winter 2020/21) in cold weather events and therefore CWP payments.

Table 4. Number of cold weather triggers and total spend in Scotland from 2017/18 until 2020/21.

Year	Number of CWP Payments	Scottish Payments as a % of GB	Total Value £m
2017/18	987,000	21%	24.90
2018/19	408,000	37.9%	10.20
2019/20	7,000	100%	0.17
2020/21	854,000	21.2%	21.30

Historically many people eligible for CWP will not receive a payment for every winter period, because the triggers for payments are concentrated in certain weather stations. For instance, in 2019/20 only 7,000 payments were made, consisting of 2,000 people getting one payment of £25, 1,000 people getting two payments for a total of £50, and 1,000 people getting three payments for a total of £75.

Assuming there is no change to the qualifying benefits, a flat payment of £50 each year would provide those living in areas where there have historically been few triggers with a similar or higher amount each year than they receive under the current system. Conversely, those living in areas which historically have frequent triggers would potentially recieve less than they do under the current system. As the current payment is £25 for each trigger, people living in areas with three or more triggers would receive less under the £50 payment. However, data from Scottish weather stations from the past six years indicates that only eligible recipients living in six of the twenty seven weather station areas covering Scotland would have, on average, received less had the payment been set at a flat rate of £50. These are generally less densely populated rural areas covering a small amount of eligible clients.

Since we cannot forecast the triggers in advance, we cannot say definitively who would definitively be affected by this. However, we believe the positive impact of this change in approach will be acutely felt by those eligible low-income households who may not have previously received a payment (under the current DWP Cold Weather Payment,) due to the current dependency on weather. Although under this proposal the level of payment will not increase as the temperature recorded drops, we believe it will provide more predictable support bringing a better platform for those eligible clients who receive it to meet extra heating costs as they arise.

5.5 Financial Implications

Last year there were 854,000 payments made to CWP recipients in Scotland totalling more than £21 million. The year before there were only 7,000 payments totalling less than a quarter of a million. Because payments are weather-dependent, overall expenditure fluctuates considerably from year to year (see Table 2 above). By removing the uncertainty of weather dependence we anticipate that our guaranteed £50 payment will provide at least £20 million to those households every year. This is £5 million more than the estimated budget for CWP (based on average expenditure since 2009/10).

Unless there are prolonged periods of very cold weather in future winters the Scottish Government’s annual expenditure on LIWHA will, therefore, exceed the budget provided for CWP as part of the annual Block Grant Adjustment (BGA). While this will increase costs and limit scope for increases to the value or frequency of payments, it will improve dependability for recipients and enable the government to be in a better position to more accurately forecast actual expenditure every year.

Question 17. Do you agree or disagree that the proposed rate of £50 for LIWHA is appropriate?

Question 18. If you disagreed, please could you explain why?

5.6 Format of Payment

Our intention is for LIWHA to be paid to clients annually, one off basis. This would take the form of a cash payment, as is the case now with individual CWPs. Currently eligible clients for CWP are identified and paid through the system which processes their qualifying benefit. There is no application process and payments are made directly into a client’s bank account.

The majority of respondents to our Experience Panel survey on winter heating benefits indicated that the fact that it is paid automatically into their account was a particularly positive element of the current benefit and so is something that we intend to continue. This approach offers eligible clients the ability to retain the flexibility of the current CWP, but would have the benefit of adding certainty and consistency to the payments received by eligible recipients struggling to heat their homes in winter, as they would be guaranteed a payment for each winter period, whether or not their geographical location had experienced a cold weather event.

Question 19. Do you agree or disagree with the proposal for LIWHA to be given to clients in the form of a cash payment and not another form?

Question 20. If you disagreed, please could you explain why?

Question 21. Do you agree or disagree with the proposal to pay LIWHA as an annual one-off payment each winter?

Question 22. If you disagreed, please could you explain why?

5.7 Qualifying Week

For CWP, eligible clients are identified and paid automatically every time a ‘cold spell’ trigger is identified in their geographical location. As the individual circumstances of a client changes, so does their eligibility for a qualifying benefit and consequently their eligibility for CWP. Client eligibility is determined from the point a ‘cold spell’ is triggered, not at the start of winter or during a ‘qualifying week’ as is the case for other winter heating benefits.

Clients are notified by letter when a cold spell has been triggered and advised they will receive a payment. However, on occasion this letter is not received until after the client has been paid. This can cause some confusion, particularly as the CWP is made through the qualifying benefit system so the description on a bank statement makes this look like an overpayment of another benefit.

As we intend to remove the weather dependency of this benefit when we introduce LIWHA we will need to be able to identify eligible clients before any payments are made. Therefore, it is our intention to set a ‘qualifying week’ for LIWHA replicating the approach taken to identify eligible clients for the current Winter Fuel Payment (WFP) and the Scottish Government’s Child Winter Heating Assistance (CWHA). This means that an individual’s entitlement to LIWHA will be based on entitlement during the ‘qualifying week’ rather than during a particular period of cold weather.

Setting the ‘qualifying week’ for the week beginning with the third Monday in September of any given year would be consistent with other winter heating benefits being paid across the UK. This enables clients to be identified before the beginning of the winter period, ensuring that they are notified early and can therefore plan ahead with the certainty that they will receive a payment each year.

This date is appropriately associated with a winter payment and would give us a reasonable amount of time to identify eligible recipients to ensure that all clients receive their payment in time. However, unlike WFP and CWHA, this option would mean that there is a substantial period of time between the ‘qualifying week’ and when the intended payments of the new benefit are to be made to eligible clients.

Question 23. Do you agree or disagree with the proposal to set a ‘qualifying week’ during which eligible clients for LIWHA will be identified?

Question 24. If you disagreed, please could you explain why?

Question 25. If you agreed, please provide a preference for when you think the qualifying week for LIWHA should be?

5.8 Timing of Payment

We know that meeting the costs of fuel for heating in the coldest months of the year causes many that currently receive CWP significant financial difficulty. Our stakeholder engagement on this area has indicated that the timing of any new payment is important to clients who currently receive CWPs. The timing of the current payments, which are paid out to clients within 14 days of a cold weather event in their area currently causes some confusion and is often hard to predict. Often clients have had to wait to receive a payment following a period of extreme cold weather and when it is received the time of need has passed. This is a particular issue for those households who have prepayment meters.

It makes sense to provide this support when it is needed most. The coldest months in Scotland tend to be January and February and our ongoing stakeholder engagement suggests some clients would prefer to receive their winter heating benefits in these months. Trends also indicate that February is the month in which most cold weather triggers have occurred over the past 6 years (see table 5 below). We therefore propose making the new payment in February each year, enabling clients to plan ahead ensuring they are able to put this new payment towards the increased fuel cost often normal for this time of year.

Table 5. Number of cold weather triggers by month in GB for the last 6 years.

Cold Weather Payment (triggers)	November	December	January	February	March
2015/16	0	0	19	6	1
2016/17	8	0	2	3	0
2017/18	0	30	13	62	35
2018/19	0	0	30	13	0
2019/20	5	0	0	2	0
2020/21	0	8	55	77	0

Question 26. Do you agree or disagree with the proposal to make LIWHA payments to clients in February each year?

Question 27. If you disagreed, please could you explain why?