Fuel Poverty (Target, Definition and Strategy) (Scotland) Bill and Fuel Poverty Strategy: health impact assessment

2. New definition of fuel poverty and who it will affect

The latest Scottish House Condition Survey ( SHCS) statistics (December 2017) indicate that around 649,000 households (26.5%) of Scottish households were in fuel poverty in 2016 based on the current definition of fuel poverty. Of the 26.5% of households living in fuel poverty 10% of these were families.

The Fuel Poverty (Target, Definition and Strategy) (Scotland) Bill:

• Sets a new long term target that by the year 2040, no more than 5% of households are in fuel
• Sets a new fuel poverty definition which is:

Households in Scotland are in fuel poverty if:

A household is in fuel poverty if

a) The fuel costs necessary for the home in which members of the household live to meet the conditions set out in subsection (2) of the Bill (heating homes to specified temperatures and meeting other reasonable fuel needs) are more than 10% of the household's adjusted net income ( i.e. post-housing costs), and

b) After deducting such fuel costs, the household's childcare costs (if any), the household's remaining adjusted net income is insufficient to maintain an acceptable standard of living for members of the household.

• Requires Scottish Ministers to publish a fuel poverty strategy and then publish a report every 5 years to update on progress towards the long term target and the plans for the next 5 years, and to report at the end of the target date.

Our aim is to ensure support from Scottish Government programmes is targeted at those who need it most no matter where in Scotland they live. By using the Minimum Income Standard we can ensure those poorest households receive the support they require.

This new definition will:

• focus in on low income households by introducing a new income threshold to our definition of fuel poverty which will be 90% of the UK MIS after housing and childcare costs are deducted; and
• help us to better target our resources at those who are most in need of support, no matter where they live in Scotland.

In order to identify an acceptable standard of living the new definition is using the UK Minimum Income Standard which is produced by the Centre for Research in Social Policy ( CRSP) at Loughborough University, supported by the Joseph Rowntree Foundation. This attempts to define the income that different household types need in order to reach a minimum socially acceptable standard of living, drawing on the experience and opinions of ordinary people.

The independent academic review recommended that, for the purposes of fuel poverty, the definition be based on 90% of the MIS total for each household type. They also recommended excluding council tax, rent, water rates, fuel costs and childcare costs from the calculation of the MIS total for each household.

This new income threshold is considerably higher, for most household types, than the standard 60% of median income used to define relative income poverty ^[1] . This ensures that households only marginally above the income poverty line that are struggling with their fuel bills, will be captured in the new definition. It also removes higher income households from the definition, even if they would need to spend 10% or more of net household income after housing costs on required fuel costs. This addresses a drawback, highlighted by the independent review panel, of the 2001 definition where households with quite high incomes could be classified as fuel poor.

This ensures that households above the income poverty line that are struggling with their bills will be captured in the new definition.

The Scottish Government is adopting, with some minor adjustments, the proposed definition set out by the independent academic review panel, including measuring income after housing costs and introducing an income threshold based on the UK Minimum Income Standard ( MIS). However, some of the recommendations proposed by the academic review will not be adopted:

• the MIS thresholds will not be adjusted upward for households living in remote rural areas or where at least one member of the household suffers long-term sick or disability; and
• the enhanced heating regime will not be applied for households with children under 5. However, although this is the current policy position, any final decision on this will be a matter for regulations made under the Bill defining households for which enhanced heating is appropriate as a measurement. If substantial new evidence is brought forward on this issue in the future which indicates the proposed approach disproportionally disadvantages those households with children under 5, the Scottish Government can consider reflecting this in the regulations .

The additional costs borne by rural and remote households are already taken into account in the modelling used to estimate fuel poverty. Regional variations in temperatures and exposure to the wind as well as types of stock and information about occupants are used. These can lead to greater energy usage estimates to maintain either standard or enhanced heating regimes in rural and remote rural areas. In addition, regionalised (North and South Scotland) energy prices are used to reflect the different consumer prices paid in different parts of Scotland.

Finally, by deducting housing and childcare costs from both household income and the MIS, regional variations are further taken into account. The proposed use of 90% of MIS therefore gives a consistent and simple standard, which accounts for regional variation, and set a minimum income level well above, for most household types, the standard 60% of median income used to define income poverty.

This therefore ensures households above the income poverty line that are struggling with their bills will be captured in the definition.

For the first time, we are introducing a new income threshold to our definition of fuel poverty which will be 90% of the UK Minimum Income Standard ( MIS) after the costs for fuel, housing, council tax; water rates and childcare are deducted. This approach was broadly welcomed in the responses to our consultation because it removes higher income households from the fuel poverty definition. This threshold is also considerably higher, for most household types, than the standard definition of absolute income poverty after housing costs which ensures households above the income poverty line that are struggling with their fuel bills will be captured under the new definition.

National measurement of fuel poverty will continue to be through the annual Scottish House Condition Survey ( SHCS). Although we use a state of the art commercial model to estimate a household's required energy consumption when we measure fuel poverty, we will further review the model to determine whether this adequately reflects the requirements of rural households.

These proposed changes to the definition are ultimately expected to reduce inequalities of outcome, caused by socio-economic disadvantage.

Households requiring an enhanced heating regime

In the Fuel Poverty (Target, Definition and Strategy) (Scotland) Bill we have set out the temperature regimes that will be applied under the new definition to contribute to a healthy, indoor living environment which is free from condensation, mould growth and damp. They are relevant throughout the whole year although the required energy to meet them will vary, including according to monthly average external temperatures for the region in which the household lives.

The new heating regime represents an enhancement from the current definition of fuel poverty for households that we anticipate to be most affected by the adverse outcomes of living in a colder home. For these households, the other rooms' temperature in the heating regime for the new definition increases from 18°C to 20°C compared to the 10% definition while the living room temperature is maintained at 23°C. This removes the potentially harmful impact of a 5°C temperature difference between different rooms in the home.

We will define in regulations to the Bill, the households to which the enhanced heating regime will apply. This is likely to cover those households where:

a) at least one member has self-reported as having a physical or mental health condition or illness lasting or expected to last 12 months or more;

b) or, in the absence of the above, at least one member is aged 75 or over.

Part a) is the same criteria as used in the original 10% definition. Using self-reported information gathered through the Scottish House Condition Survey ( SHCS) we are identifying households where members themselves report that they have a condition which may impact on their needs in the home, although we do not ask them to tell us how their condition affects them.

It would be very challenging to define a list of long-term illnesses or disabilities that would indicate a person requires an enhanced heating regime. The impact of a specific medical condition or disabilities can vary significantly, as can their vulnerability to the effect of inadequately heated homes. However, we do propose to undertake additional work to determine whether it is possible to refine part a) of the definition above further, in order to better capture those who are likely to be most affected by the adverse outcomes of living in a colder home.

Part b) also represents a change from the original 10% definition. More older people than ever before are living healthy, active independent lives, well into their retirement. Therefore, we believe that an enhanced heating regime for all older people once they reach 60 years of age is no longer appropriate and, as we set out in our consultation, we will increase the age thresholds at which older households are considered to require an enhanced heating regime, based on age alone. The independent panel that reviewed the fuel poverty definition suggested that a threshold around 75 – 80 years of age may be more appropriate. We have decided to use the lower age of this range so that, for older households, where a person does not suffer from any long-term ill health or disability, we will not consider them as requiring this enhanced heating regime until they reach 75 years of age.

This age threshold is also consistent with our approach to our Warmer Homes Scotland fuel poverty scheme. Eligibility criteria for that scheme was agreed with input from key stakeholders, including Age Scotland and Citizens Advice Scotland, to ensure support is focussed on those with low incomes, including the working poor, fuel poor families, and those aged over 75.

Our analysis of 2015 data indicates that 60% of households with any adults aged between 60 and 74 inclusive will still be classed as requiring this enhanced heating regime because of health issues or because they also contain another adult aged 75 or over. Overall, around 80% of households classified as requiring an enhanced heating regime under the existing definition will remain so under the new definition.

If any additional evidence is brought forward in the future that indicates a different age threshold is more appropriate then we will review this aspect of the definition, and will be able to bring forward changes to the regulations, without requiring primary legislation.

Children under 5 years of age

Respondents to the consultation suggested that although the fuel poverty strategy consultation noted there is a lack of evidence on the need for a higher temperature for bedrooms of children under the age of 5, no allowance is made for households needing to heat their home for longer periods of time, as they might spend more time at home.

However, although the Scottish Government has decided not to adopt the recommendations of the independent review panel, any final decision on this will be a matter for regulations made under the Bill defining households for which enhanced heating is appropriate as a measurement.

If substantial new evidence is brought forward on this issue in the future which indicates the proposed approach disproportionally disadvantages those households with children under 5, the Scottish Government can consider reflecting this in the regulations .

Based on 2015 data, the fuel poverty rate for families with children would increase from 16% (current definition) to 23% under the new definition. The households in these groups who are brought into fuel poverty by the new definition have high fuel costs relative to their after housing costs income, as well as low residual incomes. These households will become more likely to be eligible to apply for help from Scottish Government fuel poverty programmes.

These proposed changes to the definition are ultimately expected to reduce inequalities of outcome, caused by socio-economic disadvantage. This is because, in comparison to the existing definition, the proposed definition has a stronger focus on households with low incomes. This means that the definition will be more aligned with existing programme delivery but will also result in an increased focus on those needing most assistance from fuel poverty programmes than under the current definition.

In addition, there is a clear link between child poverty and fuel poverty and we will ensure that our plans to tackle both of these issues remain aligned.

Through the Fuel Poverty (Target, Definition and Strategy) (Scotland) Bill we are committed to tackling fuel poverty and targeting fuel poverty and energy efficiency measures on those most in need, including low income families with children. As set out in the Tackling Child Poverty Delivery Plan we will take sustained action to boost applications from low income families to Warmer Homes Scotland, our national fuel poverty scheme. This will be achieved by targeted advertising and by partnering with key stakeholder organisations with a specific remit to represent the rights of children and young adults.