Fuel Poverty (Targets, Definition and Strategy) (Scotland) Bill: island communities impact assessment

Key Findings: Targets

As outlined on page 4 above, the new national target being set is that in 2040, as far as reasonably possible, no household in Scotland is in fuel poverty and, in any event no more than 5% of households in Scotland are in fuel poverty; no more than 1% are in extreme fuel poverty and the median fuel poverty gap of households in Scotland in fuel poverty is no more than £250 in 2015 prices before adding inflation. This target has been extended to Local Authority level, to drive progress towards the achievement of the national target and eliminate regional disparities. This addition has not been commented upon by island community stakeholders due to the timing of this report, however it is dealt with in the relevant section below.

Concerns have been expressed by island community stakeholders over the combined effect of higher fuel prices and off gas grid properties creating a greater potential for their households to fall into the bottom 5% of fuel poor in Scotland. At Stage 2, amendments were passed to define extreme fuel poverty on the face of the Fuel Poverty Bill as well as include targets in relation to the eradication of it as part of the 2040 and 2030 targets.^[2] The 2030 target; is that, in the year 2030, the fuel poverty rate is no more than 15 per cent of Scottish households, no more than 5% of Scottish households are in extreme fuel poverty and the median fuel poverty gap is no more than £350 in 2015 prices, before adding inflation.

These measures will ensure there is a focus on those deepest in fuel poverty, no matter where in Scotland they live.

Target: No more than 5% of households in Scotland will be in fuel poverty in the year 2040

We discussed this target with the island communities and considered written consultation responses received to the Fuel Poverty Strategy for Scotland Consultation. Whilst there were representations from those who were concerned about meeting the target, or those who felt it could be more ambitious, those views did not identify a different impact on island communities on having a national target. For this reason, we do not believe there is a differential impact on island communities in having a national target, though approaches to meeting it may be different.

Target: The interim (2030) target for extreme fuel poverty and fuel poverty

Island community stakeholders have expressed a concern that their community members who are in extreme fuel poverty and living in hard to treat, off gas grid homes will fall into the bottom 5% of fuel poor and remain there. In their submission for the Fuel Poverty Strategy Consultation, the Highland Council stated: -

"Fuel poverty levels are higher in remote rural communities. Without a targeted proportionate approach which recognises this, it is likely that levels in such communities will remain higher than in urban areas but will not be reflected in any national target or milestone… Targeting of the extreme fuel poor needs to start immediately."

THAW Orkney in their submission for the Energy Efficient Scotland Consultation stated: -

"Many properties in rural areas, including Orkney, are likely to be deemed difficult to treat and will require specialist survey information and more expensive, specialist materials to effectively implement an improvement to energy efficiency… However, ...[this]... should not exempt difficult to treat properties from having expensive work completed, especially in cases of fuel poverty."

Dion Alexander of the Highlands and Islands Housing Association's Affordable Warmth Group (HIHAAW), gave the following oral evidence to the Local Government and Communities Committee:

"Extreme fuel poverty is having to spend twice that [10%] or more. In our submission, we ask that extreme fuel poverty should continue to be measured, because it will provide a guide to what is going on in the elimination of the worst forms of fuel poverty. We say very firmly that extreme fuel poverty is intolerable in a civilised society and that it should be eradicated as quickly as possible - within 5 years."

Concerns about extreme fuel poverty being particularly prevalent and difficult to tackle were a recurring theme throughout our stakeholder meetings and a consensus emerged that those in extreme fuel poverty must be made an absolute priority.

At the Argyll and Bute ICIA stakeholder meeting, participants highlighted again the importance of tackling extreme fuel poverty first rather than simply relying on the 'low hanging fruit'. Their written and oral evidence also gives further explanation as to why extreme fuel poverty is a concern for them:-

"[H]ouseholders in remote and rural areas could be disproportionately represented in the residual 5%, given the older, pre 1919 housing stock, reliance on either full electric or oil based heating system and issues with supply chain."

This evidence was re-iterated in the stakeholder meeting, while the ICIA stakeholder meeting on Stornoway in Lewis highlighted extreme fuel poverty levels as one of the main challenges on the islands. The geography, culture (crofting) and climate of the islands and different island groups present different challenges to the mainland. Additional costs for the delivery of measures include multiple ferry trips and accommodation needs for the contractors during their stay to complete the work which may also be weather dependent. A greater proportion of single elderly home owners living in hard to treat homes in remote areas add to the challenge of treating households with extreme fuel poverty levels.

Under the current definition extreme fuel poverty across Scotland over the 2015-2017 period was at 8%, lower than the rate of 12% under the new definition. We can see from Table 1 that this trend is reflected in 4 of the island local authorities - Argyll & Bute, Highland, Na h-Eileanan Siar and North Ayrshire - however Orkney shows slightly lower rates of extreme fuel poverty under the new definition, while Shetland remains the same (see also the full local authority analysis shown in Annex F).

These increases are mainly driven by the change under the new definition, which considers the percentage of income on required fuel spend on an After Housing Cost basis rather than on a Before Housing Cost basis, effectively reducing the threshold for required fuel bills.

Table 1: Extreme fuel poverty data in island local authorities under the current and proposed definitions, 2015-17.

	Current	Proposed new definition with a minimum income standard uplift for remote rural*, remote small towns and island areas, and benefits received for a care need or disability deducted at part B.**	Difference
Argyll and Bute	15%	20%	↑5%
Highland	17%	21%	↑4%
Na h-Eileanan Siar	23%	25%	↑2%
North Ayrshire	5%	8%	↑3%
Orkney	23%	22%	↓1%
Shetland	18%	18%	0%
Scotland	8%	12%	↑5%

* The estimates are based on applying an uplift to areas covered by categories 4 and 6 of the Scottish Government's urban rural classification. This is in line with the Local Government and Communities Committee's Stage 1 report and is expected to be what will be set out in regulation.

** The data presented for the proposed new definition, is our best available estimate based on the Scottish House Condition Survey (SHCS). Further work is in progress to collect information through the 2018 SHCS on the income of other adults (beyond the highest income householder and their spouse) in the household as well as childcare costs. These are not currently accounted for in the data presented. For more information, please see Annex A: A note on data used in this report.

Looking specifically at island local authorities, we can see fuel poverty rates that are lower under the new definition than they were under the current definition, however the extreme fuel poverty rates are higher under the new definition than they were under the current definition. Extreme fuel poverty rates are higher for most of the island authorities (ranging from 18% in Shetland to 25% in Na h-Eileanan Siar over the 2015-2017 period) than for Scotland as a whole (12%). Therefore, most of the households on island authorities that remain in fuel poverty after the income threshold has been applied (i.e. under the new definition of fuel poverty) are in extreme fuel poverty.

The importance of using robust island data to correctly identify those who need the most support and monitor improvements was a common theme across all islands. It was suggested by some island stakeholders, that for island proofing purposes, the Scottish Housing Condition Survey sample is too small.

It was also suggested that potentially live data can be used from Home Energy Efficiency Programmes for Scotland and Area Based Schemes (HEEPS ABS) instead of the SHCS, as well as most information needed for the new fuel poverty definition already being gathered for ECO. Local authorities with island communities in their catchment areas could provide island bespoke data so that it isn't lost in the broader picture. A case study approach could also support the quantitative data. Knowledge can be easier to obtain due to small catchment areas, closer networking and strong community ties.

We have considered the views shared with us about sample sizes used for the Scottish Housing Condition Survey. However, the SHCS survey design actually means that island communities are more accurately represented through greater on the ground participation by community members than communities on the mainland: a higher proportion of the island local authority populations are sampled compared to other local authorities. Furthermore, response rates are generally higher in island local authorities and as a result, their final survey sample is more representative of their underlying population than in other local authority areas. Therefore we do not feel changes to the survey are necessary.

HEEPS ABS and ECO data can only cover those households that actually receive an intervention and so cannot provide an accurate picture of fuel poverty as a whole. In addition, the HEEPS ABS and ECO data does not include all the necessary information to determine whether households are in fuel poverty, such as energy requirements to meet required heating regimes and housing costs required under the new definition. However, a qualitative reporting section will be considered for inclusion in the reporting cycle for the Fuel Poverty Bill to make better use of this type of information.

We also know from other evidence and from the testimony of stakeholders from across the islands during our meetings with them, that extreme fuel poverty can be particularly difficult to eliminate in island communities where building types are harder to improve to the required energy efficiency standard and opportunities to reduce fuel costs are more limited. In addition, the hard to treat housing stock can vary in its type between the islands. At the Lewis ICIA stakeholders meeting it was mentioned that the majority of homes in the Western isles are solid wall and therefore more likely to be harder to improve to the required energy efficiency standard. At the Shetland meeting the hard to improve stock was timber 4 inch kits with approximately 2 inches of insulation in the walls and cavity fill in these properties is not an option as it causes the timber frame to rot.

Such issues combined with the colder climate in the islands means that some of these homes may have the heating on throughout the whole year. If the household is also on a low income, then they are more likely under the new definition to continue to be in extreme fuel poverty after the introduction of the Minimum Income Standard thresholds.

In our discussions with stakeholders it was clear that they had concerns about their ability to tackle extreme fuel poverty and were very keen to see greater flexibility for local scheme delivery and longer term funding on islands. They believe this would allow for bespoke solutions that fit in with their unique housing issues and they are keen for this to be reflected in the final Fuel Poverty Strategy. It was also noted that vulnerable householders in island communities favour face to face communication with local organisations rather than the internet or the telephone.

The inclusion of an interim extreme fuel poverty target of no more than 5% of households in extreme fuel poverty by 2030 in the Fuel Poverty Bill as well as targets relating to a 2030 median fuel poverty gap of no more than £350 in 2015 prices before adding inflation and a 2030 fuel poverty rate of no more than 15%, shows that there is a clear desire within the framework legislation to prioritise extreme fuel poverty and tackle the depth as well as prevalence of fuel poverty.

All of the island communities we asked about this felt that, because of the prevalence of extreme fuel poverty and hard to treat properties, taking a 'worst first' approach to tackling fuel poverty is the right approach to supporting island communities to meet fuel poverty targets and they would like to see this reflected in the final Fuel Poverty Strategy.

Mitigation Actions

Action 1: In order to address the higher levels of extreme fuel poverty in island communities, the Scottish Government and partners will review how funding is allocated to ensure that extreme fuel poverty levels are taken into account as well as fuel poverty levels as part of the final Fuel Poverty Strategy.

Action 2: The final Fuel Poverty Strategy will work with island communities to design, pilot and implement delivery flexibilities that will support the tackling of hard to treat extreme fuel poverty.

Action 3: A qualitative reporting section will be considered for inclusion in the reporting cycle for the Fuel Poverty Bill.

Target: Local authority statutory targets of no more than 5% of households in their catchment areas to be in fuel poverty and no more than 1% in extreme fuel poverty target by 2040.

By applying the national targets, including the interim targets, to the local authority level we are ensuring that progress towards the targets will be uniformly distributed across the whole of Scotland.

It was clear from our discussions with island communities that different island local authorities will begin from different starting points due to disparities in types of buildings and ownership levels as well as levels of extreme fuel poverty (further information in the definition section below).

The first section of Annex F; the Scottish House Condition Survey Key Findings, describes the characteristics where island local authorities show differences to Scotland as a whole. It should be noted that some of these characteristics showed differences across island local authorities and non-island rural local authorities, suggesting that some of these differences may be driven by rurality and not the fact that these households are on an island. This is the case for off gas grid homes, larger dwellings and owner occupiers. Stakeholders believed these differences may result in a greater level of local authority intervention in order to implement more intensive improvement of island dwellings. They felt this may have financial implications for island local authorities and authorities which have islands within their catchment areas when tackling fuel poor households. The Scottish Government acknowledges these higher funding levels and has a commitment to spend more per head on energy efficiency in remote rural areas including island communities through the Home Energy Efficiency Programmes and Area Based Schemes (HEEPS ABS).

These differences are:

• A higher proportion of dwellings off the gas grid; 84% in Na h-Eileanan Siar, 100% in Orkney and Shetland, 48% in Argyll & Bute and 62% in the Highlands versus the Scottish average of 16% (2014-2016 figures). Off-gas grid properties have a more limited set of alternative fuel suppliers, constraining the ability to deliver reduced heating costs.
• A higher proportion of dwellings with 3 or more bedrooms: 64% on Orkney, 67% in Shetland and 72% on Na h-Eileanan Siar compared to the national average of 49%, meaning higher fuel bills and potentially greater costs to improve energy efficiency. Larger dwellings will necessitate higher fuel bills to reach requisite temperatures and potentially higher costs to improve the energy efficiency of the fabric of the building.
• Greater numbers of owner occupiers on the islands in comparison to the Scottish national average of 61%: Na h-Eileanan Siar 74%, Orkney 77% and Shetland 69%, of which a higher percentage are owned outright than in Scotland as a whole. While there may be fewer owner occupied households in fuel poverty under the new definition, extreme fuel poverty levels will be increasing. This suggests that financial interventions in the island communities should be more weighted towards loans and equity loans rather than grants.

This indicates that island local authorities will find it more challenging to meet local authority targets.

Mitigation Actions

Action 4: Given the additional challenges faced by island communities due to the differences in housing characteristics versus the mainland as well as the need to strengthen the consultation process for the Fuel Poverty Strategy, the Scottish Government will ensure that representatives from island local authorities are fully involved in the process to develop the strategy.