Pension Age Winter Heating Payment: Business and Regulatory Impact Assessment (BRIA)

Background

2. In July 2016, the Scottish Government launched a public consultation which went on to inform the content of the Social Security (Scotland) Act 2018. This legislation provided Scottish Ministers with the legislative power to deliver new Winter Heating Assistance in Scotland, with the intention of replacing the UK Government’s Cold Weather Payments (CWP) and Winter Fuel Payments (WFP).

3. In 2020 we launched Child Winter Heating Payment (CWHP, previously known as Child Winter Heating Assistance) which extended eligibility for WFP to help mitigate the additional heating costs that the households of the most severely disabled children and young people face in the winter months.

4. In February 2023, we launched Winter Heating Payment (WHP), replacing CWP in Scotland with a guaranteed payment each winter, targeting low-income households who have additional need for heat, including households with young children, disabled people and older people, providing stable, reliable support every winter.

5. We now propose to introduce Pension Age Winter Heating Payment (PAWHP) mirroring the UK Government's decision to restrict WFP eligibility, ensuring continued support is provided to people in receipt of relevant benefits who have reached the state pension age. This will be delivered by DWP in winter 2024-25.

6. In July 2024, the Chancellor of the Exchequer Rachel Reaves announced the UK Government’s intention to restrict eligibility to Winter Fuel Payment (WFP) to those in receipt of relevant benefits. The UK Government’s decision reduced the Block Grant Adjustment by an estimated £150 million in 2024-25, over 80% of the cost of PAWHP.

7. On 14 August 2024, given no prior consultation on UK Government’s decision and following careful consideration of the options available to Scotland, including the significant reduction in budget, the Scottish Government announced that it had taken the difficult decision to replicate the restricted eligibility of WFP for PAWHP.

8. The timing of the UK Government announcement has meant it is not practicable for the Scottish Government to deliver PAWHP in winter 2024/2025. This winter, our proposed new benefit will be delivered by the Department for Work and Pensions under an agency agreement with Scottish Ministers.

9. This approach will ensure that payments will be made to eligible pensioners in winter 2024-25 following the UK Government’s announcement to restrict WFPs to those in receipt of relevant benefits.

10. The Scottish Fiscal Commission (SFC) has a statutory duty to provide independent and official forecasts of Scottish GDP, devolved tax revenues and devolved social security expenditure. The Protocol for engagement between the Scottish Fiscal Commission and the Scottish Government notes that the SFC may produce forecasts where it considers the policy, or policies, to have a "non-negligible impact on receipts or expenditure". Having considered the measures in these regulations, the SFC forecast that 137,000 households will receive PAWHP in 2024-25. The SFC forecasts that the total spending on PAWHP will be £32 million in 2024-25, which is £148 million lower than the previous forecast in December 2023 before the policy change.

11. The Scottish Government is committed under the ‘Fairer Scotland for Older People’ strategy to seek to ensure the financial security of older people in Scotland. PAWHP will contribute to that ambition together with a wider range of initiatives to mitigate fuel poverty, such as our energy efficiency delivery programmes – Warmer Homes Scotland and Area Based Schemes – which have supported over 150,000 households living in, or at risk of fuel poverty in the past decade, as well as our Islands Cost Crisis Emergency Fund which helps island authorities support their island communities through cost-of-living pressures. Additional support through Winter Heating Payment is available to pensioners in receipt of Pension Credit.

12. Support in addition to social security payments, and the support mentioned above, is available through the Scottish Governments investment in our Council Tax Reduction Scheme and free bus travel for all older people over the age of 60 in Scotland. The Scottish Government has also provided over £2 million from our Equality and Human Rights Fund, supporting older people’s organisations to deliver work focused on tackling inequality and enabling older people to live independent and fulfilling lives. The Minister for Climate Action has also secured the agreement of energy suppliers to participate in a working group aimed at co-designing a social tariff.

13. The Scottish Government continues to support vulnerable households from fuel poverty through a range of actions within our limited devolved powers. This year alone, we are spending £134 million on activities to mitigate UK Government policies through schemes such as Discretionary Housing Payments and the Scottish Welfare Fund, which provide vital support to households struggling to meet their housing and energy costs.

14. The Scottish Government is committed to tackling fuel poverty and has consistently supported vulnerable households through a range of actions, including delivering our Winter Heating Payment which, in contrast to the UK Governments Cold Weather Payment, guarantees a reliable annual payment of £58.75 to people on low-incomes, including those pensioners in receipt of Pension Credit each winter.

15. Similarly, ending child poverty is our single greatest priority. We’ve already consistently up-rated all benefits in line with inflation, and our intention now is to provide certainty to families and put more money in their pockets by making it a legal requirement to annually up-rate all devolved benefits – including Best Start Grants, Best Start Foods and our winter heating payments. This is an estimated investment of at least £6 million for 2025-26, rising to at least £12 million in 2029-30, according to the latest published SFC forecasts.