Pension Age Winter Heating Payment: Island Communities Impact Assessment (ICIA)

Executive Summary

4. This ICIA has considered the potential effects of the introduction of Pension Age Winter Heating Payment (PAWHP) and how the policy might impact people living in island communities.

5. 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 changes to WFP eligibility reduce the Block-Grant Adjustment associated with devolution of the UK’s WFP by an estimated £150 million in 2024-25, over 80% of the cost of the Scottish Government’s new replacement benefit.

6. 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, which mirrors the UK Government’s decision to restrict WFPs to those in receipt of relevant benefits, will be delivered by the Department for Work and Pensions (DWP) under an agency agreement with Scottish Ministers.

7. The findings were initially based on desk research and feedback from stakeholders and people with lived experience during the public consultation to inform the content of the Social Security (Scotland) Act 2018^[2]. However, given the urgent nature of the change in policy and laying of these regulations, to ensure payments are made to pensioners in Scotland this winter, we have only been able to complete minimal research relating to the revised eligibility criteria.

8. This change is expected to reduce the number of individuals in Scotland entitled to a payment by roughly 900,000, with between 110,000 and 130,000 pensioners remaining eligible for payment in Scotland this winter. This reduction in caseload will exclude pensioners who are not eligible for Pension Credit or other relevant benefits, or who do not take up their entitlement, resulting in differential treatment based on age.

9. The Scottish Government acknowledges that other people of pensionable age may also face financial difficulties and would benefit from this support. The UK Government decisions means it is not possible to extend the payment on a universal basis. As the impact assessment shows, older people on low incomes are among the most vulnerable to cold winter temperatures and, within the budgetary restraints imposed by the UK Government's decision, support is targeted on those individuals who can readily be identified as most likely to benefit most from this support this winter.

10. Prior to the UK Government decision to restrict eligibility of Winter Fuel Payment, we consulted on our policy proposals for PAWHP as a universal payment. During our public consultation^[3] on PAWHP, and Social Security Experience Panel survey^[4], we gathered further evidence from key stakeholders and those with lived experience of the benefit system and experience of island and rural life, including specifically how we might improve delivery for those living off-gas grid.

11. However, given the manner of the UK government’s announcement, with no prior consultation, and urgency in laying of these regulations, to ensure payments are made to pensioners in Scotland this winter, it has not been possible to consult further on the revised policy.

12. In accordance with section 13 of the Islands (Scotland) 2018 Act, this ICIA has:

• Identified and described areas where PAWHP will have an effect on an island community which is likely to be significantly different from its effect on other communities (including other island communities.;
• Assessed the extent to which the Scottish Ministers consider that PAWHP can be developed in such a manner as to improve or mitigate, for island communities, the outcomes resulting from it.
• Considered and proposed mitigation or actions to support the aims of PAWHP within the island communities, and
• Considered any financial implications of the above.

13. Based on the data considered so far and our intention for PAWHP to be delivered in equivalent terms of WFP, by the DWP under agency agreement with Social Security Scotland this winter, we think this policy will have a neutral impact on people living in island communities.