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

Cost of Living

41. Rural and island communities already face some of the highest levels of fuel poverty. The cost of living in rural and island communities is higher than ever because of the current cost crisis.

42. The costs of many amenities and activities are higher for people living in island communities than those living on the mainland. A lack of choice, greater distances, remoteness, and accessibility means that shopping, energy bills, travel, postage, mobile phone services and broadband can be more expensive for people living in island communities compared to those on the mainland.^[13]

43. The National Islands Plan^[14] acknowledges that extreme fuel poverty rates are higher for most of the island authorities. We also know 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, traditionally constructed buildings and energy efficiency challenges can vary between the islands. Higher living costs on islands, combined with higher fuel costs can create the conditions for fuel poverty.

44. Local authority, Na h-Eileanan Siar have previously stated in their written evidence to a fuel poverty strategy consultation undertaken by the Scottish Government, “it is essential to factor in higher living costs to an understanding of poverty in remote and rural areas. Poorer households in the islands are likely to be significantly worse off financially than an equivalent-earning mainland household because of the higher cost of living”.^[15]

45. The reduction of fuel poverty is a key Strategic Objective of the National Islands Plan. The National Islands Plan provides a framework for action to meaningfully improve outcomes for island communities and therefore many of the key areas of work related to the plan support our island communities to address the cost of living.

46. We are determined to address the higher levels of extreme fuel poverty found in many of Scotland’s remote rural and island areas. We continue to work with consumer stakeholders, suppliers, and the regulator to progress meaningful, collaborative actions, within our limited powers, to support rural communities. This includes calling on the UK Government to introduce a social tariff scheme to provide the right and fair support for some of the most vulnerable energy consumers across the whole of Scotland. 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.

47. According to 2017-2019 figures there are a higher proportion of dwellings off the gas grid in island communities: 50% in Argyll and Bute; 88% in Na h-Eileanan Siar; 100% in Orkney and Shetlands; and 61% in Highlands; compared to 17% in Scotland overall^[16]. Off-gas grid properties have a more limited set of alternative fuel suppliers, constraining the ability to deliver reduced heating costs.

48. A higher proportion of dwellings with 3 or more bedrooms in Na h-Eileanan Siar (69%), Highland (62%), Orkney (69%) and Shetland (68%) compared with the national average of 50%^[17], means higher fuel bills and potentially greater costs to improve the energy efficiency of these homes. Larger dwellings also necessitate higher fuel bills to reach requisite comfortable ambient temperatures.^[18]

49. A range of work is being undertaken by the Scottish Government to address the challenges that people in island communities face. For example, the Islands Strategic Group was established in August 2016. The group considers strategic issues affecting the island communities of Scotland, and to ensure greater involvement of the relevant councils in helping to identify and design solutions to the unique needs and challenges these communities face.

50. On 24 May 2024, the First Minister announced an additional £1 million round of the Islands Cost Crisis Emergency Fund to help island authorities support their island communities through cost-of-living pressures. In developing the Fund, the Scottish Government engaged widely with our island stakeholders, from civil society organisations to local authorities themselves and our own colleagues in government.

51. Our energy efficiency schemes continue to spend more per head on installations in rural and island areas – where we know costs are higher. Through our Warmer Homes Scotland scheme, we have made available renewable heat and micro generation measures some of which may be particularly beneficial to rural and remote communities not served by the gas grid. These include ground source heat pumps, micro-wind, and micro-hydro systems.

52. We recognise that fuel costs are on average higher for island communities, and that this has been magnified by the current cost of living crisis. PAWHP will provide an important contribution towards heating costs for pension age households on low incomes living within island communities.