Cost of Living (Tenant Protection) (Scotland) Act 2022 - proposed extension: statement of reasons

4. Proposal to extend

4.1 The ongoing cost crisis continues to place people across Scotland in an unprecedented economic position. Renters, in particular, have lower household incomes, higher levels of poverty and are more vulnerable to economic shocks. 63% of social rented households and 40% of private rented households do not have enough savings to cover even a month of income at the poverty line, compared to 24% of households buying with a mortgage and 9% of households owning outright.^[2]

4.2 This economic position has not yet changed fundamentally and many households on low and modest incomes continue to struggle. People are facing increased costs across the board, and the biggest impact is felt by those on the lowest incomes. The Office for National Statistics estimated that inflation for low-income households was 11.9% in October 2022, leaving many struggling to cope.

4.3 A comprehensive overview of the latest economic situation was provided in the first report to the Scottish Parliament published on 12 January 2023.^[3] Key points highlighted include the following:^[4]

• The fuel poverty rate is expected to increase from 35% in October 2022 to 39% in April 2023, when the Energy Price Guarantee increases.
• Consumer Price Index (CPI) inflation, which was 9.9% in August 2022, stood at 10.5% in December. While CPI inflation is expected to moderate over the course of 2023, it will remain elevated, with the Office for Budget Responsibility expecting inflation to still be as high as 7% in Q3 2023.
• Increases in pay and earnings remain below inflation, with the Scottish Fiscal Commission expecting that real disposable income per person in Scotland will fall by 2.3% in 2023-24.
• While the decision by the UK government to uprate reserved disability and low-income benefits by 10.1% (the inflation rate in September 2022) in 2023-34 will compensate benefit clients for the exceptionally high rate of inflation in 2022-23, they will again face elevated inflation in 2023-24; the UK Government has also decided to freeze Local Housing Allowance (LHA) rates, which apply in the private rented sector, at 2020 levels for the third year running.
• Latest data shows high levels of rental growth, with the Scottish Government Private Rent Statistics (primarily based on advertised rents) showing a 6.2% annual increase in average 2 bedroom monthly rents across Scotland in the year to end September 2022, while data from letting agents (which relates to new let rents only) showing high growth: Rightmove reporting an annual increase of 13.0% and Citylets an increase of 8.3% in Q3 2022 in Scotland, and Zoopla reporting an increase of 11.4% for Scotland in October 2022. The ONS Private Rental Index experimental statistics shows an acceleration in the annual growth rate in Scotland, from 3.6% in August 2022 to 4.4% in December.^[5] These data show that in the absence of legislation, there is a high probability of substantial increases in rents for existing tenants.

4.4 It is taking the wider economic context and stakeholder engagement into account that Scottish Ministers have given consideration to the question of whether Part 1 of the Act should be extended. In doing so, careful consideration has been given to the requirement to balance the needs of many stakeholders and partners who wish to see the provisions remain available, against the commitment given when the Act was introduced, that the provisions would not remain in place unless necessary.

4.5 Part 1 of the Act can only be extended in its entirety and not on a provision by provision basis. Any provisions that should not be extended therefore need to be expired through separate regulations.

4.6 Throughout the proposed six month extension period, if provisions are deemed to be no longer necessary during that time, they must be suspended or expired early. A suspended provision could subsequently be revived if this was considered necessary.

4.7 Therefore, proposing that Part 1 of the Act be extended at this time does not mean that all provisions covered by the extension will remain in place until 30 September 2023. The Scottish Government will continue to review whether the provisions remain necessary and proportionate in connection with the cost of living.

4.8 This Statement of Reasons provides further detail of the justification for extending the expiry date of Part 1 of the Act.