Scottish Fuel Poverty Advisory Panel recommendations - September 2023: Scottish Government response

Annex A: Strategy – review and interim update

Recommendation 1

The SFPAP recommends that the Scottish Government should complete its required 5-year review of the Strategy by the dissolution of this parliament in May 2026.

Our Fuel Poverty Act 2019 and referenced provision below, sets out a dedicated review point timeline – which I am committed to and will apply no later than December 2026.

Provision 6 of the Act:

(5) The Scottish Ministers are to keep the fuel poverty strategy under review and may at any time revise it.

(7) Within 5 years after publishing the fuel poverty strategy under section 8(1)(a), the Scottish Ministers are either—

(a) to revise the strategy, or

(b) to publish an explanation of why they have decided not to revise it.”

Recommendation 2

The SFPAP supports the Scottish Government’s intention to complete an interim update to the Strategy this year. The SFPAP advises the Scottish Government to include a strategic delivery plan in this update.

I recognise and acknowledge the extensive engagement undertaken by the Panel in the short period in which the public body has been formed, garnering a wide-range of views, insights and opinions how best we can collectively tackle fuel poverty in Scotland.

The Fuel Poverty Act 2019 commits Scottish Ministers to prepare, consult, publish and lay a periodic progress report in Parliament, every 3 years from the date of strategy publication.

The current dates for our first periodic report will cover December 2021-24.

The Panel by statute is to meet after the publication of each periodic report to consider progress and likelihood toward meeting the fuel poverty targets, and the extent to which the four drivers of fuel poverty are being addressed. This must be followed by a report from the Panel to Scottish Ministers on its consideration of these matters.

This will be our first key milestone in evaluation of our strategy progress. It will be critical to our own reporting and separately to inform the Panel’s report to Scottish Ministers in 2025, as we draw upon a newly established outcomes-focused fuel poverty monitoring and evaluation framework – which will be progressed this year with the Panel – and aligned accordingly with related policy frameworks, including the Heat in Buildings monitoring and evaluation framework, published at the end of 2023.

The policy landscape

Recommendation 3

As part of the Strategy update, SFPAP recommends that the Scottish Government adopt an outcomes-centred approach which underpins the strategic vision of eradicating fuel poverty – enabling a clear line of sight between the vision and the actions needed to realise it.

Our current Fuel Poverty strategy outlines and covers the priority action area that – ‘In collaboration with the Scottish Fuel Poverty Advisory Panel, we will develop an effective outcomes-focused monitoring and evaluation framework for this strategy.’ Chapter 9 of our strategy – Monitoring and Reporting – sets out our approach to this fundamental area of work in progress towards delivery of our 2040 statutory targets. As outlined in this section, there has already been consultation and engagement with a comprehensive range of key partners, towards the development of a draft outcomes framework.

I acknowledge our current strategy action to develop and publish an outcomes framework in 2022 has not been possible, particularly with timings in relation to the Panel’s appointment in January 2022 and recruitment of the Panel secretariat late 2022. This is set out as a priority action area in our strategy and is unchanged. We have a strong foundation base to build upon with several positive discussions to date with the Panel on monitoring and evaluation – I am supportive of the need for this framework to be developed together this year – to aid our ongoing progress with our statutory targets and inform any future review of the strategy.

Recommendation 4

As part of the Strategy update, SFPAP recommends that the Scottish Government map the high-level policy landscape for those policies directly supporting the delivery of fuel poverty targets - those which fall both within devolved competence and those which are reserved. This is fundamental to understanding and influencing the strategic fuel poverty landscape, with the many varied and inter-connected policies across Scottish Government, which will either have a contribution or be impacted by the levels of fuel poverty in Scotland.

I am committed to the principle of further mapping the policy landscape. I have witnessed first-hand in my portfolio the interaction of fuel poverty policy with a range of sectors including health, education, housing, justice, energy and the environment – and it is vital we continue to harness the power of policy collaboration and engagement towards our collective goals. I agree that the ability to draw what is a complex and multi-faceted landscape together in a coherent way can provide us with a uniquely strong baseline to achieve our statutory targets, and I have asked my officials to work with you to consider how best to achieve this.

Fuel Poverty Targets

Recommendation 5

The SFPAP advises the Scottish Government to set out and test the relative impact of the drivers of fuel poverty in achieving both the interim - 2030 and 2035 - and the 2040 statutory fuel poverty targets in its Strategy update.

This will be a key element in working with policy, analysts and the Panel, as we take forward our Fuel Poverty outcomes-focused monitoring and evaluation framework this year. I note the positive early discussions held between officials and the Panel on the impact of the fuel poverty drivers to date, which will be further progressed this year as part of the framework development, with a strong read-across to the published Heat in Buildings framework. It will be important to understand and test the interconnections of other related policies, where this is possible, in line with our own statutory targets, respectively with climate change and child poverty. Additionally, I recognise that the relationship between action and impact is not always a linear one, therefore we consider an appropriate mechanism that will enable us to capture and measure impacts.

Our latest Scottish Government modelling under the Ofgem energy price cap for a typical dual fuel household paying by direct debit, estimates that from January to March 2024 there will be around 840,000 fuel poor households in Scotland – 34% of all households. That is why, testing the relative impact of the 3 drivers of fuel poverty is so critical and will help with informing our future policy and strategic direction. It will also be important to take account of and draw upon any existing evidence which have considered the impact of the drivers.

Fuel poverty vulnerability and research

Recommendation 6

In updating the Strategy, the SFPAP advises that the Scottish Government maximise the potential to work with the SFPAP in 2023/24 to increase the understanding of fuel poverty through the creation of a joint research plan. This plan, with supporting funding, will facilitate the building of a holistic, national evidence base which will provide consistent and robust fuel poverty data over the lifetime of the targets.

In principle, I support the Panel’s recommendation for the creation of a joint research plan between Scottish Government policy officials, analysts and the Panel, with the aim to facilitate the building of a holistic, national evidence base. As a first step, I would suggest an initial scoping exercise with discussion between relevant officials and the Panel. This should consider our evidence baseline, any current gaps and the existing research landscape. It will be important to robustly test the cost and governance, which will need to be place in order to support any newly developed joint research plan, running up to our 2040 target date.

Funding and Investment

Recommendation 7

The SFPAP advises that the Strategy update should review the investment needed to improve the energy efficiency of homes and develop an accelerated rolling 5-year programme with measurable outcomes.

I recognise that there remain far too many homes where poor energy efficiency is a significant driver of fuel poverty in Scotland. I believe that continued investment by the Scottish Government is needed, but that further accelerating progress is a challenge that will require working in partnership with others to solve.

More than 150,000 fuel poor households have warmer homes that are less expensive to heat thanks to our investment of over £850 million in energy efficiency improvements since 2013. However, as you will be aware, surging energy prices, falling real incomes and rises in the cost of living have left hundreds of thousands more Scottish families in fuel poverty in 2024. These drivers of fuel poverty are not within our control and their effects are often only partly mitigated by improvements in energy efficiency.

There remains an unprecedented level of financial pressure upon public spending in Scotland. Despite this, this year we have maintained our investment in making homes warmer and less expensive to heat for fuel poor households. It remains our intention to provide greater certainty about our planned investment in these schemes in the medium term to strengthen delivery and achieve improved value for money.

However, long term investment by the Scottish Government will increasingly need to be matched by investment by property owners. Last year we launched a public consultation about the scope of regulations in Scotland to improve energy efficiency and eliminate direct emissions from heat in buildings. These regulations will be central to how we accelerate progress and in determining the priorities for future public investment in improvements.

Partnership and collaboration

Recommendation 8

The SFPAP advise that the Strategy update should consider a capability mapping and how sector-wide organisations and NGOs committed to tackling fuel poverty – across housing, energy, and advice sectors – can be leveraged to support the delivery of fuel poverty targets.

I agree that we must make full use of the skills, resources, and expertise across the sector to collectively tackle the challenges of fuel poverty and continue to understand and respond to the complex and evolving landscape.

This work is an integral fabric of policy development and delivery, which is set out within the Fuel Poverty strategy as our baseline to progress and build upon towards. Equally since the establishment of the panel at the start of 2022, I recognise the extensive level of engagement held to date internally with Scottish Government officials and areas, as well as, with key, far wider reaching external partners in Scotland and outside. My officials will further consider with the Panel how we do this. It is clear that no one Government, area or sector alone can or will achieve the successful delivery of our statutory targets.

Recommendation 9

The SFPAP recommend that the Strategy update should explore the value in building on the Scottish Government’s Energy and Anti-Poverty Summits to create effective collaboration and a partnership approach to support delivery of the Fuel Poverty Strategy.

To continue progressing and building on the valuable collaborative partnership opportunities created by the Scottish Government’s Energy and Anti-Poverty Summits, I chaired three short-life working groups focusing on the specific challenges facing non-domestic, rural and vulnerable energy consumers. As the Panel will be aware, Matthew Cole as a member of both the Priority (Vulnerable) Consumers and Rural Energy working groups, that each group brought together a range of stakeholders, many of whom also attended the Summits. These included representatives from industry, consumer organisations and the third sector, as well as from our Fuel Insecurity Fund 2023/24 partners.

These groups highlighted the importance of collaboration, and played an important part in informing the Scottish Government’s package of new collective asks to the UK Government around necessary steps towards meeting our Fuel Poverty targets. These asks, including on a Social Tariff or related provision, were put to the UKG prior to its Autumn Statement and I am grateful for the Panel’s input within such working groups, as well as your published social tariff recommendations. While it is disappointing that the UK Government continues to show no intention of pursuing a social tariff, it remains vital that we continue working together – building the necessary evidence base and continuing to call collectively and persuasively for support for the most vulnerable energy consumers.

I firmly believe that these groups can and should continue beyond their original short life remit to examine and voice the case for action at UK level while continuing to foster effective partnership action within Scotland. I will seek to harness this momentum to draw upon key expertise, knowledge and partnership to help us support key forthcoming workstreams, specifically in the area of fuel poverty strategy.

Advice and advocacy

Recommendation 10

The SFPAP advises that the structural importance of advice and advocacy in tackling fuel poverty needs greater emphasis in the Strategy update. The Panel reiterates its October recommendations and suggests that these are built into the plan for delivering the Strategy to give the advice and advocacy sector stability.

The Poverty and Inequality Commission published its second briefing on the Cost of Living crisis in the Summer of last year, shared with the Cabinet Secretary for Social Justice and Minister for Housing. This highlighted the dedication of advisors and their desire to provide quality services in the face of increasing demand and the pressures which that places on advice workers. This is supportive of the Panel’s recommendation to provide the advice and advocacy sector greater stability.

The Cabinet Secretary for Social Justice’s response to the Commission Chair set out the measures from Scottish Government with £11.7 million investment (now increased to £12.3m since the Cabinet Secretary’s response) this year to support the delivery of free income maximisation, welfare and debt advice. The continuation of our support for Money Advice Scotland’s Adviser Wellbeing project, which provides wellbeing training and support for advisers and reiterated our commitment to supporting the advice services sector as they continue to provide much needed support to households across Scotland during this challenging time.

The briefing notes organisations are working together and identifying areas of good practice to help one another and their clients, including where advice services are finding “one stop shops” helpful in offering coordinated support. This model of support is an area we see real benefit in developing and as part of our funding for welfare, debt and income maximisation services this year, we are continuing our investment in Welfare Advice and Health Partnerships as well as launching a new £1 million Advice in Accessible Settings Fund, delivered by Advice UK. Both of these pieces of work will help ensure people are able to access advice within services they already go to such as GP surgeries as well as other community, health and education settings. Conversations are underway with relevant partners on the continuity and mainstreaming of this provision beyond this financial year.

Consumer Scotland will play an increasingly important role in providing strategic leadership across the consumer landscape in Scotland – complementing and strengthening the efforts of other consumer bodies in Scotland. The Scottish Government looks to Consumer Scotland to help create a structure of consumer advice and advocacy services that is streamlined and which effectively meets the needs of consumers living within vulnerable circumstances.

Energy Market Reforms

Recommendation 11

The SFPAP advises that the Strategy update should bring a stronger focus to the opportunities which the Scottish Government has to influence the UK Government on energy market reform to protect low-income households.

The UK Government are currently working on options for wholesale electricity market reform, as well as considering changes needed in the retail energy market. The design of a future electricity market will have far reaching impacts on our energy transition and climate policy interests. This will include where we are able to scale up our renewable generation and the cost of electrifying heat, transport, and industry – and crucially, how quickly we can achieve this. My officials will continue to work with UK Government counterparts as it is imperative that Scotland’s views are considered as these plans progress.

Officials have also been working to build an evidence base to inform our response to the UK Government’s second Review of Electricity Market Arrangements (REMA) consultation (now expected in early 2024), and to provide an updated policy position in the final Energy Strategy and Just Transition Plan which is due to be published by summer this year. To this end we have commissioned an independent study through Climate XChange to explore the potential opportunities and threats GB electricity market reform could pose for Scotland.

I would welcome the Panel’s insight and expertise to help further inform our evidence base and the position we set out in the final ESJTP.

I also recognise the Panel’s connection with the UK Government REMA end user forum and continue to endorse such engagement, including the potential for the Panel to connect in with any forthcoming Scottish Government research where appropriate.

We continue to urge the UK Government to accelerate their strategic decision on the rebalancing of gas and electricity prices – which are vital in ensuring a fair and just transition to clean heat – and recognising any decision must consider the impacts for fuel poor households and appropriate support.

Protecting Vulnerable Households

Recommendation 12

The SFPAP recommends that the Strategy update should bring a stronger focus to the opportunities which the Scottish Government has to influence the UK Government on social tariffs.

The Scottish Government has called repeatedly on the UK Government to deliver a social tariff mechanism for those who need it the most, and our call has been supported by partners across the energy industry and the third sector. The Advisory Panel has played a significant and key role into the development of this work and abiding principles.

The Scottish Government believes that a social tariff should be funded primarily though the Energy Profits Levy (or a similar mechanism) when energy prices are unprecedentedly high, with recourse to general taxation as prices fall. A specific levy on energy bills to fund and deliver a social tariff will not only place undue hardship on priority consumers, but also disincentivise energy savings in the same way that high standing charges currently do.

I have set out and shared the conclusions from our Priority Energy Consumers working group on this issue with the UK Government towards the end of 2023. I have, in addition, reiterated my offer to work with the UK Government on the design of a social tariff mechanism.

Recommendation 13

The SFPAP recommend that the Strategy update should include a focus on analysis and identifying eligibility criteria when crisis support is provided. This would enable an assessment of the key Fuel Insecurity Fund, alongside other central and local funds, to identify potential gaps in the targeting of energy cost and managing energy debt financial support.

While we will continue to help people make their homes warmer and easier to heat through our energy efficiency delivery programmes, and support those in fuel crisis this winter, the powers to make a real difference remain with the UK Government. As I set out directly with Fuel Insecurity Fund partners following the Scottish Budget, faced with one of the most difficult financial climates since devolution, with real terms cuts to our block grant from the UK Government, we have had to make tough decisions, and it has not been possible to commit additional funding to the Fuel Insecurity Fund – which received a one-off increase in funding during the height of the energy bills crisis – for 2024-25 at this stage.

Since winter 2020, we have made over £63m available via the Fuel Insecurity Fund to support households at risk of self-rationing or self-disconnecting their heating source. Our latest forecast estimates with the tripling of the Fund this year, now suggest we will reach close to 250,000 households across Scotland by the end of this financial year with some level of direct support via our extensive and trusted third party network.

We are doing everything within our limited powers to support households struggling with energy bills, including continued investment in our Winter Heating Payment to provide targeted support at the most critical point in the year. This is on top of investment in the Scottish Welfare Fund for 2024-25, supporting those in the greatest financial stress. Our Warmer Homes Scotland Scheme and our Area Based Schemes both support those most at risk of living in fuel poverty to live in warmer and easier to heat homes – the budget for both of these schemes has been maintained at that same level as for 2023/24.

The Scottish Budget, in addition, commits £6.3 billion in social security benefits and payments in 2024-25 - just over £1 billion more than last year. This includes increasing the Scottish Child payment in line with inflation to £26.70 a week, giving more support to over 323,000 under 16s who receive it. This payment is not available anywhere else in the UK – and it’s available because we’re prioritising lifting children out of poverty. I am aware that the Panel have formally responded to the recent Pension Age Winter Heating Payment consultation, which closed earlier this month.

I remain clear that these can only be mitigation measures – we know the UK Government has continually failed to take the necessary steps – which only it can take – in the fiscal and policy levers to fundamentally reduce fuel poverty levels in Scotland. There is strong merit in this recommendation to map the funding landscape, with a view to specific improvements including any eligibility criteria for targeted support, between officials and the Panel.

Recommendation 14

The SFPAP recommend that the Strategy update should set out an approach to improving health outcomes for those suffering fuel poverty, such as implementing the Warm Homes Prescription model.

There is strong and existing evidence of the links between fuel poverty and the implications for public health. Whilst we know people in fuel poverty typically ration heating, living in cold homes, or compromise on other costs i.e. food or travel in order to afford heating and other energy services, some households will only heat for vulnerable people or only heat one room. These experiences can, of course, detrimentally impact people’s lives in other ways, including poor mental and physical health, social isolation and financial hardship, and are shown to cause, or exacerbate existing conditions (respiratory, circulatory, disability, mental health). As the Panel will be aware, this is an area which the Priority Energy Consumers Group have taken forward some work in the links between fuel poverty and poor health outcomes.

Our current Energy Efficiency delivery programmes have a strong focus towards preventing poor health outcomes. For example, our Area Based Schemes (ABS) target the most deprived SIMD areas and there is evidence from a longstanding research project by NHS Ayrshire and the Energy Agency that improvements delivered though ABS have helped to improve some health conditions. This links with a growing evidence base from the Scottish Deep End project, with GPs in general practices serving the 100 most deprived populations in Scotland.

The Warm Home Prescription pilot trial findings and recommendations set out in September last year are positive. I am interested as to how this model could feed in and inform our support already provided in Scotland, through our Energy Efficiency delivery programmes. I have asked my officials to monitor the planned next steps and to provide me with advice and options on our contribution to better aligning and supporting positive health outcomes.

Monitoring and evaluation

Recommendation 15

The SFPAP advise the Scottish Government that, in consultation with the SFPAP, an outcomes-based monitoring and evaluation framework should be created in 2023/24 as part of the work to update the Strategy.

The development of an outcomes-focused monitoring and evaluation framework for the Fuel Poverty strategy is a priority area of action which will be developed in collaboration between Scottish Government and the Scottish Fuel Poverty Advisory Panel this year. This will support our respective future reporting and review of the strategy.