Scottish House Condition Survey: Methodology Notes 2019

4. Measuring Fuel Poverty

36. Under the 2001 Housing (Scotland) Act (section 88), the Scottish Government was committed to eradicating fuel poverty as far as practicably possible by November 2016. In June 2016, the Minister for Local Government and Housing informed Parliament that, based on the advice received from experts, it was unlikely that the statutory fuel poverty target would be met. This was confirmed by 2016 and 2017 fuel poverty rates, under the old definition of fuel poverty, of 26.5% and 24.9% respectively.

37. The Fuel Poverty (Targets, Definition and Strategy) (Scotland) Bill was introduced to the Scottish Parliament on 26 June 2018 and the Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019 received Royal Assent on 18th July 2019. This includes a new definition of fuel poverty based on advice from an independent panel of experts and further scrutiny and amendment by the Scottish Parliament.

38. As set out in section 3 of the Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act, a household is in fuel poverty if, in order to maintain a satisfactory heating regime, total fuel costs necessary for the home are more than 10% of the household's adjusted (i.e. after housing costs) net income, and if after deducting fuel costs, benefits received for a care need or disability and childcare costs, the household's remaining adjusted net income is insufficient to maintain an acceptable standard of living. The remaining adjusted net income must be at least 90% of the UK Minimum Income Standard (MIS) to be considered an acceptable standard of living, with an additional amount added for households in remote rural, remote small town and island areas.

39. Extreme fuel poverty follows the same definition except that a household would have to spend more than 20% of its adjusted net income (after housing costs) on total fuel costs to maintain a satisfactory heating regime.

40. Where a household is in fuel poverty, the fuel poverty gap is the annual amount that would be required to move the household out of fuel poverty.

41. The figures presented in the 2019 Key Findings report are a best estimate of fuel poverty rates under the new definition of fuel poverty, following amendments agreed at Stage 2 of the Fuel Poverty (Targets, Definition and Strategy) Bill. The method for the production of the fuel poverty statistics follows the approach introduced in the 2018 Methodology Notes.

42. The majority of elements of the new definition have been captured in the estimates in the 2019 report, including the deduction of Disability Living Allowance, Personal Independence Payments and Attendance Allowance from net household income (at part 2 of the definition, for the comparison to MIS) and the application of an uplift to the MIS for remote rural, remote small town and island households based on previous studies.^[1]

43. The Fuel Poverty (Enhanced Heating) (Scotland) Regulations 2020 and Fuel Poverty (Additional Amount in respect of Remote Rural Area, Remote Small Town and Island Area) (Scotland) Regulations 2020 came into force on the 26th February 2020. These regulations set out the types of households for which the enhanced heating regimes are appropriate and specify who is to determine the uplifts to the MIS for households living in remote rural, remote small towns, and island (RRRSTI) areas.

44. The first set of fuel poverty estimates fully compatible with all of the elements of the new definition in the Act, including the regulations above, requires additional information being collected from 2020 onwards^[2] and the production of a new MIS for Remote Rural, Remote Small Town and Island areas.

4.1 Fuel Poverty Energy Requirement

45. The energy requirement is calculated on the basis of the households heating regime and other uses of energy in the home. This information is combined with relevant fuel prices to obtain a modelled fuel bill. No information on the actual spend on energy is used in the definition of fuel poverty.

46. To estimate the annual household energy consumption, and hence the fuel bill, the SHCS employs the full BREDEM 2012 model. This is considered a more realistic estimate of energy demand than SAP because it uses more information about the occupants and the physical characteristics of the dwelling from the physical inspection of dwellings and the household interview conducted as part of the SHCS.

47. The BREDEM calculation for space heating requires that the heating regime for each dwelling is specified in terms of the temperature of the dwelling, or parts of it, and the number of hours heating is required. The fuel poverty definition requires that the energy needs of "vulnerable" households are assessed on the basis of enhanced heating regimes.

48. For statistics in the 2019 publication, a satisfactory heating regime is defined as follows:

For "vulnerable" households (those where at least one member is aged 75 or over, or at least one member has a long-term sickness or disability), 23°C in the living room (zone 1) and 20°C in other rooms (zone 2), for 16 hours every day.

For other households, 21°C in the living room (zone 1) and 18°C in other rooms (zone 2) for 9 hours a day during the week and 16 hours a day during the weekend.

49. The Fuel Poverty (Enhanced Heating) (Scotland) Regulations 2020, which came into force on the 26th February 2020, sets out four heating regimes which will apply to households going forward. This requires the collection of additional information on home occupancy in the social survey.

50. The four new heating regimes are:

• Enhanced heating regime 1, where living rooms (zone 1) are heated to 23°C and the rest of the dwelling (zone 2) is heated to 20°C for 16 hours every day. This will be applied to households where the dwelling is frequently occupied and at least one member of the household: is aged 75 or over, or has a long-term sickness or disability, or is in receipt of benefits received for a care need or disability.
• Enhanced heating regime 2, where living rooms (zone 1) are heated to 23°C and the rest of the dwelling (zone 2) is heated to 20°C for 9 hours during weekdays and 16 hours on weekends. This will be applied to households where the dwelling is not frequently occupied and at least one member of the household: is aged 75 or over, or has a long-term sickness or disability, or is in receipt of benefits received for a care need or disability.
• Enhanced heating regime 3, where living rooms (zone 1) are heated to 21°C and the rest of the dwelling (zone 2) is heated to 18°C for 16 hours every day. This will be applied to households where the dwelling is frequently occupied and at least one member of the household is aged 5 or under.
• Standard heating regime, where living rooms (zone 1) are heated to 21°C and the rest of the dwelling (zone 2) is heated to 18°C for 9 hours during weekdays and 16 hours on weekends. This will be applied to all other households.

51. Where a household fits the criteria for applying enhanced heating regime 1 and enhanced heating regime 3, for example if a member of the household is aged 75 or over and another member is aged 5 or under, enhanced heating regime 1 will be applied.

52. Frequently occupied is defined as: during the morning or afternoon or both on weekdays by any member of the household when it is cold.

4.2 Fuel Poverty Modelled Running Costs

53. The SHCS does not collect information on the price of fuel which surveyed households use. In order to calculate the modelled fuel bill for the fuel poverty calculation, information on fuel prices is obtained from other sources. Table 1 sets out the sources of information on fuel price for different types of fuels used in the derivation of the fuel poverty indicator.

54. The method for determining the cost of the energy requirement in the production of fuel poverty statistics follows the approach introduced in the 2014 Methodology Notes. However, the current report continues a further small improvement first introduced in the 2016 physical survey through the collection of information on the use of pre-payment meters for all households. This means that we are able to identify pre-payment users and assign the appropriate fuel price for them. All other households are applied a weighted average of standard credit and direct debit tariffs.

55. Fuel prices are averaged over a year and relate to Scotland, or regions of Scotland, where suitable information is available. For metered fuels, some of this information is available from Quarterly Energy Prices (QEP), a BEIS National Statistics publication. Rates for E10, E18 and E24 tariffs are not available from this source and the SHCS uses a bespoke survey of suppliers carried out by Alembic Research. For non-metered fuels the analysis uses prices published as part of the Sutherland Tables publication and SAP 2012.

56. While this method accounts for some of the variation in the price of metered fuels for individual households across Scotland, there are further differences which are not captured: both across energy suppliers and types of tariffs. The information required for this is not available at present.

57. In 2019, a household's lights and appliances are now assigned as using an off-peak tariff if an off-peak electricity meter is present, even if there is no form of electric heating in the dwelling. Historically, the BRE energy model has only modelled off-peak electricity tariffs for households which have an off-peak meter and use some form of electric heating (whether used for space heating or hot water). Where a household does not have a form of electric heating, the lights and appliances were assumed to use standard electricity, regardless of the type of electricity meter selected at L3 of the survey form. This was grounded in the assumption that off-peak electricity is designed to be used with electric heating, and therefore should only be modelled if electric heating is present. For 2019, this assumption has been removed to align more closely with the conventions applied in RdSAP. This change does not affect the energy consumption of a dwelling, only the fuel prices applied to the energy associated with lighting and appliance use. Only 20 records (<1% of the sample) were affected by this change in 2019 therefore the impact on overall modelled energy costs will be minimal.

Table 1: Sources of information on the price of domestic fuel used in costing the energy requirement

Fuel type

Mains gas, Electricity 7, and Electricity Standard

Source: Department for Business, Energy and Industrial Strategy (BEIS), Quarterly Energy Prices publication, Tables 2.3.4 and 2.2.4

Geographical area: North Scotland, South Scotland

Time reference: Annual average

Payment method: Pre-payment metered fuel price for the relevant households; weighted average of St. Credit and Direct Debit for all other households

Electricity 10, Electricity 18, and Electricity 24

Source: Bespoke survey of energy suppliers

Geographical area: North Scotland, South Scotland

Time reference: Annual average

Payment method: Pre-payment metered fuel price for the relevant households; weighted average of St. Credit and Direct Debit for all other households

LPG and solid fuels

Source: Sutherland Tables

Geographical area: Scotland

Time reference: Annual average

Wood

Source: Sutherland Tables (wood chips and wood logs based on pellets price adjusted by SAP ratios)

Geographical area: Scotland

Time reference: Annual average

Oil

Source: Department for Business, Energy and Industrial Strategy (BEIS), Quarterly Energy Prices publication, Table 4.1.2

Geographical area: UK

Time reference: Annual average

District heating prices: SAP 2012 fuel price tables, adjusted by CPI for Gas

4.2.1 Warm Home Discount

58. The Warm Homes Discount (WHD) scheme was launched in April 2011. Energy suppliers are mandated to provide support in the form of discounts and rebates, as well as advice and assistance, to fuel poor customers.

59. The SHCS does not collect information on whether respondents receive direct financial support under this scheme. In fact it would be difficult to collect such information as many people are not aware that they are benefiting from a rebate. However, unless this is accounted for in the survey, the modelled fuel bill and therefore fuel poverty would be overestimated.

60. The publication of the 2014 SHCS Key Findings report introduced an allowance for the WHD rebate in the estimation of the number of fuel poor households in Scotland and the 2014 Methodology Notes contain a detailed description of the methodology. This was based on modelling households' eligibility for the scheme. This method has been used in all subsequent Key Findings reports.

61. The approach consists of the following stages:

• Details of the number of households in receipt of each component of the WHD are provided by Ofgem for GB as a whole. It is assumed that the number of recipients in Scotland is proportional to Scotland's share of households in GB (9.2%).
• Details of eligibility for each element of the WHD provided by Ofgem, are used to flag all households in the SHCS dataset who meet these criteria. Because of limitations in the available survey information, some approximations are necessary.
• A series of runs are made, where a sample of likely recipients is drawn at random from the pool of all eligible households. For each sample the WHD rebate amount (e.g. £140 for 2019 data, the same as the previous five years of the scheme) is subtracted from the modelled household fuel bill. The estimated number of households in receipt of the Core and Broader Group element of the WHD in Scotland is used to constrain the size of the sample which is selected.
• A representative iteration based on the number of fuel poor households among modelled recipients is selected from all runs as the best estimate of the set of household in the survey who benefit from the Core or Broader Group element of the WHD scheme.

62. Improvements to the methodology behind the modelling of WHD receipt will be made alongside the implementation of all the elements of the new definition of fuel poverty.

63. The value of the WHD rebate (£140) is subtracted from the total cost of the modelled energy requirement for all households who are selected through the simulation method as beneficiaries from the scheme.

4.3 Household Income

4.3.1 Definition of the household's adjusted net income for the measurement of fuel poverty

64. The adjusted net income against which fuel poverty is assessed under the new definition is defined as the income of all members of the household, including dependants, after housing costs. This includes income from the following sources:

• usual earnings from employment;
• profit or loss from self-employment;
• all Social Security benefits (including Council Tax Reduction,^[3] Housing Benefit, Social Fund, maternity, funeral and community care grants, but excluding Social Fund loans) and Tax Credits;
• income from occupational and private pensions;
• investment income;
• maintenance payments, if a person received them directly;
• income from education grants and scholarships (including for students, top-up loans and parental contributions);
• the cash value of certain forms of income in kind (free school meals, free welfare milk, and free school milk).

65. Under this definition, the household's adjusted net income is calculated net of the following items:

• income tax payments;
• National Insurance contributions;
• Council Tax;
• Rent or mortgage costs
• contributions to occupational pension schemes (including additional voluntary contributions) and any contribution to personal pensions;
• all maintenance and child support payments, which are deducted from the income of the person making the payment; and
• parental contributions to students living away from home.

4.3.2 Measurement of income in the SHCS

66. The household income figure used in the SHCS comprises the net income of the Highest Income Householder (HIH) and their spouse/partner collected through the household interview on a self-reported basis. Due to this, the survey will underestimate income for households with more than two earners or benefit recipients and may therefore overstate fuel poverty for this group. The inclusion of income of any other member of the household will be introduced, along with other developments, when producing the first set of fuel poverty estimates fully compatible with all of the elements of the new definition in the Act. This requires additional information being collected from 2020 onwards.^[4]

67. The survey collects information on the receipt of the Winter Fuel Payment and this is included in the household income of all households with a person aged 60 or over who had stated that they have received this payment.

68. All income data are thoroughly checked for inconsistencies by the survey contractor, IPSOS MORI, and corrected where the source of error can be readily identified. Mostly, errors are due to incorrect recording of the period for the income amount (e.g. per annum amounts were incorrectly recorded as per month). Where amounts given covered a period of less than a year, it is assumed that they are typical incomes for the purpose of calculating the annual income. Earnings data are requested net (after tax and national insurance), but gross amounts are collected if the respondent was unable to provide a net amount. Tax and national insurance are calculated for the amounts given gross and deducted to give the net annual income. Many benefits are not taxable. The amount received is requested for benefits and other regular income sources. The amounts for these income sources are therefore assumed to have had tax already deducted, where applicable

69. The total household income figure is then adjusted by deducting housing costs, which includes the council tax, water and sewerage charges and rent or mortgage costs incurred by members of the household.

70. Where respondents have not provided information about the amount of council tax they pay, this has been modelled based on the council tax band of their dwelling and some household characteristics which make them eligible for certain discounts. In 2012 and 2013, when the SHCS was first integrated into the SHS, no questions about the council tax liability of households was asked as part of the survey. For these years all council tax payments have been modelled as described in the 2013 SHCS Methodology Notes. Council tax questions were re-introduced in 2014 and since then, where respondents provide an answer, it has been used in the calculation of net household income. Where this information is not provided, council tax is imputed using the same method as in the preceding years.

71. In 2015 some additional quality assurance rules were introduced in the modelling of council tax. In 2017, questions collecting household council tax information were amended to distinguish between cases where the reported amount included discounts/reductions or not.

72. These question changes are reflected in calculations of net household income after council tax necessary for the fuel poverty estimate, in particular where Council Tax Reduction (CTR) is accounted for. While in practice the application of CTR results in a lower Council Tax bill, the survey records the saving as an additive contribution to overall household income.

73. Where a respondent provides a council tax value net of any discounts or reductions, any contribution to income from (CTR) is removed from their household income total, as this will be reflected in the partial council tax value reported. If the respondent provides a full council tax value, any declared CTR is left incorporated in the overall household income total.

74. The rent and mortgage figures used in the SHCS are collected through the household interview section of the SHCS on a self-reported basis. Mortgage costs given for the household are assumed to be paid by the HIH and their partner/spouse alone. Rent costs given for the household are adjusted for the amount the HIH and their partner/spouse pay for when the total number of contributing adults are taken into consideration.

75. For the purposes of calculating fuel poverty, household records with missing rent or mortgage cost data are assumed to have no rent or mortgage costs.

76. Improvements to the methodology behind the measurement of income after housing costs will be made alongside the implementation of all the elements of the new definition of fuel poverty.

4.3.3 Missing income information imputation

77. Although some level of item non-response is inevitable across all aspects of the social and physical surveys (e.g. where a householder refused to answer a particular question, or a surveyor could not get into a loft), in most situations this does not affect the power of the survey to produce valid and useful estimates. The exception to this is the assessment of income, where there is generally a higher proportion of item refusals.

78. In order for the survey to be able to produce income, a statistical process known as imputation is carried out. Imputation involves replacing missing values with the values associated with other households which have the same characteristics, defined according to the nature of the missing item.

79. Hot Deck imputation was used for all missing income items. In Hot Deck imputation, the sample is divided into imputation classes based on the relevant characteristics of cases and these classes contain potential donor cases. A donor case is selected at random from the imputation class and the item value for that case is assigned to the case with the missing item value. The relevant characteristics were chosen using regression analysis.

80. The imputation of missing income data has been carried out by the survey contractor, Ipsos MORI.

4.4 Benefits Received for a Care Need or Disability

81. Benefits received for a care need or disability includes: disability assistance, personal independence payment, attendance allowance, severe disablement allowance and disability living allowance received by members of the household.

82. For statistics in the 2019 publication, we deduct all relevant care and disability benefits except Severe Disablement Allowance, at part 2 of the definition.

83. The benefit figures used in the calculation of fuel poverty are collected through the household interview section of the SHCS on a self-reported basis. Benefits received for a care need or disability are subtracted from the household's net income (after housing costs) alongside fuel costs and childcare costs, which is then compared against the MIS for the purpose of determining if the household's remaining adjusted net income is sufficient to maintain an acceptable standard of living in the second part of the fuel poverty calculation.

84. In 2018, questions collecting household benefit information were heavily revised in the 2018 social questionnaire and included further questions on the benefits received by all members of the household. The benefits received for a care need or disability data used in the 2018 and 2019 Key Findings report comprises those received by the HIH and their spouse/partner only. The inclusion of stated benefits received by any other member of the household will be introduced, alongside the implementation of all the elements of the new definition of fuel poverty.

4.5 Childcare Costs

85. As with 2018, in the 2019 Key Findings report, childcare costs were not included in the calculation of fuel poverty. The inclusion of childcare costs will be introduced, alongside the implementation of all the elements of the new definition of fuel poverty.

86. Childcare costs, against which fuel poverty is assessed, means the paid costs incurred for any care or supervised activity provided for a child who is below school age or who is receiving primary education other than that provided during the child's education or where the main reason for incurring the costs is the child's participation in the activity. These costs are subtracted from the household's net income (after housing costs) alongside fuel costs and benefits received for a care need or disability, which is then compared against the MIS for the purpose of determining if the household's remaining adjusted net income is sufficient to maintain an acceptable standard of living in the second part of the fuel poverty calculation.

87. Since 2018, childcare costs are collected through the household interview section of the SHCS on a self-reported basis for all children aged between 0-11.

4.6 UK Minimum Income Standard (MIS)

88. The UK MIS figures used in the calculation of fuel poverty are obtained from annual budgets produced by the Centre for Research in Social Policy at Loughborough University. These annual budgets are based on detailed lists of goods and services required by different household types. MIS values for each year and household type are calculated from these annual budgets after the deduction of: council tax, water and sewerage charges, rent costs, childcare costs and fuel costs.

89. The households in the SHCS are categorised as 1 of 17 household types^[5] based on information collected in the social interview then the corresponding MIS value^[6] for that year and household type are assigned to the household.

4.6.1 MIS remote rural, remote small towns, and island (RRRSTI) uplift

90. In recognition of the higher living costs that can apply in RRRSTI areas in Scotland, for the purpose of this calculation for households living in these areas, an additional amount is added to the relevant UK MIS figure. The households which receive this RRRSTI uplift are identified by their urban rural classification.

91. The uplifts that are applied to the MIS for households in RRRSTI areas are estimated, based on the approach taken by the 2017 Scottish Fuel Poverty Definition Review Panel which used average data from the MIS for remote rural Scotland published by Highlands and Island Enterprise in 2013. In RRRSTI areas, the uplift for:

• adult (aged 16-64) single or couple households is 15%
• pensioner (aged 65 or over) single or couple households is 19%
• family households is 27.5%
• mixed (1 adult and 1 pensioner) couple households is 17% (the average of 15% and 19%)

4.7 Median Fuel Poverty Gap

92. The figure taken to determine the actual median fuel poverty gap for each household is the lower of either:

• the amount required so that the fuel costs necessary for the home are no longer more than 10% of the household's adjusted net income (after housing costs), or
• the amount required which, after deducting fuel costs, benefits received for a care need or disability and childcare costs, means the household's remaining adjusted net income is sufficient to maintain an acceptable standard of living.

4.7.1 Adjusted Median Fuel Poverty Gap

93. Time trends in the fuel poverty gap have been presented as the median gap before adjustment and the median gap adjusted to 2015 prices. The adjusted median gap figures have been presented in order to assess progress against the 2040 fuel poverty gap target set out in the Act.

94. The adjustment has been calculated in alignment with the increases or decreases in the annual average consumer prices index (CPI) over the period from 2015 to the year which the figure relates to.