Social Tariff Working Group minutes: December 2024

Attendees and apologies

• Head of Heat Strategy and Consumer Policy, Scottish Government (chair)
• Carolynne Hunter, Fuel Poverty and Disability Campaigner
• EDF
• EON
• Scottish Power
• Centrica
• OVO
• Octopus
• The Wise Group
• British Gas Energy Trust (BGET)
• Inclusion Scotland
• Consumer Scotland
• Advice Direct Scotland (ADS) 
• Energy Advice Scotland (EAS)
• Citizens Advice Scotland (CAS)
• Scottish Fuel Poverty Advisory Panel

Items and actions

Opening remarks 

• the chair thanked all stakeholders for attending the second meeting of the social tariff working group, confirmed the agenda, and reminded the membership that the group cannot take definitive decisions as these remain reserved to the UK Government (UKG). The aim is to reach consensus and make recommendations to the UKG on the design of a social tariff mechanism
• the group agreed the minutes of the previous meeting which will be published on gov.scot

Lived experience

• Carolynne Hunter (CH) provided a testimony of her lived experience of extremely high energy bills due to the life support equipment and heating requirements needed to keep her daughter Freya comfortable and healthy
• in 2022, CH received a bill of more than £800 for one month of usage and was advised by her provider that nothing could be done to reduce this. The experience led CH to actively campaign through the media to raise awareness and drive change. Many families in similar circumstances are spending a huge proportion of their income on energy bills and are unable to cut usage as this would have consequences for their children’s health. Some carers are also unable to participate in paid work, which causes further financial difficulty
• extremely high energy bills cause significant stress and anxiety, worsening mental wellbeing, and can force difficult decisions such as considering residential care or moving home. However, in many cases, local authorities do not have appropriate accommodation available for families’ needs. There is also an onus on health and social care services to support people who require their care
• the chair thanked CH for her time and contribution, in response to which the group offered the following observations:
  • the volume of energy used should be considered as much as the cost of the unit of energy
  • high bills are a year-long problem, as winter costs are spread throughout the year for direct debit payers 
  • consumers are rationing throughout the year in a bid to stop increases in direct debits 
  • those with unavoidably high energy consumption should benefit from predictability through a social tariff
  • the quarterly shift in the price cap causes stress for those on low income, as their incomes aren’t shifting with it, causing shocks to household budgets 
  • recommendations to UKG should be fully and properly attested against impact assessments and modelling solely on fuel poverty would be inadequate

Targeting people in receipt of benefits 

• the Scottish Government’s current position is that a social tariff should be targeted and applied automatically to those on means-tested benefits, disability payments, and people who narrowly miss out on benefits
• the chair sought feedback on the discussion paper shared prior to the meeting. The following points were made:
  • benefits alone will not solve this challenge, even in the short to medium term
  • not all in fuel poverty receive benefits and not everybody on benefits is in fuel poverty
  • developing a minimum viable product and implementing it quickly is important, so using benefits as proxy is a starting point but cannot be the final destination 
  • many, including families like CH’s, will still have unaffordable bills even with a social tariff, so consideration of these circumstances, and the role of NHS Scotland and/or Social Security Scotland, is required
  • evidence suggests the very poorest are not getting the benefits they need
  • there is a risk that if we take an ‘easier’ approach we support people who do not need it, rather than focusing on those who do
  • if our intention is to focus on supporting people in fuel poverty, then it’s not necessarily linked to income, but to unavoidable energy usage
  • means tested benefits only cover half of those who are in fuel poverty 
  • it will take time to get to the right data set from HMRC to confirm household income data
  • for those eligible, support should be automatic
  • fuel poverty is based on modelled energy use and not on consumption 
  • data and insight could also be provided by the NHS, where staff are already carrying out assessments of peoples circumstances
  • we do not hold data on households energy needs and energy consumption, nor do we have comprehensive data on household income so the group will need make pragmatic decisions and choices about how we could proxy those things most effectively
  • it is crucial that we make this a simple and easy way forward for UKG as aiming for perfect solution may raise too many questions and cause inaction
  • the objective should be to close the gap and make a cold home warm, which means support may not necessarily go to all who meet the definition of being in fuel poverty  
  • a social tariff should be targeted in a way which supports those who really need it (i.e. in deep fuel poverty) rather than a catch all social tariff that supports millions but in a more shallow way

Targeting those outwith the benefits system

• the group considered how and whether to capture consumers on low incomes but not on benefits and who are currently in, or at risk of, fuel poverty. The following points were noted:
  • need to consider whether the mechanism might inadvertently support too many customers, increasing other consumers bills, and pushing them into fuel poverty
  • considerations for targeting are linked to the form of support offered, for example in a ‘tariff’ model targeting too many may remove some consumers from the competitive market, reducing other ways to save money. Whereas this is less of a consideration under bill rebates
  • the lowest two income bands referenced (i.e. less than £15,000 annually and £15,000 - £24,999 annually) feel correct however this should be combined with other important data such as energy efficiency, consumption, disability, for example
  • consideration of liquid and illiquid assets is important, including whether it is right to support people who are asset rich
  • an annual discount or tariff level could be set, similar to the cap, so that a household in receipt of a social tariff does not pay more than the cap regardless of usage

Data matching

• there will be challenges in accessing robust and reliable date to confirm consumer eligibility. Any resolution will require collaboration between stakeholders, and will take time. The chair asked  Advice Direct Scotland to brief the group on open banking as a potential solution: 
  • open banking would allow government or suppliers to identify those narrowly ineligible for benefits as well as vulnerable consumers, such as social tenants/people living in park homes, by confirming their income
  • it seems to be difficult to get the correct, real time data sets from HMRC, and even if this is possible, will be a timely process
  • ADS use open banking to support people with debt and it has acted as a quick way of confirming income and debt levels 
  • the water industry currently uses data for a social tariff mechanism through Equifax ‘Tariff Connect’
  • open banking would need to be made fully accessible for disabled people and those without technology or digital skills 
• the following points were noted:
  • most suppliers already use open banking to target support however experience is that less customers will opt into the service or will only share so much
  • suppliers agree that, within the legal parameters, they are happy to share data to better target support
  • while the Warm Homes Discount isn’t the favoured long term solution, widening eligibility and increasing the support may be a good start, in line with seeking a more appropriate support
  • WHD is applied inconsistently across GB at the moment, so aligning this may be a way to improve targeting 
  • there are three different fuel poverty definitions which will drive different outcomes for Scotland, England and Wales
  • important that government bodies also agree to share data
  • there is good practice in the Netherlands in this area as they have a framework in place to share data between energy suppliers, government, and a trusted third sector charity, in order to deliver support 

Next steps 

• the Scottish Government will engage further with the membership in the new year, prior to the next meeting, with a view to moving towards a group consensus on consumer eligibility. Members were invited to submit written evidence to support this work
• the next meeting will take place on 22 January 2025 focusing on tariff level and funding. Material will be circulated closer to the meeting

Summary of Actions 

• SG analysts to model impact of a social tariff on the lowest two income bands referenced (i.e. less than £15,000 annually and £15,000 - £24,999 annually) alongside other important data such as energy efficiency, consumption, disability, for example
• SG to consider WHD eligibility in Scotland noting the view that aligning eligibility across GB may be a way to improve targeting
• SG to explore the Netherlands example of a social tariff and engage with the Dutch government to understand the practicalities of their system
• members to submit written contributions and evidence on consumer eligibility to support a consensus across the group on the questions discussed at the meeting