Tackling fuel poverty in Scotland: a strategic approach

Chapter 6 – Raising Household Incomes

Fuel poverty is also about the amount of income a household has available to pay for energy. Our Lived Experience Research showed that fuel poor households on a low income were more likely than other fuel poor households to be struggling to pay for heating costs, leading to feelings of stress, worry and anxiety, as well as the coping strategies discussed in Chapter 5. These findings were echoed in our Evidence Review which found low financial resilience among fuel poor households.

While the majority of households in fuel poverty are on a low income, it is those households who are also in income poverty that are most likely to face difficulties paying for their essential needs. According to the official poverty definition, individuals are considered to be in relative (income) poverty if their equivalent net household income is below 60 per cent of the median income in the same year. In the supporting technical annex, we have set out the details of who is more likely to be in relative poverty.

The Scottish Government is already taking a range of actions to tackle poverty and build a fairer Scotland for all. Due to the significant overlap between fuel poverty and relative poverty, these actions are also expected to raise household incomes for those in fuel poverty.

Building a fairer Scotland for all

Making Scotland more equal and socially just is one of the key priorities of the Scottish Government. Our ultimate aim is to break the intergenerational cycles of poverty, inequality and deprivation. We will continue to seek to raise household incomes through a range of policies and programmes.

Tackling fuel poverty is inextricably linked to our national mission to eradicate child poverty. The Child Poverty (Scotland) Act 2017 sets ambitious targets across four different measures and the first Tackling Child Poverty Delivery Plan 2018-2022 identifies that 90% of children in poverty live in one of the six priority family types. These groups are likely to face specific barriers to accessing services and employment. Therefore, if we effectively tackle poverty for these households, we will be able to deliver considerable progress on our child poverty ambitions.

We will continue to explore all opportunities to align the action we take to tackle both fuel and child poverty and recognise the ways in which these experiences overlap for low income households.

Improving the social security system

As part of our efforts to improve the social security system and as per the recommendations of the Just Transition Commission, we will consider whether targeted financial support may be required to address fuel poverty as a result of the transition to decarbonised heat.

The Scottish Government wants to see a social security system based on dignity, fairness and respect. We are doing what we can, with the powers that we have, to increase incomes, reduce household costs, and mitigate the impacts of poverty in Scotland. This includes delivering new benefits like Child Winter Heating Assistance and the Scottish Child Payment, as well as improved versions of existing benefits, like our planned replacement for Cold Weather Payments.

Ensuring access to entitlements

Our Lived Experience Research found that many households in fuel poverty felt that it would be a good idea for HES to be able to share clients' data with a partner organisation to enable an assessment of benefit entitlement. There was a perception that the benefits system can be difficult to navigate, leading many to be unaware of their entitlement. There were no significant concerns about data sharing, as long as this was done securely and with consent.

HES are already able to refer clients to have a benefit check completed. We will explore how data sharing arrangements might enhance this service further.

SG Action – We will explore how data sharing could enhance support from Home Energy Scotland to provide fuel poor households with a benefits check

A key principle enshrined in the Social Security (Scotland) Act 2018 is that social security is an investment in the people of Scotland. Scottish social security will support over half a million people and we want all who are eligible to take-up the financial support available to them.

Advice services play a critical role across Scotland's communities in helping citizens to understand their rights and to seek solutions in a range of areas such as money and debt, housing and homelessness, social security and consumer issues. Our Evidence Review highlighted how changes in UK benefits and sanctions can be associated with periods of extreme financial hardship and intense stress for households. In 2021-22, the Scottish Government is investing more than £12 million in welfare and debt advice services.

Between 2018 to 2020, £500,000 of funding was provided to Health Boards to strengthen income maximisation referral pathways in health settings. The Financial Inclusion Universal Pathway Quality Improvement Collaborative launched in November 2019 with the aim of creating more formal income maximisation routes between maternity and health visiting services and local money and welfare advice services.

SG Action – We will share the learning of the Financial Inclusion Universal Pathway Quality Improvement Collaborative to strengthen partnership working between income maximisation services and health settings

In addition to extending partnerships between advice agencies and primary health care settings, in 2021-22 we will make funding available to create new partnerships between advice agencies and schools – to help ensure that families who need it are able to access whole family person-centred advice and support via a single access point.

We continue to work with local authorities, NHS boards, third sector organisations, and a range of advice and support services to ensure we take every reasonable step to encourage people to receive their full entitlement.

Opposing social security cuts

We have consistently opposed the UK Government's cuts to social security, including the two-child limit, the benefit freeze, the bedroom tax, and, most recently, their decision to cut Universal Credit by £20-per-week from the start of October 2021.

The Joseph Rowntree Foundation conducted analysis indicating that the cut to Universal Credit at the end of September would pull 500,000 people across the UK, including 200,000 children, into poverty^[18]. This will reduce the ability of families across the UK to be able to meet basic living costs, including fuel costs, and we therefore urge the UK Government to reconsider its decision.

UKG Action – We urge the UK Government to reconsider its decision to cut Universal Credit by £20-per-week

Minimum Income Guarantee

A Minimum Income Guarantee (MIG) is a guarantee that everyone will receive a minimum level of income this can be met through employment, tax relief, and social security benefits.

The Scottish Government is committed to commencing work in the current Parliament to provide a MIG for all, which could be an important step to raising the incomes of households in fuel poverty.

We will consider step changes through the social security system over the next Parliament so that everyone in Scotland has enough money to live a dignified life.

We have established a steering group to progress the delivery of a MIG and have engaged with those supportive of a MIG to invite their views on how this could be delivered in practice.

SG Action – We will explore how a Minimum Income Guarantee could offer those on low incomes safety, security and dignity, which will impact on fuel poverty by raising the level of income available to households to meet their reasonable energy needs

Providing financial support

Providing financial support - winter benefits

Winter benefits are designed to help those who have an increased need for heat during the coldest months and who are therefore more exposed to the health risks of living in a cold home. Those benefits are the Winter Fuel Payment and Cold Weather Payment – currently provided throughout the UK by DWP – and Child Winter Heating Assistance, introduced by the Scottish Government in November 2020.

In our Lived Experience Research, benefits such as the Winter Fuel Payment and Cold Weather Payment, as well as the Warm Home Discount, were seen as particularly important among those in lower income households in receipt of pensions or benefits who commonly said they would otherwise be unable to afford their heating bills. Some participants who were currently in work and struggling financially felt they were worse off than those on benefits, as they received no financial support towards the costs of heating their homes.

Because you are not on benefits, you're paying full price for everything […] give the ones that are paying everything a helping hand as well"

Kimberley, Family with children 5 and under, Social renter, Large urban, FP and EHR

Providing financial support - Winter Fuel Payment

The Winter Fuel Payment provides an annual, tax free payment of between £100 and £300 to people above the women's state pension age to help them cope with higher heating costs during the winter months. It is currently delivered by the DWP but is being devolved to the Scottish Government. We intend to deliver our replacement benefit on a like-for-like basis, providing continued support to around 1 million eligible Scottish people who have reached the state pension age.

SG Action – We will deliver our replacement benefit for Winter Fuel Payment on a like-for-like basis

Providing financial support - Cold Weather Payment

The Cold Weather Payment (CWP) is a payment of £25 paid by the DWP to eligible people each time a 'cold spell' is recorded in their local area during the winter months.

We intend to replace the CWP with a new annual payment of £50 for low income households who are currently eligible to receive CWP during cold spells. The payment will be provided regardless of local temperatures or weather conditions, providing greater certainty to recipients.

By removing the weather aspect of eligibility for the current CWP, we may be able to provide more predictable support to around 400,000 individuals each year who are in receipt of a qualifying low income benefit (e. g. older people, disabled people, and families with a child under five or a disabled child).

SG Action – We will replace the Cold Weather Payment with a new annual payment of £50 for all low income households who are currently eligible to receive the Cold Weather Payment during cold spells, providing greater certainty and consistency for around 400,000 people in Scotland

Providing financial support - Child Winter Heating Assistance

Child Winter Heating Assistance is an automatic, annual payment to eligible children and young people under the age of 19 who receive one of the 'qualifying benefits':

• the highest rate of the care component of Disability Living Allowance for children,
• the highest rate of the care component of Child Disability Payment, or
• the enhanced rate of the daily living component of Personal Independence Payment.

They must be getting the qualifying benefit on any one day during the 'qualifying week'. This is the week commencing with the third Monday in September each year.

In 2020/21, the payment was £200. The amount payable for 2021/22 is £202, due to uprating.

The assistance has been developed to address the increased costs that severely disabled children, young people, and their families incur as a result of:

• heating their homes to a higher temperature in winter; and
• the need to heat their homes through the night, or for periods of the night, because another person is required to provide care and support to the child or young person during the night.

Social Security Scotland began making payments of Child Winter Heating Assistance to eligible children and young people in November 2020, with 14,053 payments made totalling £2. 8 million.

In 2021/22, the Scottish Government is making payments to approximately 5,000 additional clients. We estimate that Child Winter Heating Assistance will provide assistance to over 19,000 children and young people in 2021/22, at a cost of around £4 million.

This form of social security assistance is not available anywhere else in the UK and is entirely funded by the Scottish Government. The payment does not need to be spent on winter fuel bills but is intended to help ease the overall financial pressures on households with a severely disabled child or young person.

Providing financial support - Warm Home Discount

The Warm Home Discount (WHD) is an annual one-off rebate on electricity bills paid by energy companies between September and March. Currently the WHD is worth £140 and scheme costs are applied to all household bills.

We spoke to households who received the WHD as part of our Lived Experience Research. They generally viewed it as being very helpful and were appreciative of this.

I couldn't be without it… if I was running a bath every night normally [like I should be] I don't know how I could afford it. "

Catherine, 35+ no children, Social renter, Large urban, FP, EHR

Eligibility for the WHD is automatic for households in the Core Group where the household receives the Guarantee Credit element of Pension Credit. Eligibility for a second "Broader" group is set by energy suppliers but must include households on a low income and/or in receipt of certain social security benefits. Currently these households have to apply for a WHD each year on a `first come, first serve basis'. Typically these households receive a rebate from March onwards, if their application was successful.

The UK Government launched a public consultation in June 2021 seeking views on the proposed reforms to the WHD. This would replace the current Broader Group with a new Core Group 2 with automatic eligibility and payments. This proposed reform would only affect England and Wales. BEIS are proposing a separate scheme for Scotland because this information is collected in a different way by the Scottish Assessors Association.

As set out in Chapter 3, the Scottish Government is urging the UK Government to review levy funding for the WHD and the Energy Company Obligation and work with Scottish Ministers so that these can be brought together into a single, flexible Scottish Fuel Poverty scheme, as provided for in the Scotland Act. This will support low-income households with higher energy costs, help fund necessary energy efficiency improvements, and help fund the switch to zero emissions heating.

UKG Action – We urge the UK Government to review levy funding for the Energy Company Obligation and the Warm Homes Discount and work with Scottish Ministers so that these can be combined as a single, flexible Scottish Fuel Poverty scheme, as provided for in the Scotland Act

Providing financial support - Scottish Child Payment

The Scottish Child Payment (SCP) is another new benefit, unique to Scotland. This is paid to families with children under the age of six and is worth £40 per child every 4 weeks. We are delivering bridging payments for older children and young people worth the equivalent of the SCP until it is fully rolled out to under 16s by the end of 2022. We have also committed to doubling the value of the SCP to £80 every four weeks from April 2022.

SG Action – We will double the value of the Scottish Child Payment to £80 every four weeks from April 2022

We have also committed to support children and young people who are not yet eligible for the SCP, with £520 to be paid in both 2021 and 2022 through bridging payments for those receiving free school meals due to low income.

Together with Best Start Grant and Best Start Foods, SCP will provide over £8,400 of financial support for families by the time their first child turns six. For second and subsequent children this will provide over £8,000.

Providing financial support – Carer's Allowance Supplement

The Carer's Allowance Supplement was introduced in 2018 to raise the incomes of carers in Scotland. It is an extra payment of £231. 40 paid two times a year for individuals who are in receipt of Carer's Allowance on the qualifying dates.

In recognition of the extra pressures faced by carers as a result of the COVID-19 pandemic, we made an extra payment of £230. 10 to Carer's Allowance recipients in June 2020, on top of Carer's Allowance Supplement (CAS). The Coronavirus CAS payment supported around 83,000 carers at a cost of £19. 2 million.

The Carers' Allowance Supplement (Scotland) Act 2021 makes provision for another extra Coronavirus payment with the December 2021 Carer's Allowance Supplement. This will mean more than 91,000 carers will receive a double payment increasing their December payment to £462. 80, an extra investment by the Scottish Government of around £21 million to help increase the incomes of unpaid carers.

Providing financial support - Scottish Welfare Fund

The Scottish Welfare Fund is a national discretionary fund that helps families and people in Scotland who are on low incomes. It is delivered by local authorities and provides support to applicants in the form of Community Care Grants and Crisis Grants.

A Community Care Grant is available to individuals who require help to establish or maintain their home and can also be provided to families facing exceptional pressure. A Crisis Grant is available to individuals who are in crisis because of a disaster (like a fire or flood), or an emergency (like losing their money or facing an unexpected expense).

Eligible applicants can be provided with support in-kind or in cash and, in certain circumstances, an award can include support for fuel costs.

Maximising household incomes

We are committed to ensuring that support is available to help low income households increase their incomes and reduce their household costs.

Maximising household incomes – free bus travel

The National Bus Travel Concession Scheme for Young Persons (Scotland) Order 2021 came into force on 1 April 2021. This enables the creation of a new scheme to provide free bus travel to all Scottish residents aged under 19.

On 12 November, legislation came into force which extends the new scheme to include 19-21 year olds. The new scheme will cover young people aged 21 and under when it goes live, which is scheduled for 31 January 2022.

Free bus travel for young people is expected to reduce household outgoings, which will aid children and families, particularly those living in poverty.

SG Action – We will provide free bus travel to all young people aged 21 and under, which will impact on fuel poverty by ensuring household incomes can be used to meet reasonable energy needs

Maximising household incomes – improving access to childcare

As part of our plans to tackle child poverty, we are committed to making an unprecedented level of investment in early learning and childcare. From August 2021, we have almost doubled the funded entitlement from up to 600 hours per year to up to 1140 hours per year for all 3 and 4 year olds, and eligible 2 year olds. The expansion will provide more flexibility for families, with parents having greater choice of providers and a child's early learning and childcare provision hours being more aligned to working patterns, whilst being delivered in a manner that provides a high quality experience for the child.

Maximising household incomes – free school meals

The Scottish Government has provided funding for free school meals to all children in the first three years of primary school, at all publicly-funded schools in Scotland, since January 2015.

In 2020-21, we invested over £56 million in the continuation of free school meal provision for low income families during school closures, periods of online learning, and school holidays. We also delivered two £100 hardship payments benefitting around 145,000 children and young people from low income households receiving free school meals.

We are now commencing the expansion of universal free school meal provision in primary schools and special schools and delivering alternate free school meal support for all eligible children in holiday periods, starting with P4s this year. In addition to this, we have committed to provide free breakfast and lunch provision year round to primary and special school pupils.

SG Action – We will expand universal free school meal provision in primary schools and special schools and deliver alternate free school meal support for all eligible children in holiday periods

Ensuring access to affordable housing

The cost of housing can be a significant pressure on household budgets for those on a low income and can therefore contribute to fuel poverty. Making sure everyone in Scotland has access to good quality housing is a vital part of the Scottish Government's drive to secure economic growth, promote social justice, strengthen communities, and tackle inequality. Housing to 2040, our first long term housing strategy, sets out a vision for what we want homes and communities to look and feel like for the people of Scotland, no matter where they live and what point in their life they are at.

Ensuring access to affordable housing – building more homes

Housing to 2040 includes an ambition to deliver a further 100,000 affordable homes up to 2032, with at least 70% of these for social rent, once the previous 50,000 affordable homes target has been delivered. We will deliver 50,000 of these homes by 2026-27 and a further 50,000 homes by the end of 2031-32.

SG Action - We will deliver 110,000 energy efficient, affordable homes by 2032 – at least 70% of which will be in the social rented sector and 10% in our remote, rural and island communities – which will ensure homes are affordable as well as warmer and cheaper to heat

Ensuring access to affordable housing - Rented Sector Strategy

We will improve accessibility, affordability and standards across the whole rented sector, publishing a new Rented Sector Strategy informed by tenants and bringing forward a new Housing Bill early in this Parliament to strengthen tenants' rights and improve the housing rights of people experiencing domestic abuse. The Strategy will benefit from a phased approach, with a first iteration published by December 2021 which will be consulted on in early 2022. The final version will be published in the second half of 2022 and the Housing Bill will pick up on any legislative aspects identified in the Strategy.

SG Action - We will produce a Rented Sector Strategy and include any legislative aspects in a Housing Bill in this parliamentary term which will support renters in ensuring their housing costs are affordable and levels of fuel poverty in the rented sector are reduced

Ensuring access to affordable housing - Discretionary Housing Payments

Discretionary Housing Payments support tenants struggling with their housing costs where Universal Credit or Housing Benefit does not cover the cost of their rent. Those in receipt of Housing Benefit or the housing element of Universal Credit who require further financial assistance in order to meet housing costs are eligible to apply.

We are continuing to push the UK Government to reverse its damaging welfare changes which put people at risk of homelessness and at risk of being pushed into poverty. We have pushed the UK Government to ensure Local Housing Allowance rates do not go back to the pre-pandemic cuts which saw the private sector become completely unaffordable for people in receipt of benefits in some areas.

The UK Government decision to maintain Local Housing Allowance rates in cash terms in 2021/22 is a further freeze for private renters and places additional pressure on tenants which in turn adds to the pressure on the Discretionary Housing Payments funding pot.

We are continuing to provide the necessary funding in this area because it is the right thing to do, providing a lifeline for families and individuals already struggling to meet housing costs.

SG Action - We will continue to mitigate the bedroom tax until such times as we are able to abolish it, which will impact on fuel poverty by ensuring household incomes can be used to meet reasonable energy needs

Promoting Fair Work First

Fair work is central to our economic recovery and must be a hallmark of our wellbeing economy. We must make sure that new jobs are good jobs - complying with high workplace standards and paying fair wages.

Through the Scottish Government's Fair Work First (FWF) approach, employers are being asked to commit to adopting fair work practices. We will continue to roll out a FWF approach across the public sector, aiming to drive fair work practices across the wider labour market to support economic recovery and renewal and, in doing so, support tackling poverty interventions.

SG Action – We will continue to roll out a Fair Work First approach across the public sector, which will help ensure households have adequate levels of income to meet their reasonable energy needs

Promoting Fair Work First - real Living Wage

As part of the FWF approach, the Scottish Government wants to see more workers being paid at least the real Living Wage (rLW). The rLW, like the definition of fuel poverty, is based on the Minimum Income Standard which establishes the minimum income needed for an acceptable standard of living.

SG Action - We will continue to encourage more employers in Scotland to pay the real Living Wage, which will help ensure households have adequate levels of income to meet their reasonable energy needs

Promoting Fair Work First - Living Hours Accreditation

We recognise that paying the real Living Wage alone will not give workers a decent weekly wage. That is why we have launched a new Living Hours Accreditation Scheme for Scotland. The new scheme recognises that the number, frequency and stability of hours of work are also critical to tackling in-work poverty. As well as payment of the real Living Wage, criteria for Living Hours Accreditation includes:

• A contract reflecting accurate hours worked and a guaranteed minimum of 16 hours a week (unless the worker requests otherwise);
• At least 4 weeks' notice of shifts and guaranteed payment if shifts are cancelled within the 4 week period.

SG Action - We will continue to encourage more employers in Scotland to achieve Living Hours Accreditation, which will help ensure households have adequate levels of income to meet their reasonable energy needs

Improving access to employment

Unemployment is at historically low levels but there are still many who struggle to find and keep a job. We want to do as much as we can to ensure that as many people as possible benefit from work.

We are seeking to deliver a fairer recovery providing just transitions to the labour market. We recognise that the employability landscape is complex and are working with partners to simplify this whilst addressing existing social and economic inequalities and preventing those who are most vulnerable from being further disadvantaged by the impacts of COVID-19.

Improving access to employment - No One Left Behind

Through our No One Left Behind approach, we will deliver an all age approach to employability that is flexible, person-centred and integrated and aligned with other wrap around services including health, justice, housing provision, and advice services.

Improving access to employment - Parental Employability Support Fund

In 2021/22, we will invest £8. 65 million in the Parental Employability Support Fund putting in place interventions that support employability and in-work progression for low income parents. The Fund helps low income families identified as being most at risk of experiencing poverty to increase their earnings through employment by gaining and progressing in fair work.

Building inclusive and sustainable local economies

As well as developing a culture of fair work in Scotland, we aim to create the right environment for more inclusive and sustainable employment opportunities to flourish. We will achieve this by continuing to fund, develop, and deliver City Region Deals and Regional Growth Deals to attract investment and create jobs, while also developing, promoting, and implementing community wealth building as an approach to deliver inclusive growth.

Building inclusive and sustainable local economies - community wealth building

Community wealth building is a practical and outcomes focussed approach to local economic development that supports the delivery of a wellbeing economy in Scotland. By redirecting wealth back into the local economy, community wealth building can help increase local economic activity, as well as driving greater community ownership. It could therefore contribute to higher household incomes and, potentially, greater community involvement in local energy projects.