The cost of remoteness: reflecting higher living costs in remote rural Scotland when measuring fuel poverty

Background

Following the passage of the Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019, the Scottish Government commissioned CRSP to:

• Carry out research in remote rural Scotland that consulted groups of citizens living in different areas about what is needed for a minimum, socially acceptable living standard in their communities, and how this varies from the research in urban UK.
• Use this research to establish a baseline of budgets for broad household types in remote mainland Scotland and in the islands, using these to calculate a percentage “uplift” to be applied to the MIS benchmarks in the Scottish fuel poverty calculation.
• Update these calculations annually, based on price increases and the changing composition of MIS.

The plan was to uprate based on CPI price indexation, in odd-numbered years, and to carry out repricing of items and further analysis every time urban UK MIS budgets were rebased and reviewed, in even numbered years. A refresh of the remote Scotland research is planned every eight years.

In practice, the Covid-19 pandemic disrupted the early part of this plan. The original figures were to have been for 2020, but insufficient data were available from the Scottish Housing Survey to make use of a benchmark for that year, and price data in 2020 was unstable, so the first report (Davis et al, 2021) was adjusted to cover 2021, and published in late 2021.  The present report, the first uprating of the figures, therefore covers 2022, a year in which a rebase of UK MIS has already taken place (Davis et al., 2022). More precisely, all UK MIS budgets applying to households without children were ‘rebased’, and all those for households with children were “reviewed” in that year, in both cases using fresh groups of members of the public. Under this method, the ‘rebase’ asks groups to specify household requirements starting with a ‘blank sheet’, so lists of items are compiled from scratch. In contrast, the ‘review” method presents new groups with already-compiled lists, and asks if there is anything that needs changing, so most items remain the same.

A further complication has been that the results of this UK rebase and review have also been greatly affected by the pandemic and its aftermath. In most years since the first review of MIS budgets in 2010, there have been relatively minor changes in the budgets. In 2022, a range of more substantial changes in what is considered essential caused budgets to rise significantly faster than inflation, which itself was at a thirty-year high. These changes included specification of more choices about holidays, paying for more regular recreational activities, and a number of health and hygiene-related items that added to the cost of personal goods and services.

Such changes, when substantial, pose a problem for the updating of additional MIS costs calculated for particular circumstances such as living in a remote area. Without repeating groups in those areas (which is not feasible on an annual or biannual basis), we cannot confirm whether or not the changes noted in the urban MIS UK research should apply there as the baseline of expenditure to which additional costs are added. For example, families with children in 2022, in urban areas of the United Kingdom, noted that parking charges had risen sharply, and substantially increased provision in the budgets for parking. This may or may not apply to remote rural areas to the same degree. Another example is that working age adults in urban areas increased the number of paid-for weekly activities that they think are needed as a minimum, influenced by a greater need for social participation in the wake of the pandemic. Again, there is no way of knowing whether people in remote rural Scotland would also consider minimum spending on recreation to have increased.

2022 calculations

The calculations in 2022 took a pragmatic approach to this challenge. The project design suggests that every two years, after UK budgets have been reviewed/rebased, calculations take into account, where possible, both new pricing information in remote rural Scotland and analysis of how changes in the contents of UK budget affect the additional cost of living in remote areas.

In 2022, however, it did not make sense to reprice UK family budgets in remote rural Scotland, since this would have meant using budget lists that had not been changed in detail since 2020, even though the rebasing research (for households without children) showed clearly that these are out of date. Families with children have only had their budgets reviewed and amended, not reconstructed item by item. For these groups, therefore, a simplified calculation was made. This was based on the assumption that overall, taking both inflation and changes in budgets into account, the remote Scotland budgets changed by the same proportion between 2021 and 2022 as the main urban UK budgets, in each budget category for each household type. In practice the change may be greater or smaller than this, but in order to update the overall uplift, this provides the best-available assumption.

On the other hand, for pensioner and working-age households without children, which were rebased using new items for the UK, the plan to use additional pricing research in remote rural Scotland proved feasible, using the new 2022 UK lists. In some cases, such as food and personal goods like toiletries bought in supermarkets or local stores, the main task involved making comparisons between prices of a representative set of goods to work out a percentage uplift to apply to the relevant rebased budgets. In others, such as holidays and some other aspects of recreation, the composition of spending was different, and remote Scotland costs had to be calculated separately. This is where the most problematic anomalies emerged – specifically in the case of working-age singles and couples without children. In these cases, an increase in the UK activities and holidays budgets raised the overall social participation budgets to significantly above the equivalent in remote rural Scotland, even inflation-uprated. Since there is no evidence to indicate whether or not people in those areas would also have increased these budgets, it would be misleading to report that leisure is now cheaper in remote rural Scotland than in urban areas. In the absence of evidence about whether it is either cheaper or more expensive, we have reported the remote Scotland budgets to be the same as the UK ones in these particular cases.

While the 2022 update has therefore had several rather ad hoc elements, the 2024 update is likely to be carried out on a more consistent basis in line with the original plan. Most notably, it has been decided to rebase all MIS UK budgets in that year, which will avoid combining two different methods for different household types in the same year.

The Appendix gives more specific information about how each part of the remote Scotland budgets have been calculated in 2022.