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Proposed Fuel Poverty Strategy, response to Committee's letter of 14 December

Letter from Cabinet Secretary for Net Zero, Energy and Transport, 22 December 2021

Dear Neil,  

Thank you for your letter of 14 December providing comments from the Committee on the proposed Fuel Poverty Strategy and for sharing the note of the informal evidence session with people who have lived experience of fuel poverty.   

We are in agreement that lived experience of fuel poverty must be core to the Strategy’s design and implementation.  That is why we have ensured that the Scottish Fuel Poverty Advisory Panel will include at least one member with lived experience of fuel poverty.  Furthermore, we will be progressing our work in line with the Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019 (“The Act”) by ensuring that we consult people with lived experience of fuel poverty before laying any regulations under The Act, as well as every time we revise the Strategy or prepare reports on our progress towards the targets. 

As set out in the Strategy, we intend to keep evidence, including lived experience, at the heart of our approach and will work with the Scottish Fuel Poverty Advisory Panel to explore the opportunities to carry out further lived experience research and build on our existing evidence base. 

My response to your further comments are set out below: 

Development of the strategy 

The proposed Fuel Poverty Strategy sets out the challenge of addressing both low incomes and high energy prices, given the impact of COVID-19 and rising energy prices.  As the Committee notes, these challenges along with inflationary pressures could have an effect on household finances which lasts beyond this winter.  The Scottish Government will therefore monitor the impact of the assistance we are providing through the Winter Support Fund and will also consider what further support may be required beyond this winter.

We plan to consult with the Scottish Fuel Poverty Advisory Panel, once appointed, on the Fuel Poverty Strategy, as per section 7(2)(g) of The Act.  Following this consultation, if we consider that revisions to the Strategy are required, we will consult widely, including with all groups specified under The Act.  Additionally, a number of the actions contained in the Strategy will require stakeholder consultation to inform delivery.

Measuring the effectiveness of the Strategy 

As set out in the proposed Strategy, we intend to work with key stakeholders, including the Scottish Fuel Poverty Advisory Panel, once appointed, to develop an outcomes framework which will set out our expected outcomes and how our proposed actions will help us to achieve them.  In doing so, we will consider the suggestions that the Committee has made regarding how this outcomes framework could relate back to the statutory and interim targets.

Rural inequality 

Our heat and energy efficiency programmes recognise the challenge in rural areas and provide higher levels of grant support to reflect the higher costs of delivering measures.  We also continue to make free, bespoke, impartial advice available to all households in Scotland through Home Energy Scotland, including specialist advice for the more complex, in-depth interventions that may be relevant for many rural properties.  Loan cashback grants are also available for energy efficiency measures to help reduce running costs, including for solid wall insulation.  We have committed to replacing loan cashback with standalone grants during 2022-23.

And through the shared policy programme in the Bute House Agreement, we have committed to provide additional support for rural and island homes which require bespoke and targeted advice.  We will set out further detail on how we will support island communities in our forthcoming Islands Energy Strategy.

Energy efficiency programmes

As set out in our Programme for Government, we are committed to establishing a new dedicated National Public Energy Agency to provide the leadership and coordination required to accelerate delivery of transformational change in the decarbonisation of heat in Scotland.  

In line with our ambitious targets set out in the Heat in Buildings Strategy (published 7 October), the priority now is the scale of transition that we need to see in the decarbonisation of heating systems of 1 million homes and 50,000 non-domestic premises between now and 2030.  Ensuring that this transition is fair and that no one is left behind remains a critical commitment.

That is why we are now focusing our efforts on creating a new Agency that will coordinate and accelerate both the pace and scale of heat and energy efficiency retrofit across the domestic, non-domestic and public sectors in Scotland.  To support this aim, the Agency will also aid public understanding of the changes required and act as a centre of expertise to inform developments.

In recognition of the real urgency in our need to act now to tackle heat decarbonisation head on, we are also already working to establish a virtual Agency by September next year.  A central role of the virtual Agency will be to act first to build on, improve and co-ordinate existing – and future – advice and delivery programmes, before scaling up to deliver this function within the single dedicated body by September 2025.

The work of the Agency will be guided by key principles that seek to align the heat decarbonisation and fuel poverty agendas, as set out in the Heat in Buildings Strategy.  By bringing new coordination to our existing heat and energy efficiency delivery programmes, the Agency will work to ensure that people can continue to access the help they need, when they need it throughout the transition process.  Over the course of this Parliament, we will invest at least £1.8bn in heat decarbonisation and energy efficiency measures – and of this, we have committed to at least £465m being made available to support those in fuel poverty in the heat transition.

On 30 November we published an early Call for Evidence to inform next steps in development of the Agency, representing the first stage in a process of open and transparent collaboration across the Scottish heat decarbonisation landscape in development of the new body by the end of this Parliament.  I would invite and encourage any member with an interest in this agenda to provide a response as part of this process.

Warm Homes Discount  

Scottish Ministers have limited powers under the Scotland Act (2016) to develop the Warm Home Discount scheme in Scotland and these can be vetoed by the UK Government.  Scottish 
Ministers have written to their UK counterparts to propose a new single flexible scheme in Scotland to replace both ECO and the Warm Home Discount. This would allow us to increase help with current bills when it is needed and better target those in fuel poverty, as for example during the recent COVID-19 public health emergency. 

We have also highlighted the needs of households in remote rural areas and off the gas grid. Scotland needs a more flexible scheme that can reflect the different needs of our communities and all the causes of fuel poverty.   We would expect to take a pragmatic approach to the design of a separate scheme in Scotland, maintaining broad alignment with the schemes in England and Wales - providing greater certainty and predictability for energy suppliers. 

We are awaiting a response from the UK Government about whether they would consent to a single Scottish scheme (combining ECO and WHD). 

Winter Fuel Payment  

Work is progressing on the Scottish replacements for Cold Weather Payments and Winter Fuel Payment which will be delivered over the next three years, starting with the introduction of our new Low Income Winter Heating Assistance (LIWHA) in winter 2022. Our consultation on the new LIWHA, which will provide guaranteed payments of £50 each winter to low income families regardless of the weather, was launched on 1 December.  Low Income Winter Heating Assistance will be an investment of around £20 million every year to support people towards the costs of heating their homes irrespective of the weather, temperature, or where they live in Scotland. This is another important milestone in our ambitious programme to devolve some of the UK benefits system to Scotland.  It is also part of our broader approach to support people who need extra help with heating costs during the coldest months of the year. 

Our Pension Age Winter Heating Assistance, which will replace Winter Fuel Payments in Scotland, is provisionally scheduled to be delivered in winter 2024. Given the very large number of older people who receive it every year, our priority for replacing Winter Fuel Payment is to do so in a safe and secure way so that people continue to receive the right amount of support at the right time. Our current proposals for that benefit are, therefore, to replace it on a like for like basis and we will consult separately on our plans to do so next year. 

Pre-payment Energy Customers 

We agree that it is important for consumers using prepayment meters to be aware of, and be able to access smart meters, bringing with them added tariff choice, ability to top up remotely and economic benefits for consumers and suppliers. 

The smart meter programme is owned and led by the UK Government. We have raised with them, and Ofgem, factors which hinder take up of smart prepayment meters, such as consumer experience of the smart meter journey, issues with communications systems and a lack of smart meter access for those with restricted meters and electric heating – households which are more likely to be in fuel poverty. We have recently seen additional protections put in place to improve the experience of prepayment meter consumers. For example, in December 2021 Ofgem strengthened regulatory protections to address the risk of consumers using PPMs from self-disconnecting. 

Whilst we support these actions, we would like to see energy suppliers go further to support consumers using prepayment meters. As in our Heat in Buildings Strategy we will continue to press for further reforms so that consumers with prepayment meters are able to access similar tariffs to direct debit consumers, and we will continue to raise the issue of smart prepayment in our engagement with Smart Energy GB, Energy UK, the wider energy market, as well as in regular meetings with BEIS.

Social Security

We have introduced Child Winter Heating Assistance which is unique in the UK. Our intention with this payment is to mitigate the increased heating costs incurred by families of the most severely disabled children and young people, as a result of having to sustain a higher temperature at home during winter due to their disability or long-term condition, and having to heat their home throughout the night due to night-time care needs.   

This benefit is for families with children and young people in receipt of the highest rate of the care component of either Disability Living Allowance (DLA) for children or Child Disability Payment. In November the eligibility criteria were expanded to include young people aged 16 to 18 and in receipt of the enhanced rate of the daily living component of Personal Independence Payment.

Child Winter Heating Assistance delivers on the 2016 manifesto commitment to extend eligibility for the Winter Fuel Payment to families with children in receipt of the highest care component of Disability Living Allowance for Children. 

We recognise the need to consider further targeted support for severely disabled adults of working age, in acknowledgement of the fact that households with a disabled person irrespective of age is more likely to be in financial difficulties. We will therefore continue to consider whether, and if so how, we can better support disabled adults over the winter months. The focus of our current efforts is on prioritising support for some of the most vulnerable children and young people.

I would like to thank the Committee for taking time to consider the proposed Fuel Poverty Strategy and for providing me with their views.   

The Fuel Poverty Strategy will be published on 23 December.

A copy of this letter has been sent to Shona Robison, Cabinet Secretary for Social Justice, Housing and Local Government and to Dean Lockhart MSP, Convener, Net Zero, Energy and Transport Committee.

Michael Matheson