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There is quite a lot in there and you have covered a wide range of issues. At an international, and particularly a European, level, there is much greater focus on decarbonisation of the energy sectors and there is a clear determination to move towards renewable energy at a much faster pace than anticipated.

We need only look at the comments that the European Commission has made and the approach that it has taken—Commissioner Timmermans has highlighted the importance of renewables, and Europe’s largest economy, Germany, has set out its stall very clearly when it comes to the focus on renewables and hydrogen as its future approach—to see that there is a real step up in pace and in the desire, at European level, to decarbonise energy markets, reduce dependency on imports, particularly from Russia, to meet climate change targets, and to deliver security of supply.

In recent months, it has been interesting to see how countries in other parts of Europe are recognising that they will not be able to meet all their renewable energy challenges themselves, so they are looking at the potential of other countries to provide markets and support. I have had engagements with ministers and representatives from different parts of Europe who are looking at Scotland as a potential exporter of renewable energy, particularly in the context of green hydrogen. Scotland is seen as a potential main source of green hydrogen to support the European economy.

Let me put that in context. Germany has said that it wants a big focus on hydrogen to decarbonise industrial processes. Germany will require to import about 70 per cent—the vast majority—of its hydrogen, so it is looking for import markets in the countries that are in a position to support that activity, including Scotland.

We are talking about faster decarbonisation, a greater focus on renewable energy, and countries that are looking for import markets and export opportunities because of the focus on greater energy security at European level.

On actions that can be taken, countries that have introduced windfall taxes include Germany, Italy and Spain. I hear people making the argument that, if we introduce a windfall tax, we will not see investment in renewables, but Shell was looking to invest in offshore renewables in Scotland, in a partnership with Scottish Power, before it was making record profits. That interest is not going to change. Renewables investment is increasing in Italy, Germany and Spain despite the introduction of windfall taxes. The argument is a red herring: the reality is that investors are still moving into those markets because they want to be there, and they can see that that is how security of supply will be delivered.

The UK Government needs to act quickly. It needs to look at introducing a windfall tax and using the proceeds to support people during the cost of living crisis that millions of households are facing across the UK, and which is only going to get worse.

Potentially, yes.

Thank you, convener. Good morning. Households across the country are struggling to cope with the cumulative pressures of the cost of living crisis, and energy costs lie at the heart of that crisis. Record-high inflation, which is in large part being driven by energy price increases, has forced thousands of people to choose between heating and eating and to experience the worst decline in living standards in the past few decades. The tragic events in Ukraine have exacerbated the already elevated fuel prices, which have risen to unprecedented levels, and the impacts are felt by domestic and business consumers in Scotland. We have also seen the standing charges in fuel bills double, which means that reducing consumption does not save as much as would have been the case previously.

Scotland is a forerunner in renewable energy generation and has the potential to expand our renewable capacity and reduce energy bills. However, investment is being held back due to unfair network charges, which is a missed opportunity in the current energy crisis. A significant number of Scottish households are off the mains gas grid and, due to the interconnected nature of the energy market, natural gas price increases have had a knock-on effect on electricity, heating oil and liquefied petroleum gas prices.

This year, the Scottish Government is set to invest almost £770 million in helping to tackle the cost of living pressures, which includes a £150 cost of living award to support households with higher energy costs, and there is a further investment of £10 million to continue our fuel insecurity fund. Crucially, we are also committed to investing at least £1.8 billion over the next five years in heating and insulating Scotland’s homes and buildings.

We have repeatedly called for urgent and targeted support from the UK Government in the immediate and longer term, such as: a one-off windfall tax on companies that are benefiting from significantly higher profits during the pandemic and energy crisis; direct financial support for low-income households; improvements to the warm homes discount scheme; and a temporary removal of VAT on energy bills.

Sadly, in the March budget, in the energy security strategy and, last week, in the Queen’s speech, the UK Government repeatedly failed to deliver anything to match the scale and urgency of what is required. However, we continue to engage with the UK Government on those matters. We are also engaging with stakeholders and the sector to explore what more we can do and how we can work on a four-nations basis to help to address what is a growing crisis for many households.

Convener, I am happy to respond to the committee’s questions.

I do not believe that there should be a windfall tax only on energy companies; our view is that there should be a windfall tax on companies that have made a significant profit during the pandemic, including the oil and gas sector—in other words, the energy sector itself. That would expand the range of any windfall tax and, potentially, increase the pot available to the UK Government to create measures to address the cost of living crisis. I sense that the chancellor’s position on that changed during the weekend in a way that suggests that he is starting to think about the possibility of introducing a windfall tax on the energy sector.

Presently, we are not looking at an emergency budget. That is because we have a fixed budget, which means that we would not be able to draw in extra resource. We are looking at the present allocation of funding across different portfolios to see whether we can target more of it at people who are experiencing particular difficulty during the cost of living crisis. That work is being done now. However, given that we have a fixed budget, there are no plans for an emergency budget at the present time.

There is a lot in that, and I will unpick some of it. I disagree with the wait-and-see approach. Customers on direct debits saw an £693 increase in their default tariff and pre-payment customers saw a £708 increase in their default tariff. We do not have to wait to see what to do, because people are already experiencing significant financial challenge. That is why I do not agree with the UK Government’s wait-and-see approach. The measures that have been taken do not go far enough—we need to go much further.

Should we deal with it as a welfare issue or as an energy issue? It should be a combination of both, not one or the other. We need to make sure that we take action through the welfare provisions that are available, and reinstating the £20 uplift in universal credit would be a step in the right direction in addressing the crisis. That was introduced because of the pandemic but has been removed at the very peak—or potentially at the very peak—of a cost of living crisis, so that was the wrong thing to do.

We have sought to use the welfare powers that we have to help to manage the cost of living crisis that households face. For example, we have doubled the child payment and increased it by a further £5, and we have increased the eight benefits that we are responsible for by 6 per cent. We are trying to uplift them in line with the rise in the cost of living.

We are seeking to use the welfare powers that we have to help to meet some of those costs, but I recognise that that is not sufficient in itself. Action needs to be taken in the energy markets. Some of that will be short term and some of it will be medium term.

In the short term, Keith Anderson’s proposal on the deficit fund is one option that could be considered. There is a range of other things that we could do as well—for example, removing VAT and examining some of the social and environmental costs that are attached to energy bills could save households another £140 to £150 on their bills. There are other measures that could be removed.

There are aspects to energy that could be addressed in the short term. In the medium term, we need to keep in mind that energy bills are going up also because of failures in the market. Many retail companies have withdrawn from the energy market, which has resulted in costs being added to household bills to address those company failures. That says to me that there has been clear, systemic regulatory failure in the sector.

The companies broadly fall into two categories: those that are hedged and those that are unhedged. The ones that are largely left to the retail market are unhedged companies. They did not have a business plan or structure to be able to absorb big spikes in energy costs. They have withdrawn from the market and, because of the supplier of last resort arrangements, the costs have been transferred to other companies and socialised across the rest of our energy costs.

That indicates that there is a systemic failure in the sector. That needs to be addressed, but I am not convinced that the Office of Gas and Electricity Markets has yet set out actions that will address that in future. Ofgem needs to do more on that. I am more than happy to expand on and explore that aspect as well.

Given that many of the costs are directly attributable to the big spike in energy costs that are driven by wholesale gas prices, we need to speed up decarbonisation. I welcome the fact that the UK Government has also acknowledged that. The priority now needs to be moving towards renewables at a faster pace. That will give us energy security. Furthermore, as renewables are lower in cost, that will also help to drive down bills in the longer term.

It is not a case of doing one thing or the other; it must be a combination of the two. Where we can take action, we are trying to do so, but there is no doubt in my mind that much more needs to be done.

I cannot give you a figure off the top of my head for the number of civil servants who are involved in tackling fuel poverty, but I am more than happy to provide you with that information. Of course, many of them will be involved not just in fuel poverty but in wider social policy areas such as child poverty and household poverty. In other words, they will work not just on one specific bit of poverty but across a range of areas, because they are all interlinked. The households that are experiencing child poverty are often the same households that are experiencing fuel poverty, and those who are experiencing poverty in general often experience fuel poverty, too.

The danger in a governmental sense lies in taking a silo-thinking approach to this rather than a cross-departmental approach. However, I am more than happy to come back to you with the number of civil servants who are employed in tackling poverty, including fuel poverty.

The response that I got from Kwasi Kwarteng largely said that these matters could be discussed at the four nations net zero joint ministerial group—if I recall correctly. I might be wrong, but I think that that is what was said. We also asked the UK Government to work with us on creating a joint ministerial group back in January this year. It has not taken up that offer, and it has not engaged with us specifically on tackling the cost of living crisis.

Again, because of the interconnected nature of the energy sector, wholesale gas prices are forcing up the price of LPG and oil gas heating. Our view is that there is a need for regulation in this sector, and we have raised that with the UK Government on a number of occasions. However, it is very clear that it has no plans to do so.

The sector is engaging with BEIS on what it can do to meet some of the spiralling costs that off-grid properties are now facing. Given the fact that 17 per cent of our population in Scotland is off-grid, it is an area that should have some regulation in order to manage some of the potential cost impacts that big price spikes can have on households. At about 12 per cent, the off-grid sector in England might not be as big, but it is still a sizeable percentage. There is a need for some market intervention, and there is a variety of different models that we could look at, but at the very least there should be some sort of engagement on different options for regulating the sector, given its impact on so many fuel-poor households in rural parts of Scotland.

If you can do so, I will ensure that we take the matter up with the finance secretary.

I have a question so that I am clear about what you mean. Our investment in energy efficiency measures such as area-based programmes is largely modelled on what can be delivered in the sector, what we can take forward and what can be expanded where there are reasonable grounds to do that. You said that that means that we will not be able to meet what we intend by the end of this year—what exactly are you referring to?