ScotGov advisers give warning as extreme fuel poverty levels double

It comes as expert analysts expect energy prices to further rise in January and in April after the price cap set by the energy regulator Ofgem dropped below £2000 for the first time since April, 2022.

This winter there is no sign of the reintroduction of a £400 energy bills support scheme to help households as was the case last winter when the UK Government's Energy Price Guarantee set average dual fuel bills at £2500 per year.

An estimated 28 million households received a £66/£67 monthly discount on their energy bills between October 2022 and March 2023, under the scheme.

The Scottish Fuel Poverty Advisory Panel has raised concerns about the "particularly worrying" rising levels of fuel poverty in Scotland.

The panel which oversees the Scottish Government's progress in its strategy for tackling fuel poverty and acts as a statutory consultee is concerned over the current extreme fuel poverty rate from March which estimates there were 739,500 households in extreme fuel poverty - around 29% of homes. That's a rise from 12.4% in 2019.

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The panel said there was a "stark contrast" in the current extreme fuel poverty rate and the targets that have been set.

Fuel poverty relates to households that must spend a high proportion of their household income to keep their home at a reasonable temperature. It is affected by three key factors - a household’s income, their fuel costs, and their energy consumption, which in turn is affected by the energy efficiency of the home.

Extreme fuel poverty is defined in Scotland, that after housing costs, the total fuel costs needed to maintain a satisfactory heating regime are more than 20% of the household’s total taxable income.

The panel has raised further concerns that there are now an estimated 925,000 households were in fuel poverty - around 37% of homes. That is 309,000 more than in 2019 when 24.5% were affected.

The Scottish Government set a target that in the year 2040, no more than 5% of households would be in fuel poverty.

The panel in a briefing seen by the Herald said: "Both the rise in fuel poverty and the increasing percentage of those suffering fuel poverty in the 'extreme' category are particularly worrying."

They said that since 2019 progress made in reducing fuel poverty rates "has effectively been reversed".

Fuel poverty is defined in a similar way to that of the 'extreme' except it relates to more than 10% of a household's total taxable income.

The panel said that it is concerned that Ofgem’s price cap calculation does not adequately recognise costs either of heating a home with electricity, or the average costs for those who rely on unregulated fuels. It said it therefore "fails" to recognise the fuel cost consumption for those living off-gas grid.

A UK Government study shows the areas that have the highest concentrations of home owners that are off the gas grid are in Orkney (100% or 11,000 homes), Shetland (100% or 11,000 homes), Western Isles (88% or 13,000 homes), Highland (61% or 74,000 homes) and Argyll and Bute (56% or 27,000 homes).

The panel said both the Scottish Government and the UK Government need to do more to support the vulnerable this winter.

It says the UK’s system of energy price support is "no longer fit for purpose" and that a comprehensive and flexible social tariff - which is a discount on energy for those most in need - is required to replace the Warm Homes Discount, which is designed to help vulnerable households with the cost of heating their home over the winter. Those eligible for the scheme will see the UK government contribute £150 towards an electricity bill.

But the panel say that had not kept pace with inflation or the high costs of energy and that its value was "insufficient and is not tapered in a way that restores fairness to those who have to pay more to heat their homes".

The panel has said consideration could be given to whether there should be a Scotland-specific social tariff and whether this might better serve the needs of those suffering fuel poverty in Scotland.

"A significant level of targeted support will be needed to ensure vulnerable customers are able to heat their homes to recommended temperatures and access required energy services," they said.

It said that costs of a social tariff should be covered through general taxation and not be the result of levies onto existing bills.

It recommends the Scottish Government considers reforming the current Winter Weather Payments and considers developing a Scottish Energy Supplement on top of any social tariff to address any specific circumstances in Scotland.

The panel, amongst a list of recommendations made to ministers setting out a new approach to supporting vulnerable and disadvantaged households, says that it should review the amount of investment needed to improve the energy efficiency of homes and develop an "accelerated rolling five year programme".

It says that the Scottish Government's Heat in Buildings Strategy, which sets out the vision for future heat in buildings including actions to help address fuel poverty involves the spending of £1.8 billion of capital funding for heat and energy efficiency improvement in buildings across Scotland during the course of the current parliament. The next Scottish Parliament election is due to be held on May 7, 2026.

The panel suggest there should be an "increase in the policy ambition and funding for energy efficiency in homes".

From October 1, the price cap for households in England, Wales and Scotland was cut to £1,834 a year for a typical annual dual-fuel energy bill, from its previous figure of £2,074.

But this is still nearly £800 more than it was at the start of 2021.

Analysts Cornwall Insights has forecast that the price cap will rise in January to £1923 a year based on average use and was expected to edge higher again in April to £1,923.

The Israel - Gaza conflict, industrial action at Australian gas production facilities and possible sabotage to the Scandinavian Balticconnector gas pipeline are all affecting global energy price expectations.

MPs have further warned that cost-of-living support payments have not been enough to meet the scale of the problem and offer only a short-term reprieve for many people.

The cross-party Work and Pensions Committee called for the Government to consider widening the eligibility for future payments and to take more account of the financial difficulties faced by people with disabilities and families.

Its report said: “We are particularly concerned that the additional support offered to those with disabilities was only £150 per year and we recommend that this particular support be increased in proportion to the costs that people with disabilities incur.”

After receiving nearly 2,000 survey responses from those with first-hand experience of cost-of-living payments, the committee said it acknowledges the important impact the payments have made and the speed of distribution.

But it said the unsophisticated nature of the payments system has placed significant limitations on how it has met the needs of different groups, such as families, older people and those with disabilities.

Any future cost-of-living support payments should take account of family size, while financial support for those with disabilities should be increased in proportion to the additional costs that they incur, the report argued.

It also suggested that the Government consider uprating universal credit, instead of issuing payments.

The report said: “Given we have also heard that an uplift of the regular benefits received would be more beneficial for budgeting than ad-hoc cost-of-living support payments, the Government should consider uprating universal credit instead of issuing these payments.

“It should maintain the ad-hoc payment system for those on legacy benefits as these benefits cannot be so easily uprated.”

Guidance to local authorities on the household support fund should also be clarified, to make clear the potential eligibility of some people with no recourse to public funds, who are currently missing out on help, the committee suggested. Details of the fund should be better communicated and advertised, and the application process should be made more accessible, it said.

A UK government department for energy security and net zero spokesman said: "We recognise the cost-of-living challenges families are facing and spent £40 billion paying around half a typical household’s energy bill last winter.

“While energy prices are falling - our Energy Price Guarantee remains in place to protect people until April. We are also providing additional targeted support for the most vulnerable, with three million households expected to benefit from the £150 Warm Home Discount and millions will receive up to £900 in further Cost of Living Payments.

“We continue to keep all options under review for those most in need.”

A Scottish Government spokesman said: “We are considering the recommendations of the Scottish Fuel Poverty Advisory Panel and will continue to work with the panel to reach our ambitious statutory targets.

“The Scottish Government continues to do everything within our limited power to support households struggling with energy bills - trebling our Fuel Insecurity Fund to £30 million this year. Our fuel poverty programmes are targeted at the most vulnerable, providing help with energy efficiency improvements and heating. We also offer direct help with energy costs in some circumstances.

“We continue to call on the UK Government to do more to help those suffering fuel poverty by providing targeted support, including the introduction of a social tariff.”