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Scottish Fuel Poverty Statement

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The Scottish Fuel Poverty Statement

5 Key Developments since 1996

5.1 Since 1996, there have been a number of developments at both UK and Scottish level which are likely to have had an impact on the overall number of households in fuel poverty in Scotland. Once the results of the 2002 Scottish House Condition Survey become available in 2003, it will be possible to quantify the impact that these measures have had. In the meantime, some of the key factors which are likely to have affected the numbers of people in fuel poverty in Scotland are set out in this chapter.

Employment and Income Measures

5.2 Reducing worklessness and increasing employment rates are key factors in the drive to create social justice and to reduce poverty. The importance of low income as a causal factor in the experience of fuel poverty means that measures that tackle unemployment and low income should have had an impact on the numbers in fuel poverty. Since 1997, both the UK government and the Scottish Executive have put in place a range of measures to tackle employment and income issues.

Tackling unemployment and low income

The achievement of full employment by providing opportunities for all those who can work is one of the Scottish Executive's key targets for the achievement of social justice. Together with our partner organisations we are:

  • Helping unemployed people to find work through our adult training programme, Training for Work, which aims to be help people improve their work-related skills through the provision of appropriate training and structured work activity;
  • Targeting young people through our Skillseekers training programme, which aims to provide young people with a valid work-based route to skills and qualifications.

We are working in partnership with the UK Government to:

  • Deliver a comprehensive welfare to work programme though the New Deals, which are targeted at unemployed people on benefits, with specific activity focusing on young people, lone parents, people suffering long-term unemployment, people with disabilities, and those aged over 50;
  • Address the problems in areas of high unemployment in a targeted way through our Action Team for Jobs, which operate in East Ayrshire, West Dunbartonshire, the Highlands and Islands, Glasgow, Dundee and North Lanarkshire.
  • Deliver a range of tax and benefit measures designed to ensure that everyone can take advantage of employment opportunities and can expect to achieve a reasonable standard of living as a result. Measures such as the national minimum wage, the Working Families Tax Credit, the Children's Tax Credit and the Disabled Person's Tax Credit are already making a real impact on people's lives.

5.3 Data from 1999-00 shows that there has been a slight fall in the proportion of working age adults living in households with low incomes in absolute terms since 1996/97 - reflecting the general improvement in living standards. However, levels of working age people in relative low income households have remained broadly constant.

Price regulation and operation of the energy market

5.4 The cost of fuel is one of the three primary causes of fuel poverty in Scotland. As with income, there have been changes since 1996 which are likely to have had an impact on the prevalence of fuel poverty in Scotland. For example, the electricity and gas supply markets have been fully opened up to competition in Great Britain. New wholesale trading arrangements for gas were introduced in October 1999 and the New Electricity Trading Arrangements (NETA) were introduced in March 2001, although customers in Scotland may not have seen the same benefits as those in the rest of Great Britain. Similar market changes are due to be introduced in Scotland with the creation of the British Electricity Trading and Transmission Arrangements (BETTA) that should bring benefits to consumers in Scotland. These changes are due to come into effect in April 2004.

5.5 The liberalisation of the energy markets and the promotion of competition has led to significant reductions in annual average domestic energy prices, which are now at their lowest since 1974. This has obvious benefits for all consumers, but particularly the fuel poor, for whom energy represents a higher proportion of household expenditure than it does for better off households.

5.6 The nature of future changes in the price of fuel will affect the numbers of people in fuel poverty in Scotland. With all other factors being constant, an increase in fuel prices is likely to bring more people into fuel poverty, and a decrease is likely to take people out of fuel poverty. This effect may be more marked in overall terms in Scotland than in other parts of Great Britain, given the higher relative rates of fuel poverty here.

5.7 It is difficult to make predictions about future fuel prices. However, as set out in the UK Fuel Poverty Strategy, we expect that competition has already driven significant inefficiencies out of the market, and that future fuel price changes are likely to range from a further 10% decrease to a 15% increase for domestic gas in real terms, and a further 2% decrease to a 5% increase for domestic electricity in real terms. Given the uncertainties around future price changes, it would be useful to be able to model the possible impact of different changes on the numbers of households in fuel poverty and in Chapter 6 we set out more details of how we plan to take this forward.

5.8 Different fuel types have different prices, and the choices available to consumers in a particular area will govern the range of prices for which they can obtain fuel. Not having access to a gas supply reduces the choices of fuel for customers and may lead to their having to use less energy efficient or more costly methods of keeping their houses warm. The UK Government has established a working group to consider the issues surrounding extension of the gas network. The initial report of the group recommends that further work is needed to test the effectiveness of extending the gas network in addressing fuel poverty.

5.9 Although competition has brought real benefits to consumers, through lower prices, the UK Government does not believe that the interests of the fuel poor can be left to the markets alone. It is determined that consumers on low incomes should not be regarded as less attractive customers and should benefit equitably from these developments. It has therefore:

  • introduced powers and duties in the new Utilities Act 2000 relevant to tackling fuel poverty;
  • asked the Regulator, Ofgem, to develop a Social Action Plan, which is now in place;
  • encouraged the industry to bring forward initiatives to help tackle fuel poverty as part of their long term commercial strategy;
  • established the Gas and Electricity Consumer Council, branded as 'energywatch' to act as a consumer champion operating independently of the regulator.

5.10 Some energy companies are engaged in work to bring the benefits of competition to those experiencing fuel poverty, and our further work programme will examine this issue further.

Ofgem's Social Action Plan

To support its general work to keep prices as competitive as possible and ensure that all customers can take up the benefits of a competitive market, Ofgem published a Social Action Plan in March 2000. The plan sets out a programme of work which Ofgem and others are undertaking to tackle fuel poverty. Ofgem issues an annual update on the plan and progress has been made on a number of important issues:

  • Company initiatives - Ofgem has encouraged company initiatives designed to help address the needs of the fuel poor, including those offering new ways to pay and to help household manage their fuel bills, and those providing a package of advice and assistance with energy efficiency measures.
  • Licence obligations - Ofgem took action to strengthen the licence obligations on energy companies to provide protection to customers with payment difficulties, to ensure pre-payment meter customers to receive a decent service, to entitle the elderly, disabled and long-term sick to a range of special services, and to provide for energy efficiency advice to be made available by companies.
  • Fuel direct - Agreement was reached to improve the operation of Fuel Direct, which enables customers receiving benefits who are in debt to energy suppliers to have their fuel bills deducted direct from their benefits in order to help with budgeting.
  • Price comparisons - Work has been done to improve the quality and accessibility of information available on price comparisons and Ofgem will continue to work with energywatch to promote information on prices and supplier choices.
  • Research - A substantial programme of research has been carried out, including work looking at self-disconnection, the provision of energy efficiency advice, and better prevention and management of debt.

Housing Improvement Measures

5.11 The quality and condition of people's homes will have an impact on the likelihood of them suffering fuel poverty. The Scottish Executive and its partners have put in place a range of measures to improve the quality of housing stock in Scotland.

Scottish Executive Programmes

5.12 The Home Energy Efficiency Scheme (HEES) ran from 1991 to June 1999. In its later years, HEES was a small grant scheme for households wholly or mainly dependent on state benefit, enabling them to select one or two energy efficiency measures from a package. The scheme covered all sectors of the housing stock, and between 1991 and 1999, HEES provided greater comfort and lower fuel bills to around 270,000 Scottish households. HEES was superseded in July 1999 by the Executive's Warm Deal. This provides households dependent on certain benefits with a package of insulation measures to the value of up to 500 5. In the three years from 1999/2000 to 2001/02 more than 137,000 homes have been improved under this programme with average fuel bill savings of between 62 and 95 per annum.

5.13 This initiative will have had an impact on the numbers of households in fuel poverty in Scotland. However, as eligibility depends on the receipt of certain social security benefits, there are likely to have been a number of people benefiting from the Warm Deal who were not in fuel poverty. Further information about the benefits of the Warm Deal are set out in the evaluation report 'Benefits from the Warm Deal in Scotland 2000/2001' which is on the Scottish Executive's website 6. A report for 2001/02 will be published in the Autumn.

5.14 In September 2000 , the Scottish Executive introduced its Central Heating Programme. This provides a central heating and insulation package for all local authority and housing association tenants and in 40,000 pensioner homes in the private sector, which in both cases, currently lack any form of central heating. The programme will also pay for systems in the private sector where the existing system does not function and is beyond repair.

5.15 The programme has been accelerated in the social rented sector - and by 2004 most local authority and housing association properties will have central heating. All private sector elderly households will have central heating by April 2006. The programme will also be extended in the local authority sector from 2004, to upgrade or replace partial central heating with whole house heating. Eaga manage the programme for the private sector and had installed 3,500 systems by 31 March 2002. Social landlords - local authorities and housing associations - had installed 5,000 new systems by the same date. A full report will be published in the Autumn.

5.16 As well as these programmes to tackle heating and energy efficiency in existing stock, we also estimate that over 8,000 new and improved units will be delivered through regeneration and development partnerships using a mixture of public and private finances as part of the Executive's New Housing Partnership Programme. This is likely to have had an impact on the numbers of people in fuel poverty. In addition, resources have been earmarked to support transfers to community ownership and these transfers will generate significant additional investment in housing quality.

Housing Associations

5.17 Housing associations are currently responsible for almost all new build in the social rented sector. In 1999/2000, 97% of all housing associations included energy efficiency measures in designs for new build. From September 2000, all new housing association stock is expected to achieve a Standard Assessment Procedure 7 (SAP) rating of between 85-90 and all rehabilitated housing to achieve a SAP of between 65-70. This is likely to have a positive effect on the numbers of people suffering from fuel poverty in Scotland.

Local Authorities

5.18 The Home Energy Conservation Act 1995 was introduced in Scotland in December 1996. The Act placed a duty on local authorities to devise strategies that would result in significant improvements of the energy efficiency of the housing stock. In 2000/01, Scottish councils spent 343 million on their own stock. Within that sum 92 million was spent on works to improve energy efficiency.

5.19 Local authorities report progress to Ministers every two years and the second set of progress reports, covering the period April 1999 to March 2001 have recently been submitted to the Scottish Executive. A report on progress during this two-year period will be commissioned and published later in 2002 and we will provide more details about progress in the final version of this fuel poverty statement.

Transco's 'Affordable Warmth' programme

5.20 Further improvements to the housing stock in Scotland have resulted from Transco's Affordable Warmth programme. This involves the use of lease finance to encourage the installation of high-efficiency gas central heating and energy efficiency measures. The approach was developed by Transco, the national pipeline operator, and is targeted at local authorities and Registered Social Landlords. As part of the programme, Transco has also supported training courses to meet the skills demand generated, and to date, over 1,200 people across the UK have received training.

Energy Efficiency Measures

5.21 Since 1994 major electricity supply companies have been under an obligation to deliver energy efficiency programmes under the authority of the industry regulator. The companies have created and managed energy efficiency schemes to deliver environmental and social objectives. This programme was referred to as Energy Efficiency Standards of Performance or EESOP 1 (1994-1998) and EESOP 2 (1998-2000). As of April 2000, gas suppliers, as well as electricity suppliers have been required to deliver an energy saving target under EESOP 3, which ran to March 2002.

5.22 EESOP has now been renamed the 'Energy Efficiency Commitment' (EEC) and consists of an obligation on licensed gas and electricity suppliers to encourage or assist domestic customers to take up energy efficiency measures. EEC came into operation in Great Britain in April 2002. This obligation will form the basis for the targets for the promotion of improvements in energy efficiency from domestic consumers that suppliers must deliver through their EEC programmes.

5.23 The UK Government remains committed to helping lower income consumers through the EEC. It proposes that suppliers should be required to secure 50% of their energy savings from the priority groups - those on low incomes, pensioners, or those in receipt of certain passport benefits. These initiatives are likely to have had an impact on the numbers of people in fuel poverty in Scotland.

5.24 Alongside the Energy Efficiency Commitment, the UK Government and the major energy companies have collaborated to establish the Energy Saving Trust (EST). This is a non profit making company established to work through partnerships towards the sustainable and efficient use of energy in the domestic and small business sectors.

5.25 It runs a number of programmes (such as a UK-wide network of Energy Advice Centres), which although not solely aimed at fuel poor households, do also address their needs. The Scottish Executive recently increased its funding to the Energy Saving Trust in Scotland by 28% from 2002-03 in order to help it deliver more in the area of domestic energy efficiency.

The Energy Saving Trust in Scotland

The Energy Saving Trust (EST) was set up after the 1992 Earth Summit in Rio de Janeiro in order to help reduce carbon dioxide emissions in the UK. It is a non-profit making organisation, funded by government and the private sector, and works with a range of partner organisations to deliver the sustainable and efficient use of energy. EST includes the reduction of fuel poverty as one of its key areas of work in its current medium-term strategy. In Scotland, the Trust currently works towards tackling the fuel poverty problem in a number of ways:

  • Awareness raising. EST has an extensive programme of awareness-raising initiatives, which have included national media, campaigns and a heavily publicised energy efficiency week. The programme helps address fuel poverty by promoting grants such as the Warm Deal and the Central Heating Initiative, and by publicising low-cost and no-cost measures to reduce energy consumption.
  • Energy efficiency promotion programmes. EST runs a number of programmes promoting energy efficiency in the home, such as the energy advice centre network; and a local authority programme which includes the HECAction and innovation grants programme. New programmes being started include a housing managers' programme for Registered Social Landlords, and a Community Energy Programme to part-fund district heating and combined heat and power schemes.
  • Partnership working. Through its HECAction programme, the EST has drawn together many partnerships to work on energy efficiency initiatives, generally involving at least two local authorities and typically also other partners drawn from the private or NGO sectors. These partnerships have generated some useful experience for future fuel poverty initiatives.
  • Monitoring and evaluation of change. The EST's Home Energy Efficiency Database holds data on energy efficiency measures in the UK housing stock on a property-by-property basis, and will allow accurate monitoring of carbon savings and assist local authorities in monitoring and meeting their HECA targets.

Changes since 1996 with a potentially adverse impact on fuel poverty

5.26 This chapter has set out details of some of the initiatives and programmes which are likely to have had a positive impact on the numbers of people in fuel poverty in Scotland since 1996. It will not be possible to quantify these effects until the findings of the 2002 Scottish House Condition Survey are available in 2003.

5.27 Alongside these measures, it is also important to note that there may be wider factors which could have adversely affected the numbers of households in fuel poverty. Some of the factors which might have adversely affected fuel poverty in Scotland include deterioration in the housing stock, changes in climate, and changes in occupancy levels resulting from wider trends in lifestyle. We do not, however, expect these to outweigh the beneficial impact of the measures set out above.