3. The Consumer Context
Consumers in Scotland, in common with those across the UK, are in the midst of unprecedented change. The coronavirus pandemic has affected jobs, income and services, bringing uncertainty and sometimes detriment. Many have experienced the loss of loved ones, or prolonged ill-health. The pandemic has altered where consumers spend their time, often with more time at home and in local areas, increasing their household's reliance on essential services like energy, post and water. That shift in location has also influenced changes in leisure activities and spending patterns. These developments have implications for the geographic distribution of demand for energy, water and post services, and therefore for the infrastructure that meets those needs.
Prices of consumer goods are rising. The rate of inflation has increased significantly, reaching 5.4% in December 2021, the highest level for thirty years. This has included an unprecedented surge in gas prices which has fundamentally changed the GB energy market. As of mid-January 27, companies have been put out of business since August. Consumers face the prospect of substantial increases in fuel bills when the current price cap is adjusted in April, with some forecasts suggesting a rise of as much as 50%, and the risk that many more households will be find themselves in fuel poverty.
Real wages are predicted to only increase by 0.1% during 2022, while the Resolution Foundation forecasts that families will typically face increased costs of around £1,200 pa in the form of higher energy bills and tax increases. This income squeeze will impact consumers and risks pushing more people into poverty.
Even before the pandemic the UK's exit from the European Union was already expected to lead to major adjustments to the supply and demand for goods and services, with implications for prices and availability. The impact of this is still unfolding, with new customs rules having come into force on 1st January 2022.
The pandemic and exit from the European Union have come at a time that we are just starting to get to grips with the greatest challenge that current and future generations face, global heating. That the changing climate is already affecting people's lives is evident, with increasing extreme weather events and flooding. In December Storm Arwen caused the worst damage and loss of power in Scotland for 20 years.
World leaders met in Glasgow at COP 26 in November to discuss the global response. Consumers will need to be at the forefront of that change and the evidence is clear that they want climate change addressed. But from their home heating systems, to the way the way they travel and use water more must be done to enable consumers to participate in the transition to Net Zero, and for the costs of that to be fairly shared across society.
The need for robust, effective consumer representation in this context is clear. Advice and advocacy must adapt to meet the needs of consumers in these unprecedented times. The consumer experience in Scotland is shaped by specific issues including the geography and climate, economic differences shaped by income and demographics, through to physical assets such as the housing stock, access to infrastructure and prevalent technologies.
The policy context and levers also differ in Scotland. There are more ambitious climate targets and opportunities to influence policy and delivery. During 2022/23 the Scottish Government is due to establish a new National Public Energy Agency which will be an important player in the consumer landscape.
Over the next year, we will focus on improving outcomes for consumers in Scotland. This workplan sets out how we will do so in the energy, water and postal markets.
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