Tackling Fuel Poverty in Scotland - periodic report 2021-2024: Scottish Fuel Poverty Advisory Panel's response

Drivers:

Driver 1: Poor Energy Efficiency of the Home (pp. 11–30)

Energy efficiency is an important factor in determining how much energy is consumed in the home. Improving the energy efficiency of Scotland’s homes and buildings is regarded by the Scottish Government as essential to securing a just transition to net zero and ensuring that poor energy efficiency is removed as a driver of fuel poverty.

The Heat in Buildings Strategy was published in October 2021, setting out a programme to transform Scotland’s homes and workplaces so that they are warmer, greener and more energy efficient. This included fulfilling the requirement under the Climate Change (Scotland) Act 2009 to report annually on progress against this strategy. The Panel considers that poor energy efficiency of the home is the fuel poverty driver where the Scottish Government has most significant legislative, fiscal, and policy levers to effect change.

The Panel acknowledges that the funding commitments the Scottish Government has made to energy efficiency programmes are significant.

Between the financial years 2021-22 and 2024-2025, this includes a £501 million spend on Area Based Schemes and Warmer Homes Scotland.

A further £66.05 million was spent via the Social Housing Net Zero Fund and Home Energy Scotland between the financial years 2021- 2022 and 2023-2024.

This is part of Scottish Government’s £1.8 billion commitment during this parliament to support delivery of its Heat in Buildings Strategy. However, given the fact that only £790 million has been spent as at the end of Q1 2025/26 and the existence of supply chain challenges in delivering retrofit, the Panel’s view is that Scottish Government may struggle to spend these funds ahead of the end of this Parliament in 2026.

It is also noted from stakeholder feedback to the Panel that the funding allocated for energy efficiency schemes has been reduced in real terms.

Although the Panel recognises progress made in developing energy efficiency legislation, the Panel notes that, since the publication of the Periodic Review, the Scottish Government has announced a delay to the Heat in Buildings Bill to ensure that the drafting legislation simultaneously leads to a reduction in carbon emissions and tackles fuel poverty. This alignment is welcome and responds to the Panel’s (amongst others) view of the crucial importance of ensuring that fuel poverty mitigations and considerations are grounded in the Bill from the outset.

The delay should not be allowed to slow progress on fuel poverty action.

In the Periodic Report (pg. 11), the Scottish Government states that continued long-term improvements to the energy efficiency of Scotland’s housing stock are being made, with 56% of homes rated EPC band C or above in 2023 – an increase of around 3% from 2022, helping to improve the warmth of homes and reduce energy costs.

However, fundamental gaps in the periodic reporting include no assessment of the impact of the investment on tackling fuel poverty and no assessment of whether the rate of energy improvement measures is sufficient to achieve the statutory targets.

Consequently, there is no awareness of the rate at which delivery needs to be accelerated to meet the targets. Without an operationalised monitoring and evaluation framework, the Panel is unable to determine the impact on fuel poverty rates from the improvements in energy efficiency interventions.

There is limited data on which measures have been installed and for whom, with few insights into the lived experience of those in fuel poverty once measures have been installed.

This makes it challenging to understand whether such measures are having the desired effect or are moving the dial on fuel poverty rates. This is important because we have heard from stakeholders the risks of, for example, some new net-zero technologies and systems not being used in a optimum way post-installation, and particularly after any change in ownership or occupancy.

The Panel has identified that there are opportunities to strengthen data presented in the Periodic Report, the connections between policy actions and fuel poverty outcomes and through these, the potential for targeted impact.

Specific examples of where we consider improvements could be made are as follows:

• Information on the rate at which the housing stock below EPC Band C is being improved. Presenting the EPC figures as a percentage of total stock (pg. 11) does not enable a distinction to be made between retrofit of existing housing, new build housing, and old homes being removed from the system. This in turn masks the rate of improvement, or otherwise, needed in the existing housing stock including the level of ambient movement that will occur anyway over the period of the Strategy.
• The relationship between the number of households supported by each programme and the improvements in annual EPC with the aggregate data on the number of fuel poor households reached by this, or the overall impact on fuel poverty rates.
• Clarity on how bill savings of £400 are calculated and how this differs from statements made over the last 6 months, where bill savings from energy efficiency measures have been estimated as £300 and £500.
• Clarity on the distinction between modelled and measured assessments for energy efficiency measures and the relationship of the outputs from the various programmes with the data in the Scottish House Condition Survey.
• Follow on engagement with those receiving measures to understand the impact on their experience and overall costs.

The Panel recognises that to deliver the Strategy, a stakeholder delivery framework has been developed involving local authorities, agencies and funding programmes.

Stakeholders have made representations to the Panel highlighting the risk that local authorities feel under resourced to deliver their Local Heat and Energy Efficiency Strategies.

The Panel has also highlighted to the Scottish Government its concerns about the approach to funding Warmer Homes Scotland by amending eligibility criteria with the purpose of aligning demand to available budgets.

The Panel is of the view that this is not an appropriate mechanism to manage or understand demand for improving energy efficiency and has recommended that the Scottish Government should not be aiming to restrict demand.

It is also essential that the current drivers of underspend on the current Area Based Schemes are understood so these can be addressed in any evolution and prioritisation of the Strategy.

The Periodic Report does not detail the extent of the current Energy Company Obligation programme’s (ECO) and the Great British Insulation Scheme’s (GBIS) (UK Government and Ofgem administered schemes) net effect on the attainment of the Scotland’s fuel poverty targets.

Data is provided outlining money spent on programmes administered by Scottish Government, yet these UK- wide initiatives also have implications for fuel poverty programmes. Given the unique challenges faced by many in Scotland, there is a need to understand how supplier and UK Government-administered schemes are impacting the Scottish picture – and where changes may be required in the interests of consumers in Scotland.

This should be reflected in the Strategy’s monitoring and evaluation framework. There should be a clear plan with actions to ensure that Scottish consumers benefit proportionally from ECO4, GBIS and other similar measures. The Panel would note that by referencing ECO and GBIS funding under the high prices driver (pg. 24) under “Engagement on Reserved Policy”, the Periodic Report risks conflating reserved energy policy with energy pricing.

The Panel also notes that whilst the Community and Renewable Energy Scheme and Carbon Neutral Islands Project represents important policy action it is unclear what fuel poverty benefits these will deliver.

Overall, whilst funding for energy efficiency is significant and the related policy actions broadly sound, the Panel finds that the outcomes are not clearly defined at the outset and there is a lack of data to show how they are contributing to meeting the fuel poverty targets. This makes it hard to assess their efficacy in relation to fuel poverty. Greater clarity is also needed in reporting the relationship of energy savings to improvements with a clear explanation of the calculation metric and then consistency in presentation of the data. This will increase the potential for impact and targeting of policy actions.

The Panel is of the opinion that the rate at which the energy efficiency of the stock is improved needs to be significantly accelerated to meet the statutory targets. The Panel references in Part 3 that the potential for the current delivery model based around Local Heat and Energy Efficiency Strategies, Warmer Homes Scotland, Area Based Funding and Home Energy Scotland to deliver the step change required is fully evaluated.

Driver 2: Low Household Income (pp. 16–21)

Low incomes make paying for energy challenging, and often impossible, particularly in an era of high energy prices. Fuel poverty is an intersectional issue where multiple coalescing points of vulnerability determine a household’s risk of fuel poverty.

We know that those with low incomes often have higher energy needs, including those with disabilities, chronic health conditions, the very young and older people. We also know that low incomes cause people to ration fuel and for some, to self- disconnect their energy supply altogether – both of which impact their health, wellbeing and overall quality of life. Fuel rationing and disconnection also have wider negative impacts, particularly where households are experiencing child poverty and/or more than one person has health issues. Energy debt is a consequence of fuel poverty and the level of energy indebtedness that households find themselves in highlights the unaffordable steps that many take to mitigate fuel poverty personally

Individual actions and behaviours to manage the impact of fuel poverty have knock on implications for the demand on advice and support services.

The Periodic Report highlights the significant spend in providing financial support to individual households to address fuel poverty through winter heating benefits, access to crisis funding and intervention on housing costs. The Panel notes the challenge of reporting on the relationship between financial support and fuel poverty outcomes and therefore, to what extent programmes are effective in reducing fuel poverty long-term and contributing to the fuel poverty targets

In July 2024, Winter Fuel Payment eligibility criteria were changed by the UK Government, which resulted in a reduction in the block grant allocation for this policy. We see no evidence in the Periodic Report of an impact assessment of this reduction in income support.

The Periodic Report discusses the Pension Age Winter Heating Payment (PAWHP) (the successor of the Winter Fuel Payment). We see no assessment of the targeting of PAWHP or analysis of seasonal energy costs to underpin the level of financial support required. Our evidence from investigations into remote and rural fuel poverty suggests that this is critical.

The Fuel Insecurity Fund (FIF) played a key role in mitigating some of the impacts of fuel poverty and extreme fuel poverty at the peak of the energy price crisis until the closure of the fund in March 2024. If the Scottish Welfare Fund and Islands Cost Crisis Emergency Fund discussed in the Periodic Report are playing a role in replacing the support previously available through the FIF, there should be data available on the level of energy support payments made and the outcomes achieved.

The impact of the transition between a direct fuel poverty support fund and a more generic household support fund on fuel poverty mitigation and alleviation should also be made clear.

The Periodic Report refers to several housing interventions – discretionary housing grants, capital investment programmes and rent policies – which can potentially impact on housing costs but again makes no reference to outcomes achieved in reducing fuel poverty.

The Periodic Report does not recognise that under the Scottish Government definition of fuel poverty, and evidenced by Scottish Government analysis, financial support to reduce energy bills has a more significant impact in tackling fuel poverty than interventions that increase income – this is not reflected in policy.

In addition, the Panel has raised its concern on the inclusion in the Strategy of policy interventions which relate to wider cost of living challenges. For example, in the Periodic Report there are references to cost-of-living interventions such as free bus passes and free school meals. These do not impact net income as set out in the fuel poverty definition, nor are they considered by the Scottish House Condition Survey in reporting on levels of fuel poverty.

The Periodic Report recognises that although fuel poverty is correlated to low income, it is not equivalent to income poverty.

Scottish Government statistics reveal that 31% of those in fuel poverty are not income poor. The Panel therefore seeks acknowledgement that supporting the fuel poor through income-based measures (as often assessed through income-related benefits) risks missing those not in income poverty but in fuel poverty.

The Periodic Report makes a clear albeit high level link between fuel and child poverty. The intersectionality between fuel poverty and child poverty is clear, families are one of the household types more likely to be in fuel poverty. However, this overlap needs to be recognised at a strategy and policy delivery level with programmes developed that speak to both.

Overall, there is significant Scottish Government financial support to increase the income of low-income households, with some interventions directly related to annual assistance with energy costs. However, the Panel questions the relationship between some of the interventions set out in the Periodic Report and addressing fuel poverty and once again, finds that outcomes are not clearly defined at the outset and that there is a lack of data to show how they are contributing to meeting the fuel poverty targets. This makes it hard to assess their efficacy.

Driver 3: High Energy Prices (pp. 22-27)

The Panel recognises that since the Strategy was published, high energy prices have been the primary driver of the increased levels of fuel poverty in Scotland. In spite of recent reductions in energy prices under the energy price cap (which at its peak was £2,380 under the Energy Price Guarantee from October 2022 to June 2022), the average bill paid by mains gas and electricity customers remains high. The October to December energy price cap for 2025 is £1,755 – 44% higher than winter 21/22. The energy price cap does not protect those customers who rely on unregulated fuels, including oil.

The energy price crisis has left a legacy of huge consumer energy debt, with many households still struggling to pay their energy bills. Intelligence suggests that energy prices will continue to be high until the late 2030s. Scotland’s ambition to eradicate fuel poverty by 2040 will therefore take place in the context of continuing high energy prices.

The Panel’s view is that the current Strategy, and hence periodic reporting, is weakened by the failure to consider the potential impact of each of the fuel poverty drivers on achieving the fuel poverty target and specifically the failure to make clear any assumptions on long-term energy price stability and to evaluate associated risks.

Scottish Government modelling set out in the Periodic Report of what fuel poverty rates would be if energy prices were the same as in 2019 posits both the negative impact of energy pricing, and the positive gains made through actions on other fuel poverty drivers (e.g., income, energy efficiency).

These dynamics reinforce our view of the importance of evidencing the relative impact of each fuel poverty driver. The Panel’s view is that high energy prices should be a key area of policy focus but that whilst positive and tangible work on a flexible energy discount mechanism (a social tariff in the language of the Periodic Report) is apparent, the impact of other Scottish Government positions and actions on high prices are less well stated.

Energy markets and regulation are critical to energy prices as a driver of fuel poverty, and the net zero transition of the energy system in Scotland and across the UK will have implications for future energy prices, as the Periodic Report recognises. There is little in the Periodic Report, however, to set out how the Scottish Government expects UK and GB- wide energy policy, pricing and market reform to impact fuel poverty levels in Scotland. Here, the monitoring and evaluation framework could draw out the impact of UK Government policy on Scottish consumers.

The delayed Energy Strategy and Just Transition Plan (ESJTP) (pg. 57), for example, has the potential to significantly impact future energy prices through shifting Scotland’s energy technology mix towards lower-cost, lower-carbon sources of generation and storage. Other energy transition initiatives, such as the Strategic Spatial Energy Plan (which sits with the National Energy System Operator (NESO) with representation from national and devolved governments) are also referenced in the Periodic Report.

However, there is no clear assessment of the expected links to fuel poverty or Scottish Government’s approach to influencing towards fuel poverty outcomes.

The UK Government has published its Clean Power 2030 Action Plan, which will impact the final ESJTP and includes some scenario-based modelling of transition timelines and costs by the NESO, which will impact Scotland’s energy transition and costs paid via consumer bills. The links between these policies and the fuel poverty strategy and delivery need to be set out.

Overall, the Panel is conscious of the critical role played by high energy prices in fuel poverty outcomes and that many related levers are not in the Scottish Government’s power. However, the Scottish Government does have capacity to influence as well as its devolved powers. It is the Panel’s view that the Scottish Government should position its fuel poverty strategy and actions in this context and that of ongoing change, accompanied by dedicated evidence and advocacy positions. The material included in the Periodic Report does not permit a full evaluation of progress for this driver.

Driver 4: How Energy is used in the home (pp. 28–32)

How energy is used in the home can and does lead to increased fuel poverty. A lack of understanding of home heating systems, for instance, can cause people to limit their heating use to unhealthy levels. Some people may be signed up to inappropriate or unaffordable tariffs, leading them to unwittingly pay more than they should and potentially to ration their energy use. These challenges are compounded by suppliers not understanding the individual needs of consumers, and recent evidence of supplier malpractice in dealing with people in vulnerable situations.

Scotland is the only UK nation to recognise this driver in relation to national fuel poverty programmes. The Panel’s view is that this driver is the least well understood and least well actioned. As the Periodic Report fails to set out a coherent approach to addressing this driver, our reflections on it are limited.

The Panel questions how the Warm Homes Discount and Local Heat and Energy Efficiency Strategies listed under this driver in the Periodic Report (but not in the Fuel Poverty Strategy) reflect behavioural interventions. This observation informs our recommendations in Part 3.

This behaviour-related section of the Periodic Report extensively references energy advice, both in terms of Scottish Government services and wider advice offerings. Whilst this advice may influence how energy is used in the home, the mechanism for this is not well stated.

Moreover, it is unclear how the fuel poverty impact of advice services is assessed.

It would be beneficial, for instance, to understand the impact on the attainment of the fuel poverty targets of the 60,000 annual households in fuel poverty who have benefitted from energy efficiency advice via Home Energy Scotland.

The Periodic Report (p. 84) references the Panel’s early recommendation to review the design of energy advice services to take account of national and local needs, recognising the increased demand for energy advice services since the energy price and cost of living crisis, as well as to review the design of energy advice services, including the funding model.

The focus of our recommendation was third sector energy advice services.

The Panel’s view is that by focussing on Scottish Government core-funded and UK levy-funded energy and financial advice services there is a lack of recognition of the crucial role that the wider third sector plays, locally and nationally, in mitigating fuel poverty and the funding challenges these advice services face. It also means that the Periodic Report fails to consider advice services holistically.

The Periodic Report makes no assessment of the sufficiency and sustainability of the current advice model, and from a customer perspective what works best and where. There is also no evidence in the Periodic Report to draw out the social and economic impacts of these services.

There are key elements of how energy is used and levels of consumption in the home which affect fuel poverty outcomes, including not least self-rationing, self- disconnection, the incorrect use of technologies, inadequate ventilation or underheating. The role of the Scottish Government in influencing these behaviours should be considered.

The Panel’s key reflection on the driver of how energy is used in the home is that Scottish Government action in this space is not well specified and that where it is listed, the relationship of the driver to behaviours and contribution made to the fuel poverty targets is not clear. It is therefore not possible to assess progress.

The Panel would encourage the Scottish Government to reflect on how this behavioural driver is framed, to consider the use of research to better understand the factors that influence how energy is used in the home and through this, the action on this driver’s potential contribution to tackling fuel poverty, and the priority actions that are required to impact on meeting targets.