4 Fuel Poverty
- In 2016 fuel poverty declined by 4.3 percentage points compared to 2015: 26.5% or 649,000 households were fuel poor, and 7.5% or 183,000 households were living in extreme fuel poverty ( Table 29). This is a reduction of 99,000 households compared to 2015 when 30.7% or 748,000 households were fuel poor.
- Almost two thirds (2.7 percentage points) of the reduction in fuel poverty rates between 2015 and 2016 can be attributed to the drop in the price of domestic fuels over this period. Around a third (1.5 points) can be attributed to improvements in the energy efficiency performance of the housing stock and the rest (0.1 points) can be explained by higher household incomes.
- Between 2015 and 2016 there has been a more noticeable decline in fuel poverty in the private sector, increasing the gap when compared to the social sector. Fuel poverty rates in the private sector have reduced from 30% to 25% while the rate in the social sector has remained at around 32%.
Figure 18: Fuel Poverty and Extreme Fuel Poverty since 2003/4
Note: Energy requirement underpinning fuel poverty estimate modelled on the following basis: 2003/4 – 2009: BREDEM – 12; 2010 – 2013: BREDEM 2012 v.1.0; from 2014 onwards: BREDEM 2012 v.1.1.
4.1 Definition and Measurement of Fuel Poverty
137. As set out in the Scottish Fuel Poverty Statement, a household is in fuel poverty if, in order to maintain a satisfactory heating regime, it would be required to spend more than 10% of its income on all household fuel use  .
138. Under the 2001 Housing (Scotland) Act (section 88), the Scottish Government was committed to eradicating fuel poverty as far as practicably possible by November 2016  . In June 2016, the Minister for Local Government and Housing informed Parliament that, based on the advice received from experts, it was unlikely that the statutory fuel poverty target would be met.
139. The Scottish Government is currently consulting on a new Fuel Poverty Strategy for Scotland, including a proposed new definition of fuel poverty based on advice from an independent panel of experts. The data presented in this report is based on the current definition.
140. We expect to begin reporting on the proposed new definition in the next Annual Report based on data from the 2017 survey. However, data from the 2018 SHCS will be required before complete estimates can be included covering all the elements of the new definition.
141. Extreme fuel poverty indicates that a household would have to spend more than 20% of its income to maintain a satisfactory heating regime.
142. A satisfactory heating regime is defined as follows:
- For "vulnerable" households  , 23°C in the living room (zone 1) and 18°C in other rooms (zone 2), for 16 hours in every 24.
- For other households, 21°C in the living room (zone 1) and 18°C in other rooms (zone 2) for 9 hours a day during the week and 16 hours a day during the weekend.
143. Although space heating is the largest component of the energy spend which underpins the fuel poverty estimate, there are other types of energy use that are also taken into account, such as water heating, lighting and appliance use, and cooking. All types of energy expenditure are estimated on the basis of a standard set of behavioural assumptions and do not reflect the actual energy use of the household, which may vary considerably depending on personal preference and priorities relative to other types of household expenditure.
144. Figure 19 shows that in 2016, on average, around 74% of the modelled household energy demand was from space heating, 13% from water heating, 11% from lighting and appliance usage, and 3% was accounted for by cooking.
Figure 19: Mean Household Energy Consumption by End Use, 2016
Note: Figures do not add to 100% due to rounding
145. The energy costs of maintaining a satisfactory heating regime and other uses of energy are modelled using data from the physical inspection of dwellings and the household interview conducted as part of the SHCS, as well as information on consumer fuel prices. The methodology for modelling the cost of energy use was updated for the 2014 Key Findings report and details were provided in the accompanying Methodology Notes  .
146. The current report continues to use this improved method for setting the cost of the domestic energy requirement. However, it also introduces a further small improvement through the collection of information in the 2016 survey about pre-payment meters for energy supply, which has allowed us to improve the accuracy of fuel price information for pre-payment users, who are more common among lower income groups which are at higher risk of fuel poverty. In 2016, 23% of households in Scotland had a pre-payment meter (mains gas, electricity, or both); an estimate of the impact on fuel poverty of this methodology change is presented in section 4.3.4.
147. The cost of the energy requirement includes an allowance for the bill rebate provided under the Warm Home Discount ( WHD) scheme  . It no longer includes the £12 contribution of the Government Electricity Rebate ( GER) as the scheme only ran for the previous two years (2014 and 2015)  .
4.2 Fuel Poverty and Extreme Fuel Poverty
148. Between 2015 and 2016 the rate of fuel poverty declined by around 4 percentage points. In 2016 there were 649,000 fuel poor households representing 26.5% of all households. The number of fuel poor households fell by 99,000 compared to 2015 when 30.7%, or 748,000 households, were living in fuel poverty ( Table 29).
149. This is the lowest rate recorded by the survey since 2005/6, and the same level as in 2007.
150. Around 183,000 households (or 7.5%) were living in extreme fuel poverty in 2016, compared to 203,000 households (or 8.3%) in the previous year.
Table 29: Estimates of Fuel Poverty and Extreme Fuel Poverty since 2011
|Fuel Poverty||Extreme Fuel Poverty|
Note: There are some discontinuities in the underlying methods as follows: figures for 2011 and 2012 allow for WHD adjustment only; 2013 include WHD and price source adjustment; figures from 2014 onwards include WHD and price source adjustment and an updated BREDEM model; from 2016 a further improvement is included by assigning pre-payment metered fuel prices to the relevant households.
4.3 Drivers and Trends
151. Fuel poverty is affected by levels of household income, the price of fuel and the energy efficiency of housing. Fuel poverty under the existing definition is distinct from poverty in that, while low income is an important driver, it is not a prerequisite. As shown in Table 35, fuel poor households are found in all income bands. Around 10% of all fuel poor households had weekly income above £400 before housing cost, which places nearly all of these households in the top half of the income distribution ( Table 35). Fuel poverty also depends on the condition of the home and the cost of energy for space and water heating, cooking, lighting and running appliances.
152. In Table 30 and Figure 20 we have constructed indexes to compare trends in the three key drivers of fuel poverty since 2003. Measures of energy efficiency and household incomes are derived from SHCS data. The fuel price index is constructed from BEIS quarterly prices as described in section 4.3.1. Prices and incomes are presented in nominal (cash) terms.
Figure 20: Trends in Fuel Price, Energy Efficiency and Median Income, 2003/4 to 2016
Note: All values indexed to 100 in 2003/4. Data for this chart are provided in Table 33. Fuel Price index constructed as described in section 4.4.1.
Fuel poverty energy requirement modelled on the following basis: 2003/4 – 2009: BREDEM – 12; 2010 – 2013: BREDEM 2012 v.1.0; 2014 and 2015: BREDEM 2012 v.1.1.
Fuel poverty costs as follows: 2011 and 2012 include WHD adjustment only; from 2013 onwards include WHD and price source adjustments; from 2016 a further improvement is included by assigning pre-payment metered fuel prices to the relevant households.
153. Since 2003 both the proportion of dwellings rated A-D and median household income have grown by 38%. Fuel prices have risen much faster, so that by 2016 they were around two and half times (155%) their level in 2003.
154. Until 2012 fuel price growth has outweighed gains from improving energy efficiency, such that the increase in fuel poverty broadly mirrored the growth in the fuel price index  . Between 2013 and 2014 the rate of fuel poverty did not increase in line with the rise in the average fuel price index, and there are a number of factors that may have contributed  . In the last two years, the decline in the price of fuel was reflected in a reduction in the fuel poverty rate.
Table 30: Fuel Price, Energy Efficiency and Income Indices
|Key Drivers of Fuel Poverty: Indices 2003/4=100|
|Survey year||Fuel poverty||Fuel Price Index||EE: A-D rated||Median income|
Source: BEIS Quarterly Prices; SHCS.
Note: Fuel poverty rates shown on BREDEM-12 basis (old energy model) up to 2009 and on BREDEM 2012 basis (new energy model) from 2010.
EE ratings shown on SAP 2005 basis up to 2009 and on SAP 2009 basis from 2010.
4.3.1 Fuel Costs
155. Data published by the Department for Business, Energy and Industrial Strategy ( BEIS) on the price of key fuels enables us to construct time series for the price of fuels for the average Scottish household over the longer term.
156. Using information from the SHCS about the fuels used for space and water heating we can weigh the national quarterly fuel price indices published by BEIS  and produce an average index value for the price of the heating fuel requirement for Scotland. The results are shown in Figure 21.
157. Since the majority of Scottish households heat their properties with gas (79%), the national average index follows the gas index closely. Between 2003 and 2014 the price of the fuel mix required by the average Scottish household almost trebled. In 2015 and 2016 the average index fell by 5.6% and 5.4%, respectively, primarily due to the falling price of oil and gas.
Figure 21: BEIS Fuel Price Indices and a Weighted Average for Scotland: 2003 to September 2017
Table 31: BEIS Current Fuel Price Indices and a Weighted Average for Scotland: 2003/04 – September 2017
|Current fuel price indices|
|Year||Gas||Electricity||Liquid fuels||Solid fuels||Other fuels||Weighted Average|
|to Sep 2017||122.6||134.3||88.0||115.2||128.1||121.4|
BEIS Quarterly Energy Prices, Table 2.1.3. Indices supplied with 2010 = 100 https://www.gov.uk/government/statistical-data-sets/monthly-domestic-energy-price-stastics
Weighted average based on SHCS heating fuel use proportions, 2003/4 to 2016. 2017 proportions assumed unchanged from 2016.
158. BEIS has published fuel price data up to September 2017. As fuel use changes slowly, we assume that the fuel mix in Scotland in 2017 was the same as captured by the 2016 SHCS in order to extend the weighted average for Scotland into 2017. In the third quarter of 2017 the weighted average of heating fuels started to rise, mostly driven by increases in prices for electricity (up 5.2%) and liquid fuels (up 20.6%). This amounts to an approximately 0.6% increase in the composite price on average 2016 levels to September 2017 ( Table 31).
4.3.2 Household Income
159. The SHCS is not designed to capture income comprehensively. Total household income is not recorded, only that of the highest income householder and their partner. Income is reported in nominal terms and is not equivalised to take into account that households of different size and composition need different levels of income to sustain the same living standard. Figures in this section therefore may not align with official statistics on household income and inequality.
160. In 2016, 50% of households earned £22,000 or more after tax, up from £21,600 in 2015. This median income has increased by 22% (around £3,900) in cash terms since 2010.
161. Between 2015 and 2016 there was a 1% nominal increase in mean income of the surveyed households (Table 32). This was not uniform across the distribution. There were decreases for the 2 nd and 3 rd bottom income deciles, and increases for most deciles in the top half of the distribution except for the highest decile where mean income remained broadly unchanged. The largest increase was observed in the lowest income decile.
Table 32: Mean Annual Income in Each Decile Group, SHCS 2015 and 2016
|Income Decile||Year||Percentage change|
4.3.3 Housing Stock
162. As we have seen from the analysis in Chapter 3, on some measures the energy efficiency of the housing stock increased between 2015 and 2016. There were improvements in the energy efficiency profile of domestic gas and oil boilers, and the SAP ratings for older properties (1919-1944) and properties built between 1965 and 1982 as well as urban dwellings and those on the gas grid. As shown in Table 33, the mean modelled energy required to meet the fuel poverty heating regime for 2016 was 26,644 kWh, compared to 27,398 kWh for 2015, a reduction of 2.7%.
163. At the same time running costs have dropped more dramatically, by 7.7%, which reflects the additional contribution of the lower price of domestic fuels in 2016 compared to the previous year.
Table 33: Modelled Annual Energy Consumption and Running Costs, 2010- 2016
|Energy requirement||Running Costs|
|Year||Mean (kWh)||Annual change||Mean (£)||Annual change|
Fuel poverty energy requirement modelled on the following basis: 2003/4 – 2009: BREDEM – 12; 2010 – 2013: BREDEM 2012 v.1.0; 2014 and 2015: BREDEM 2012 v.1.1. Fuel poverty costs as follows: 2011 and 2012 include WHD adjustment only; from 2013 onwards include WHD and price source adjustments; from 2016 a further improvement is included by assigning pre-payment metered fuel prices to the relevant households.
4.3.4 Impact on Fuel Poverty
164. To understand how the changes in the price of domestic fuels and the incomes of the households included in the SHCS sample interact with the performance of the housing stock, we carried out a micro-simulation which sought to isolate the impact of each set of factors on the level of fuel poverty recorded in 2016. The results are illustrated in Figure 22 and Table 34.
Figure 22. Contributions to Change in Fuel Poverty Rate Between 2015 and 2016
165. Between 2015 and 2016 fuel poverty fell by 4.3 percentage points The results from the micro-simulation analysis indicate that almost two thirds (2.7 percentage points) of this reduction could be attributed to the lower price of domestic fuels in 2016 compared to the previous year. The remainder was due to higher household incomes and improved energy efficiency performance of the housing stock, 0.1 and 1.5 percentage points respectively. Around a third of the overall reduction in fuel poverty can therefore be attributed to the energy efficiency performance of the housing stock  .
166. The pre-payment method change has a very small effect, increasing the fuel poverty rate in 2016 by 0.1 percentage points. This is because the increase in fuel poverty for pre-payment users resulting from assigning pre-payment tariffs (which are higher than the overall weighted average of all payment methods) to these households is partly offset by the reduction in fuel poverty for non-prepayment users, for whom the weighted average of standard credit/direct debit tariffs is lower than the price averaged across the three payment methods. Whilst the effect may vary slightly for some sub-groups of households, overall it is very small.
167. The analysis which underpins these findings uses SHCS data from 2015 and 2016 to model hypothetical rates of fuel poverty under different scenarios, adding one change at a time. This included the following steps as shown in Table 34.
- First, 2016 fuel prices were applied to the 2015 survey sample to determine the effect of price change alone under 2015 levels of energy demand and household income.
- Next, the income of households in this sample was updated by the mean change observed for their decile group between 2015 and 2016. This demonstrated the additional effect of income on fuel poverty between 2015 and 2016.
- We then estimated the fuel poverty rate in 2016 before the pre-payment method change, to compare to the fuel poverty rate modelled at the previous step and therefore to estimate the effect of the improvement in the energy performance of the housing stock between 2015 and 2016. 
- The remaining difference from the observed rate for 2016 was attributed to the impact of the pre-payment method change.
Table 34. Steps in Attributing Change in the Fuel Poverty Rate Between 2015 and 2016
|Fuel Poverty Rate||Step Difference|
|Fuel Poverty 2015||30.7%|
|- Step 1: Fuel price change||28.0%||-2.7 points|
|- Step 2: Income change||27.9%||-0.1 points|
|- Step 3: Attributed to energy efficiency change||26.4%||-1.5 points|
|- Step 4: Pre-payment method change||+0.1 points|
|Fuel Poverty 2016||26.5%|
4.4 Characteristics of Fuel Poor Households
168. Figure 23 illustrates some of the key attributes of the fuel poor population in 2016. Around 10% of households living in fuel poverty are families with children. The remaining 90% are almost equally split between older one- or two-person households, on the one hand (48%), and all other types of households with adult residents (42%), on the other.
169. The large majority of fuel poor households are owner occupiers (58%), 31% are social housing residents and the remaining 11% rent in the private sector. 70% of fuel poor households live in houses – of which 24% are detached properties, 19% semi-detached, and 26% terraced – while the remaining 30% occupy flats.
170. Almost one quarter (23%) of the dwellings of fuel poor households were built before 1919, and 13% were built since 1982. The remaining 65% were constructed in the intervening years.
Figure 23: Composition of Fuel Poor Households by Selected Household and Dwelling Characteristics, 2016
4.4.1 Household Characteristics
171. Table 35 shows fuel poverty rates by a number of household characteristics for 2016 and in comparison to the previous year. Some of the highest and lowest rates of fuel poverty can be seen among private sector residents: 37% of outright owners but only 11% of those with a mortgage are assessed to be fuel poor. The fuel poverty rate for outright owners reduced from 45% in 2015 to 37% in 2016.
172. Older households make up a substantial part of those who own their property outright; they have generally lower income than working age households and their energy needs are assessed under an enhanced heating regime in accordance with the fuel poverty definition. The properties in which they live are often larger, requiring more energy to heat, and are more likely to be detached which leads to greater heat loss. Correspondingly, at 41%, older households have higher fuel poverty rates than other household types.
173. The private housing sector has a lower rate of fuel poverty compared to the social housing sector: 25% and 32% respectively. There was a more noticeable decline in fuel poverty in the private sector between 2015 and 2016, reversing the temporary reduction in the social-private gap we saw in the SHCS sample for 2015. In particular, the fuel poverty rate in the private rented sector has decreased from 33% in 2015 to 23% in 2016.
174. As in previous years, fuel poverty has a strong association with income and households in the lower income bands have the highest rates of fuel poverty: 87% for the bottom income band and 49% for the 2 nd bottom band. Households with weekly income of £400-500 and £500-700, i.e. the 2 nd and 3 rd highest bands, saw some of the largest reductions in fuel poverty in 2016, down respectively 8 points and 5 points since 2015.
Table 35: Fuel Poverty Rates by Household Characteristics, 2016 and 2015
|Weekly Household Income|
|Council Tax Band|
|Band G – H||28||20%||162||30||23%||133|
4.4.2 Dwelling Characteristics
175. Table 36 shows how the level of fuel poverty varies across dwelling characteristics.
176. The lowest rates of fuel poverty are associated with higher energy efficiency standards. 14% of households living in post-1982 dwellings are fuel poor, similar to those living in properties rated C or better. Both of these categories have seen an improvement from 2015 in terms of fuel poverty levels. Gains in reducing fuel poverty have also taken place among those living in pre-1919 dwellings or dwellings rated band E.
177. Households using gas as primary heating fuel have seen the largest improvement in fuel poverty levels since 2015; 23% of these households are fuel poor, down from 27% in 2015. This is likely to be at least in part due to the fall in gas prices accelerating compared to the previous year. Consequently, the rates of fuel poverty for households within coverage of the gas network and for urban households have both decreased in 2016, to 25% and 24% respectively from 30% in 2015.
178. The fuel poverty rate for rural households remained at a similar level to the previous year (the difference between the rates of 37% in 2016 and 35% in 2015 is within the margin of error). Similarly, the rates of fuel poverty for households using oil as primary heating fuel and for those living off the gas grid are not significantly different from the levels achieved in the previous year.
179. Levels of fuel poverty among households using electricity as main heating fuel have remained among the highest, at 51%. Although the results suggest that this group may have also experienced some gains since 2015, the sample size is too small for the difference to be significant.
Table 36: Fuel Poverty by Dwelling Characteristics, 2016 and 2015
|Age of dwelling|
|Primary Heating Fuel|
|EPC Band ( SAP 2012)|
|B - C||137||14%||1,006||163||18%||923|
|F - G||66||66%||155||80||70%||161|
|SIMD: Most deprived 15%|
Note: Fuel poverty rates for the 15% most deprived areas showed in this table use the most recent SIMD publication available for the time period of the SHCS sample; figures for 2016 are based on SIMD 2016 and the 2011 definition of Data Zones, whereas figures for 2015 are based on SIMD 2012 and the 2001 definition of Data Zones.
4.5 Fuel Poverty and Income Poverty
180. Although fuel poverty is correlated with low income, it is not equivalent to income poverty. This section updates previous analysis of how these two conditions relate in the household population under the current fuel poverty definition.
181. According to the official poverty definition, individuals are considered to be in relative (income) poverty if their equivalised net household income is below 60 per cent of the median income in the same year. Official poverty estimates are calculated using the Department for Work and Pensions' ( DWP) Family Resources Survey ( FRS). The latest estimates for Scotland were published on 15 March 2017 and relate to 2015/16. 
182. It is possible to use the SHCS to determine how fuel poverty and income poverty relate, although there are some caveats to this approach. One of the main caveats is that the SHCS does not collect the full range of household income data used to derive the official measure of poverty. For example, income information is only collected for the head of the household and their spouse/partner. As a result, the SHCS would underestimate the income of households with more than two earners, and therefore over-estimate levels of income poverty. To correct to some extent for this we make a corresponding adjustment to the equivalisation method used for producing official poverty statistics. It is therefore important to note that the results presented here do not reproduce exactly the official measure of fuel poverty and are only approximate.
183. A further caveat is that the latest published income poverty estimates relate to 2015/16. In order to derive a poverty threshold figure for 2016 we use the relationship between the SHCS and the FRS estimates of the median equivalised household income for the previous year, 2015. We adjust the 2016 SHCS median by the ratio between the two estimates observed in 2015 to obtain a 2016 poverty threshold. We estimate this as £291 per week before housing costs ( BHC) for a couple without children.
184. As Table 37 shows around half of all fuel poor households would be considered poor in terms of their income (53% or 342,000) while the other half have incomes above the relative poverty threshold (47% or 307,000 households). This pattern is similar to 2015.
Table 37a: Estimated Number and Proportion of Households by Fuel Poverty and Income Poverty Status, SHCS 2015 and 2016
|Income Poor||Not Income Poor||All|
|Not Fuel Poor||000s||96||1,707||1,803|
|Not Fuel Poor||000s||87||1,599||1,686|
Table 37b: Fuel Poverty Rate (%) by Income Poverty Status, SHCS 2015 and 2016
|Not Income Poor||19.6%||15.3%|
185. Figure 24 sets out this information graphically. While those living in income poverty have a very high risk of experiencing fuel poverty (almost 8 out of 10 do, similar to 2015), the opposite is not necessarily true. Whilst there has been an overall reduction in fuel poverty between 2015 and 2016, this has mostly occurred for households which are not also income poor. Of the not income poor, 15% are fuel poor compared to 20% in 2015. The difference between the fuel poverty rate for those households that are income poor is not statistically significant.
Figure 24: Fuel Poor and Income Poor Households, SHCS 2016
186. Table 38 provides further information about the characteristics of the households who fall into the different sub-groups.
187. Households who are both income poor and fuel poor tend to live in more energy efficient dwellings. They are more likely to use gas for heating and live in urban locations, compared to other fuel poor households. These characteristics point to low income as a key reason for their experience of fuel poverty. These households are more likely to include families with children compared to other fuel poor households.
188. On the other hand, those who are not poor but experience fuel poverty have high likelihood of living in low energy efficiency properties, more than other fuel poor households and well in excess of the average for Scotland. Among these households the share of electricity use for heating is higher and the use of mains gas is lower. Such households are more likely to live in rural locations and include a higher share of older households compared to other fuel poor households and the rest of Scotland.
Table 38: Household and Dwelling Characteristics by Poverty and Fuel Poverty, 2016
|Fuel, not Income Poor||Fuel & Income Poor||All Fuel Poor||Income, not Fuel Poor||All Scotland|
|EPC Band ( SAP 2012)|
|Primary Heating Fuel|