Tackling Fuel Poverty in Scotland: periodic report 2021-2024

Section 1: Reporting on Progress 2021-24

As set out in section 3 of the 2019 Act, a household is in fuel poverty if, in order to maintain a satisfactory heating regime, total fuel costs necessary for the home are more than 10% of the household’s adjusted net income after housing costs^[4], and if after deducting fuel costs, benefits received for a care need or disability and childcare costs, the household’s remaining adjusted net income is insufficient to maintain an acceptable standard of living. The remaining adjusted net income must be at least 90% of the UK Minimum Income Standard (MIS) to be considered an acceptable standard of living, with an additional amount added for households in remote rural, remote small town and island (RRRSTI) areas. If more than 20% of net income is needed, the household is defined as being in extreme fuel poverty.

The 2019 Act sets an overarching target that by the year 2040, as far as reasonably practicable, no household in Scotland will be in fuel poverty and in any event, no more than 5% of households are fuel poor, with no more than 1% of households in extreme fuel poverty, and that the fuel poverty gap - the annual amount that would be required to move a household out of fuel poverty - will be no more than £250 (in 2015 prices). There are also interim targets for 2030^[5] and 2035^[6]. All of these targets were set based on the economic situation in 2017/18 when the fuel poverty bill was being progressed by the Parliament.

The Fuel Poverty Strategy was published in December 2021, which set out 55 actions across the four drivers of fuel poverty (high energy prices, low household income, poor energy efficiency of the home, and how energy is used in the home). These 55 actions which can broadly be grouped into the 10 priority areas for action were intended to support Scottish Government’s efforts in reaching the 2030, 2035 and 2040 statutory targets. The progress of these actions is summarized in Section 2 of this report.

The Scottish Government has limited control and influence on energy prices, which remains reserved, and income other than assistance it can provide through Social Security Scotland and as such its focus has been primarily on energy efficiency of the home through the national programme of Warmer Homes Scotland, Area Based Schemes and also through the provision of advice and support on how energy is used in the home. Despite limited control over energy prices, the Scottish Government has worked with the UK Government, Ofgem, energy suppliers and others in making the case for supporting energy consumers as well as making direct interventions through the availability of crisis support.

The following section provides an update on actions, including those beyond the Strategy, that have been undertaken across the four fuel poverty drivers and in addressing the fuel poverty targets.

1. Fuel poverty driver: Poor Energy Efficiency of the Home

Improving the energy efficiency of Scotland’s homes and buildings is essential to securing a just transition to net zero and ensuring that poor energy efficiency is removed as a driver of fuel poverty; supporting progress towards our fuel poverty targets. It can also positively impact individual’s health by helping homes stay warm and prevent condensation.

We have continued to make long-term improvements to the energy efficiency of Scotland’s housing stock, with 56% of homes rated EPC band C or better in 2023 – an increase of around 3 percentage points from 2022, helping to improve the warmth of homes and reduce energy costs.

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 the Strategy.

As outlined in the 2022, 2023 and most recent 2024 progress report, various heat and energy efficiency funding and advice programmes are available as part of the Heat in Buildings Strategy. This includes our energy efficiency delivery programmes targeted at those most at risk of fuel poverty – Warmer Homes Scotland and Area Based Schemes – of which statistics are regularly published.

Furthermore, an initial Monitoring and Evaluation Framework was published in November 2023 and is designed to demonstrate the extent to which our Heat in Buildings policies and programmes are delivering emission reductions and achieving wider outcomes.

Summary of action taken between 2021 to 2024

Heat and Energy Efficiency Delivery Schemes

Warmer Homes Scotland

This is the Scottish Government’s national programme to help those households living in or at risk of fuel poverty through the grant funded installation of measures such as insulation and heating systems in their homes. From 2021 up to March 2024, we allocated £165 million to the programme which has supported over 15,000 households in that period. In October 2023, we re-launched the scheme with more funding and have allocated £85 million in financial year 2024/25, the scheme’s highest budget to date with a record number of installations expected. On average, customers save around £400 per year on their fuel bills through the improvements that are installed.

Area Based Schemes

Our Area Based Schemes (ABS) programme enables local councils to design and deliver local schemes and projects targeting areas with high levels of fuel poverty. Improvements are provided as grant-in-kind to households living in or at risk of fuel poverty. For example, a case study by the Energy Saving Trust identified that 47% of improvements delivered as part of Glasgow’s ABS projects had benefitted households in areas ranked in the lowest 10% of the Scottish Index of Multiple Deprivation. The same case study also found that 64% of properties had an EPC rating of C or above after ABS improvements had been installed. Between April 2021 and April 2024, we have allocated £192 million in ABS funding which has helped around 18,200 households to improve their homes.

Both the Warmer Homes Scotland and Area Based Schemes provide support across the entirety of Scotland, including in rural and island communities. Rural properties, particularly in remote areas, tend to be less energy efficient than urban properties. Overall, dwelling characteristics associated with lower energy efficiency are disproportionately represented in rural areas. To account for the higher delivery costs faced by these communities Warmer Homes Scotland uses a National Customer Price to ensure measures are charged at the same level whether they are in rural and remote areas or in the central belt. Councils in these areas can apply a higher maxima of grant-in-kind as part of our Area Based Schemes.

Wider projects out with our Heat in Buildings Programme also offer support to these communities. The Carbon Neutral Islands Project provides support to six islands in Scotland (Hoy, Barra, Raasay, Islay, Yell and Great Cumbrae) in their efforts to become carbon neutral by 2040 in line with the principles of a just transition. £2.2 million of funding has been distributed in 2024/25 to support these goals including the funding of renovations to social housing on Raasay to improve their energy efficiency. This builds on funding provided in 2022/2023 and 2023/2024 on initiatives to lay the groundwork for net zero development on these islands. These projects have also benefitted from ABS funding and planned local delivery of energy efficiency and heating improvements.

Home Energy Scotland Grant and Loan Scheme

In addition to support specifically targeted to those living in or at risk of fuel poverty, schemes are available to households across Scotland to install clean heating and reduce the heat demand in their homes.

In December 2022, we launched the Home Energy Scotland (HES) Grant and Loan Scheme as an update to the HES Loan and Cashback scheme, which is open to all domestic owner-occupiers in Scotland. Whilst not specifically targeted at households in fuel poverty, the HES Grant and Loan Scheme provides homeowners in Scotland a grant, interest free loan or a combination of both to support the installation of clean heating systems and energy efficiency measures. From 1 April 2023 to 31 December 2024, over 16,000 clean heat systems and energy efficiency measures were installed in properties across Scotland.

Social Housing Net Zero Fund

We launched the Social Housing Net Zero Heat Fund to help Registered Social Landlords (RSLs) and local authorities to install zero direct emissions heating systems and energy efficiency measures across their existing stock, making up to £200 million available up to 2026. The scheme now offers a maximum of £35,000 of capital funding per property (based on the average per property costs) with an overall £5 million maximum for a project. In 2023 the fund was reviewed and it was decided that the “Fabric First” strand of funding will continue to 2026 and the intervention rate for clean heat technologies was increased to 60%, thus reducing the match funding requirement and helping to accelerate the deployment of clean heat. To accommodate higher costs in rural areas and support a just transition to net zero, an uplift on the grant per property maximum was made available to rural and remote rural projects. As of the latest funding checkpoint 9, the Fund has awarded over £74 million to 80 social housing projects across Scotland.

Private Rented Sector Landlord Loan Scheme

The Private Rented Sector Landlord Loan Scheme offers private registered landlords interest free and low interest loan funding to enable them to invest in improving the energy efficiency of their properties and install clean heating systems. The scheme offers funding of up to £38,500 per property, including £15,000 for energy efficiency measures. Since its launch to December 2024, over 350 energy efficiency and renewable measures were installed with funding support from the scheme.

Legislation and Reform

In November 2023, we consulted on proposals for a future Heat in Buildings Bill to prohibit the use of polluting heating systems, like gas boilers, in all privately owned and privately rented homes and non-domestic properties after 2045, and to require some building owners to do so earlier than 2045.

We also consulted on ways to set a minimum energy efficiency standard for homeowners and landlords, which included an option to install as many energy efficiency measures, as listed, that would be technically feasible for their property.

The Scottish Government consulted twice on reform of Energy Performance Certificates (EPCs), in 2021 and 2023. Our 2023 consultation followed advice received from the Climate Change Committee. The Heat in Buildings Bill consultation also included proposals that EPCs could be used as one form of evidence of compliance with proposed clean heat and minimum energy efficiency standards.

We also consulted in parallel on a separate and equivalent performance standard for social housing, the Social Housing Net Zero Standard, which will replace the post-2020 Energy Efficiency Standard for Social Housing. This revised Standard will be designed to ensure that all 630,000 homes in this sector transition to clean heating before the end of 2045.

The consultations on proposals for a Heat in Buildings Bill and the Social Housing Net Zero Standard (SHNZS) both closed on 8 March 2024. At the time of publication, we are currently considering the responses and will confirm our decisions on next steps as soon as practicable.

EPC Reform

We published our response to our consultation on EPC Reform on 21 January 2025. Our response confirmed that we plan to lay new regulations later in 2025 and bring them into force in 2026.

As part of this, we intend to introduce three main new ratings on to the domestic EPC:

• Heat Retention Rating
• Heating System Rating
• Energy Cost Rating

These ratings will be accompanied by additional information within the EPC that helps people understand how different parts of their home, such as the insulation level or heating system, contribute to the costs and emissions.

The Energy Cost Rating is a renaming of the existing SAP / EPC Rating / Energy Efficiency Rating. By retaining this rating, and renaming it, this will allow government policies which rely on the existing rating, such as fuel poverty programmes and targets, to continue to review progress against this new rating. The new Heat Retention Rating will measure how well a building retains heat (i.e. its fabric energy efficiency) and will provide an additional measure of progress in addressing the impact of poor energy efficiency as a driver of fuel poverty.

Our Scottish Government response sets out our position on EPC reform. At the time of publication, we are still considering our response to the Heat in Buildings Bill consultation and will set out the position separately, when responding, on how EPCs could support proposed mandatory standards.

2. Fuel poverty driver: Low Household Income

Although fuel poverty is correlated with low income, it is not equivalent to income poverty^[7]. However, we know that households who are also in income poverty are the most likely to face serious difficulties paying for their essential needs including energy.

In 2023 the majority of fuel poor households (69% or 591,000) were also in income poverty^[8]. Conversely, 270,000 households (31% of all fuel poor households) were estimated to be fuel poor but not income poor.

Households that are both income poor and fuel poor tend to live in more energy efficient dwellings than other fuel poor households, potentially because of high energy efficiency standards in the social rented sector. They are more likely to use gas for heating, live on the gas grid 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.

Eradicating child poverty is the defining mission of this Government, and is inextricably linked to efforts to tackle fuel poverty. The next five years will be critical in delivering our statutory targets to significantly reduce levels of both child poverty and fuel poverty by 2030. We will look to use every lever at our disposal to drive further progress.

In March 2022, the Scottish Government published Best Start, Bright Futures, our second Tackling Child Poverty Delivery Plan for the period 2022-26. Best Start, Bright Futures is a plan for all of Scotland and sets out how we will work in partnership with the public, private and third sectors, together with people and communities to deliver progress against the targets set in statute through the Child Poverty (Scotland) Act 2017. This includes through action focused on increasing earned incomes, reducing the cost of living, and maximising incomes from social security and benefits in kind.

Annual progress reports on child poverty outline a comprehensive range of actions undertaken since 2021 to maximise income and help reduce the cost of living for families. This includes through investment in support which is not available elsewhere in the UK, such as the Scottish Child Payment, and wider policies including Free School Meals and improving access to childcare which are also incorporated within the Fuel Poverty Strategy, as outlined in Section 3.

Action for the period December 2021 to March 2022 is captured within the annual progress report for 2021-22. The annual progress report for 2022-23 was published in June 2023, with the annual progress report for 2023-24 published in June 2024. The Poverty and Inequality Commission have provided independent scrutiny of progress over this period, and their recommendations and commentary for each period are set out in the corresponding report. An annual progress report for the period 2024-25 will be published by the end of June 2025.

It is estimated that in 2023-24, the Scottish Government invested nearly £2.9 billion in support targeted to low-income households, with spend benefitting children rising to almost £1.4 billion from £1.1 billion in 2021-22.

Summary of action taken between 2021 to 2024

Winter Heating Benefits

Social security is an essential collective investment in the wellbeing of our country, and a basic human right that offers vital support which any one of us could need at any time in our lives.

We recognise that household finances are increasingly being stretched due to high fuel costs, and that some households are doubly disadvantaged having a greater need for essential heat due to a member of the household’s age, health condition or disability.

Social Security Scotland currently delivers two forms of winter heating support. Winter Heating Payment (WHP), which has paid out a total of £44.9 million since its inception in winter 2022/2023 and Child Winter Heating Payment (CWHP) has paid out £21.3 million of support since it was launched in November 2020. These figures include payments up to 31 October 2024.

Combined, these benefits provided more than £30 million of support in winter 2023/24. And are forecast to have provided £38.5 million of support this past winter (2024/25).

WHP replaced the Department for Work and Pensions (DWP) Cold Weather Payment (CWP) in winter 2022/23, helping over 453,000 households with their heating expenses for winter 2023-24 alone, totaling £25 million of investment. WHP provides targeted, reliable financial support to those most in need of help with their energy costs every winter, including people who are on a low income and who are a disabled adult or a family who have responsibility for a disabled child, or a child under five. The introduction of WHP confirmed our move away from providing support that was reliant on weather conditions, recognising that there are certain groups that are less likely to be able to afford higher energy bills, having an identified need for support because they are on low incomes and have additional need for heat.

CWHP helps mitigate the additional heating costs that the households of the most severely disabled children and young people face in the winter months. This non-means-tested, automatic payment provided assistance to over 33,000 children and young people in 2023/24, paying out a total of £7.8 million.

It was also our intention to fully transfer the UK Government Winter Fuel Payment with the role out of a ‘like for like’ universal benefit known as Pension Age Winter Heating Payment (PAWHP) in winter 2024/25. However, in July 2024, the UK Government announced its decision to restrict entitlement to Winter Fuel Payment to those in receipt of Pension Credit and other means-tested benefits from this winter. The UK Government’s approach reduced the Block-Grant Adjustment associated with devolution of the UK’s Winter Fuel Payment by £147 million in 2024-25, over 80% of the cost of the Scottish Government’s new replacement benefit, PAWHP. The timing of the UK Government decision, taken without any prior consultation with the Scottish Government, and the significant financial impact of this decision, meant it was not practicable for the Scottish Government to expand the PAWHP eligibility criteria this winter. However, Section 3 of this report highlights plans to bring forward regulations to introduce a universal PAWHP in winter 2025-26 for all pensioner households in Scotland.

Scottish Welfare Fund

The Scottish Welfare Fund is an essential source of support for those in crisis and most in need. It is administered by local authorities and provides two forms of discretionary award that do not need to be paid back by applicants.

Crisis Grants are to help meet immediate short-term needs arising from an emergency or disaster and Community Care Grants help eligible people establish or maintain a home. Statistics show that the second most common reason for award to Crisis Grants are for essential heating expenses.

The Fund is delivered in partnership with local authorities, who are responsible for managing expenditure throughout the financial year, including determining their priority level for grant applications. Local authorities have the ability to move priority ratings throughout the financial year to help manage demand and their budgets.

Despite significant fiscal pressures, the Scottish Government has invested £41 million in the Scottish Welfare Fund every year since 2021/22. We provided an additional £2.5 million in 2022/23 and in 2024/25 we have invested a further £20 million in the Scottish Welfare Fund to ensure vital support to those most in need.

Islands Cost Crisis Emergency Fund

We are also aware that island communities experience acute cost-of-living pressures due to often higher costs of fuel, a colder climate, and a lack of consumer choices compared to the UK mainland.

The Scottish Government’s Islands Cost Crisis Emergency Fund (ICCEF) was established in December 2022 to help local authorities support those islanders most impacted by the cost-of-living crisis.

Since then, the ICCEF has distributed £3.4 million to communities across Scottish islands, with monies directly allocated to local authorities through the General Revenue Grant on a population basis. Since 2024-25, the Fund has had a strengthened focus on tackling child poverty.

Local authority decisions on where funding will be directed are based on their local knowledge and their understanding of the impacts of the cost-of-living crisis on their islands.

Actions funded by the programme to date include heating payments support, grants for food banks, Love Local food voucher cards, and free school breakfasts.

In the Programme for Government published in September 2024, we committed to continue delivering the ICCEF going forward.

Minimum Income Guarantee

The Scottish Government committed to exploring a Minimum Income Guarantee (MIG) longer-term in the Programme for Government 2021/22. An independent Expert Group was formed in 2021 to define what a MIG could look like in Scotland - they will report on their findings imminently. We will consider their recommendations in due course.

Everyone in Scotland deserves to live healthy, financially secure and fulfilling lives which could be achieved by the introduction of a MIG. This is an innovative and potentially transformational idea that could tackle poverty and inequality by ensuring everyone has enough money to live a decent life. It would see reform to work, the cost of essentials, services and social security which together will provide a stronger safety net for all.

Fuel Insecurity Fund

As a direct intervention and mitigation towards the continuing global energy crisis affecting many thousands of fuel poor households across Scotland, funding was reallocated by the Scottish Government to support the doubling of the Fuel Insecurity Fund budget in 2022/23 from £10 million to £20 million at the end of 2022.

The appointment of First Minister, Humza Yousaf in March 2023, led to the announcement the Fuel Insecurity Fund budget would be tripled in 2023/24 to £30 million. Since the funds establishment in late winter 2020 to the end of March 2024 as a crisis support, over £63 million has been made available through the Fuel Insecurity Fund, to support households in Scotland at risk of self-rationing or self-disconnecting their heating source. The fund ceased in 2024/25; however we continue to offer support to vulnerable households, including through our Winter Heating Benefits as detailed above.

In November 2024, the Scottish Government announced £41 million in additional support for people struggling with energy costs in winter 2024/2025. This included an additional £20 million to the Scottish Welfare Fund as outlined above, to enable councils to provide more vital support to people in crisis, and an additional investment of a further £20 million allocated into the Warmer Homes Scotland Scheme.

Further support

As outlined, the Scottish Government is taking a range of collective policy actions and interventions in order to best support households and families to tackle a reduction in both child and fuel poverty rates.

In 2021 we set a target to deliver 110,000 energy efficient, affordable homes by 2032 – at least 70% of which will be for social rent and 10% in our rural and island communities – which will ensure homes are affordable as well as warmer and cheaper to heat. We started to deliver against this target on 23 March 2022, following completion of our previous target, and to end September 2024 have delivered 24,382 homes of which 18,539 (76%) are for social rent.

In October 2022, the Cost of Living (Tenant Protection) (Scotland) Act 2022 was passed in Parliament as a temporary measure to protect tenants in Scotland during the cost crisis. This legislation acted to stabilise rents for sitting tenants, helping people to stay in their homes during the worst of the cost-of-living crisis.

In March 2024 the Housing (Scotland) Bill was introduced to Parliament, bringing forward a package of reforms which will help ensure people have a safe, secure, and affordable place to live, including measures that will support the implementation of a long-term system of rent control.

Furthermore, Discretionary Housing Payments support tenants struggling with their housing costs where Universal Credit or Housing Benefit does not cover the cost of their rent.

In the last four financial years, and since the publication of the Fuel Poverty Strategy in 2021, the Scottish Government has invested over £340 million in Discretionary Housing Payments to deliver our commitment to fully mitigate the UK Government’s bedroom tax and mitigate the benefit cap as far as we are able to within devolved powers.

3. Fuel poverty driver: High Energy Prices

Increases in fuel prices had the largest impact on the change in fuel poverty rates between 2022 and 2023, increasing the fuel poverty rate by around 4.4 percentage points. This outweighed increases in income between 2022 and 2023 which when combined with increases in household budgets needed for a decent standard of living, decreased the fuel poverty rate by 2.4 percentage points.

In 2023 the average index price of fuel continued to rise and grew by 15.9%, with gas showing the largest increase at 18.4% compared to 2022. However, the year-on-year changes show that the rise of the index is slowing, with liquid fuels decreasing by 20.2%.

Description of figure 1

The results from the micro-simulation analysis^[9] indicate that changes in fuel prices and changes in income and household budgets would affect fuel prices differently. Applying fuel price changes increased the fuel poverty rate by 4.4 percentage points whilst applying income and household budget changes decreased the fuel poverty rate by 2.4 percentage points. The fact that income has had a smaller effect than fuel prices in 2023 is largely the effect of increases in the MIS^[10] household budgets (ranging from 12% to 23%) counteracting increases to income (8% on average).

The residual change is attributed to other factors such as differences in energy efficiency performance, changes to housing costs, other changes in the housing stock and other underlying changes to the sampled stock distribution. These factors combined to increase the rate by 0.9 percentage points.

This reinforces the detrimental impact energy prices has, and continues to have on households, fuel poverty and ultimately progress with our statutory targets, and the urgent need for reform of the GB energy market, including the introduction of a social tariff mechanism (targeted bill discount), rebalancing of gas and electricity prices, and wholesale electricity market reform.

Summary of action taken between 2021 to 2024

Consumer Scotland

Following the passing of the Consumer Scotland Act 2020, Consumer Scotland legally came into existence in April 2022. Consumer Scotland is an independent statutory body established to ensure consumer interests are at the heart of a fair, transparent and sustainable Scottish marketplace. The body plays an integral role in representing the views of consumers and tackling the most serious issues of consumer harm.

Advocating on behalf of energy consumers is a key component of Consumer Scotland’s work, and the organisation continues to gather data on the experiences of energy consumers, as well as engaging directly with UK Government officials and Ofgem to influence policy development.

Consumer Scotland has commissioned research to monitor perceptions of energy affordability of consumers in Scotland, developing an Energy Affordability Tracker that is repeated at regular intervals. This approach has allowed Consumer Scotland to be responsive to a rapidly changing landscape by providing insight into current consumer experience, and by extending the survey to gather consumer insight into new themes as required.

In March 2023, Consumer Scotland published its first four-year Strategic Plan which is supported by an annual workplan laid in Parliament. In July 2024 the body launched an investigation into the consumer protection frameworks in the market for energy efficiency and low carbon heating products.

Engagement on reserved energy policy

In 2021 the Scottish Government proposed combining the Warm Home Discount (WHD)^[11] and Energy Company Obligation (ECO)^[12] as a single, fairer and more flexible fuel poverty scheme. Scottish Ministers have limited executive powers in the Scotland Act (2016) to design separate schemes in Scotland and can only do so with the approval of UK Ministers. The UK Government did not agree to this proposal.

In 2022 the UK Government established separate WHD schemes in Scotland, England and Wales. This enabled WHD rebates to be provided to low-income families living in low energy efficiency homes (as per the targets and definition of fuel poverty in England). These regulations provided for an increase in the WHD rebate of £10 (to £150) and the total number of rebates provided in Scotland was expected to rise by 50,000 to 280,000. Reported delivery was 256,409 rebates^[13].

The UK Government’s preference was for ECO to continue as a GB scheme. The ECO4 scheme was launched in March 2022 and encourages delivery of multiple retrofit measures (as part of a whole house approach). ECO4 eligibility prioritises low-income households in the least energy efficient homes (reflecting the definition of fuel poverty and targets in England).

The ECO4 scheme has benefitted around 93,000 households across GB and approximately 8,000 households in Scotland. This compares with 440,000 households (GB) and 53,000 in Scotland as part of the previous ECO3 scheme. The ECO4 scheme has cost approximately £3.4 billion to date compared with £1.8 billion in total for ECO3^[14].

In October 2023, the UK Government expanded the current ECO scheme to include the Great British Insulation Scheme (GBIS). As of February 2025, around 46,887 households had received improvements with 2,723 Scottish households having benefitted from the GBIS scheme (6% of those participating). Total costs of the scheme were reported as being £125 million^[15].

Energy Summits

The Scottish Government convened two Energy Summits in 2022 involving suppliers and third sector organisations to examine what more can be done to support consumers through the energy crisis. 

These summits led to the establishment of short-life Ministerial working groups, running concurrently between June and November 2023, on

• Rural;
• Priority (sometimes known as vulnerable); and,
• Non domestic energy consumers

The groups identified collaborative actions to help mitigate the impact of high energy prices on consumers across Scotland. The work of those groups informed a Ministerial letter to the UK Government in November 2023 with a package of asks in relation to domestic and non-domestic consumer protection – including the urgent need for action to deliver a social tariff mechanism as well as further measures to support businesses, independent hospices and those in rural and island areas, where energy costs are often considerably higher.

Introduction of a Social Tariff

The Scottish Government established a Social Tariff working group in November 2024, chaired by the Acting Minister for Climate Action, bringing together stakeholders to co-design a deliverable policy with cross-sector support. The groups final report was shared with the UK Government in March 2025, recommending targeted bill support in the form of a unit rate discount, with the level of discount proportionate to need, applied automatically, and available to all fuel users.

The powers to deliver a social tariff remain reserved; the Scottish Government is pleased to be having more constructive discussions with the new administration on delivering this crucial policy.

Rebalancing gas and electricity prices

We continue to urge the UK Government to take action on rebalancing gas and electricity prices through the transfer or removal of levy costs linked to various environmental and social schemes. This will provide vital support for the transition to clean heat (by lowering electricity prices) but must be done in a way that is commensurate with efforts to tackle fuel poverty.

Wholesale electricity market

Current GB wholesale electricity market arrangements are not fit for the delivery of our net zero ambitions, nor our aims to tackle fuel poverty. Under current arrangements, our electricity prices are tied to volatile global gas prices.

Wholesale electricity costs are the single largest and most volatile part of a typical electricity bill and as such, changes in the wholesale price of electricity have the biggest bearing on bills. The price paid by consumers for electricity varies considerably and network charges, policy costs and various other factors impact the cost of bills. Wholesale costs made up 37.5% of the average GB electricity bill of the Q1 2025 price cap^[16].

The key reason for high wholesale electricity prices in GB is the fact that gas prices have been historically high, and gas sets the price of electricity in GB more than anywhere in Europe. In 2021, gas set the price of electricity 97% of the time, and the average between 2015 and 2021 was 83%^[17].

As this is a reserved policy area, the UK Government is exploring how to address these high costs through their Review of Electricity Market Arrangements (REMA). The second REMA consultation was published in March 2024, with Scottish Ministers providing a response in May 2024 which highlighted the need for wholesale market reform to deliver consumer savings and tackle fuel poverty. Regular engagement with UK Government and wider stakeholders on REMA is ongoing and will continue as REMA moves into its decision-making phase.

A Scottish Government commissioned report assessing the potential impact of locational pricing (the most significant of proposed reforms in REMA) in Scotland was published by ClimateXChange in August 2024. This report incorporated the views of an expert advisory panel, which included consumer groups, renewable developers, flexibility providers and more. Scottish Government also helped facilitate the first ever Edinburgh Markets forum in December 2024, which was hosted by ClimateXChange, Edinburgh University and the Royal Society of Edinburgh. This forum allowed for discussion between a wide range of representatives, including consumer groups and international experts, and ensured Scottish stakeholder voices were heard directly by the UK Government who were in attendance.

The Scottish Government is clear that wholesale market reform must ensure system efficiencies and the low generating costs of renewables are passed through to consumers in the form of lower bills and that any reform must consider those most vulnerable, including those in or at risk of fuel poverty.

The UK Government’s December 2024 update on the timetable for decision making on REMA proposals was welcome. However, it is crucial the UK Government now delivers proposals quickly to ensure positive outcomes for consumers from wholesale market reform can be delivered as soon as possible.

4. Fuel poverty driver: How energy is used in the home

We recognise that, for some households, making small changes to how energy is used at home may help to reduce energy bills. However, when measuring fuel poverty, the energy costs of maintaining a satisfactory heating regime and other uses of energy are modelled using data from the physical inspection of dwellings, the household interview conducted as part of the SHCS, as well as information on consumer fuel prices.

Therefore, household energy bills used to measure fuel poverty are based on these modelled criteria and not on actual energy consumption. What this means is that the way energy is used in a home can impact on that household's lived experience of fuel poverty, but it will not have any impact on fuel poverty rates, because of the way that they are calculated.

To improve the experiences of those at risk of fuel poverty, we continue to fund advice services to support individuals, including on how to keep homes warmer and easier to heat, signposting to appropriate organisations for support, and broader advice on issues such as debt.

Summary of action taken between 2021 to 2024

Advice services

Home Energy Scotland

Since the beginning of 2021, we have allocated £34.1 million to Home Energy Scotland (HES) to provide Scottish households with free, impartial and bespoke advice and support on how to keep their homes warmer and easier to heat. Through this service, advisors have supported an average of 127,000 households a year since 2021, with around 60,000 a year of those households vulnerable to fuel poverty. HES also provides access to our energy efficiency funding schemes, including Warmer Homes Scotland, and will refer or signpost households to local and national organisations for further assistance with benefits and energy bills.

Levy funding

Advice Direct Scotland (ADS) and the Extra Help Unit (EHU) at Citizens Advice Scotland receive levy funding from the UK Government for energy and postal work.

ADS operates and maintains the www.energyadvice.scot website and also has the ability to provide energy suppliers with real time information and dashboards, which drive impact and partnership working with suppliers and the EHU.

Specifically, ADS delivers free, practical advice and information on energy related matters for citizens of Scotland including:

• Energy company billing and meters
• Energy company complaints and disputes
• Energy grant and assistance
• Energy scams and fraud
• Experiencing loss of energy supply
• Microbusiness energy consumers
• Switching energy suppliers
• Vulnerable energy consumers

The EHU is a second-tier advice service which supports vulnerable domestic and micro-business consumers across Great Britain with energy and postal complaints. In relation to energy, the EHU has statutory duties to investigate complaints where a supply has been disconnected or is at imminent threat of disconnection, including prepayment meter faults, self-disconnection and metering tampering. The EHU also has statutory powers to investigate complaints on behalf of vulnerable consumers. A consumer is deemed to be vulnerable if they are unable to resolve a complaint without additional support.

Wider advice services

In 2024-25, we have allocated over £12 million for the provision of free income maximisation support, welfare and debt advice.

This investment supports advice services which are delivered in a range of ways, including face-to-face, telephone and on-line. We provide funding to a range of advice providers including Citizens Advice Scotland and their network of Bureau through the Money Talk Team, StepChange Debt Charity, Advice Direct Scotland and others.

Our investment includes an allocation of up to £1.5 million to increase the provision of advice within services that people already go to through our Advice in Accessible Settings Fund.

Delivered by Advice UK, the Advice in Accessible Settings Fund supports partnership working between advice agencies and other services in order to increase the accessibility and awareness of advice.

Projects supported by the fund are delivering holistic advice services, including debt advice, in education, health and other community settings.

Warm Home Discount

The Warm Home Discount (WHD) scheme (Scheme Year 14) is worth £52 million with up to £7 million reserved for industry initiatives. This budget allows for a £150 rebate to be provided to around 93,000 households in the Core Group and up to 207,000 households in the Broader Group in 24/25.

The Core Group in Scotland consists of households receiving Pension Credit Guarantee Credit. Households in the Broader Group must apply for a rebate from their energy supplier’s scheme. Eligibility criteria for broader group applicants is set out in regulations and includes most households in receipt of income related benefit with a child or disability premium.

Local action

In addition to the work undertaken across our 32 local authorities, supporting improvements in the energy efficiency of our housing stock, through the Area Based Schemes programme, the Scottish Government has continued to support local authorities in their own long-term planning for their local areas, which take account and support both local and national fuel poverty targets. Alongside the wider long-term and sustainable measures, local authorities continue to be supported through our further investment into the Scottish Welfare Fund – which allows help with living costs via access for a crisis grant or community care grants in each local authority area. Furthermore, there is an obligation upon each local authority to prepare and publish a Local Housing Strategy and more latterly introduced, Local Heat and Energy Efficiency Strategy, which respectively support an assessment of housing need and demand; and long-term plans to decarbonise, improve energy efficiency and tackle fuel poverty. This collective drive of policies can help aid each of the 32 local authorities in their wider progress towards reducing fuel poverty rates in their own area.

Local Housing Strategies

All local authorities are required to prepare a Local Housing Strategy (LHS), informed by an assessment of housing need and demand, setting out what their priorities and plans are for the delivery of housing and related services over a five-year period.

LHS guidance to support local authorities includes a requirement for local authorities to be aware of what the existing Fuel Poverty, Energy Efficiency and Climate Change targets are and for these to be reflected in LHS priorities and outcomes.

Refreshed LHS guidance will be published in 2025 and will ensure appropriate links are made between fuel poverty, energy efficiency, achieving heat decarbonisation and climate change.

Local Heat and Energy Efficiency Strategies

Local Heat and Energy Efficiency Strategies (LHEES) are long term plans for an entire local authority area to decarbonise heat, improve energy efficiency and tackle fuel poverty. They are at the heart of a place based, locally led and tailored approach to the heat transition.

A Scottish Statutory Instrument (SSI) was passed by Scottish Parliament requiring local authorities to have strategies and delivery plans in place by the end of 2023 and then update them every five years. Guidance, which sets out what is required to fulfil the SSI was published in October 2022.

The LHEES Guidance requires local authorities to analyse six LHEES Considerations which includes identifying areas where poor building energy efficiency is a driver of fuel poverty. Local authorities have also identified tackling fuel poverty as one of their priorities and this has informed the creation of delivery areas and near-term actions set out in their LHEES delivery plans. As at end of January 2025, 29 LHEES have been published.