Targeted energy bill support: Letter to UK Government

From: Acting Minister for Climate Action Alasdair Allan 

To: UK Minister for Energy Consumers Miatta Fahnbulleh

Dear Miatta,

When we first met in October last year I reiterated the Scottish Government’s commitment to supporting the people of Scotland with high and unaffordable energy bills – recognising that the fundamental levers to make a difference are with the UK Government.

High energy prices remain the single greatest driver of fuel poverty in Scotland, and we have progressed various actions within our devolved powers. These actions have been aimed at raising household incomes and improving energy efficiency. They include reinstating the Winter Fuel Payment for pensioners and committing spend of over £575m for energy efficiency and clean heating projects. This follows our having already allocated £1.3 billion of funding through our Heat in Buildings schemes so far this Parliamentary Session (to 2024/25).

However, this is not enough to drive down stubbornly high fuel poverty rates. Scenario modelling has shown that under a scenario wherein 2023 fuel prices remained at 2019 levels, with all other factors being equal, the fuel poverty rate would be around 19% or 472,000 households. This would be a decrease of around 389,000 households from the current rate figure of 861,000 (34%). Additionally, around184,000 households (7%) would be in extreme fuel poverty, a reduction of around 308,000 households from the current estimates of 491,000 (19%). Details of this analysis will be published on the Scottish Government website in due course.

A social tariff mechanism, perhaps better framed as targeted bill support, is urgently needed to ensure that energy consumers are protected against high costs at source and can afford all of their energy needs.

You noted in our October meeting that there are several different conceptions of a social tariff. I agreed that it was important to understand what the term should mean in practice and that we would share the outputs of our working group with you as soon as possible. The group treated its work and this ask with the utmost seriousness – the level of support for moving forward with these plans is significant. I am pleased to now share with you the final report which demonstrates cross-sector consensus on the way forward.

Reference to a social tariff does not, in practice, mean moving customers on to a different tariff (as was the case pre-2011) and instead means a discount or rebate (whether flat or staggered) applied to bills.

For that reason, the Scottish Government believes that the UK Government must urgently deliver a unit rate discount, with the level of discount proportionate to need. This would address the issue of unaffordable bills at source without removing people from the competitive market by placing people on a different tariff. A one-off flat rate rebate in the form of the Warm Home Discount is insufficient and is not a long term solution. A separate scheme must be delivered in addition to the Warm Home Discount.

The need to deliver an enduring scheme which recognises the financial challenge faced by government means that it is also important that eligibility moves beyond targeting based on being in receipt of benefits. I therefore welcome the recent drive to address data challenges, which are critical to better targeting support, now and in the future. 

A sophisticated set of metrics should be developed, including, for example, a combination of household income, medical need, and rurality. Support should be applied automatically to eligible households, and available to all fuel users, offering transitionary protection to ensure that consumers can afford their current heating and energy needs while supporting them to transition to clean heating. There may be scope to include an application route for those not automatically eligible.

On Monday 17 March, I attended a roundtable held by the British Gas Energy Trust on behalf of the Social Tariff Working Group where I had the opportunity to hear from frontline organisations and fuel poverty campaigners about the positive impact these changes would make. What is clear is that reform must address the problem of high prices at source. The implementation of a future scheme, and any wider reform, must be progressed in a way that alleviates fuel poverty and the cost of living crisis while supporting the transition to net zero.

In line with the UK Government’s consultation on a review of their Fuel Poverty strategy in England, I am aware our officials are in contact, with subsequent due process and analysis to follow from early April, ahead of setting out next steps. I would strongly urge that the outputs from the Social Tariff Working Group can act as a foundation and mainstay of a revised strategy, providing a signal of intent and leadership by the UK Government in tackling fuel poverty at source.

Finally, we note the UK Government proposals to widen the eligibility for the Warm Home Discount rebate but not increase the level of support. While additional funding is welcomed, this will be paid for through a levy on peoples already high energy bills, and it is not an effective way to reduce fuel poverty rates and ensure that everyone can afford their energy needs. I will write to you separately in response to your recent letter.

I am pleased that our officials have remained engaged on this work. Our overriding priority has been to work across boundaries, including industry, government, and the third sector to demonstrate support for these proposals, and we have achieved this.

Only the UK Government has the power to legislate in respect of energy price setting and regulation, however the Scottish Government remains committed to working closely with you to deliver reform as quickly as is practicable. Addressing fuel poverty is a challenge shared across Great Britain and I would welcome a discussion on next steps.