Memorandum submitted by Energy Action
Scotland
1. BACKGROUND
1.1 Energy Action Scotland (EAS) is the
Scottish charity with the remit of ending fuel poverty. EAS has
been working with this remit since its inception in 1983 and has
campaigned on the issue of fuel poverty and delivered many practical
and research projects to tackle the problems of cold, damp homes.
EAS has worked with both the Scottish Executive and the UK Government
on energy efficiency programme design and implementation and is
a member of the Scottish Executive's Fuel Poverty Forum.
1.2 Poverty is a very complex, multifaceted
issue of which fuel poverty is only one aspect but this is the
aspect that EAS deals with in this submission.
2. EXECUTIVE
SUMMARY
The following recommendations are aimed at addressing
fuel poverty in Scotland:
2.1 EAS believes that in defining fuel poverty
disposable income should be calculated after housing costs have
been deducted, since the householder has little opportunity to
influence the cost of housing and including this in the equation
falsely inflates the level of income available to the household
to purchase fuel and other essentials.
2.2 Government should review the administration
of tax credits and benefits and should provide more funding for
income maximisation initiatives to encourage people to claim benefits
they may be entitled to.
2.3 Winter Fuel Payments should be extended
to include disabled people who receive middle or higher rate Disability
Living Allowance care component or the higher rate of the mobility
component and a regional weighting should be introduced to address
the fact that the Scottish heating season is much longer than
in the rest of the UK.
2.4 Government revenue has benefited by
the increased revenue from VAT receipts because of higher energy
prices and EAS recommends that this money should be redirected
into initiatives to assist the fuel poor.
2.5 Prepayment meter tariffs should be brought
into line with standard energy tariffs.
2.6 Fuel Direct should be more generally
available.
2.7 The new social tariffs should be evaluated
to ensure they are affective in tackling fuel poverty before developing
them further or prescribing a national social tariff. The rates
for social tariffs should be lower than any other energy tariffs
available from suppliers on the open market.
2.8 Energy companies should adopt a more
proactive approach to the fuel poor by using the data they hold
on fuel debt to target energy efficiency and welfare benefits
advice to those who need it.
3. BACKGROUND
3.1 The three main causes of fuel poverty
are low disposable household income, high domestic fuel prices
and poor energy efficiency of the dwelling. Of these, the first
two are matters reserved to the UK Government and the third is
devolved to the Scottish Parliament.
3.2 The best predictors of fuel poverty
are income band, tenure and extent of central heating. "All
households with an average weekly income of less than £100
have a high probability of being fuel poor regardless of other
factors. For those with incomes of £100—1999, those
in private tenures are more likely to be fuel poor than those
in public sector housing".[1]
3.3 Households in receipt of Jobseekers
Allowance, Sate Retirement Pension and Widows Pension are significantly
more likely to be fuel poor than households which are not. Approximately
63% of fuel poor households in receipt of benefits receive State
retirement Pension; 25% of households receiving the benefit are
fuel poor.
3.4 The Scottish Executive is required by
the Housing (Scotland) Act 2001 to end fuel poverty by 2016 but
there is real concern that this target will not be met.
3.5 The cost of maintaining reasonable heating
levels in Scottish housing is significantly higher than in other
parts of the UK partly because of the longer heating season but
also because of historically poorer building standards. There
is no allowance for this in the calculation of welfare benefits.
3.6 Many vulnerable households have benefited
from increased incomes since 1997 and the Scottish House Condition
Survey (SHCS) 2002 attributes half the reduction in fuel poverty
to increases in household income. However, the recent rise in
fuel prices has wiped out much of the progress that has been made
towards meeting fuel poverty targets in Scotland. Overall to fuel
poverty proof all homes in Scotland, it has been estimated by
EAS that £1.7 billion is required.
3.7 The number of households in fuel poverty
in Scotland has fallen from 738,000 (35%) in 1996 to 286,000 (13%)
in 2002, with some 452,000 households being taken out of fuel
poverty according to the Scottish House Condition Survey 2002.[2]
In that period 15% of households were removed from fuel poverty
by means of energy efficiency measures, while 35% of households
were removed by the reduction in fuel prices and 50% were removed
by increases in household incomes.
3.8 Communities Scotland also reported that,
all else being equal, for every 5% increase in fuel prices a further
30,000 Scottish households are pushed into fuel poverty. This
means there could now be in excess of 600,000 fuel poor households
in Scotland.
4. DEFINING FUEL
POVERTY
4.1 In 2002, the Scottish Executive adopted
the following definition of fuel poverty[3]
in line with the definition used in the UK Fuel Poverty Strategy:
"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 (including Housing Benefit or Income
Support for Mortgage Interest) on all household fuel use."
4.2 Due to differing opinions on whether
to include Housing Benefit and Income Support for Mortgage Interest,
the Scottish Executive also agreed to monitor progress on the
following definition of fuel poverty: "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 (excluding
Housing Benefit or Income Support for Mortgage Interest) on all
household fuel use."
4.3 The SHCS 2002 data shows that the number
of households in fuel poverty in Scotland fell from 738,000 (35%)
in 1996 to 286,000 (13%) in 2002. It attributes half the reduction
to increases in household income, 35% to reduced fuel prices and
15% to improvements in energy efficiency. If Housing Benefit and
Income Support for Mortgage Interest are excluded from the definition
of income used to derive fuel poverty estimates, the total fuel
poor estimate increases to 363,000 (17%). If all housing costs
are excluded from income, this rises further to 445,000 (20%).
5. SCOTTISH STATISTICS
ON FUEL
POVERTY
Scotland faces particular problems unique from
the rest of the UK.
5.1 There is a strong association between
income and fuel poverty and there are almost no fuel poor households
in the top three income bands. In 2003 average earnings in Scotland
were almost 12% lower than in England.[4]
5.2 Due to the difference in climate, Scotland
has a much longer heating season and a home in the north of Scotland
can spend 68% more on fuel use than in the south of England.[5]
5.3 Some 33% of homes in Scotland are off
the mains gas network. Research into the effectiveness of the
Scottish Executive's Central Heating Programme found that the
installation of central heating and energy efficiency measures
removed 87% of households from fuel poverty.[6]
However many fuel poor properties are in rural and remote areas,
where the cost of providing a gas supply would be uneconomic.
These areas are then forced to use more expensive fuels to heat
and provide power to their homes. This contributes to the overall
differential cost of heating a home in Scotland.
5.4 The tenure mix of Scottish housing stock
has changed dramatically over the last 15 years with 70% of all
housing stock now considered to be owner occupied or privately
rented. Many of those who bought their council properties are
now seen as asset rich but cash poor, often being unable to maintain
their homes in a satisfactory manner.
5.5 Scottish housing differs significantly
from that found in England. While both countries have a similar
proportion of properties with cavity walls (70% in England, 67%
in Scotland), Scotland has 23% traditional sandstone or granite
houses, with 10% of dwellings classified as "non-traditional",
split between concrete, timber and metal-framed housing.[7]
Around 25% of all homes in Scotland do not have a loft, due to
the large number of flatted and tenemental properties that are
prevalent in many of our cities and towns. All these types of
property are `hard-to-treat' in energy efficiency terms.
6. POVERTY IN
SCOTLAND
6.1 The Scottish Executive introduced an
updated measure of multiple deprivation during 2004: the Scottish
Index of Multiple Deprivation 2004 (SIMD 2004). It measured six
key deprivation domains: current income deprivation, employment
deprivation, health deprivation, education, skills and training
deprivation, geographic access and telecommunications deprivation,
and housing deprivation. Research carried out by EAS and Strathclyde
University, and based on the earlier SIMD 2003, establishes a
clear link between fuel poverty, multiple deprivation (or poverty)
and excess winter deaths.
6.2 According to this research, there is
a greater chance of becoming an excess winter death statistic
in Glasgow (one in 36 aged over 65) than in any other local authority
area in Scotland, emphasizing that poverty is a significant factor.
More than 2,760 people in Scotland died of winter-related illnesses
throughout the winter of 2004-05.[8]
6.3 The link between poor housing and poor
health has now been established and awareness of fuel poverty
should be included in training for health professionals.
6.4 Much of the progress that has been made
towards eradicating fuel poverty is likely to be wiped out by
recent energy price rises and the future is very uncertain given
the current geopolitical climate and the fact that the UK will
soon be relying more on imported gas. According to research carried
out by energywatch gas prices have increased by 87% and electricity
prices have increased by 55.8% between 2003 and 2006.
6.5 Government policy has not addressed
the issue of higher energy prices and consequently vulnerable
households will have to absorb these increases into their budgets.
Revenue raised from increased VAT receipts on energy should be
hypothecated into fuel poverty initiatives.
7. THE BENEFITS
SYSTEM
7.1 Initiatives aimed at increasing household
income have played an extremely important role in the reduction
of fuel poverty in Scotland. These initiatives have helped to
increase household income, but have also enabled more people to
qualify for certain schemes set up for those at risk from fuel
poverty, such as the Warm Deal and Cold Weather Payments.
7.2 Figures[9]
published by the Department for Work and Pensions on the take
up of income related benefits, shows that in 2003-04 between £4.2
and £7.3 billion of benefits went unclaimed. Many are simply
unaware that they can receive help with their rent, Council Tax
or care costs. For others, the benefits system is far too complex,
with some people unable to fill in the appropriate applications.
Moreover, some people are put off claiming means-tested benefits
as they do not want to provide personal information or face intrusive
questioning.
7.3 Research by the Citizens Advice Bureaux
(CAB) found that home visits, with face to face contact with clients,
are essential to successful benefit take up.[10]
People need a high level of support to fill in complex forms and
to identify which benefits they may be entitled to. More funding
is needed to provide face to face advice for clients.
7.4 EAS believes that benefits entitlement
checks should always be provided as part of energy efficiency
schemes and where there is a fuel debt.
8. PAYMENT METHODS
8.1 Direct debit is one of the cheapest
ways of paying for fuel, with online payments attracting additional
discounts but many consumers, particularly those on low incomes,
are unable to take advantage of these opportunities as they do
not have a bank account. Price comparison lists produced by energywatch
show that consumers could save between £72 and £92 annually
if they switch to direct debit.
8.2 Prepayment remains the most expensive
way of paying for gas and electricity, with the most vulnerable
households and those with a fuel debt often using this payment
method. Therefore, not only are prepayment customers paying more
for their gas and electricity, they are largely prevented from
taking advantage of cheaper tariffs as fuel debt prevents them
from transferring to a cheaper supplier. Suppliers should be required
to reduce pre-payment tariffs to bring them into line with standard
tariffs.
8.3 Fuel Direct was initially designed as
a payment method of last resort for people in receipt of certain
benefits. As the Department for Work and Pensions (DWP) does not
view Fuel Direct as a debt prevention scheme, customers in receipt
of the qualifying benefits only qualify for this payment method
if they have a large debt with their fuel supplier. One of the
main benefits of Fuel Direct is that total payments for debt are
set at a maximum of £2.80 (2004 levels) per debt, per week.
Customers in fuel poverty and with a substantial level of debt
may be better off paying by Fuel Direct than the more expensive
prepayment meter. EAS believes that Fuel Direct should be more
generally available as an acceptable method of payment.
9. SOCIAL TARIFFS
9.1 Speaking at the June 2005 launch of
Ofgem's Social Action Plan, Sir John Mogg, Chairman of Ofgem,
called for a joined-up approach to tackling fuel poverty, with
an increase in corporate social responsibility initiatives aimed
at alleviating fuel poverty and the introduction of social tariffs.
9.2 Minister for Communities, Malcolm Chisholm
MSP suggested during his speech at Energy Action Scotland's annual
conference in November 2004 that fuel suppliers should offer special
tariffs to people in receipt of Pension Credit to combat the effects
of rising fuel bills. Since this announcement, several large energy
suppliers have launched social tariffs and trust funds aimed specifically
at helping vulnerable people at risk from fuel poverty.
9.3 These initiatives have included discounted
tariffs and grants for households in severe fuel poverty and the
provision of grants for agencies working to assist vulnerable
households. Research by the Centre for Sustainable Energy[11]
concluded that social tariffs are ad hoc, inconsistent and poorly
focussed on fuel poverty and that this should be reviewed by Government,
regulator and energy suppliers before any decisions are taken
to develop social tariffs more widely as a tool for tackling fuel
poverty
10. WINTER FUEL
PAYMENTS
10.1 The Winter Fuel Payment is a non means-tested
annual payment to help pensioners pay their winter heating bills
and is currently set at £200 for people aged over 60 and
£300 for those over 80 years old.
10.2 The Trade and Industry Committee at
Westminster recently acknowledged that certain vulnerable groups
not in receipt of the Winter Fuel Payment or eligible for other
government funded schemes aimed at alleviating fuel poverty are
in dire need of assistance.
10.3 Children's charities and disability
campaigners also claim that the Winter Fuel Payment fails to assist
non-elderly groups at risk from fuel poverty. A warm environment
and the need for constant hot water are important requirements
in the therapy of many disabilities and this has an effect on
the weekly fuel bill. Those with restricted mobility face higher
fuel bills due to longer periods spent indoors and should also
be entitled to Winter Fuel Payments.
10.4 The effectiveness of the Winter Fuel
Payment in alleviating fuel poverty has also been brought into
question. With age being the only qualifying criterion, affluent
households with a person over 60 years old are fully able to claim
the Winter Fuel Payment whilst low-income households under the
age of 60 cannot claim this payment, despite their personal circumstances
for example, young children or those with a disability, requiring
them to spend more on their fuel bills.
10.5 In addition to this the Scottish climate
is significantly colder than the rest of the UK with a much longer
heating system but this issue is not addressed by the Winter Fuel
Payments system. This could be addressed by having a regional
scale of payments for Winter Fuel Payments with the additional
top-up paid as a fuel credit to be redeemed against fuel bills.
10.6 Cold Weather Payments are paid to those
receiving Income Support or Jobseekers Allowance due to long-term
sickness or disability, being aged over 60, having a child under
five years old, or being responsible for a disabled child. The
payment is also made to those receiving Pension Credit. The payments
are made automatically for each qualifying week if the average
temperature for the area has been or is expected to be 0°C
or below for seven consecutive days. It has been argued that the
same qualifying criteria should apply to the Winter Fuel Payments
and EAS agrees with this recommendation.
11. CONCLUSION
EAS believes any study of poverty in Scotland
must look at fuel poverty, as this is a distinctive and significant
factor. Two of the main causes of fuel poverty (income and energy
price) are matters reserved to the UK Government, with the third
(energy efficiency) being devolved to the Scottish Parliament.
Liz Futcher on behalf
of:
Energy Action Scotland
October 2006
1 Scottish House Condition Survey 2002-Fuel Poverty
in Scotland. Back
2
Scottish House Condition Survey (SHCS) 2002 and Fuel Poverty
in Scotland: Further Analysis of the SHCS 2002, both published
by Communities Scotland. Back
3
Scottish Fuel Poverty Statement (August 2002). Back
4
Percentage calculated from figures in "Patterns of pay:
results of the 2003 new earnings survey", Office for National
Statistics. Back
5
"Fuel Expenditure on Heating-Climactic Variation",
Digest of United Kingdom Energy Statistics, DTI 1995. Back
6
Impact of Central Heating Programme on Tackling Fuel Poverty:
Survey of Scottish Households included in 2001-02. Back
7
"Energy Efficiency in Scotland', Energy Efficiency Partnership
for Homes, 12 January 2005 http://www.est.org.uk/partnership/energy/index.cfm?mode=view&news-id=295 Back
8
"Excess Winter Deaths in Scotland, 2004-05", General
Register Office for Scotland. Back
9
"Income Related Benefits-Estimates of Take-Up in 2003-04",
Department for Work and Pensions. Back
10
"Serious Benefits-The success of CAB benefit take up campaigns",
2003. Back
11
CSE Report "Social tariffs: a solution to fuel poverty"
April 2006. Back
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