The Scottish Government has put forward a Bill on fuel poverty which will re-define how it is measured. Orkney tops the table for fuel poverty – this Bill will affect many households in the islands.

Current Definition

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.

If over 20% of income is required, then this is termed as being in extreme fuel poverty.

A satisfactory heating regime is defined as:

For “vulnerable” households, 23°C in the living room and 18°C in other rooms.  For other households, this is 21°C in the living room and 18°C in other rooms.

Income is defined by the Scottish Government as that of the householder and their partner not the whole household.

The Fuel Poverty (Target, Definition and Strategy) (Scotland) Bill was put before the Scottish Parliament on the 26th of June 2018. It is now at stage one in its progress through parliament and is being examined by committees.

Fuel poverty was supposed to be eradicated from Scotland by November 2016. Clearly that did not happen. The new legislation will redefine what constitutes fuel poverty. It also accepts that fuel poverty cannot be eradicated and instead aims to reduce it to 5% by 2040.  5% of all households in 2040 could be equal to around 140,000 homes.

New Definition

The new definition calculates the proportion of household income required to maintain a satisfactory level of heating and meet the household’s other reasonable fuel needs within the home and assesses the extent to which households can then maintain an “acceptable standard of living” once housing and fuel costs are deducted.

The household income relates to all those within the house contributing income.

1. Calculate total household income including earnings of all adults (after tax and National Insurance deductions) and all benefits.

2. Subtract rent or mortgage payments, council tax and water and sewerage charges to give “adjusted net income”.

3. Calculate costs associated with adequate heating requirements

4. Are these fuel costs more than 10% of adjusted net income? If “no”, then the household is not in fuel poverty. If yes:

5. Subtract fuel costs and childcare costs (if any) from the adjusted net income.

6. Is remaining income below 90% of the minimum income standard applicable to that household type (after the notional costs allocated as part of that MIS to rent, council tax, water rates, fuel and childcare have been deducted). If “yes” then the household is in fuel poverty.

The ‘aim’ of the new definition is said to target support where it is most needed. What it also does is reduce the number of homes considered to be fuel poor. The number will drop from 26.5% to 23.8%. It will have an even more pronounced effect for homes in rural areas currently deemed to be living in fuel poverty falling from 154,000 under the current definition to 99,000 under the new one.

The new definition is intended to help younger households and especially those with young families with child care costs. For older households, however, and in particular those who own their own home it will see a significant drop in those considered to be living in fuel poverty.

This latter point is especially important for Orkney and other island communities where there is an aging demographic with a high rate of home ownership.

Fuel Poverty Strategy

A fuel poverty strategy will be produced which Ministers will have to report on every 5 years to see if it is on track to meeting the target for 2040. There is no information in the current Bill on what happens if the targets are not met. Household income and energy regulation (how much you are paying for your energy needs) are reserved to the UK Government. The only thing the Scottish Government can actually practically effect is energy efficiency.

Energy Action Scotland was disappointed with some aspects of the Bill and ‘profoundly disagreed’ with the timescale put forward.

“Energy Action Scotland is also disappointed that the Scottish Government continues to use the UK Minimum Income Standard (MIS) in its fuel poverty calculation without the need to adjust the MIS thresholds upwards for households living in remote rural areas.  This takes no account of the specific circumstances of hundreds of thousands of rural fuel poor who pay significantly more for all goods and services, not just energy costs.  It ignores the rural and poverty premiums experienced by many.

“Despite this, Energy Action Scotland remains committed to working with the Scottish Government and all MSPs who share our concern about the 649,000 households in Scotland currently living in fuel poverty. Energy Action Scotland will continue the work to ensure that a warm, dry, affordable-to-heat home becomes a reality in Scotland, not simply an aspiration.”

The Local Government and Communities Committee of the Scottish Parliament is consulting on the proposals in the Bill. The closing date to send in views is Friday 9th of November. You can find all the information for that here:  Call for Evidence 

(graphics taken from SPICe Briefing)

Reporter: Fiona Grahame