Local Government and Communities Committee

Meeting date: Wednesday, March 13, 2019

Official Report 604KB pdf

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Fuel Poverty (Target, Definition and Strategy) (Scotland) Bill: Stage 2

Under item 3, the committee will take evidence from the Minister for Local Government, Housing and Planning in relation to the Fuel Poverty (Target, Definition and Strategy) (Scotland) Bill. We will discuss options for the development of a separate minimum income standard for islands and remote areas.

I welcome to the committee, once again, Kevin Stewart, the Minister for Local Government, Housing and Planning. He is accompanied by the Scottish Government officials Anne Cornelius, bill team leader, and Ailie Clarkson, statician—sorry, I mean statistician. I invite the minister to make an opening statement.

Good morning, convener—I have to say that “statistician” is a word that I have a problem with, too.

At stage 1, I welcomed the committee’s support for our proposed use of the United Kingdom minimum income standard in the measurement of fuel poverty and I recognised concerns that had been raised about the higher costs that are faced by people who live in remote rural areas, remote small towns and island communities.

I committed to bringing forward an amendment at stage 2 to introduce an MIS uplift for those areas. I provided the committee with the details of the three options that I considered, which were informed by expert advice from Professor Donald Hirsch. I will provide some background on the options that I examined.

All the options are based on the extensive research that already goes into the UK MIS. They align with scheduled updates to the UK MIS and focus on identifying where there are additional costs in such areas. Expert advice suggests that, for this purpose, extensive primary research should be carried out periodically—an eight-year period from 2020 is proposed.

The amount by which costs are higher varies more greatly by household type than by geography. The research will be conducted across various remote rural areas, remote small towns and island locations, so that the MIS uplift is representative of all those areas. That will lead to an average uplift varying by three main household types: working age, pensioner and families. Those points are reflected in the options that I considered.

Option 1 accounts for specific goods and services and higher prices in those areas, and applies a flat threshold of 110 per cent of UK MIS, to be reviewed on the proposed eight-year cycle. The figure of 110 per cent is in line with advice from Professor Hirsch. Option 2 allows only for higher prices and not specific goods and services to be taken into account, and it determines new uplift thresholds for the three main household types annually. Option 3 is the most comprehensive option: new uplift thresholds for the three main household types are determined annually, based on an assessment of the goods and services that are required, as well as their price. New primary research that underpins that would take place every eight years and, in intervening years, account will be taken of inflation and the biennial collection of local price data and analysis of the impact of any changes to the UK MIS. Therefore, my preference is option 3, as it provides the most balanced and comprehensive approach.

I am happy to hear the committee’s views and willing to answer any questions, although I may refer to Ms Clarkson when it comes to some of the technical points.

Thank you. Ms Clarkson does the job that I struggle with the title of, doesn’t she?

Indeed. I will not say it either.

Thank you, minister, for the positive way in which you have engaged with the committee. To follow up on what you said about Professor Hirsch, to what extent was he involved in devising the three options?

Professor Hirsch has been very helpful. Ms Clarkson and her colleagues have been in touch with him on a number of occasions on the issue, so he has been fairly heavily involved in devising the options. Our analysts have considered the evidence that Professor Hirsch provided on the bill and had a number of conversations with him in developing the options. We have taken on board his advice in that regard, which it is vital to do, due to his knowledge of the UK MIS.

Options 1 and 3 are based directly on some of Professor Hirsch’s suggestions. Option 2 presents an alternative, but I acknowledge that, without doubt, Professor Hirsch would not be supportive of it, as it does not require the specific basket of goods and services to be developed in respect of remote, rural and island communities. That is part of the reason why, as I have indicated, my preference is option 3, which I think offers a good, balanced, comprehensive and, most important, evidence-based approach.

If we rule out option 2 on the basis that you and Professor Hirsch do not like it, who came up with options 1 and 3?

They were the result of a combination of work that was carried out between Professor Hirsch and Ms Clarkson and her colleagues. I will let Ms Clarkson give more detail of how the work was seen through.

We had a number of conversations with Professor Hirsch about the ways in which the committee’s recommendation could be achieved. Professor Hirsch indicated that around 110 per cent of the UK MIS in the areas that have been set out would be a suitable approach for measuring fuel poverty. We also discussed option 3. We feel that it goes further and does exactly what the committee is looking for, but it does so in a way that builds on research that is available—primary research every eight years, but also work in between—to ensure that the uplifts that are being applied are as up to date and relevant as possible.

As you can imagine, there has been some to-ing and fro-ing, but one of the notes from Professor Hirsch says:

“Finally, I would end by noting that if a simplified percentage such as 110% of MIS were adopted, it would be important to review this from time to time, as our update in 2016 showed that these costs can be quite sensitive to change”.

That is one reason why my preference is for option 3, rather than one of the more simplistic alternatives.

This week, MSPs were emailed by Energy Action Scotland offering a basket of potential amendments. One of those proposes MIS uplifts for people with additional costs. The submission says:

“The UK MIS specifically does not take account of those individuals or groups who have additional costs, such as those who have a disability or long-term illness.”

Energy Action Scotland is calling for an uplift to take that into account. You will have seen that proposal, minister, as we have all been sent it. Do you have any comments on it?

If it would be helpful to the committee, I am more than happy to respond in writing on the proposed amendments. On the fourth amendment in the list, the bill already includes an enhanced heating regime for households that may be most affected by the adverse outcomes of living in a colder home. As we have already discussed, we will define those households in regulations. Obviously, such households have higher temperatures and longer hours of heating than other households, which result in higher fuel costs. I have asked my officials to analyse all those proposed amendments and the impacts. I am more than willing to provide further detail on that specific amendment and the other proposals that have been shared with the committee and MSPs.

That would be helpful.

It is entirely up to you, but you will be aware that timescales are pretty tight.

I will do my level best to get the information to the committee as soon as possible. Some of the proposed amendments are out of the scope of the bill. One of the amendments proposes a parliamentary committee, but it is not for me to tie the hands of Parliament—it is up to Parliament to decide which committees it should establish. Further, some aspects of the proposed amendments would be unachievable and might cause some grief. For example, if we moved too quickly in replacing technology to deal with something, not far down the road, we might have to rip that out and put in other technologies.

I would rather go into more depth on all that in writing. I will provide the committee with the evidence that we have on that. I am sure that we all want to work from an evidence base and we will do our best to provide the committee with that.

I want to ask about the assessment of prices in remote towns and island communities. How will that be conducted, what primary research will be done and who will do it?

That is quite a complex question. It is expected that the organisation that is responsible for the remote rural uplift will organise research panels of local households across several of the locations covered—which we have already agreed—and split them into the three main household types that I spoke about: working age, pensioner and family households.

11:15  

Previously, that has been done through in-depth discussions about which additional goods and services are required by the households to maintain an acceptable standard of living, using the UK MIS basket of goods and services as a starting point. They then explored with the households other things, such as price information; where they buy goods, such as local stores; internet purchases, which is a biggie, and we are all aware of the work of Richard Lochhead and others on delivery, which will be taken into account; and local transport providers—the list goes on. Price information on those things will be collected every two years and any consequential changes from the updating of the UK MIS will be taken into account. The approach is pretty comprehensive.

Having those criteria and going into those locations—and understanding that, by the nature of where people are, they may have to endure financial pressures that others do not, or they may not have the chance or amenities to deal with those pressures—will give you a view of the situation. You will also be able to compare and contrast what is happening in communities in different locations and whether there are similarities or whether some areas are in greater need.

There will be similarities across the board with the elements that are used to formulate the UK MIS, but the approach that we propose is much more comprehensive. We will find the differentials in certain things, and we may also find that certain goods and services may be cheaper in some communities compared with the UK MIS. Many folk will say that that is highly unlikely, but it is possible. We will have a comprehensive overview, using the experiences of households to see exactly what they face, and from that we can work out exactly what is required. Ms Clarkson and her fellow professionals—in the profession that we will not mention—and Professor Hirsch or whoever else is involved, will be able to look at it comprehensively.

Good morning, minister. This question is probably related to the discussion that we have just had. I am not sure whether you have seen an email that we received—it was from Di Alexander, who is the chair of the Highlands and Islands housing associations affordable warmth group, or HIHAAW, to get that on the record. [Laughter.] Its key ask is that there be two rural MIS figures:

“one for the islands (115%) and one for all remote rural mainland areas (110%)”.

I am sure that you will reflect on that and have officials looking at it, but do you have any comments on it?

I have seen Mr Alexander’s email and my officials have spoken to him regularly. I have not seen Mr Alexander for a while, but he is always very forthcoming with his views on many of these issues. I recognise some of the arguments that he has made, and we will continue to discuss those with him. However, there are difficulties with what he proposes. I refer to the point that I made earlier when I quoted the communication from Professor Hirsch. To repeat, he said:

“I would end by noting that if a simplified percentage such as 110% of MIS were adopted”—

or whatever percentage it may be—

“it would be important to review this from time to time, as our update in 2016 showed that these costs can be quite sensitive to change”.

Our proposal for a comprehensive approach across the board will, I think, cover all the changes much better than just having a fixed percentage at any point in time.

I hand over to Ms Clarkson, because she and others have talked to Mr Alexander recently. Before I do so, I should say that other officials are continuing to gather views as we progress—at the moment, they are probably in the air between Orkney and Shetland.

From our discussion with Mr Alexander, I understand that he is generally supportive of option 3, particularly the idea that the uplifts would be updated annually and that they would be based on the extensive research that we have proposed. However, he feels that some account should be taken of differences between the islands and other areas. We have had discussion about the figures that he included in his communication, and I have pointed out that 115 per cent is probably too high and that in the island areas the figure would probably also be closer to 110 per cent.

The discussion with Professor Hirsch and others has always suggested that, in terms of differences in uplift, the biggest variations are by household type, and that is what we propose to take account of in option 3—the biggest differences. That will result in more than just a single uplift of 110 per cent. Therefore, we are going further than we had to go to meet the recommendation.

To clarify, if you are doing the overall survey and taking everything into account—the basket of goods, as you call it—will that not pick up on where the uplift is most needed, whether that is an island or the rural mainland?

I hope that that will be the case, but I ask Ms Clarkson to comment again.

Obviously, the research would take account of the differences in different areas. We would have research groups with people from the different geographies to look at those aspects. Professor Hirsch has already looked at that in the work on the Highlands and Islands from 2013 and 2016. As I pointed out, his information suggested that the variation in uplift by geography was not really so great as the variation by household type. He has already considered that based on the research that was undertaken in those areas.

I have listened carefully to what you have said. As a statistician—there is somebody on the committee who can pronounce that word, which is always useful—can you confirm that, basically, you are saying that option 3 is more sophisticated and as a result would pick up what it would need to pick up? If on any given island there were material differences that were not differences in the type of household, option 3 would be sophisticated enough to pick that up. It would pick up what would need to be picked up to ensure that it reflected reality on the ground, wherever that happened to be. That seems to be what has been said.

We think that that is the case, but again I ask Ailie Clarkson to comment.

What we propose to do is suitable for the purposes of fuel poverty measurement. It looks at providing that uplift for those different household types, using an average across those different areas. It takes account of the research in those different areas, but it provides that as an average uplift.

The proposal is in line with some of the recommendations that came out of discussions with the panels previously.

On the issue of averages, the approach cannot be overelaborate. There must be a commonsense approach whereby we have a position that looks at the islands as a whole. However, within that, there is a huge differential in terms of the type of houses, the cost of fuel provision and the cost of living. Even in the Clyde islands, for example, there is a difference between Bute, Cumbrae and Arran. I imagine that there will be a bigger difference between some of the islands and the mainland than there might be even between the islands.

How do you work out an average if you are looking at different populations? For example, how can you average out Colonsay, which has perhaps 150 people, with Shetland, which has more than 20,000? Clearly, you cannot be absolutely specific for every island, but what allowances have been made for communities that have specific issues regarding the cost of living on those islands and, therefore, the relative cost of fuel and everything else?

Mr Gibson is exactly right about the differences that exist across the board on this issue. We do not want there to be too much complexity in reaching a point that might not be that different. I think that what we have before us is the right balance in getting the approach right for everyone in remote, rural and island areas, whether they live in Arran or Rousay. There are folk who would like to add to the complexity so much that we would probably be as well trying to take things down to the individual house level, which would be absolutely unachievable and a complete and utter bureaucratic nightmare. We have to strike the right balance. I think that what we have proposed, after discussions with Professor Hirsch, strikes the right balance.

Ailie Clarkson has considered the technicalities in much more depth and she can talk about that.

The MIS research is intended to be representative. It builds on the methodology of the UK MIS, which involves a consideration of panels of households by household type and tries to determine the goods and services that are needed for those different types of households and which would be representative more widely. We propose to take that approach in specific geographic areas.

You mentioned fuel and housing specifically, and they are taken account of in other aspects of the definition. At the point of comparison to the minimum income standard, they are not necessarily to be considered in that regard, because they are taken account of in the earlier part of the definition, and variations in housing type are built into the modelling that we undertake, to ensure that that is taken account of across the different types.

I understand that the Scottish Government, the Convention of Scottish Local Authorities and others are less than supportive of the position, which I have advocated myself, that each local authority should have a 5 per cent target so that we could ensure that there would be no areas in which, for example, a disproportionate number of households would be left in fuel poverty by 2040. If that is not going to happen, would the Scottish Government consider having a 5 per cent target for remote rural and remote island communities when the rest of Scotland has a 5 per cent target?

Originally, we were talking about a target for the 32 local authorities, but given that the Scottish Government clearly understands that there is an issue with regard to island and remote rural communities, might there be a separate target for them to ensure that, regardless of all this MIS information, we can reduce fuel poverty on the islands to the same extent as we can in mainland communities?

11:30  

You have to watch how you say “MIS information”.

I have talked previously about some of the difficulties in having targets for each local authority. Having specific targets for areas may cause real difficulties. I do not want to go into too much depth on that today, because we are talking about the MIS aspect.

I would prefer to talk about targeting those folks who are in extreme fuel poverty, whether they live on islands, in remote rural areas or in urban areas. As I said, we will lodge amendments on that at stage 2. It is vital that we all try to deal first with those folks who are in greatest hardship, no matter whether they are on an island, in a remote area or in a city. We should target them first and we will lodge amendments to do that.

In short, you are not keen on a separate target.

That would be extremely difficult and would throw up a number of other difficulties. Ms Clarkson has done some work on local authority targeting and there are some anomalies around that. I do not know how much work has been done on the idea of a specific island target.

We have not looked specifically at that yet, but the general view would be that such proposals should be evidence led and subject to consultation, which has not happened so far in this process.

If we look at some of the work that has been done in various spheres, there is evidence that unintended consequences or anomalies sometimes come into play when specific targeting, for example, is tried.

It would be interesting to see your amendments, minister.

I am sure that you will see them soon enough.

I echo Graham Simpson’s point—this is a helpful way of approaching the issues in the bill.

There is now agreement on having a separate MIS for rural and remote areas and islands. As the minister pointed out, that is just a definition, which will lead to a national statistic. To follow on from Kenny Gibson’s point—putting aside separate targets—is there any reason why reporting on fuel poverty cannot be disaggregated to local authorities, looking at rural and remote areas and islands using urban rural classifications 4 and 6 and other classifications?

No, not at all. We use a number of tools to ensure that we have information from various places, including the Scottish household survey, so that we can look at what is happening across Scotland as a whole and break that down to local authority level. That information could be broken down into remote and rural areas and island areas. There is no difficulty in reporting that.

We have identified that rural and remote areas and islands throw up specific challenges. It would therefore be helpful to be able to report on the incidence of fuel poverty in those areas in particular. Are you saying that there would not be a problem in doing that, statistically speaking?

Ms Clarkson has all of this at her fingertips and knows about the current ways of gathering information and what information we disseminate fairly regularly.

Under the Scottish house condition survey, which we use to report on fuel poverty, we can break that down by the sixfold urban rural classification and separate out categories 4 and 6 in reporting on fuel poverty rates. That is what we did in the December publication on the current definition and we can continue to do that when the new definition comes into force.

We can send the committee the links to the most recent set of reporting, if that would be useful.

We have seen that. I just wanted to probe whether it is statistically valid to do that.

Yes. The sample that we have for the Scottish house condition survey allows us to break it down to those areas of the urban rural classification. By combining three years’ worth of data, we can also report on, for example, the island authorities—Shetland, Orkney and the Western Isles. We do that annually, but we do so by combining the three-year sample.

Finally, regarding the amendment that the minister proposes to lodge on the MIS, the bill already makes provision that if, for example, Loughborough University ceases to exist or Professor Hirsch gets a job in Australia doing something else, the Scottish Government will put appropriate arrangements in place. Is it your intention that the amendment will be prescriptive on the methodology, or will you seek to have some general statutory obligations that would be detailed in regulations?

I probably need to get back to you on that. I have been careful during the meeting not to speak about one organisation in particular. However, we will have to get back to you on the depth of the response that is required there.

That is fine. My concern is about, on the one hand, not having something too prescriptive—as you said, these things can throw up changes over the next 20 years—and, on the other hand, not having something that is so flexible that it allows people to forget the important issues that have been raised during scrutiny of the bill.

I understand completely where Mr Wightman is coming from. If we can do something to provide some comfort on that, we will do so. As I said, I have tried not to talk about one particular organisation. At the same time, I entirely take your point that we do not want to have something in primary legislation that is very difficult to change. We should ensure that we outline exactly in that primary legislation the very basics. We will provide you with some comfort on that, and we will respond to the committee on it.

Good.

There are no further questions. I thank Mr Stewart and his officials for attending the meeting.

I would be more than happy to speak to committee members individually or to provide the committee with additional information, as required. We will provide the committee with what we have already agreed today to provide.

As always, minister, you will ensure that the information that we have requested comes to the committee. Thank you.

11:38 Meeting continued in private until 11:49.