Chamber and committees

The Scottish Government is certainly conscious that the current wholesale electricity market is not fit for the delivery of our net zero ambitions or, as the member highlights, for tackling fuel poverty.

Electricity market reforms and wider energy policy interventions must have the aims of reducing costs for Scottish consumers and businesses, ensuring that communities feel the benefit of the energy transition, protecting investment in our renewables industry and supporting decarbonisation.

We are determined to address the higher levels of fuel poverty that are found in rural communities such as the one that I live in, and we have already taken action to ensure that our energy efficiency schemes seek to achieve that end by spending more per head on installations in those areas where we know that costs are higher.

Liz Smith has my sympathy on that point. The Scottish Government is more than disappointed about that, not just because of the slow roll-out in some areas of smart meters, but in relation to radio teleswitch service—RTS—meters. There are more than 140,000 of those in Scotland, as she will be aware, yet we have little idea how they will operate after the proposed ending of the signal to them in June.

Obviously, those are matters over which the Scottish Parliament and Government have no legislative power, but I assure the member that I am not slow in raising them with energy companies and with the UK Government, because we must get a solution to the issue before June.

I am happy to correspond with Liam McArthur on the issue that he raises specifically on Orkney. I acknowledge the point that he makes about island areas having among the worst fuel poverty rates in the country, so I will happily try to be of help.

On Liam McArthur’s first point, I do not see a contradiction in seeking to work constructively with the UK Government where we can on issues such as a social tariff, while pointing out the error of the UK Government’s ways. Its inactivity on the cost of fuel is leading directly to making people fuel poor.

That is another area in which we have had constructive conversations with the UK Government. We continue to call on the UK Government to explore mandating community benefits from renewable energy developments to maximise a just energy transition. Only the UK Government has the power in law to change that. However, the greatest impact will come from introducing a social tariff mechanism in the short term, to ensure that energy consumers are protected against high costs. Stuart McMillan’s point is well made.

In among that rhetoric, there were some important questions that I will try to address.

At the outset, I point out that, in all of that, Douglas Lumsden overlooked the fact that the single biggest factor in driving fuel poverty is the cost of fuel—otherwise, it would not be called fuel poverty. As a result of the increase in the cost of energy, a massive counterbalancing factor has been employed against everything that the Scottish Government has been doing to increase the incomes of the very people to whom Douglas Lumsden referred.

For instance, the figure for those who are in extreme fuel poverty—who spend 20 per cent of their income or more on keeping warm—would now be down to 7 per cent. That would still be too many people, but it would mean that we were on target to meet our ambitions to deal with that in Scotland.

The inaction of successive UK Governments—

The Scottish Government is investing £300 million in our heat in buildings energy efficiency delivery schemes. The Scottish Government is always open to finding new ways of sharing information about those schemes, but the evidence is that the people who take up that option are pleased with the schemes that we have. They see a difference in not only the carbon footprint of their house but their energy bills. The Scottish Government will continue to put resource into that area as a priority, as it recognises that it is one where policy on fuel poverty and policy on carbon go hand in hand.

The member mentions the war in Ukraine. I do not deny the importance of that, but the inaction of successive UK Governments to deal with the fundamental issue, which is the cost of fuel, is why we have fuel poverty.

Today is a key milestone, as we publish our first three-year fuel poverty periodic report, in line with the Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019, setting out the progress and steps that we are making in Scotland, with the limited powers at our disposal, in tackling fuel poverty.

This statement is timely, because Ofgem’s latest energy price cap rise comes into effect at a United Kingdom level today. The price cap rise marks the third increase in a row, and it means that energy bills will be 9.4 per cent—or £159—higher than they were this time last year, despite the new UK Labour Government having promised that it would bring energy bills down by £300.

Nothing could be a starker illustration of the necessity that drives the Scottish Government’s action in this area or of how policies that are driven from outwith Scotland sometimes run counter to what we seek to achieve in this Parliament. I know that the implications of that are being felt keenly by consumers across Scotland. All that said, the fuel poverty statutory periodic report sets out the real and important progress that has been delivered within the limitations of our devolved powers, such as the actions that we have taken to raise household incomes, reshape our social security system and provide financial support through our heat in buildings schemes.

The report crucially highlights two important points as to why the fuel poverty rates have increased since the fuel poverty strategy was published, in December 2021. First, the volatile nature of energy price increases has outweighed gains in energy efficiency and household incomes, which has led to increased rates of fuel poverty and extreme fuel poverty. Secondly, it is only the UK Government that can and must act to use the fundamental policy and fiscal levers at its disposal, especially in relation to fuel prices, in order to help to eradicate fuel poverty in Scotland.

The global events that we have witnessed in the past three years, which continue to unfold, have had a substantially negative impact on the progress that was being made in tackling fuel poverty. Together with that, an enduring cost of living crisis has led to a sharp rise in our energy bills, alongside the cost of other essentials, which has impacted all households across the country and worsened the poverty premium that is faced by those on the lowest incomes, who are at the sharpest end of price rises.

Our published scenario modelling reinforces the impact of high energy prices on fuel poverty rates in Scotland. To emphasise that point, the modelling shows that, under a scenario in which 2023 fuel prices remained at 2019 levels, the fuel poverty rate would now, with all other factors being equal, be around 19 per cent, which is 472,000 households. In other words, if fuel prices had not gone up since 2019, the efforts that we are making in Scotland would have led to a decrease of 15 percentage points—around 389,000 households—from the current fuel poverty rate of 34 per cent, which is 861,000 households. To put it even more simply, fuel poverty would now be going down were it not for the rise in fuel prices.

However, the average weighted index price of fuel in Scotland almost doubled between 2019 and 2023—it increased by 96 per cent—which is why we invested more than £63 million in short-term crisis support through the fuel insecurity fund, to help with household energy bills. We continue to provide on-going support through the Scottish welfare fund and have committed to the further delivery of our islands cost crisis emergency fund in order to support our island communities.

That is together with our collective policies in support of raising household incomes, with more than £3 billion to tackle poverty and the cost of living crisis for households this year. The package spans a range of support for energy bills, childcare, health and travel, and social security payments, such as the Scottish child payment, that is either not available anywhere else in the UK or is more generous here.

Despite those challenges, we are committed to tackling fuel poverty. We want to build on the success of the warmer homes Scotland scheme and the area-based schemes delivery programmes. That is why, this year, we are investing £300 million in improving the energy efficiency of our housing stock. In total, 56 per cent of all households now have an energy performance certificate rating of C or above.

More than £65 million is being provided across our three winter heating benefits this year, which will provide vital support with heating costs to more than 630,000 people. Crucially and relevantly, we will introduce a universal pension-age winter heating payment of £100 for every Scottish pensioner household that is not in receipt of relevant benefits, with those in receipt of a relevant low-income benefit receiving £200 or £300 depending on their age.

We know that tackling fuel poverty requires a long-term, sustained effort and a whole-sector approach with suppliers, consumers, the regulator and, most importantly in this context, the UK Government. Making changes requires the use of fundamental policy and fiscal levers—which only the UK Government can use and which the previous UK Government continually failed to use—to protect household energy bills and address the legacy of soaring levels of energy debt.

Over the past six months, the Scottish Government has been working closely with the energy industry and consumer organisations. That work has involved co-designing a deliverable social tariff scheme that would rise to the challenge and actually make a difference. I am pleased to update members that the social tariff working group’s final report has now been shared with the UK Government. The group’s outputs demonstrate to the UK Government the strength of cross-sector commitment to delivering a targeted bill support scheme. In addition, I have set out a clear set of asks of the UK Government as it undertakes a review of its fuel poverty strategy and targets. I am committed to working closely together on delivering that crucial policy, alongside wider fundamental UK Government policy actions, as a matter of urgency.

The fuel poverty progress report that we have laid in the Parliament today only reinforces the point that, although considerable strides have been made, the fuel poverty rate in Scotland being at 34 per cent is largely due to inaction to date from the UK Government on the fundamental issue that affects everyone: fuel prices. We will continue to engage with a range of stakeholders across Scotland, including the Scottish fuel poverty advisory panel, and we will duly consider the recommendations in its report when it is published.

Like other members across the chamber, I am all too aware of the human consequences of fuel poverty and rapidly rising energy bills. Despite the formidable factors outwith our control that I have mentioned and the sometimes counterproductive policies that have originated elsewhere, the Scottish Government is committed to countering, mitigating when possible and, ultimately, tackling fuel poverty, which affects the lives of so many families across our country.

Patrick Harvie is right to point to the volatility of fossil fuel prices. I myself have referred to that issue and pointed to it as one of the primary reasons for fuel poverty. He will appreciate—indeed, he has indicated this—that there is not much that I can say two days before the statement on the heat in buildings bill, other than to pick up on one of the questions that he asked. There will be a bill and, as the Acting Cabinet Secretary for Net Zero and Energy has indicated, that bill will have to meet twin objectives: dealing with the very real climate crisis that Patrick Harvie alludes to and ensuring that we do not put people in fuel poverty.

I sympathise with some of what the member says. There is clearly a need to ensure that heat networks are regulated. As he suggests, that power lies with the UK Government and its agencies, but we make that point to the UK Government, because, if we are to see an increase in the use of heat networks across Scotland, as I hope we will, we must also undertake the work that is necessary to reassure consumers that they are dealing with a fair market and not one that is subject to the problems that the member has mentioned.