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Chamber and committees

Meeting date: Tuesday, November 30, 2021

Net Zero, Energy and Transport Committee 30 November 2021 [Draft]

Agenda: Decision on Taking Business in Private, Fuel Poverty Strategy, Subordinate Legislation, Public Petitions


Contents


Fuel Poverty Strategy

Our first substantive item is an evidence session on the draft fuel poverty strategy. I welcome Michael Matheson, Cabinet Secretary for Net Zero, Energy and Transport, and Naeem Bhatti, head of the Scottish Government’s fuel poverty and housing standards unit. Good morning to both, and thank you very much for joining us, as that provides to the Parliament, through the committee, the opportunity to scrutinise and comment on the draft fuel poverty strategy before it is finalised.

Cabinet secretary, I believe that you want to make brief opening remarks.

The Cabinet Secretary for Net Zero, Energy and Transport (Michael Matheson)

Good morning to the committee.

The fuel poverty strategy builds on the draft strategy that was published back in 2018. It identifies a comprehensive range of actions to address all four drivers of fuel poverty.

Our statutory fuel poverty targets to 2040 are ambitious and challenging. They will be even more challenging to achieve, as the pace of change that is demanded by our climate change targets is unprecedented—and the costs of supporting fuel-poor households to transition to net zero are significant, as we are committed to ensuring that no one is left behind. There are potential tensions between the drive to decarbonise heat and the reduction of fuel poverty.

Work to decarbonise homes and buildings over the next two decades will be led and co-ordinated by the new national public energy agency that we have committed to establishing by 2025. A virtual agency will be in place by September next year and will work in line with a set of guiding principles, as set out in our heat in buildings strategy, to support ambitions on fuel poverty and net zero. To help to inform, design and develop the new agency, I am pleased to announce that, today, we have launched an early call for evidence, to which I invite anyone who is interested in that agenda to respond in the coming weeks.

The recent sharp rise in energy prices and other pressures on household finances have highlighted the challenges that sudden changes in income and energy prices can pose. The Scottish Government has taken steps to support people through the winter months, through additional funding that is being made available to third sector organisations. We are already taking action within devolved competence but, over the longer term, we need action from the United Kingdom Government, especially with regard to how energy markets and prices can support our fuel poverty and net zero ambitions.

We will work with the Scottish fuel poverty advisory panel, once its members have been appointed, and with a wide range of stakeholders, to shape and develop the strategy as we progress implementation. Formal consultation with the panel will take place later next year.

I hope that that is helpful, convener. I am happy to respond to any questions that the committee has.

Thank you, cabinet secretary—that is very helpful indeed.

You mentioned the recent price increases in the energy market, which have generated a lot of headlines. Can you talk us through your perspective on how those price increases have impacted on fuel poverty levels in Scotland?

At this stage, it is difficult to assess exactly what impact they will have. The next set of fuel poverty figures is likely to be available in December next year—that data will pick up on the increase in prices, in particular the spike that we have seen in recent months.

The price of fuel is one of the four key drivers that create fuel poverty, so there is every likelihood that the rise will lead to an increase not only in the number of people who are experiencing fuel poverty but in the depth of extreme fuel poverty that some individuals will experience.

We continue to see rises in fuel prices overall. From my discussions with the chair and chief executive of the Office of Gas and Electricity Markets last week, there is no indication that the increase will start to abate in the near future. Individuals and households increasingly find themselves in difficulty because of the escalating costs that are associated with the spike in fuel prices, which is likely to continue through the winter months.

I expect that that will increase fuel poverty, which is why we have taken action to provide support during the winter months, as we did last year, to households that are experiencing particular difficulties. The additional £10 million that we are providing over the winter sits alongside the £25 million that we are already providing to try to meet some of the needs of those who are experiencing fuel poverty.

To recap, I expect that the fuel price rise will increase fuel poverty and the depth of extreme fuel poverty for some households.

Thank you, cabinet secretary. I will hand over to my colleagues after asking my second question. As you know, Scotland has some of the oldest housing stock in Europe. What policies is the Scottish Government pursuing to address the particular challenges that are faced by households in older housing stock, such as tenements?

You raise a good point. In some parts of the country, it is much more difficult for us to make the housing stock fuel efficient, given its age and design. That issue is particularly acute in some of our rural communities. You can see from some of the fuel poverty data that local authorities that cover predominantly rural areas have a greater degree of fuel poverty and extreme fuel poverty, largely as a result of the types of property in their areas.

However, there is also an issue in cities such as Edinburgh, in particular in older and tenement-type properties. The “Heat In Buildings Strategy: Achieving Net Zero Emissions in Scotland’s Buildings” document, which we published just a few weeks ago, sets out the approach that we are taking, not only to tackle the issue of carbon emissions from properties but to improve fuel efficiency and insulate properties much more effectively, to reduce their energy needs.

Our key approach is taken through the social housing programmes that we provide to support local authorities in their energy efficiency programmes and the replacement of heating systems. Since 2008, we have invested almost £1 billion in that work. Alongside that, there is on-going work to help to decarbonise properties in the years ahead; we have already committed £1.8 billion to that programme during this session of Parliament. The combination of seeking to decarbonise properties while making them much more fuel efficient is the principal way in which we are helping to support people to move out of fuel poverty.

Can you share with us the biggest risks in delivering the fuel poverty strategy?

There are a range of different risks associated with tackling fuel poverty. As we set out in the strategy, there are four key areas in our approach to tackling fuel poverty: fuel prices, energy efficiency, the way in which fuel is used, and household incomes. They are all interrelated. An example is the work that we are doing to improve energy efficiency in the social housing stock and the programmes that private home owners can use to improve their energy efficiency. Some of that work is making positive progress, because it can help to reduce people’s fuel needs and fuel use, which not only benefits them financially but has an environmental benefit. However, there are households that are experiencing fuel poverty or extreme fuel poverty just now, and others that are perhaps on the edge of fuel poverty and will find that, because of the escalating energy costs, they are tipped into fuel poverty or into even deeper fuel poverty.

The challenge is that there is a range of moving parts. In some areas where we have powers to improve fuel efficiency and are trying to improve heating systems in homes and make them more efficient, that work can be quite readily undermined by a spike in energy prices or other actions that have an impact on household expenditure, such as inflation costs, which means that people do not have the same disposable income to meet on-going household needs.

There are factors outwith the material aspect of the building that can have an impact. That is why some of the actions that we have taken will take us only so far. We still need collective action to create greater stability in the energy markets, so that we do not see big spikes in prices, which have a negative impact on households. We have asked the UK Government, through the Department for Business, Energy and Industrial Strategy and its ministers, to look at how the energy markets are operating, how the levy scheme is operating around different fuel types—there are heavy levies on electricity compared to gas—and how that could be used in a way that helps to keep down the increase in the number of people experiencing fuel poverty.

There is an interaction between devolved and reserved issues; there are also external factors that can have an impact on fuel poverty figures over a very short period. I expect that the spike in energy prices will cause such an impact in the months ahead.

Scotland has a challenge in respect of rural and semi-rural communities. Even in my constituency, which is in the dead centre of Scotland, between the M8 and the M9, there are people who use oil-based fuel. The combination of trying to get to net zero at the same time as managing the other risk factors could have an impact on many people in Scotland. How will the fuel poverty strategy and the changes that we are making help those people? It is not just about advice; people need practical help and there is a bit of a gap just now. Will the strategy address that gap? It is not clear where the money is or what the delivery mechanism for grants will be.

There is a combination of things. The work that we are doing around the heat in buildings strategy, not just in social housing but in private housing, will be a key part of supporting and delivering the objectives that we set out in our fuel poverty strategy. There are statutory targets within that.

I will pick up on a couple of the examples that you mentioned. We know that fuel poverty and extreme fuel poverty levels are higher in rural areas. We provide area-based programmes to local authorities to support them to implement energy efficiency measures in their areas. There is a weighting that helps to provide further resource and support to rural communities, given that they have a more extensive problem or a greater number of people experiencing fuel poverty. Some of our programmes have been amended to include greater recognition of rurality in the most recent funding arrangements.

We have also introduced a new funding arrangement with the Convention of Scottish Local Authorities, which helps to address the weighting issue for local authorities that have greater levels of fuel poverty, to ensure that more of the money is directed towards those areas.

10:15  

You mentioned your constituents in West Lothian in central Scotland who use oil-based heating systems. On how we can help to drive down the costs of the transition to non-fossil fuel-based heating systems and increase the funding available to individuals who are looking to replace their current systems with low-carbon systems, I point out that, in another change that we have made to the programme, some funding has gone from a maximum of £9,000 to £14,000 to support the transition to low-carbon systems, particularly in rural areas.

We are trying to calibrate the funding formula for the money that goes to local authorities to reflect where the greatest pockets of fuel poverty are, and in our heat in buildings strategy we are looking at how we ensure that the loans and grants-based system is calibrated to provide greater funding to those who live in off-grid areas and might therefore need alternative systems that are costlier than the systems that are available to people who are on grid. Funding must flow in a way that recognises that greater need.

Thank you. I am happy to pass over to other colleagues, convener.

I call Mark Ruskell.

I want to go a bit deeper into the issue of rural communities. At the moment, there is a big cost differential between installing a low-carbon system and sticking with an oil-based system, but how can that differential be reduced over time?

Another issue that people have raised with me is the wider servicing infrastructure. If people are being asked to make the jump to a low-carbon system and the supply chain is not there, there will be no cost reduction in that respect, but what if there is no maintenance and servicing infrastructure either? That will be a concern for people and a barrier to making that jump. I am interested to hear about the thinking about that in the heat in buildings strategy and how it will merge with the targets that have been set.

Mitigation of some of those challenges is a key part of the heat in buildings strategy. When new technology comes on to the market, and for those people who are early adopters of, say, low or zero-carbon technology, the costs often tend to be higher in those earlier stages. The general sense of the market is that, as demand grows, as capacity develops in the sector and as it becomes more common for people to deploy low-emission heating systems, costs will start to decline.

A challenge that we face in making the scale of change that we are looking for in the years ahead is that it potentially opens up the risk of pushing people into fuel poverty, given that it could be more expensive to adopt and use these systems. As a result, the proposed national public energy agency will play an important role in helping to co-ordinate and plan that work. We are, for example, looking at how action can be co-ordinated across local authorities to ensure that authorities and social housing providers are not all going off and trying to do this 32 different ways—or 200 different ways, if we are talking about housing associations. If the agency can help with that kind of co-ordination, that, too, can drive down costs. We are also looking at how we plan the introduction of some of the measures in a way that drives down costs, too.

Are we seeing a shift in the sector and some recognition of where things are going? I think that Mitsubishi’s recent investment in air source heat pumps in its plant in Livingston in Fiona Hyslop’s constituency clearly indicates that it sees this as a growing market, not just for Scotland and the UK but across Europe. Things are starting to move in that direction, but we need to take co-ordinated action to drive down costs, and one of the roles of the public energy agency will be to support that work.

You announced the consultation on the establishment of the agency today, and you are talking about the set-up being next year rather than—

Michael Matheson

A virtual set-up, yes.

In terms of work on that supply chain, how do you see the energy agency co-ordinating action? What will it do in practice? Will it rely more on local government delivery partners or voluntary sector agencies? I am looking for some clarity around what practical actions the agency will take on the ground to tackle some of these issues and to roll out programmes.

I do not want to pre-empt the feedback from the consultation but, for example, the agency could help to co-ordinate the planning of works for the decarbonisation of social housing by looking at how we bring together housing associations and co-ordinate joint planning for the decarbonisation of their heating systems. Rather than a housing association that has a stock of 500 homes looking to do that work just for those 500, it might mean working with several other social housing providers, and driving down the cost by bringing the works together. The agency could provide support and advice about that work. Co-ordinating in that way would give housing associations bigger purchasing power and also help to mitigate some of the risk of doing the work on their own. That is a practical example of one of the things that the agency could help with.

The second area, as I have mentioned to the committee previously, is the development of heat as a service, and how that could lead to supporting the development of local heating providers within local communities. Social housing providers and local authorities might look at that model in relation to a district heating system. The agency could provide them with expertise and advice on how to co-ordinate some of that action, so that if, for example, Stirling Council and Falkirk Council are looking at such a model, they can join together and we can get some shared learning. In the consultation, we are asking for feedback on that specifically, and on how the agency could support the development of that area of work.

My final question is about an issue that Fife Council raised with me yesterday. It is now very difficult to get energy companies to become the default provider for council tenants. SSE is not interested in being the default provider for Fife Council. Are you aware of that issue? We are seeing more and more energy companies going to the wall, so fewer energy companies can provide a competitive offering for council tenants. There seems to be a lack of appetite for taking on council tenants, which is worrying.

I am not aware of the specific issue in Fife, but if you want to provide me with more information on that, I would be happy to look into it.

The most recent energy provider to drop out of the market was Bulb, which has gone into special administration arrangements, which is different from what happened to the other something like 21 providers that have recently dropped out of the market. If an energy provider drops out of the market, Ofgem allocates that company’s customers to another service provider through the operator of last resort arrangements. That scheme continues to operate. Bulb customers are in a slightly different position because the Government is effectively taking them on as a special administrator, whereas someone who was with People’s Energy, which was a Scottish-based company that withdrew from the market, would have been transferred to another energy provider on the basis of that company’s rates.

Given the number of companies that have moved out of the market, the companies that are left to pick up the customers are finding having to absorb significant numbers of customers to be increasingly challenging. There is therefore a wider systemic issue within the sector that needs to be addressed, and it is an issue that I raised with Kwasi Kwarteng during a discussion that we had early on when this issue started to emerge. BEIS still needs to address it. I discussed it again with Ofgem last week. There are systemic problems within the energy market that need to be addressed, and that requires action at the UK level.

Good morning, cabinet secretary. Scotland has adopted a suite of definitions that is different from those that England, Wales and Northern Ireland use. Why is that the case, out of interest?

Michael Matheson

Which definitions do you mean?

I mean the definitions that relate to things such as fuel poverty. It is difficult to make a direct comparison between data, because different definitions exist. Why might that be the case?

The matter pre-dates my current role, because it was done through the Parliament. Naeem Bhatti can perhaps say a bit more about that. My understanding is that the different definition tries to provide a more accurate reflection of the situation in Scotland. Some of the baseline data that the UK Government uses does not reflect the specific challenge that we have in rural communities; therefore the definition that the Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019 adopted gives a more accurate picture of the depth and scale of fuel poverty in Scotland.

One of the reasons for the change in definition was that the threshold for the warm homes discount scheme that operates at a UK level is simply too high for some households in Scotland, which means that some of those households that are experiencing fuel poverty do not qualify for the scheme. Naeem Bhatti might be able to say a bit more about the history of that process, given the Parliament’s scrutiny during the passage of the act.

As the cabinet secretary has said, the Parliament agreed that definition to take into account the unique circumstances of the country as a whole. Some of the definitions in England do not align to our needs, because Scotland has more rural areas and geographical spread, and faces challenges around supply and upgrades to different tenements and buildings.

The definition is based on Scotland’s needs and does not align with the definitions for England or Wales because they have taken a different approach. Our approach considers fuel poverty after incomes and housing costs have been taken into account. As the cabinet secretary has highlighted, the warm homes discount and the energy company obligation—ECO—target a particular group of people for support, but the definition did not meet our requirements around that, which is the reason for the change, to which the Parliament agreed.

I understand. I thank you for the comprehensive reply.

The cabinet secretary said in his opening remarks that a tension exists between achieving a reduction in fuel poverty and other policy objectives, such as a transition to net zero. How do you foresee that tension being resolved? Which objective will take priority if you cannot resolve that tension?

We should not see the issue as an either/or situation. We have to see both objectives as going hand in hand. A practical tension is that many of the zero-emission energy systems that could be deployed in homes are electricity-based systems. The levies on energy that the UK Government applies now are greater for electricity than they are for gas. We need the levy system to reflect the transition away from carbon-based heating systems to low-carbon or zero-carbon systems, because the way in which the levy system is currently calibrated potentially drives up costs. However, that change cannot be done overnight, but must be done gradually, because the danger is that shifting all levies over to gas will push those folk who are still using gas into fuel poverty.

The big challenge around the transition, which the heat in buildings strategy addresses, is how to drive down the cost of the installation of zero-emission or low-carbon heating systems, while taking forward energy efficiency measures. Those objectives need to go hand in hand. A big part of the challenge is how to drive down the on-going usage costs, given that many air source heat pumps depend on electricity. At a UK level, we need the levy system to start to reflect the shift to zero-emission heating systems to ensure that it does not push more people into fuel poverty.

I will go ever so slightly local as my friend Mark Ruskell did earlier, because the point has now come up. You have talked a lot about investment in heating systems to decarbonise properties. In the draft report, the strategy and in your answer, you talked about electric-powered heat pumps. Given the catastrophe of the past few days, what are you going to do to convince people that electricity and electric-powered heating is the way to go, particularly in more rural areas, as my friends were discussing earlier? What contingency planning will be done so that, if everyone were to move to electric-powered heating and if we had the sort of catastrophe that we have had over the past few days, those in rural areas will not be left freezing in their houses?

10:30  

Noting the very serious difficulty that we have had over the course of the past few days, which continues today for some households that are off grid, many of those people live in areas that are off the gas grid, so their only option is gas-based or oil-based heating systems. As you would expect, during the course of or after any major event such as this, we need to ensure that utilities companies such as Scottish and Southern Electricity Networks and Scottish Power Energy Networks are looking to see where there are further measures that they could put in place to minimise the loss of power and the way in which that is experienced.

We must, however, reflect on the fact that the level of faults and difficulties that have been experienced across the network is unprecedented. I have heard over the course of the past few days that there have been three times the number of faults that were experienced during the beast from the east. One company indicated that there were more than 500 faults in its system, and it was trying to repair them.

That relates to what more we can do by way of resilience; one of the other aspects is how we can potentially develop local heating systems and local energy systems. As I mentioned to Mark Ruskell, one of the options around using a district energy system is that it provides greater local resilience, because it is much more self-sufficient. That is more challenging in rural areas because of how the population is dispersed, but that system has potential.

The key thing is that, when faults are found, they are addressed as quickly as possible, we try to get folk back online and we provide them with support at what is a difficult time.

How far can devolved policy measures address fuel poverty in Scotland? How important is it to have wider reform in the UK’s energy market?

It is fair to say that there is a shared interest at UK and Scottish Government levels in tackling fuel poverty. However, there are more extreme levels of it in Scotland because of the nature of our geography and housing type. It is important that the UK Government take actions to support us and to help us to achieve our fuel poverty targets, ensuring that the measures that it takes can assist us in achieving them. I might mention the way in which the levy system operates and how, while not changing it randomly, we can plan for that to be changed in a transitional way that helps to reduce fuel poverty.

There is no doubt in my mind that there needs to be a systemic shift in the energy markets. Over the past couple of months, the companies that have withdrawn largely represent a certain type of provider. There are two types of energy providers: those that are hedged, and those that are unhedged. Those that are hedged bought their gas and electricity ahead; some of them buy it 18 months ahead, some six months ahead and some three months ahead. Those that are unhedged are basically buying it on the market each day. We have witnessed how the majority of those that were unhedged—although not all of them—have dropped out of the market, because it is just not sustainable.

There is a systemic issue in how the industry is operating. Should we have been in a position where companies were unhedging our primary energy source in a way that has left millions of customers having to be transferred to other providers? There is a regulatory aspect that needs to be addressed.

The second thing that has been highlighted is the need to decarbonise our heating systems, so that we move away from the need for carbon-based heating, particularly gas-based heating. I know that that view is shared by the UK Government: it feels that we need to decarbonise more quickly in a way that reduces our dependency on fossil fuels.

I would like to think that there is a shared interest and, from my discussions with the UK Government, that seems to be the case. However, it is also important that policy actions are taken, not only to give greater certainty to the market but to address fuel poverty in a way that is compatible with our strategy and the UK Government’s plans to tackle fuel poverty.

I have some questions about the proposed national public energy agency, although we have partly covered that subject. I was surprised that there is no mention of such an agency in the quite chunky draft strategy. The cabinet secretary said that a consultation started today, but I cannot see it online yet.

For the benefit of the committee, will you tell us how the proposed agency fits in with the strategy and when it might begin? We thought that there would be a public energy company that would have a role in generation, but that did not happen, so we are a bit behind. Can we be confident that the new agency will come along quickly?

If I remember correctly, the agency is mentioned in our heat in buildings strategy because it sits better there than in the fuel poverty strategy, but two of the agency’s clear and guiding key principles will be to support us to decarbonise domestic heating systems and to address fuel poverty. I mentioned some of the work that the agency can take forward in helping to co-ordinate and plan work around decarbonising folks’ properties and how that can sit alongside work to tackle fuel poverty. That is part of why we are taking the consultation forward.

The feedback that we have had from across the sector is supportive of the role that an agency can play in helping to co-ordinate that action. As you will be aware, a range of organisations are already engaged in that work. It will be extremely valuable to have a national agency to draw that together and plan on a more strategic level, as well as to provide expertise and guidance.

As I mentioned in an answer to Monica Lennon when I last appeared before the committee, we have shifted our approach by moving to a public energy agency—we set this out in our manifesto and it was in our programme for government this year—as a reflection of the big shift that we have to make in decarbonising a million homes and 50,000 non-domestic premises between now and 2030. That is a colossal undertaking. Guided by the principles of decarbonisation and tackling fuel poverty, we need to plan and manage that as effectively as possible, and that will be a key role for the agency.

I am grateful for that clarification, cabinet secretary. With regard to joining things together, which is a phrase that you used earlier, I was surprised that there is no reference to the national public energy agency in this strategy document, but what you have said is helpful.

I appreciate that the Government’s point of view is that, because the situation has changed, to have a public energy company is no longer the right approach. However, in the spirit of the co-operation agreement, could that be looked at again and could the Parliament have a role in that? Given the challenges that we face, we need to be ambitious and look at how we can get big system change. Will the Government keep an open mind on that?

When I last appeared before the committee, I said that I was open to looking at how we could develop a model of heat as a service. We have signed a memorandum of understanding with the Danish Government, which has more experience than we have in doing that in the public sector, to look at how we can develop such a model in a more in-depth way and deliver some of a public energy company’s intended outcomes in a way that is more consistent with delivering on our net zero ambitions.

The ground has shifted somewhat, and the idea of heat as a service has real potential. For example, district heating does not have to be provided by a big company; it can be provided through local co-operative arrangements. I am very open to that model and I think that it would be more productive in creating the change that we are looking for.

I have some questions about the statutory targets for 2040 and how they apply at the national and local authority levels. There are interim targets for 2030 and 2035, but they seem to apply only at the national level. Do you expect local authorities to face difficulties? If so, what plans are in place to see whether work is being done by certain local authorities, particularly those in rural areas, to meet those targets? What challenges might they face?

You raise an important point. The statutory target for 2040 is a national target, and we have interim national targets for 2030 and 2035. We have not applied those at the local level in the same way, because of the significant differences between local authorities. For example, according to the most recent Scottish house condition survey estimate, which is for 2017 to 2019, about 33 per cent of Highland Council’s population experience fuel poverty, which is significantly higher than the national figure of 24.6 per cent. Different approaches will be necessary for different local authorities, and we need to make sure that we calibrate our programmes, funding support and assistance with recognition of the local authority areas that have greater experience of fuel poverty. That will be progressed by taking forward planning at a local level.

At present, local authorities plan that through their housing stock strategy plans, but we are working to develop local heat and energy efficiency strategies. We are working with COSLA and local authorities on how to develop those at a local level, place them on a statutory footing and provide local authorities with the necessary resources and support to implement them. We are taking that work forward at the moment, and I expect local authorities to have those plans in place by 2023 or thereabouts. We are looking at how we can make sure that they have the plans and strategies in place to deliver on the requirements to meet our fuel poverty targets.

In light of the report that we received—it is a fantastic and comprehensive report and I thank you for it—how are cold weather payments aligned with the fuel poverty strategy? Do they work in tandem or do the payments form part of the strategy? I will be slightly parochial here: there tends to be a lot of colder weather in East Kilbride because we are higher up. How will cold weather payments be applied? I wonder about the weather stations that are used. Has that issue been considered as part of the fuel poverty strategy?

Michael Matheson

I acknowledge that East Kilbride can have its own micro weather system at times—

It can.

It gets different weather from the rest of Lanarkshire and greater Glasgow.

A couple of schemes are in operation—the warm home discount scheme and the ECO scheme—that link into the pension credit scheme for automatic payments. Those who do not have the right gateway benefits are required to apply at particular points. At present, there is an agreement with the UK Government about potentially changing those schemes, including by increasing the threshold to £140. We would like to merge those two separate schemes into a single scheme, and we are engaging with the UK Government on that.

10:45  

I have taken the matter up with Lord Callanan, who is the UK minister who deals with the issue, to see whether we can simplify the approach and shift the threshold, and potentially whether we can increase the number of people who receive money automatically. That would help to make the process quicker and it would mean that individuals would not have to apply and so would not lose out because they are not aware of the scheme. There would be greater certainty around people getting the money.

That requires agreement from the UK Government and the Secretary of State for Business, Energy and Industrial Strategy. We have engaged with the UK Government on whether we can simplify the system in Scotland in a way that would help to provide a greater range of automatic payments compared with the number in the current system, in which it is largely just those who receive pension credit who are paid automatically.

I will ask our final question, cabinet secretary. You have mentioned a few times the heat in buildings strategy, which is intertwined with the fuel poverty strategy. The Scottish Government has set out an estimated cost of £33 billion for all the retrofitting and ancillary work that will be necessary for the housing and building stock in Scotland. That funding will come from a combination of public and private sector funding. When will the Scottish Government have a better idea of how that sum will be divided between public sector funding and funding from the private sector?

The costs of the heat in buildings strategy will be met by public sector, private sector and individual funding. I cannot give a specific date on which we will have X amount banked from the private sector to deliver the strategy. However, we are in discussions with private sector organisations on their scope to help to deliver some of it. During the 26th United Nations climate change conference of the parties—COP26—I met a number of companies that are interested in supporting the roll-out of district heating systems and local energy systems. There is some experience in Scandinavia on those things, which is why we have signed a memorandum of understanding with the Danish Government on district heating and heat in homes.

In the past week, I have had discussions with companies that are interested in supporting Scotland-based businesses that have models that could be scaled up and rolled out. You might be aware of the Star Renewable Energy facility on the Clyde. That family-owned business, which is based in Eastwood in Glasgow, has the potential to be scaled up and developed. There is potential for investment in those areas, in which we could be moving more towards the model of heat as a service.

I cannot give you a date by which we will have the £33 billion banked. There will be on-going work to engage with the private sector to look for areas in which it can provide support for the transition, alongside public sector investment. Public sector investment can act as a catalyst to generate greater investment, and it can help to drive down the costs and so support people who are looking to invest in their properties. We are trying to ensure that our investment is focused particularly on social housing so that we support the sector to scale up and develop and we drive down the costs, which can have a wider economic benefit as more people look to install new technologies in their properties or as commercial operators start to move into the market.

That brings us to the end of this session. I thank both our witnesses for joining us.

I will suspend the meeting to allow for a change of panels.

10:48 Meeting suspended.  

10:52 On resuming—