The UK Gov's Winter Fuel Rule Highlights the Limits of Devolution

Most Scottish pensioners - who suffer from very high levels of fuel poverty - are going to struggle even more without the universal winter fuel payment - despite Scotland being one of the most energy-rich countries in Europe.

Two-thirds of those in fuel poverty stand to lose the benefit under the UK government’s new rules. Yet unlike similar energy-rich countries like Sweden and Iceland, Scots pensioners pay the highest energy bills in Europe. Now even the tiny bit of help the UK gave them is being taken away. 

UK Chancellor Rachel Reeves decided to limit the winter fuel payments to only the fraction who are eligible for pension credit. This week the Scottish Government announced they couldn’t find the money to mitigate this austerity choice by the UK, with all the other pressures on the fixed budget they get from Westminster. 

This serves to highlight the limits of devolution. As a devolved nation, Scotland has no control over how energy is regulated or priced or the way its energy infrastructure is being used. If Scotland were an independent country. It would have the levers of power necessary to achieve its potential as a renewable energy powerhouse. It would be able to make energy much cheaper for Scots consumers and businesses.

Instead, the Scottish government was called on by many to make the money up to pay the winter fuel payment out of its fixed budget. It was asked to pay the piper but without calling the tune. About 900,000 Scots will lose what is for many a vital lifeline of £100 to £300 each winter. Almost 40% of Scottish pensioners are in fuel poverty (compared to 29% in England). Scotland is colder and it suffers from unfair energy pricing, which means many Scots face much higher bills. 

At the same time, Labour has greenlit plans for a new energy superhighway to transmit power from Scotland to the south of England - but Scotland won’t benefit from that in the way it would as an independent country. Of course, if Scotland were independent like Scandinavian countries this would be a lucrative transaction that could allow Scotland to reduce the electricity tariff. That is what other energy-rich countries like Sweden, Denmark and Iceland do. The north of Sweden is experiencing a boom as businesses set up shop there to harness cheap energy. 

Energy pricing is unfair to Scots

But Scots pensioners don’t see similar benefits from Scotland’s vast energy resources.  Instead pay the highest bills in Europe. They are higher here than in England because it is colder, standing charges are higher, and much of Scotland is not connected to the gas network (it is much more expensive to heat your home with electricity in the UK). 

Greg Jackson, the Chief Executive Officer of Octopus Energy said recently Scotland could have the cheapest electricity in Europe.  And so much more of the available energy resource could be harnessed. If the right pricing structure was in place, Scotland could attract businesses and innovation. At the moment, renewable power like wind and solar has to wait decades for connection to the weak and privatised National Grid - the only customer for its energy. The planned new transmission link to England will mean more of Scotland’s renewable energy can be harnessed. But it won’t change the fact that energy tariffs are kept artificially high in Scotland to make them the same in England. 

Offering a lower energy price close to where there is the most potential to produce it, would help Scotland to attract businesses that need a lot of power. Data centres which store huge amounts of the world’s data are moving to be sited in areas where they can make use of cheap wind and tidal energy. For example, Meta has opened one in northern Sweden. Data centres can become part of local heating networks, making use of the heat they produce from their operations. 

Double standards

Standing charges are higher in Scotland because of a decision by Ofgem. They say it is fair for energy companies to charge consumers in Scotland more to be connected to the privatised National Grid because they are further from England's major population centres. 

At the same time, they argue it would not be fair to offer Scots lower bills for the energy that is produced close to them.

Because of the one-nation British energy tariff, public money is regularly thrown away on paying wind turbines to turn off while more expensive energy is imported from Europe and Scandinavia.

A huge number of pensioners in fuel poverty

Age Scotland estimates 39% of pensioners in Scotland – a total of 397,000 people – were living in fuel poverty last year. The figure is based on more up-to-date research than the 2022 percentage of 36% often cited by the Scottish Government. Of that group, 270,000 are not eligible for pension credit and losing the winter fuel payment may make their situation catastrophic. So two thirds of those already in fuel poverty will lose the benefit. These are people who already can’t afford to keep their homes warm. Pensioners do suffer cold-related illness and even die in cold houses - and this policy will drive that number up this winter.

Pension credit thresholds are pitifully low. You have to have an income of less than £11,440 including all benefits like housing benefit to be eligible for it. The UK pension is among the lowest in the developed world. The full basic state pension which older pensioners receive is just £167 a week. The full new state pension received by the younger tranche of pensioners is a bit higher - it is exactly the same as the threshold for pension credit. 

It is obviously considerably colder in Scotland than England, but the new rules on the winter fuel payment don’t take account of that. The payment of the winter fuel allowance was in the process of being transferred to the Scottish government, as the Pension Age Winter Heating Payment (PAWHP). This process will now not go ahead. 

Conclusion

If one policy could be said to highlight the weakness of devolution it is this. An independent Scotland could reasonably hope to create similar amounts of renewable energy to the Scandinavian countries. Instead of paying the highest energy bills in Europe, they would be amongst the lowest. In Iceland, citizens pay just 4% of their income in energy bills.

Instead, the Scottish government is limited to a fixed budget that is already under huge strain. No doubt Unionists will try to make it carry the can for a UK government austerity policy that targets the weakest in society.  They will argue that the Scottish government should make up the shortfall for Westminster austerity - without being able to do anything about the amount of money it receives. If it was independent, it could sell its renewable energy to England.

But devolved Scotland can’t do that and it can’t challenge the UK energy policies that force Scots to pay the highest bills in Europe. Now Scotland can do nothing about the UK’s decision to take away even the £100 to £300 winter fuel credit that our pensioners - who suffer unfair levels of hardship - were receiving.