Cost of Living: impact on rural communities in Scotland

Following a discussion with committee clerks during the summer recess, Scottish Land & Estates is delighted to share our thoughts towards your committee’s inquiry into the specific impact of the cost of living crisis on rural communities in Scotland. Please consider this letter as our submission in this context.

Scottish Land & Estates is a membership organisation for rural businesses. Our vision is to make a prosperous and sustainable future for rural Scotland, delivering benefits for all. We do this by championing and supporting rural businesses that provide economic, social and environmental benefit to the countryside. From campsites to community owners to country estates, our members represent a diverse community passionate in promoting rural Scotland, and we’ve acted as their voice for over 100 years.

With reference to your inquiry’s terms of reference we would like to focus our comments on three key areas of policy. These are the concept of “rural proofing”, energy cost support, and governments working together.

Rural proofing

At SLE we believe that all policies and legislation, whether from the UK Government or from the Scottish Government, should be subjected to a process of “rural proofing” from the very beginning of their development.

We believe “rural proofing” should happen as a matter of course, informally, but there is perhaps scope for a formal mechanism in the legislative process, such as an impact assessment when a White Paper or even Green Paper are brought forward. There is already guidance in existence from DEFRA; “Rural proofing: practical guidance to assess impacts of policies on rural areas”. However this is clearly not being adhered to, as we will highlight in this letter, as it is simply guidance and in competition with greater competing demands on resource, both financial and time. We believe something more is needed – and indeed given much more importance in government. Rural Scotland is much more than environment and agriculture, the areas covered by DEFRA’s remit – there is also a rural dimension to health, education, transport and other areas including cost of living support. We believe the need for rural-proofing goes beyond DEFRA and should cover all areas of government. We have not proposed the detail of what that would look like, but it would necessitate the formulation of a methodology which looks at how a policy might work differently in areas categorised as rural under existing designations, and place greater duties on government to ensure it is adhered to.

As you will know, in Scotland, Local Authorities, the Scottish Government and other public bodies have to carry out an Island Communities Impact Assessment when developing, revising and delivering any policy, strategy, service or legislation that could have a significantly different effect on island communities. It is a statutory duty under the Islands (Scotland) Act 2018. This statutory basis is a key difference with DEFRA’s guidance. This example shows robust measures are possible when there is political will. Whether and how the UK and Scottish Parliaments would wish to replicate, in some degree, this mechanism for rural areas as well as islands, is a matter for those institutions – but it would be a proposal Scottish Land & Estates would strongly support if brought forward by any Member or indeed the government in either Parliament.

An clear example of why this mechanism is required is the UK Government’s support for domestic energy bills.

Energy cost support

In September 2022, the UK Government announced a significant package of financial intervention to protect households and businesses from rocketing energy prices, owing in part to inflation and the war in Ukraine. Overall, this package of support was welcomed.

The package of support included two main parts:

1) Energy Bill Relief Scheme – this was a universal grant, giving all households, as long as they have a mains electricity connection, £400 towards their energy bills. For most people, this is being credited to their consumer electricity accounts monthly throughout the winter in £67 increments.

2) The Energy Price Guarantee – this caps the price of a unit of mains electricity and of mains gas. The cap is set at a level designed to ensure that the average household, with average energy use, would pay no more than £2,500 per annum. According to the UK Government, the Energy Price Guarantee would save the average household around £700 that winter alone.

It is the second part of this support package – the Energy Price Guarantee – with which we took issue. The full benefit of the capping of unit prices applied only to consumers who use both mains electricity and mains gas. However, there are approximately 500,000 homes in Scotland who do not have a mains gas connection. Around half of them use electricity as their main source of heating – and while benefiting from a unit cap, electrical heating is generally more expensive than its gas equivalent. Of the remaining off-grid households in Scotland, however – approximately 130,000 use heating oil, while the rest use either LPG gas, coal, wood logs, or biomass for their heating. None of these alternative fuel sources are covered by any kind of unit cap. In short, this meant around a quarter of a million households in Scotland did not benefit, or benefited only partially from, the Energy Price Guarantee.

Off-grid households instead were to be offered an Alternative Fuel Payment. The UK Government had originally said this would offer “equivalent support” to off-grid homes. Given the stated savings for the average household (mains gas connected) would be around £700 this winter thanks to the Energy Price Guarantee, one would have expected the Alternative Fuel Payment to be worth around £500- 700. Instead, the UK Government set the Alternative Fuel Payment value at £100 per household, to be given as a one-off payment.

We recognised a significant disparity in the levels of support being offered to on- and off-grid homes this winter. Although it is hard to quantify exactly what that disparity is, we estimated that off-grid homes would be receiving £500-600 less than on-grid homes this winter. SLE therefore lead in calls to have this remedied, and the Alternative Fuel Payment uplifted towards parity. After several weeks and representations through Parliamentarians and Ministers at a UK level, we were pleased to hear the Chancellor announce in his 2022 Autumn Statement that the AFP was being doubled to £200. Not parity but a welcome step towards it.

All of this serves to highlight a well-intentioned policy which was clearly not “rural-proofed”, not even informally. There was a general feeling – perhaps unfairly – that this was a scheme designed by people who live and work in the urban centres of the UK who forget that not everyone has a gas boiler, and didn’t consider the consequences of making that false assumption while designing the policy.

If the UK Government is to consider any future support schemes, whether for domestic energy bills or indeed in any other area, it must ensure these policies are delivering fairly for rural Scotland as well as for the urban centres.

Governments working together

At SLE we routinely engage with Parliamentarians at both Holyrood and Westminster. Policy affecting rural communities, like policy affecting individuals’ lives in every part of the UK, does not always neatly divide along reserved and devolved lines. While responsibilities are formally designated under the terms of the Scotland Act, people, businesses and communities expect and need their governments to work together and not in opposition to one another.

A case study on joint working might be the development of a common framework for agriculture between the UK Government and the devolved nations. The case for a common framework is strong, and the development of this structure is a positive step. However, in practice, the agriculture common framework is far less effective that it could be. There are several reasons for this – including the fact common frameworks lack parliamentary endorsement, ratification and scrutiny, and like the rural- proofing guidance are effectively just a good practice guide with no statutory footing. When disagreements arise between administrations, there is no obligation on either party to adhere to processed within the frameworks designed to resolve such disputes. Common frameworks therefore, despite having the potential to be effective, have no real “teeth” and are routinely disregarded. This may conceivably have practical implications for the smooth transfer of funding to devolved administrations, putting more financial pressure and uncertainty on rural businesses in Scotland. In the context of significant increases in the cost of living and the cost of doing business, this is extremely important to rectify.

We believe that political differences between our governments, including on constitutional matters, are a barrier to constructive engagement and effective policy delivery. Often, our two governments’ overarching purposes are aligned – for people, climate, nature, and specific sectors such as agriculture – but they appear to become entrenched in a form of competition with one another. We believe a “thawing” is needed between the Scottish and UK- Governments in the interests of sound policy development and outcomes that serve the people, communities and businesses of rural Scotland. This could be helped by the further development of common frameworks, which have great potential but are underutilised and lack proper recognition.

I do hope this is helpful to your inquiry. I and my team at Scottish Land & Estates would be delighted to provide any further information or perspective you may need, in this inquiry or in future inquiries, in writing or in person.

Yours sincerely,

Sarah-Jane Laing

Chief Executive

September 2023