Response to DESNZ consultation on continuing the Warm Home Discount Scheme

Consumer Scotland welcomes the opportunity to respond to this consultation and in doing so help to shape the form of energy affordability supports for consumers in Scotland.

Energy affordability and debt continue to be pressing concerns for Scottish consumers. While bills have dropped from their peak in 22/23 during the gas crisis, there are still many households that require support to meet their energy needs. 16% of Scottish households currently find it difficult to keep up with their energy bills, and 15% are in debt or arrears. And as transmission and balancing costs are likely to rise significantly in the coming years the need for effective consumer support is likely to increase.

The financial support provided via the Warm Home Discount (WHD) scheme continues to be critical for many. We therefore support its continuation and make some specific recommendations for how it can be enhanced in the sections that follow. This includes:

• automatic data matching should apply to broader group consumers in Scotland
• payments should be delivered between November and January, when they are most needed
• there should be centralised WHD helpline to support consumers
• changes to the scheme should be effectively communicated to affected consumers.

However, we recommend the UK Government improve affordability support mechanisms in future. There are stark deficiencies in the current scheme, which remain unaddressed under the latest proposals. These include:

• The WHD is a cliff edge support. A consumer either gets it, or they don’t. Consumers who fall just outside the eligibility criteria get nothing, despite potentially being unable to pay for the energy they need.
• There is no link between the level of the discount and consumption. Consumers with complex medical needs or with a terminal illness, for example, will in many cases have unavoidably higher-than-average consumption because they need to keep their home warm or power specialist equipment. The flat nature of the support means that this is not recognised.
• The discount is not indexed in any way. Since its introduction in 2011 the discount has increased from £120 to £150, an increase of 25%. In the same time typical annual bills have risen from £1,118[i]  to £1,755[ii]  today, an increase of 57%. The effective level of support provided by the WHD has therefore dropped significantly since it was introduced.

These issues are well-known, so it is disappointing that action has not already been taken to address them. It is unlikely to be possible to resolve these problems in time for the commencement of the next scheme year. However, both the UK and Scottish Governments should commit as a matter of priority to developing a data strategy to ensure that future affordability support can be effectively targeted, and to commit to reviewing the performance of the WHD on a regular basis to ensure it is effective in reducing fuel poverty.

Question 1: Do you agree with our proposals to continue the Warm Home Discount scheme supporting households at risk of fuel poverty for the next scheme period from 2026/27? Please provide any reasoning/comments/evidence to support your view.

Consumer Scotland’s 2025 Energy Affordability Tracker found that 16% of respondents (equivalent to 393,000 households) find it difficult to keep up with their energy bills.[iii] The proportion of respondents in energy debt has increased to 15%, a significant rise from 9% in 2024. Affordability challenges are particularly acute for some groups, such as low-income households and households with a disability or health condition.

In this context, the financial support provided via the Warm Home Discount (WHD) scheme continues to be very important. We support its continuation.

However, we recommend the UK Government to improve affordability support mechanisms in future. There are stark deficiencies in the current scheme, which remain unaddressed under the current proposals. These include:

• The WHD is a cliff edge support. A consumer either gets it, or they don’t. Consumers who fall just outside the eligibility criteria get nothing, despite potentially being unable to pay for the energy they need.
• There is no link between the level of the discount and consumption. Consumers with complex medical needs will in many cases have unavoidably higher-than-average consumption because they need to keep their home warm or power specialist equipment. The flat nature of the support means that this is not recognised.
• The discount is not indexed in any way. Since its introduction in 2011 the discount has increased from £120 to £150, an increase of 25%. In the same time typical annual bills have risen from £1,118[iv] to £1,755[v] today, an increase of 57%. The effective level of support provided by the WHD has therefore dropped significantly since it was introduced.

The impact assessment for the proposed WHD scheme highlights that it is only expected to reach 45% of fuel poor households from scheme year 2025/26 onwards.[vi] This is in part because many households that are in fuel poverty do not claim a means-tested benefit. For example, the most recent Scottish House Condition Survey in 2023 estimated 31% of fuel poor households would not be considered income poor.[vii]

Further, the current proposals for WHD do not effectively target households that are fuel poor due to “high essential energy usage”. Such households include those with a disability or terminal illness. Consumer Scotland’s analysis of the Scottish Household Survey has shown that disabled consumers whose activity limits them a lot have an associated £124 additional energy expenditure annually when controlling for other potentially explanatory characteristics,[viii] Research by Marie Curie has shown bills can rise by as much as 75% after a terminal diagnosis due to essential energy use.[ix] Despite these costs, the current WHD proposals will not reach such households if they are not already in receipt of a means-tested benefit, taking no account for high essential energy usage as a driver of energy costs.

Poor targeting can also have perverse consequences, where the costs of the WHD scheme increases costs for billpayers that are already struggling. Under the current proposals, the WHD is due to increase to an average cost of £37p/a for a typical dual fuel billpayer.[x] This cost waters down the net benefit for households that receive the discount, and further compounds affordability issues for those fuel-poor households that it does not reach.

A better targeted set of eligibility criteria would need to take account of energy consumption, energy efficiency, and more granular household characteristics. Our research has shown that government and industry-held data is currently insufficient to do this, so work is needed to get it into a position where it can help target fuel poverty support at households that need it.[xi],[xii]

It will clearly take time to make the changes necessary to address these problems. So, we support taking a pragmatic approach to scheme changes for next year. But DESNZ should, as a matter of urgency, be considering what form affordability support should take in the long term. Consumer Scotland recommends that the UK Government, Scottish Government and the regulator commit to working together with industry and consumer groups for periodic reviews of the WHD within the scheme period, for example every 12-18 months, to see where improvements can be made to targeting as data improvements are achieved. A commitment to a periodic review is necessary as consumer groups and charities have raised issues around data sharing, the need for better targeting, and realising the benefits of more granular future data since the last review of the WHD in 2022, though there has been little improvement on improving data targeting since then.[xiii]

There is also an important link between revisions to the WHD and Ofgem’s Cost Allocation and Recovery Review.[xiv] In its review, Ofgem has rightly raised the question of whether a degree of progressive pricing (based on income or wealth) should be introduced to energy bills. However, this type of redistributive policy will require government agreement. We encourage the UK and Scottish governments to support Ofgem’s work and ensure joined up thinking on data and other matters.

Question 4: Which of the three options listed above is your preferred option for the next scheme period in Scotland?

Consumer Scotland has previously called for the introduction of automatic data matching to apply to the WHD Broader Group (that provides support to working-age consumers) in Scotland.[xv] From 2022 to 2025, the application-based design of the WHD Broader Group in Scotland created additional access barriers for eligible Scottish households compared to those in England and Wales, raising concerns about consumer fairness and the suitability of this approach for delivering fuel poverty support. Consumer Scotland recommends that a future WHD scheme in Scotland adopts automatic data matching to improve consumer access to the scheme, and therefore we prefer either Option 2 or 3 for the next scheme period in Scotland.

Consumer Scotland has set out our views on the potential impacts of Options 2 and 3 on consumers based on the information provided, highlighting advantages and disadvantages in response to Question 5. However, the consultation presents limited data on the impact on Scottish consumers to provide a comprehensive view on which should be preferred. Therefore, Consumer Scotland recommends governments provide further detailed impact analysis of Options 2 and 3 before any informed decision can be taken on which scheme should be chosen. We recommend that governments provide comprehensive evidence on the predicted impact of each option on the targeting of fuel poor households, consumer impacts, and distributional impacts.

Question 5: Do you have any views on the advantages, disadvantages or concerns of any of the options presented?

Alignment with Scottish Fuel Poverty Definition: The WHD aims to alleviate fuel poverty. Neither Option 2 nor Option 3 fully aligns with the Scottish definition of fuel poverty. While Option 2 incorporates additional vulnerability criteria that offer closer alignment, it also risks excluding households that are fuel poor, on means-tested benefits, but do not meet the prescribed vulnerability criteria, such as rural households or those reliant on electric heating.

Consumer Scotland recommends that the UK Government clarify how these vulnerability criteria would be operationalised through automatic data-matching. For example, current proposals do not explain how households with children under five would be identified. If consumers are required to self-declare this information to suppliers, this could introduce barriers to access and undermine the benefits of automatic data-matching envisaged under Option 2.

Ultimately, both UK and Scottish Governments should publish impact assessments demonstrating how Options 2 and 3 perform against the Scottish fuel poverty definition to ensure policy decisions are evidence-based and equitable.

Timing of Support: Both Options 2 and 3, with automatic data-matching, offer the opportunity to deliver WHD support during winter when household need is greatest. Under the current Broader Group scheme, suppliers can provide support as late as March, reducing its effectiveness.

Consumer Scotland recommends that any automatic data-matching approach includes a clear commitment to deliver WHD payments between November and January to ensure alignment with peak fuel poverty risk.

Support for Disabled and Terminally Ill Groups: Under the current Broader Group scheme in Scotland, some suppliers extended eligibility to consumers receiving disability benefits but not means-tested benefits. While social security targeting is an imperfect proxy for fuel poverty, this approach addressed affordability needs driven by high essential energy use - such as medical conditions or disability - rather than low income alone.

We recommend that future affordability policies explicitly incorporate this factor and ensure appropriate support mechanisms are in place for households with elevated energy requirements.

Question 6: Do you have any views about the use of a centralised Warm Home Discount helpline for auto matched Scottish consumers in options 2 and 3? Currently only the Core Group receives helpline support.

Consumer Scotland supports the use of a centralised Warm Home Discount helpline for partially data matched Scottish consumers in options 2 and 3. The analysis for English and Welsh data matching highlights that 96% of consumers receive the rebate without needing to take any action.[xvi] While this is the vast majority of consumers, 4% of consumers that are not automatically matched may still include vulnerable households that risk potentially missing out on vital affordability support.

As the helpline already exists in England and Wales, and therefore costs of extending this to Scotland are likely to be minimal, we support the extension of this service to all consumers in GB.

A centralised helpline provides additional benefits to both consumers and stakeholders. Firstly, it ensures that Scottish consumers that are only partially data matched will enjoy the same support as their English and Welsh counterparts, ensuring consumer fairness across GB. It also enables simpler signposting by suppliers and consumer organisations, reducing the risk of consumers being given confusing or erroneous direction.

Finally, we recommend that consumers that receive the initial notification of being only partially data-matched are also given information about relevant energy advice services to speak to for further support. In Scotland, this would include Advice Direct Scotland and the Extra Help Unit. This will ensure that any consumer that needs additional support and advice, especially around affordability matters, can get it.

Question 7. Do you foresee any practical challenges or have any delivery concerns with replacing the Broader Group and its application process in options 2 and 3 with a data matched broader Core Group?

The potential change in WHD eligibility and application process will need to be sufficiently communicated to Scottish consumers to ensure they are fully informed about changes between the scheme years.

The analysis included in the consultation highlights that some consumers who received the Warm Home Discount in previous years may no longer receive it if the Government adopts Option 2 or Option 3. Consumers may rely on WHD support that they are no longer going to receive from winter 2026/27 onwards. To ensure that Scottish consumers are fully informed, and able to plan and budget appropriately, Consumer Scotland recommends that the following steps are taken to effectively communicate the change:

• the UK and Scottish Governments effectively communicate the changes to Scottish consumers as part of a public messaging campaign, working with consumers groups and charities to amplify the message to Scottish consumers
• Ofgem, as regulator of the scheme, requires energy suppliers to notify winter 2025/26 recipients of the WHD of the changes to the scheme in advance of the launch of the 2026/27 scheme.

Question 9. Do you have any concerns about the impact of these proposals, including the three options as presented on households, in particular on those with protected characteristics in Scotland? What concerns do you have? Do you have any suggestions for mitigating your concerns, including through use of Industry Initiatives? Please provide any evidence you may have to support your answer.

Consumer Scotland is concerned that due to the current state of government data, and how useable it is to achieve automated data matching for all consumers in fuel poverty, that the current proposed options in Scotland will not achieve improved targeting of Scottish consumers in fuel poverty.

The proposed eligibility criteria based solely on benefit receipt excludes many low-income households who are fuel poor but not receiving means-tested benefits. The Scottish House Condition Survey (SHCS) highlights that a significant portion (31%) of fuel-poor households are not income poor.[xvii] Such examples include:

Disabled and terminally ill consumers not receiving means-tested benefits: Many disabled individuals have higher essential energy needs but do not qualify for benefits due to household income thresholds. This means that even if they are in fuel poverty due to these higher essential costs they will be excluded from the WHD.

Low-income working families: Households with earnings just above benefit thresholds often face high energy costs but are excluded from WHD due to not receiving qualifying benefits.

Rural and remote island households: These areas often face significantly higher energy costs due to limited access to the gas grid and reliance on expensive fuels like oil or LPG. Homes in these regions also tend to be older and less energy efficient. The Scottish House Condition Survey highlights that the rate of rural fuel poverty for remote rural households (44%) is higher than all other areas except remote small towns (rural or urban) (41%) which had a similar rate.[xviii]

Older people with modest pensions: Pensioners with incomes slightly above Pension Credit thresholds may still struggle with energy costs, especially if living alone or in inefficient housing.

Transitioning to an income-based eligibility model, with robust and integrated data from sources such as HMRC, supplemented with affordability or higher cost indicators such as data from health services, would allow for more precise targeting and reduce the risk of fuel poor households being excluded. If this income data became available, it could be combined with supplier-held energy usage patterns and affordability indicators, to better target and support fuel poor households. Consumer Scotland recommends that both UK Government and Scottish Government commit to implementing a comprehensive data strategy to enhance data quality, accessibility and sharing across government and industry partners, enabling more precise targeting of affordability interventions for fuel poor households.

Question 10. Do you think there are advantages or disadvantages in setting out eligibility separately in Scotland?

The purpose of the Warm Home Discount, as set out in this consultation, is to help alleviate fuel poverty and support vulnerable households with affordability support in the winter. The fuel poverty definition in Scotland is set out in devolved legislation.[xix] There is an advantage to having eligibility set differently for Scotland, ensuring that this affordability measure can better align with the devolved fuel poverty definition and targets. However, it also presents issues around cost efficiency, consumer access and awareness.

Administrative Burden: Due to the previous differing application-based nature of the Scottish broader group scheme, energy suppliers have faced a higher administrative burden to service eligible Scottish consumers than the rest of GB.[xx] This means that the cost to serve Scottish consumers is higher, and therefore less money is available to support affordability initiatives.

Geographical Market Share Challenges: Suppliers with different GB-wide market shares have expressed difficulties with meeting WHD targets, that has an effect on consumer access to WHD rebates[xxi]. Some GB-wide suppliers have a low market share in Scotland and find it difficult to meet their required Broader Group targets. In contrast, those with a larger proportional market share in Scotland have found themselves oversubscribed for Broader Group rebates. This again presents additional administrative costs for suppliers if they have to move underspend into industry initiatives, or oversubscribed suppliers have to signpost consumers to financial assistance through other schemes.

Potential for Consumer Confusion: Stakeholders have previously expressed a concern that the Scotland WHD scheme being different to England and Wales causes confusion among those eligible under one set of the rules but not the other.[xxii]

Question 11: Do you agree that Industry Initiatives should be continued into the next scheme period?

The Industry Initiatives fund plays a crucial role in delivering energy advice and non-financial support, including crisis interventions such as fuel vouchers for prepayment meter users to prevent self-disconnection. For those consumers without a direct relationship with their supplier, such as those living in mobile homes, it also means that they do not miss out on vital support in terms of discounts.

However, we have some concerns relating to the fairness of, and consumer’s access to, the Industry Initiatives-funded Charis Park Homes Warm Homes Discount Scheme.[xxiii] The Charis scheme is application-based and is therefore reliant on consumer awareness of and ability to apply in a timely manner to the fund. DESNZ’ own evaluation of its energy affordability support schemes during the energy crisis (including the Energy Bills Support Scheme (EBSS) Alternative Fund) found that “delivery of application-based schemes was less effective than those delivered automatically, largely due to them being hard to access for some groups and low awareness.”[xxiv] Online applications where individuals struggle with digital literacy can also prove challenging, even where phone support is provided. Anecdotal evidence from the Scottish Confederation of Park Home Residents Associations (SCOPHRA)[xxv] suggests that even where support over the phone is provided, residents can still find the application process challenging and report giving up before completing. Residents have also highlighted that the application process is time consuming and outcomes can be inconsistent. For example, residents who have previously qualified and received rebates through the scheme have been deemed ineligible in subsequent years. This has caused confusion and residents have not challenged the decisions, perhaps erroneously. 

We would welcome consideration of whether in the future it would be possible to automatically data match park homes residents and other domestic consumers without a direct relationship with their supplier for WHD support based on a strengthened understanding of the numbers and types of households who are domestic consumers but are currently on non-domestic contracts, building on work initiated by DESNZ and Ofgem in 2023. Ultimately, this could lead to more efficient and fairer targeting of fuel poverty support, as part of the WHD, but also more broadly in relation to the implementation of new fuel poverty strategies in England and Wales[xxvi] and in Scotland.[xxvii]

Question 12: Do you agree that Industry Initiatives should continue to be designed by individual energy suppliers and third-party partners? What are the benefits and drawbacks of this approach?

Industry Initiatives must be designed based on an understanding of the needs of those to whom it delivers support. Thus, the involvement of advice bodies and other charities, alongside energy suppliers, in its design and implementation is vital.

However, broader questions remain around whether this is the most efficient approach to delivering measurable outcomes in terms of fuel poverty reductions, debt relief, energy efficiency and flexible energy use in line with wider Government policy objectives.

We would like to see more coordination and alignment between Industry Initiatives and the WHD scheme overall with wider fuel poverty, clean flexibility and energy efficiency policy objectives, and reporting that reflects the contribution that WHD scheme is making to eeting these objectives (beyond what is currently reported in Ofgem’s WHD annual report).[xxviii]

Question 13: Do you have any proposals to improve the design and/or delivery of Industry Initiatives in the future? Do you have any proposals for additional activities that would be of benefit to include as permissible Industry Initiatives in the future?

There would appear to be an important opportunity with the redesign of the fuel poverty strategies in England and Wales, as well as Scotland, the rollout out of the Warm Homes Plan and the delivery of the clean flexibility roadmap, to reassess how different policy mechanisms and related activities, including Industry Initiatives and the WHD overall, can contribute to meeting broader policy objectives.

Consumer Scotland would welcome the opportunity to contribute to how this could be done most effectively and propose that DESNZ look to convene a wider set of engagement sessions that could facilitate such conversations bringing together UK, devolved and local governments, advice and consumer bodies, energy charities, suppliers, the regulator and others.

Question 14: Do you have any views on eligibility for Industry Initiatives, or the extent to which energy suppliers should have discretion and flexibility to who they are awarded to within fuel poverty risk groups?

Specifically, Consumer Scotland would propose that going forward Industry Initiatives should be extended to provide rebates to those eligible consumers who do not pay bills directly to energy suppliers beyond those living in park homes (for whom the Park Homes Warm Homes Discount already exists). For example, this would include those tenants on sub-metered systems, consumers on private wire networks, houseboats, travellers on fixed sites, and vulnerable groups in hostel accommodation. This was something discussed in relation to the extension of the 25-26 scheme but not taken forward.[xxix]

DESNZ should consider how this can best be built into the new 26-31 scheme and the budget resource implications of increased eligibility. While the Park Homes Warm Homes Discount could offer a mechanism to do this, there are broader fairness and awareness challenges associated with an application-based scheme (highlighted earlier in this response) that would need to be considered, alongside increased budget. As previously suggested, we would encourage DESNZ to consider the potential to automatically data match this group of domestic energy consumers who do not have a direct relationship with their supplier and to improve data in this area.

More broadly, and building on the response to Q13, we would believe that questions of eligibility and targeting of support should be incorporated into broader reflections on how the WHD and Industry Initiatives could be better aligned with wider fuel poverty, clean flexibility and energy efficiency policy objectives.

Question 20. Do you agree, in the absence of data matching, Scottish spending should continue to be determined as a proportion of expected spending in the England and Wales?

Between 2022 and 2025, scheme funding was allocated based on Scotland’s share of GB meter points (9.4%). This approach did not account for Scotland’s higher prevalence of fuel poverty and greater heating costs, concerns previously raised by consumer groups during the 2022 consultation. At the time, UK Government maintained that differing fuel poverty definitions across GB nations prevented comparative analysis.

Consumer Scotland recommends that, in the absence of data-matching (our preferred approach), UK Government should review whether meter points remain an appropriate basis for funding allocation and explore whether a methodology incorporating fuel poverty rates across nations is now feasible.

Question 24. Do you have any comments on the proposal for allowing rebates notices to be issued after 1 March (31 March for 2025 to 2026) where the Secretary of State is satisfied that an error has occurred?

We support the proposal to allow rebate notices to be issued after 1 March (or 31 March for 2025–26) where the Secretary of State is satisfied that an error has occurred.

Denying redress to households who have missed out on the Warm Home Discount due to administrative error would be inconsistent with principles of consumer fairness, particularly for consumers in vulnerable circumstances who may face barriers to timely engagement or redress.

Further, evidence from Consumer Scotland’s Energy Affordability Tracker shows that a growing proportion of Scottish consumers are managing energy costs not only by reducing consumption but also by borrowing from friends, family, or credit providers, with the proportion of respondents in meeting this broader definition of energy debt rising from 9% in 2024 to 15% in 2025.[xxx]

When borrowing from friends, family or credit providers the financial impact can extend well beyond the winter months. Therefore, if a household misses out on the WHD due to an administrative error, allowing a rebate to be issued after March would help alleviate longer-term financial strain that persists beyond the colder winter months, and provide a fair and proportionate means of redress for these households.

Question 25. During the scheme period between 2026 to 2027 and 2030 to 2031, do you have any suggestions on what further improvements or additions to the scheme we could be exploring?

The effectiveness of WHD and any fuel poverty support is directly linked to the Government’s ability to target the support to those households that need it most. The focus for both the UK and Scottish Governments should be on implementing a comprehensive data strategy to enhance data quality, accessibility and sharing across government and industry partners, enabling more precise targeting of affordability interventions for fuel poor households.

Consumer Scotland recommends that both Governments commit to prescribed periodic reviews of the WHD scheme, for example every 12 or 18 months, between 2026 and 2031 to explore further improvement or additions to the scheme based on improvements to data strategies.

Consumer Scotland is the statutory body for consumers in Scotland. Established by the Consumer Scotland Act 2020, we are accountable to the Scottish Parliament. The Act defines consumers as individuals and small businesses that purchase, use or receive in Scotland goods or services supplied by a business, profession, not for profit enterprise, or public body.

Our purpose is to improve outcomes for current and future consumers, and our strategic objectives are:

• to enhance understanding and awareness of consumer issues by strengthening the evidence base
• to serve the needs and aspirations of current and future consumers by inspiring and influencing the public, private and third sectors
• to enable the active participation of consumers in a fairer economy by improving access to information and support

Consumer Scotland uses data, research and analysis to inform our work on the key issues facing consumers in Scotland. In conjunction with that evidence base we seek a consumer perspective through the application of the consumer principles of access, choice, safety, information, fairness, representation, sustainability and redress.

The Consumer Principles are a set of principles developed by consumer organisations in the UK and overseas.

Consumer Scotland uses the Consumer Principles as a framework through which to analyse the evidence on markets and related issues from a consumer perspective.

The Consumer Principles are:

• Access: Can people get the goods or services they need or want?
• Choice: Is there any?
• Safety: Are the goods or services dangerous to health or welfare?
• Information: Is it available, accurate and useful?
• Fairness: Are some or all consumers unfairly discriminated against?
• Representation: Do consumers have a say in how goods or services are provided?
• Redress: If things go wrong, is there a system for making things right?
• Sustainability: Are consumers enabled to make sustainable choices?

Our response has been framed by our Consumer Principles. Reviewing policy against these principles enables the development of more consumer-focused policy and practice, and ultimately the delivery of better consumer outcomes.