New Clause 19

Climate Change Bill [Lords] – in a Public Bill Committee at 10:15 pm on 8th July 2008.

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Carbon emissions reduction targets: obligation to cooperate

‘(1) The Secretary of State may by regulations—

(a) make provision requiring energy suppliers to cooperate with responsible local authorities in the preparation and delivery of relevant local area agreements, and

(b) make provision as to the arrangements for such cooperation.

(2) The Secretary of State may by regulations—

(a) subject to subsection (3), make provision requiring energy suppliers to make such contribution as may be determined by the Secretary of State in respect of measures to achieve carbon emission reduction targets,

(b) make provision as to the arrangements for such contribution, in particular as to the restrictions upon energy suppliers in including any element of such contribution in charges to consumers.

(3) The contribution referred to in subsection (2) shall not exceed an amount equivalent to the sums raised through relevant consumer contributions made to energy suppliers.

(4) In this section—

“energy suppliers” shall mean persons who are gas transporters or gas suppliers for the purposes of the Gas Act 1986 (c. 44); and persons who are electricity distributors or electricity suppliers for the purposes of the Electricity Act 1989 (c. 29);

“responsible local authorities” shall be as defined in section 103 of the Local Government and Public Involvement in Health Act 2007 (c. 28);

“local area agreement” shall be as defined in section 106 of the Local Government and Public Involvement in Health Act 2007;

“relevant consumer contributions” shall mean those contributions made to energy suppliers by consumers in respect of Carbon Emission Reduction Targets as permitted by the Climate Change and Sustainable Energy Act 2006 (c. 19).’.—[Dr. Whitehead.]

Brought up, and read the First time.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

I beg to move, That the clause be read a Second time.

The purpose of the new clause is to suggest that the framework of the Bill be augmented by a number of practical measures. I believe that the carbon emissions reduction target programme is a superb addition to the armoury of action as far as climate change and energy efficiency are concerned. The resources of both the Government and energy utilities may be directed towards providing energy efficiency in homes. There is a process to ensure that fuel bills are lessened not by undertaking to provide assistance with payments, but as a result of changes to the way in which houses operate. The insulation of walls and microgeneration devices will lessen energy bills over a long period of time.

The new clause suggests that the CERT programme could be augmented and made even more effective by requiring utilities to contribute the amount of money that consumers are paying as a result of the programme, which is an average of £33 over the next few years. Utilities could place that money into an additional programme to ensure that energy efficiency was at its maximum in terms of changes to the way that households work. That could be done by ensuring that local authorities take the lead in identifying and undertaking work that can bring about energy efficiency.

With the contribution of the energy companies and the Warm Front programme, a range of programmes could be brought together to ensure that energy efficiency worked as well as possible. New clause 19, as hon. Members can see, would require energy suppliers to contribute that proportion of funds—the £33 per consumer—to the process. Therefore, the money, in addition to the £150 million that the CERT programme  has already started to contribute towards the process, will be augmented by several hundred million pounds over a period of years, through the contribution of energy companies—utilities—to the process.

One of the key targets of the Climate Change Bill is that we move permanently to a low-carbon economy. The success will be judged by whether that low-carbon economy works on a permanent basis, ensuring that we can live a life something like that which we live at the moment, but on the basis of a quantum reduction in carbon emissions as a result of our energy activities. That will be brought home, literally, by the preparation and retro-fitting, as it were, of homes across the country securing their domestic energy supplies on that low-carbon basis.

I anticipate that the exact wording of the new clause might not completely find favour, but I offer it as a structure for how we might proceed in making a real change, as a result of the Bill, to set us on the path to at least a firm low-carbon domestic economy. That, after all, accounts for something like 40 per cent. of the consumption—particularly in heat—in our energy economy. The new clause could make that substantial change to how those households work. I might add, in terms of the targets that the Government have set and continue to stand by, it would make a substantial contribution to the amelioration of fuel poverty by changing the basis on which people pay their energy bills. No longer would they be, as it were, a funded player in an energy market where prices inevitably are going to remain high, but they would have in their homes a facility to reduce their energy bills. They would have in their homes the equipment, devices and insulation, supported by the energy utilities, that would mean that their energy bills would stay permanently lower, with the savings that that would represent.

Photo of Gregory Barker Gregory Barker Shadow Spokesperson (Environment, Food and Rural Affairs) 10:30 pm, 8th July 2008

The new clause is interesting. At a time of an unprecedented rise in household energy costs, we must examine all options available to us to help bring down the cost of heating and the electricity bills for hard-working families, particularly those who live in fuel poverty.

It is, I am afraid, an indictment of the Government that 2.9 million people are still living in fuel poverty in this country. Bill payers already contribute £500 million a year to the alleviation of fuel poverty, through the carbon emissions reduction target. However, it is worth putting on record how inefficient much of that £500 million spent is. I thank the Local Government Association for the sterling research that it has carried out in this area and published in its report, “Switched Off, Switched On”.

Three central flaws were found with how the CERT process is run. First, as there are numerous suppliers serving the same areas, there is a lack of systematic area focus, which often means that vulnerable people in homes in need of insulation are left out because of the haphazard nature of the programme. Also, as suppliers are working towards meeting specific targets, once those targets are met the insulation programmes sometimes instantly stop, leaving a job half done.

Secondly, part of the £500 million CERT fund is spent on advertising the schemes and targeting houses that are eligible for upgrades. That results in a duplication of effort and wasting money, which would be far better spent providing insulation for the homes in most need.

Thirdly, a lack of accountability means that, while the insulating contractors are spending public money, they are only accountable to Ofgem, not to the householder in whose home the work is being done. For those reasons, I am happy to support new clause 19, which would require energy suppliers to work more closely with councils in targeting areas where fuel poverty is most severe.

Photo of Gordon Banks Gordon Banks PPS (Rt Hon James Purnell, Secretary of State), Department for Work and Pensions

I do not know whether the hon. Gentleman is aware that monitors, which can be placed on the electricity box, have been distributed in Scotland, possibly by the energy companies. The monitors send a remote signal to a screen that tells the householder their usage by the minute or the hour. When somebody switches something on, they can see the growth in usage. That is significant in making people aware of how much they are spending on electricity for their appliances. Does he agree that it would be worth expanding that scheme UK-wide?

Photo of Gregory Barker Gregory Barker Shadow Spokesperson (Environment, Food and Rural Affairs)

Absolutely, a far more ambitious roll-out of smart meters, the technology to which the hon. Gentleman is referring, would be ideal. However, that is not central to the new clause.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

I remind my hon. Friend that that was a proposal of the Quality of Life Policy Group’s report, which we presented recently, and one of the criticisms in it was that the Government have had the opportunity of rolling out the technology under current legislation, which was introduced by the Liberal Democrats and went through the House of Commons, but which the Government still have not implemented. If they had done that 10 years ago, the whole country would have smart metering today.

Photo of Gregory Barker Gregory Barker Shadow Spokesperson (Environment, Food and Rural Affairs)

Indeed, once again we have simply come back to the lack of ambition, drive and pace of Government progress. Let me come back to the point in hand. As a Conservative, I think that, where at all possible, local affairs should be organised and run locally, not directed centrally. This is a prime example of where more local co-operation would mean better value for money and a better quality of service for those families most in need of insulation and help.

Councils and other local authorities are best placed to engage with fuel poverty; they know the local area better than the energy companies do and, as a recent YouGov poll showed, 89 per cent. of British people feel that they are being ripped off by energy companies. One suspects that people will trust their own council more than they trust many of the energy companies. I would be interested to hear what the Minister has to say about those flaws in the CERT programme, identified by the LGA in its report, and what his response is to the eminently sensible proposals in new clause 19.

The new clause also deals with the emotive issue of what to do with the estimated £9 billion windfall, which energy generators have made from the first phase of the EU ETS. The chief executive of Ofgem, Alistair Buchanan, said in a statement earlier this year:

“This windfall is nothing to do with collusion or anti-competitive behaviour, but stems from the free emission permits given to companies. That is why Ofgem is renewing its proposal that this windfall could be used to help customers in fuel poverty, who have been hardest hit by the recent energy price rises.”

The proposal in the new clause that energy suppliers match the £500 million in investment with an equal amount drawn from their own funds not passported through from customers’ bills, is certainly an idea that warrants the Government’s attention, although there are arguments against it, of course. I am looking forward to hearing what the Minister has to say about it. We must be mindful of the caveat that there is no point in legislating for such a requirement, if the cost will simply be passed back to the consumer again. This is no time to be adding additional burdens to the electricity, gas or heating bills of householders. That is where Alistair Buchanan and his Ofgem team come in. They will ensure that that does not happen. The Government would have to ensure that Ofgem had the regulatory powers to police that effectively.

This is an important and timely new clause. I hope that it will encourage the Minister to address some of these issues. It could make a qualitative difference to the everyday lives of the nearly 3 million people living in abject energy poverty in the UK today.

Photo of David Chaytor David Chaytor Labour, Bury North

If hon. Members were delighted that my hon. Friend the Member for Southampton, Test chose to move the motion after the House adjourned, they will be even more delighted that one or two other Members want to speak. I will be very brief, but I want to speak in support of the principle of the new clause because it emphasises the importance of reducing demand as a solution to the problems of energy supply, as well as to climate change. It also introduces the importance of the role of local government in delivering policies to alleviate climate change. Too often in recent years, the role of local and regional government and of the devolved Welsh Assembly and Scottish Parliament have been overlooked.

I will use the new clause to raise an issue that I hope the Minister will take up in his response, and that is the role of local area agreements in delivering climate change policy. Within the new performance indicator regime, there are 185 performance indicators, only three of which are directly relevant to climate change and none of which is compulsory in the local area agreement system. I think that that point will be highlighted in the latest report of the Environmental Audit Committee, which examines the role of local and regional government in delivering climate change policy. Will the Minister discuss the range of performance indicators with his counterpart in the Department for Communities and Local Government with a view to reconsidering whether the three out of 185 indicators are sufficient to make a meaningful difference in the way in which local government pursues the climate change agenda?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

I add my support to the new clause. The scale of fuel poverty that we face and that we will face when the next round of gas and electricity price increases comes through, is far worse than the hon. Member for Bexhill and Battle indicated. The scale of fuel poverty is always understated by the figures because they are always years out of date. There are big fuel price increases coming down the track. As has been said, it is vital that,  rather than solely help poor people to pay soaring bills, we tackle the demand side and do something about the soaring bills. That is why I welcome the new clause.

I want to home in on one aspect of the existing programmes that was touched on by the hon. Member for Southampton, Test. It relates to the current structure of the Warm Front programme and the CERT programme. The new clause is preferable because of the integration with local government and the idea of neighbourhood-based initiatives. My worry is that the balance in the spending on home insulation and energy efficiency programmes is overwhelmingly on piecemeal, individual-based schemes.

Warm Front is a good thing, but individuals have to hear about it and apply individually. It is very time and energy intensive to find the right people and to get the programme to individual households. Likewise, with the CERT obligation, energy companies have to identify vulnerable households and we know the problems with that. Again, it deals with a house here and a house there. Some are geographically concentrated, but some suppliers are nationwide. It feels incredibly inefficient.

The worry about all such initiatives is the gaps. One can think of the types of households that are hard to reach: houses in multiple occupation, those in more rural and remote areas and old houses that are hard to heat and insulate. Only an area-based approach would address all those categories. I want the new clause to lead local authorities to work with the energy companies to sweep through whole areas, to take owner-occupied, social-rented, owned-outright, fuel-poor, non-fuel poor, old and young households and get on with the process of insulation and energy efficiency in a systematic way. The piecemeal schemes have done their bit, but it is now time to be systematic. When I raised the matter with the Under-Secretary of State, the hon. Member for Lewisham, Deptford, she said that the Government had a budget for area schemes, but my sense was that their budget for area-based initiatives was tiny in relation to the cost of Warm Front and the cost of the CERT.

In my judgment, the balance needs to be completely swapped over because the time for one here, one there—in a world of scarce energy, soaring energy prices and the need to tackle demand—has gone. I warmly welcome the sweep and ambition of the LGA’s proposals, and I hope that the Government will respond sympathetically to the new clause.

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs 10:45 pm, 8th July 2008

My hon. Friend the Member for Southampton, Test who spoke to the new clause, backed up by the Local Government Association, is on to a policy that carries a lot of merit. I shall explain our support in principle for the thrust of the policy as well as the specific problems that we have with it at the moment. Of course, the Government recognise the crucial role of local authorities in helping to tackle energy demand from existing homes, both social housing and private, to which my hon. Friend the Member for Bury, North referred. Local authorities have a unique relationship and have the best knowledge of where the housing need is situated.

Indeed, the best partnerships for tackling emissions through homes, and fuel poverty, are when the schemes join together. I point the Committee to Easington in  County Durham where the local authority and Warm Front have a partnership that has identified not only the heating system in every building in the district, but the number of radiators, the type of radiators, which have been done and which have not been done. It has a database to that effect.

Photo of Joan Walley Joan Walley Labour, Stoke-on-Trent North

When my hon. Friend comes to Stoke-on-Trent in the not too distant future, will he say a little about the way in which the local agreements actually work?

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

I am grateful to my hon. Friend, and I shall fulfil that pledge before the recess.

Having steered local government legislation through this place, I am in a unique position to respond to the point about local area agreements. I shall explain the architecture briefly. There is, in fact, a suite of 235 performance indicators set down by the national Government in agreement, including the children and young people’s indicators, some of which are compulsory as we would expect. However, the suite of performance indicators from which local councils can choose, as part of their local area agreements in conjunction with other public sector departments, including central Government Departments, is voluntary, as part of the devolutionary move that the Government have made. Within that are a few indicators, two specifically on climate change.

The first indicator is for the local authority to address its own emissions, activities, buildings, social services, transport and so on. The second more important indicator is for the local authority to take responsibility for the whole of the emissions in its area. I am delighted to report the high numbers of local authorities that have chosen to include climate change performance indicators in their agreements. I stress that 99 per cent. of local area agreements—and all of them are signed off—now include at least one of the two climate change mitigation indicators, and 100 out of the 150 include targets relating to the per capita emissions throughout the area. There is a huge thrust of support for the argument of my hon. Friend the Member for Southampton, Test.

The targets are not compulsory, but the argument put specifically by the hon. Member for Northavon is that the economies of scale of retro-fitting UK housing point towards geographical area-based schemes. The cost of retro-fitting, which goes back to his point, is incurred in the visit, not the kit. In social housing one can get around that by having state-wide schemes, although I am not saying that they are without problems. One has to counter against that the energy market that we have. I say to the hon. Member for Bexhill and Battle, who is substantially younger than I, that, regarding where this energy market comes from, the response is, “Tell Sid”. Had we not told Sid we would not be here now, we would have probably finished the retro-fitting by now, but I tease the young gentleman.

The Committee should not underestimate the work that has been done already in retro-fitting homes. It is not a small exercise that has already been completed. It was this Government who introduced the energy efficiency commitment scheme in 2002, so some of the criticism is a bit rich, but perhaps I am getting old and grumpy at this time of night.

The difficulty comes in the nature of the energy market. We have placed a greater obligation on the CERT scheme to provide for retro-fitting—[Interruption.] I have completely lost my thread. My Whip is questioning my age; she is being kind, I think. The obligation to help vulnerable households has been increased in terms of the total number, with 40 per cent. of the £1.5 billion aimed in that direction. There are two difficulties, however. First, my officials, in preparation for this debate, have talked to the energy regulator, the Office of Gas and Electricity Markets. Under the existing framework for the energy market, there is no way that we could guarantee that the new clause as it stands would not simply put up the prices to consumers. There is no way of achieving the desirable objective that my hon. Friend the Member for Southampton, Test outlined, which is that the costs should be passed on to the company rather than the consumer. That would be one thing that we would need to look at in the run-up to the successor to CERT, as we take this debate forward.

Secondly, the new clause would apply to all energy companies, whereas CERT applies to the six major energy companies, so there would be an unintended consequence. There is no doubt, however, that the partnership approach under the new devolved performance indicator regime, using the Warm Front, CERT and other programmes, is a good one. The hon. Member for Northavon was kind enough to mention the sums of money specifically and he is right that it is a big sum of money—about £6 million—but compared with CERT it is not a huge sum. There is much merit to the campaign and to the new clause, but there are specific difficulties that would have unintended consequences, given the current legislative framework under which we are working. That is why I accept the spirit of the new clause, but would ask hon. Members to consider the specific practicalities.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

I am pleased to hear from my hon. Friend that he is encouraged by the spirit of the new clause and the partnership that is at its centre. I also endorse what my hon. Friends and hon. Members have said about the difference between schemes where individual homes are retro-fitted, however well that may be carried out, and the extent to which energy companies are searching out those homes in order to undertake CERT activity. The possible area arrangements would involve local authorities, with their knowledge and understanding of their communities and the conditions of homes there. Such an approach to the energy efficiency of homes would represent a quantum change in how the carbon outputs of our homes must operate in the next few years.

I might add that my conversations about the new clause have concerned not just the role of local authorities. Registered social landlords would be keen to undertake such activity, in association with local authorities, to ensure that we have warm and energy-efficient homes, which are using less energy and not more, so that bills reduce rather than increase as the warmth, insulation and energy efficiency of homes increase. I consider myself encouraged by the response of my hon. Friend the Minister, who, I imagine, will go away and look at the drafting of those small bits of the new clause that do not quite add up, eliminating those and producing a perfect result. That could ensure that such a scheme  becomes a reality, at the next stage of the Climate Change Bill. Therefore, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.