‘(2A) The first purpose is the purpose of requiring, at specified times, the holder of the licence to provide bill payers with specified information in connection with their green deal plans.
(2B) The second purpose is the purpose of requiring the holder of the licence to disclose on request specified information about the payment of energy bills by a person who is, or is to be, the bill payer for a property in respect of which there is, or is proposed to be, a green deal plan.
(2C) The only persons to whom the licence holder may be required to disclose information by virtue of subsection (2B) are—
(a) where there is a green deal plan, the green deal provider under the plan;
(b) where there is proposed to be a green deal plan, a person who is authorised under the framework regulations to act as a green deal provider.
(2D) The licence holder may be required to disclose the information requested only where—
(a) the green deal provider or authorised person states that the request is made for purposes connected with the green deal plan or proposed green deal plan;
(b) the green deal provider or authorised person provides evidence that the bill payer has consented to—
(i) disclosure of the information to that provider or person for those purposes, and
(ii) onward disclosure of the disclosed information to and by other persons for those purposes;
(c) the information relates to a time within the 5 years immediately preceding the request; and
(d) the licence holder has the information.’.
Amendments 46 to 49 seek to ensure that energy suppliers must respond to requests from green deal providers for data on the energy payment history of individuals seeking to enter into a green deal plan. I should make it clear that evidence of customer consent will be required prior to that transfer of data. I will explain the reasons for introducing the amendments.
To make the green deal work we need, a point that hon. Members have raised, low-cost finance at scale at the lowest, most competitive interest rates. The likely route to achieving that will be through the capital markets, issuing bonds backed by the cash flow from green deal customer repayments. Without a track record for green deal bonds, investing institutions will want reassurance about the customers providing the income flows. Since individual customers’ green deal payment history will be short at the likely point of bond issue, their energy payment history will be required to substitute for that. We propose that energy suppliers pass limited payment history details to green deal providers, on request, at the point the customer is considering entering into the green deal plan.
There is another benefit to that arrangement. Green deal providers will have access to credit information about potential customers; for example, through credit reference agencies. However, that will be less accurate as a predictor of ability to repay the green deal than an individual’s energy payment history. It may lead the green deal provider to exercise unnecessary caution, as energy bill default occurs at lower rates than other credit arrangements, such as credit card repayments.
I explained earlier that we do not intend to make energy suppliers liable for defaults. Unfortunately, that weakens their incentive to share information with green deal providers to minimise default risk. By requiring the sharing of energy payment information, with consent, a wider customer pool will be served. That should not be a great burden on energy companies. We will not introduce new data collection requirements. The legislation will apply only to information already held. We intend to enable them to charge for access to data, with a cap on the charge level. I urge hon. Members to support these important amendments.
I hope that the Minister will be able to reassure me on a few concerns that I have about the amendments. I am concerned that they could lead to the cherry-picking of green deal customers by providers, or could result in some customers being asked to pay higher interest rates because they are perceived to be a greater credit risk, based on their record of paying energy bills. The Minister has previously said that the green deal will be available whether people own or rent, and as this is not like personal debt, personal credit ratings are not a factor. That is what the Minister has said in the past. Can he reassure me that the amendments are not a backdoor method of assessing a householders ability to repay? I fear that the amendment could bring that in, and that would be a concern.
No. The hon. Lady is absolutely right. I am grateful to her for raising that point, as it allows me to assure her and others who may take an interest in the issue. I understand why they might think that, but that is absolutely not the point of the amendment. The amendment is designed not to allow individual green deal providers to cherry-pick, on a credit rating basis, who they supply. We have been absolutely clear from the start that one of the great benefits of the green deal is that it is not credit-scored and it is not a conventional form of personal finance. It is not a loan in the conventional way. This has allowed for the overall aggregate package of credit information to be analysed and for the appropriate interest rate to be attached to it, which accurately reflects the overall risk profile of the total package of aggregated green deal customers. It allows a sufficient level of detail to be provided for the bond market analyst to correctly analyse and rate the overall amount of bonds being placed in the market. It is a capital markets mechanism; not one for the individual consumers.
Huw Irranca-Davies rose—
I am a reasonable fellow, so I will. We are not requiring any new data to be collected and will allow the energy companies to make a reasonable charge for data. The reason for collecting the data is to not allow individual properties or customers to be cherry-picked from the totality of data collected. That means that it is possible to offer credit, rather than to assume that all poorer households are bad risk. Personal credit ratings are a key part of this, because the charge is attached to a bill. It is unlikely, however, to affect the rates. The credit analysis will only be used to allow responsible lending.
This is not a way of allowing energy companies to come in and differentiate or refuse a green deal package to any individual tenant or any individual home owner. It is a means of being able to correctly analyse the bundle of credit, before it is put on the bond market, with an appropriate interest rate. I assume that different green deal providers will attract different rates of interest, depending on the overall credit profile of the package that they attempt to bring to the market.
I thank the Minister for that. I appreciate what he has described as the intention of the amendments, but I am not clear whether there is any recourse to penalties or anything else if there is evidence to suggest that, contrary to the intention, the finance providers are cherry-picking.
First, we will be looking, as part of the further detail that we will bring forward in secondary regulation, whether we need to require a flat interest rate, so that there is an inability for providers to differentiate between customers. Secondly, we will not—I am sorry I have lost my train of thought. What was the hon. Lady’s question?
We will look at penalties. That will be within the overall code of practice that affects all green deal providers. They will all be bound by it in the first instance. In the second instance, if they are unreasonably withholding credit, they would lose their green deal status.
To add to the points made by the hon. Member for Brighton, Pavilion, I am not assured by the Minister’s response on unintended consequences either. I am keen to give those 2.5 million customers who are in debt to their energy supplier in some way every opportunity to have the green deal, particularly if, for one reason or another, they do not qualify for the energy company obligation, when the details of that come forward.
I have some questions that I am keen for the Minister to answer. The energy prepayment history is attached to an individual, but the green deal is attached to the property. Will the Minister reconcile how that will work in his amendments? Also, if groups wanting green deal improvements need support, and there are individual properties within those groups, how will that be assessed? Does that make sense?
Not quite, but I will endeavour to answer the first question. The hon. Lady is correct: the broad thrust or underpinning of the whole mechanism is that repayment will be through the energy bill; it is not based on conventional consumer credit. The green deal will be available to all, regardless of status, provided there is a history of paying an energy bill.
The use of credit profiling will help to prevent irresponsible lending. It will be a further aid to the golden rule to ensure that there is no irresponsible lending to households that could not support it. It may also be another way to access the energy company obligation. Some people on very low incomes might be prepared to max out on the green deal, so it is sensible to consider the ability of the most vulnerable to sustain high energy bills, rather than to look simply at the property. That will ensure that the most vulnerable, in particular, will not get unnecessarily into debt and run into the problems about which we are all concerned.
The amendment will help to ensure that credit can be offered equitably, and we need an energy pre-payment history so that the first bill payer is protected. We do not want people taking on energy bill obligations that they are simply unable to pay, because if they are new to a home—if they have just arrived and do not have a history of paying the bill for that property—that situation might arise. That is where the provision is likely to be most helpful. If a tenant or home owner has been in the property for some time, the credit history is clearly irrelevant, as they have obviously been able to pay the energy bill, but if they have just moved into a new home it is sensible to ascertain their ability to pay.
I thank the Minister for that explanation, but it has raised another question. He may have answered it, but perhaps he might make the point clear again. If the interest rate can vary depending on the credit-worthiness of the householder, what happens if a responsible householder moves out and the person moving in has a less robust credit history? Does that mean that, as they negotiate to move into a property, they have to wait to have their credit-worthiness properly assessed before taking on the green deal, because the green deal is attached to the property and not the householder? If a new householder has a very different profile from that of the householder who has just left, how will that vetting or assessment process happen in practice as they buy or move into a new property?
There are two stages, and I agree it is slightly complex. Credit information is relevant only for the first bill payer, particularly where that first bill payer does not have a history of paying the energy bill at the property and a determination has to be made about what will be captured by the green deal and the golden rule. As the green deal is caught by the Consumer Credit Act 1974, there is a responsibility not only to make savings under the golden rule and with the ECO, but to have due regard to responsible lending. After the first individual has taken on the green deal, subsequent bill payers will not have to have their credit checked, because the green deal is attached to the bill, not the individual. People will be able to see the energy bill history before moving into a property; it will be totally transparent. They will be able to ascertain the monthly charges before moving in. If someone is new to a property, there will be an onus on the first green deal provider to ensure that the individual is taking on responsible lending.
Does the Minister foresee a situation in which an agent in charge of letting a property carries out a rent check on a tenant, or asks for a guarantor? Might that in some way encourage a particular tenant to become the second occupant of a property that has benefited from the green deal? Will there be any sub-checking of people who take over arrangements in which a green deal is already in place?
No. There is no subsequent sub-checking liability. From that point on, the green deal becomes an integral, indivisible part of the ongoing energy bill, with any subsequent property occupant enjoying all the benefits of the property’s reduced running costs. That reduction will lower the energy bill, but a charge, for which the occupant will be responsible, will be included in the composite bill.
I wonder what would happen with groups of students in university towns. Parents are usually the guarantors of students’ rent, so I wonder what the impact of that will be. I want to test what happens in that situation, because we will effectively be checking the credit-worthiness of the parents. Students are likely to stay in accommodation for only nine months or so in a year.
No, that is not the intention. The golden rule overcomes almost all those credit questions. Post-green deal, bills should be lower than they were after the green deal. [Hon. Members: “Before.”] Sorry, before the green deal; I am now completely confused. As the green deal falls under the Consumer Credit Act, the first person to take up the green deal will be required to go through the process to ensure that there is responsible lending.
This tool is designed not for the individual home owner, but for the markets, so that they can correctly analyse the risk of potentially hundreds of thousands of income streams that will be aggregated and put on the bond market. It is an enhancement tool for the capital markets, so that they can correctly price debt, hopefully at a much lower cost than would otherwise be the case.
Amendments made: 47, in clause 19, page 15, line 18, after ‘power’, insert ‘under subsection (1)’.
Amendment 48, in clause 19, page 15, line 19, leave out ‘form’ and insert
‘manner or form, or subject to specified requirements or restrictions’.
Amendment 49, in clause 19, page 15, line 19, at end insert—
‘(4) Conditions included in a licence under section 7A(1) of the Gas Act 1986 by virtue of the power under subsection (1) and the purpose mentioned in subsection (2B) may do any of the things authorised by section 7B(5)(a)(i) or (iii) of that Act (which applies to the power of the Gas and Electricity Markets Authority with respect to licence conditions under section 7B(4)(a)).
(5) Conditions included in a licence under section 6(1)(d) of the Electricity Act 1989 by virtue of the power under subsection (1) and the purpose mentioned in subsection (2B) may do any of the things authorised by section 7(3)(a) or (c) or (4) of that Act (which applies to the power of the Gas and Electricity Markets Authority with respect to licence conditions under section 7(1)(a)).’.—(Gregory Barker.)