With this it will be convenient to discuss the following:
‘(baa) requiring the funding for this obligation to be equally available to any Green Deal provider for installing energy efficiency improvements to homes.’.
Amendment 117, in clause 66, page 49, line 46, at end insert—
‘(2A) The power to make orders under this section may be exercise so as to require the funding for this obligation to be equally available to any Green Deal provider for installing energy efficiency improvements to homes.’.
Amendment 118, in clause 67, page 51, line 4, at end insert—
‘(2A) The power to make orders under this section may be exercised so as to require the funding for this obligation to be equally available to any Green Deal provider for installing energy efficiency improvements to homes.’.
The amendments, to various clauses, would all do the same thing: direct attention to what I trust will be a substantial part of the energy company obligation, which is energy efficiency improvements for fuel-poor households, and hard-to-treat properties when the person living in the house is experiencing fuel poverty. In those circumstances, it is likely that the fuel bill savings will be insufficient to pay for the full cost of improvements and so cannot be funded by the green deal alone. The aim of the amendments is effectively to ensure that when someone, through the ECO, has what might otherwise have been a green deal makeover to their home, the work that is done is bid for in an open and fair way, and not monopolised by the utility energy companies.
The amendments arise from the worry that, under existing supplier obligations within certain community energy saving programmes, there seems to be evidence of a difference in the quotations for CESP funding, depending on whether the energy supplier carries out the work in the contract, or the housing association or another party carries out the work and is then funded through CESP. It can be inferred from that that some energy suppliers are paying their in-house contractors a different rate for work that has perhaps not been tendered for competitively. The ECO will be funded by a levy on all fuel bills, and such action is not commensurate with that principle. There is not a level playing field for those who supply improvements under the ECO scheme. We must put a question mark against the extent to which there are uncompetitive practices in how the ECO works that could prevent a healthy market from developing overall for the installation of energy efficiency measures.
The ECO is essential if the green deal is to work in low-income households, and when they cannot afford to heat their homes adequately, green deal improvements will not necessarily just reduce fuel bills, but may enable the householders to heat their homes adequately—a different principle from that under the general green deal arrangements. As people will put a premium on heating their homes adequately, rather than simply saving money on their fuel bills, they are likely to have insufficient resources to repay the costs of the improvements and so will qualify for the ECO.
The amendments will ensure that the best deal is achieved when improvements are needed and provide transparency and a level playing field. In any event, as we have heard, it is unlikely that the arrangements would be the same as those for the straight-up green deal, in relation to procedures for the assessor and the number of quotes to be obtained, particularly in the case of a tenant of another organisation. There should be a level playing field when a first look is taken at the funding for the arrangements; that would give an assurance that the mechanisms that might otherwise have been employed—obtaining an assessment and making sure that it leads to a series of quotes—are built into the process.
The Government’s document on the ECO sets out the relationship between the green deal and the ECO. It states:
“It will not, however, fall to the consumer to bring Green Deal finance and ECO together. We would expect ECO support to be integrated into the Green Deal framework so that where ECO financial support and Green Deal finance combine to deliver improvements, the details are arranged behind the scenes. The consumer will see one seamless package and offer from a Green Deal provider.”
The aim of the amendments is to ensure that the ECO is available for any green deal provider and not monopolised by the big six energy companies, because a monopoly on the ECO could give the energy companies a competitive advantage and enable them to outsell other green deal providers. We want the widest possible range of providers involved in the green deal, but of course we also want to ensure that there is value for money. If the improvements are delivered by a third-party green deal provider, it will be important to ensure that the ECO is cost-effective.
I said in Committee last week:
“The draft document on the ECO”,
prepared by the Department of Energy and Climate Change,
“recognises the need for an open market to ensure the maximum possible scale and range of energy efficiency delivery overall.”––[Official Report, Energy Public Bill Committee, 7 June 2011; c. 70.]
That document states:
“it may be difficult and expensive for smaller Green Deal providers to engage and negotiate with energy companies even when they can deliver energy efficiency improvements very cost effectively. Also, for equally natural business reasons, an energy company might also be a Green Deal provider and might have a preference for funding their own internal Green Deal activity. The company might prefer to provide ECO subsidy to its own Green Deal transactions, as this would allow it to grow the Green Deal side of its business and gain market share (at the expense of other Green Deal providers which had no such access to funding).”
We want to ensure that that does not happen, and that is the purpose of the amendments.
Concern has been expressed by several organisations that the green deal, as it stands, relies too heavily on big corporate names, and favours vertically integrated businesses that will dominate the marketplace from the outset with a one-stop-shop approach, which could be bad for the market and consumers if it leads to less competition.
According to the consumer advice group, Which?, only one in five of the public find their energy supplier trustworthy. Research by YouGov for the Great British Refurb campaign found that 46% of the public trusted their local authority to deliver a green deal scheme, compared with just 28% trusting their energy supplier and only 9% trusting DIY firms or supermarkets. We want consumers, especially those in vulnerable households, to be able to access their ECO via organisations that they trust.
There are strong economic reasons for ensuring that small and medium-sized enterprises have equal access to the green deal market, which we talked about in an earlier sitting. As we know, the construction sector is dominated by small firms that have been hit particularly hard by the recession. Despite some growth, construction activity fell by 4.7%. The amendments would ensure that those small and medium-sized construction companies have an equal opportunity to take part in what will be a fantastic green scheme.
The Federation of Small Businesses has highlighted that, under current proposals, small contractors are already at risk of being excluded from delivering the work, because there is no finance mechanism to allow businesses that are not tied to major green deal providers to offer an alternative service. Energy companies, major retailers and banks could therefore dominate the market, and the choice of providers available to consumers could be reduced. The purpose of the amendments is to avoid that outcome and ensure that there is as wide a market as possible.
The Minister last Tuesday made some important points about the green deal market, and they are worth reiterating in support of the amendments that we are discussing. He said that he wanted a fully engaged small and medium-sized enterprise sector, and added:
“We want to ensure that local green deals really do add value to the local economy.”
He also said:
“The green deal will stimulate the market in the UK, driving growth across the supply chain. We very much hope that there will be opportunities for all types and sizes of company in supplying and installing a broad range of measures under the green deal. We have been working closely with business representatives covering a wide variety of company types and sizes to ensure that our framework can work for as many as possible.”
I reiterate that the purpose of the amendments is to ensure that those words mean something in practice. The Minister said that I was right to highlight that the ECO is critical to a competitive green deal market, and said:
“Additionally, we fully recognise that we need to include in our consultation how best to design the ECO to ensure that we promote an open and competitive market that will make the ECO’s opportunities available, including to smaller local participants.”––[Official Report, Energy Public Bill Committee, 7 June 2011; c. 74.]
I was very disappointed when the Government voted against our amendment on social enterprises, mutuals, charities and non-profit-making organisations. We were sad that the Minister could not support it, but we hope that he will consider the amendment before the Committee, to ensure that the green deal market will be as wide as possible. The ECO will make up a substantial proportion of the green deal market, so all providers should have equal access to participation.
Good morning, Mr Crausby. With your permission and for the benefit of the Committee, before I move on to the amendment, I would like to summarise some of the points from last week that we have followed up, and which are relevant to today’s proceedings. We had a very detailed debate on the private rented sector on Tuesday. As always, I thought it would be helpful if I were to run through the commitments that I made and the progress that I have made since the issues were raised by the Committee.
Several Committee members, including my hon. Friend the Member for Wells and the hon. Member for Brighton, Pavilion, raised a range of important issues about the role of letting agents. I made a commitment to check with parliamentary counsel. They have confirmed that a landlord could not circumvent the prohibition by engaging an estate agent or letting agent, and that those agents would be acting as the agent of a particular landlord in those cases, leaving the landlord liable.
On the substantive issue of marketing, we have confirmed that we already have the powers, when making regulations under the Energy Bill provisions, to include marketing the property. I am not yet in a position to commit to making such provisions, but we have time ahead of secondary legislation to look at that matter in more detail, as we discussed. I assure my hon. Friend the Member for Wells and the hon. Member for Brighton, Pavilion, that we shall do so seriously. I am happy to continue to work together as we undertake that process.
My hon. Friend the Member for Wells and the hon. Member for Liverpool, Wavertree, raised the issue of retaliatory evictions. I know that they feel strongly about it and have taken some time to get well acquainted with the issue. The Committee will be pleased to hear that I have taken the opportunity since Tuesday to speak directly to the Housing Minister, who has confirmed that he is happy for us to set up a joint working group to consider that specific matter and try to garner a new and up-to-date evidence base. We look forward to establishing that group and progressing its recommendations over the summer.
As to enforcement in the private rented sector, the hon. Members for Brighton, Pavilion, and for Ogmore, and my hon. Friends the Members for Norwich South and for Wells, will be pleased to hear that I have already written to the Local Government Association to seek its views, now that we have amended the Bill.
I have also written to the hon. Member for Hyndburn to explain the links between the minimum standards enforcement and the housing health and safety rating system. In short, they may be used in combination to ensure that local authorities have at their disposal the most effective enforcement mechanisms. For example, local authorities already have rights to enter properties under the rating system, where there is an immediate threat to life, to make improvement works and charge the costs to the landlord. I have written to the hon. Member for Ogmore to explain the barriers to further extending such powers of entry. I have also written to the hon. Members for Brighton, Pavilion, and for Hyndburn with more details on tribunals in respect of the tenant energy efficiency regulations.
Lastly, I would like to thank my hon. Friend the Member for Winchester for suggesting using trade organisations to reach a range of non-domestic tenants and landlords to raise awareness of the green deal. Acting on that sensible and creative point, I have written to the Minister with responsibility for business and enterprise, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), to follow through with those suggestions.
I am grateful for the speed with which the Minister has acted on the issues that we raised in Committee; that has been helpful. However, I have read the letter and I am still not clear on one thing, which I wonder whether he will clarify. It is about the role of third parties acting on behalf of tenants. We have established that third parties will be able to make green deal requests on behalf of tenants under the provisions. Will third parties be able to make requests for relevant energy efficiency improvements, and take a case to the tribunal if necessary? There was an issue with third parties acting in tribunals, and we had a big discussion about how complex that could be.
While I have the floor, I will add two small further points. Will the Minister clarify that the request may be made by tenants in privately rented properties of any energy efficiency standard, rather than just those falling below the E rating? Will the measure be open to long leasehold tenants—owner-occupiers in blocks of flats—as opposed to short-term tenants, to make requests of freeholders?
I think that the answer to all the hon. Lady’s questions is yes. I only hesitate slightly when it comes to her definition of shorter rather than longer-term leaseholds, but I do not think that there is a problem there. It is certainly our intention, as I stated earlier in Committee, to have green deal max. The provisions should be deployable in exactly the way she has suggested.
Today we will focus on the detail of the energy company obligation, known as the ECO. As I set out previously, the ECO will be entirely focused on the needs of the lower-income and most vulnerable tenants and property owners, and on hard-to-treat properties. In earlier sittings, hon. Members across parties have spoken powerfully about the importance of the twin objectives of helping the vulnerable and reducing emissions to prevent dangerous climate change. As I have said, we will consult in the autumn on the scale and reach of the ECO and on the balance of the twin, and not always mutually exclusive, objectives. I am sure that the Committee will understand that I cannot prejudge the consultation, but I am keen to hear more of the Committee’s views and to garner as much wisdom in the Committee Room as I can. I will certainly listen and reflect on the contributions.
I would like to follow up on the compliment made by the hon. Member for Brighton, Pavilion, on the Minister’s openness and willingness to respond to questions raised. Is he aware that the hon. Member for Liverpool, Wavertree, blogged on the Politics for People website last week, saying that she felt that the Bill was not “up to the task” of delivering energy efficiency, and that there was a “staggering lack of detail” in the proposals? The Bill is currently in Committee, which is about creating a framework, and the Minister has said that he will introduce legislation. Does he share my sense of disappointment? The Committee has been working extremely well and co-operatively. Does he agree that this might be an opportunity for the hon. Lady to withdraw her comments?
I did see the blog. I was surprised by it, because it directly contradicted the comments that the hon. Member for Liverpool, Wavertree and Opposition Members made in Committee. It was a slight case of Jack in town and Bunbury in the country, but I realise that those comments appeal to different audiences. I hope that we will see a little more consistency in future, but perhaps we should not dwell on that. [ Interruption. ] Oscar Wilde: “The Importance of Being Earnest”—we do not get the class of Conservative Minister that we used to.
I have lost my place.
Perhaps I can help the Minister while he looks for his notes by asking him to write to the Committee to explain that phrase—I have never heard it before.
I refer the hon. Gentleman to “The Importance of Being Earnest”, in which a character takes on one persona when in town and an alter ego when visiting his relations in Shropshire.
I reassure hon. Members that if ECO companies choose to distribute subsidies in fundamentally anti-competitive ways, broad powers in the Bill will tackle that. For example, they will be obliged to deliver their obligation, or a substantive chunk of it, in particular ways. I assure Committee members that when I was in opposition, I spent much time talking with stakeholders and thinking through the nature of the Bill. We have thought about how the new framework would work, what we wanted behind it, and our aspirations for it. My hon. Friends and colleagues have worked with me on the proposition, first in opposition and then in Government. The intention to have more competition to drive a healthy market has always been at the forefront of our minds. We have always intended to introduce measures that not only shatter the idea of the previous Government’s one-provider monopoly, but get beyond the big six and way beyond Warm Front and the carbon emissions reduction target model. This is an ideal opportunity to marry our energy ambitions with the coalition’s localism and big society agendas.
We absolutely intend to ensure that there is a strong and vibrant local alternative, but, by definition, we cannot prescribe exactly what that should be. The local response will be different in different parts of the country and in different communities. We want to create as much diversity and choice in local provision as possible through an overarching, non-prescriptive framework, as well as through underpinning powers that prevent consolidation into one or two market players, which we saw in the energy sector as a whole under the previous Government.
I am not persuaded that it would be right to use the powers before there is any evidence of need. In doing so, we might inadvertently risk putting costs on to ECO companies for no real benefit. At the same time, I fully recognise that green deal providers may be looking for assurance that ECO subsidy will be available on a genuinely and reasonably open basis. That is why my Department and my officials are actively exploring with energy companies, local authorities and a plethora of smaller stakeholders and SMEs the possibility of a mechanism to bring together energy companies and green deal providers in an open market. That would not be dissimilar to the ideas to which the hon. Member for Southampton, Test alluded in his remarks. We are in the same sort of place. I would be interested to explore further with him, outside of the Committee, how that might work in practice. I would welcome his input into our conversations with market participants about creating this framework and an open market where measures for the ECO subsidy are traded via a broker or market along the lines that he suggested. That is exactly what we are thinking.
Obviously we want to ensure that that does not create an additional burden, that it is not complicated to enter and that it is non-bureaucratic, so that we do not simply set up a market mechanism for its own sake. If we could stress-test some of our ideas with the hon. Gentleman, that would be helpful.
The brokerage function that we have in mind, which will form part of the consultation, will introduce transparency and liquidity into the market, as well as having a number of advantages over regulations, although the possibility of regulation would remain as a backstop. I would expect to be able to say more about that specific function and how we anticipate it working in the consultation in the autumn. In light of that, I ask the hon. Member for Southampton, Test to consider withdrawing the amendment.
I thank the Minister for those remarks. We are very much in the same area on the need to ensure that these arrangements are transparent, fair and clearly advantageous across the board to those in receipt of them. On that basis, I will consider taking up the Minister’s kind offer that we look at this further as we go through the process. I beg to ask leave to withdraw the amendment.
I am sorry, my notes were removed from my office the day before yesterday, along with my iPad, so I am slightly at a loss. I am without what I thought I should have.
In assistance and sympathy with the hon. Lady, I will speak briefly on the principle of the amendment, which is worthy. From the wording of the amendment, I understand that it intends that ECO funding should be available to properties not in the green deal plan. We have had a fair bit of debate on that in earlier clauses, so I will not rehearse that again.
The important principle, which the Minister may address in his response, is whether it will be possible for ECO funding to be available to those properties not in the green deal plan. That would extend the ability to be specifically targeted by ECO resources beyond those properties where the green deal is willingly taken up, making a significant impact in particular on those properties that are hit by fuel poverty. I believe that that is the principle of the amendment, and we have some sympathy with it. We do not want the scheme to be restricted to those who would solicit approaches from firms because they are interested in those properties within the green deal. We want it to be targeted. I think the Minister sympathises with that idea, too. The ECO should extend to those properties where a green deal package is neither offered nor sought, but where ECO funding would deliver significant impact. I am thinking particularly of communities in his constituency and in mine, where the ECO could have a major impact. The green deal will be attractive, but the ECO alone would have a much more significant impact.
I hope my contribution reflects the principle of the hon. Lady’s amendment, and I welcome the Minister’s response on whether the spirit of the amendment is what is intended by the Bill.
To follow on from that, I would like the Minister to clarify the situation for those who choose not to take up the green deal or are in hard-to-treat homes. Under the Bill, because what we are discussing involves loans, some people will be precluded from entering into a green deal for one of a range of reasons, such as being greatly indebted. Some people living in F and G rated properties will need assistance, which the ECO might provide even if the green deal is not on offer to them.
I am sorry to hear that things were stolen from the office of my hon. Friend the Member for Wells. I am sure the House authorities will take that matter very seriously.
It is helpful that my hon. Friend has moved her amendment because it allows me to give her explicit reassurance. The amendment would allow the Secretary of State to specify that ECO delivery does not have to be limited to homes that take out the green deal. I am happy to say that the amendment has no practical effect: although a close interaction between the schemes is intended, there is absolutely no legal bar to the ECO being delivered outside the green deal. That may, for example, be the case in some fuel-poor homes, which could attract 100% ECO subsidy. I imagine that is what the amendment anticipates.
There has occasionally been blurring in the minds of some Committee members in previous debates, but one must be clear about the difference between a green deal assessment and a green deal plan. Obviously, before any home accesses the ECO there will need to be a green deal assessment, which is the umbrella name. In the poorest households, however, the tenant or householder could, for reasons to which other Members have alluded, be unable or have declined to take up the offer of the green deal framework under the golden rule of pay-as-you-save.
I cannot conceive of many cases in which no measure would be worth pursuing under the green deal, but I can see that some people might be reluctant to take it on. In such cases it is conceivable that the ECO could be used for any substantial improvements to the home without a green deal package, in the conventional sense, being used. I totally reassure my hon. Friend on that point.
I would like a bit more clarity. Let us take the worst example: a poor parent in a G rated property whose financial problems preclude them from having a green deal loan, but who has three young children who do not deserve to be punished. Theirs might be a hard-to-treat home, which might attract part-ECO, but they would not be entitled to the green deal element because of the parent’s lifestyle. Such a situation arises frequently in my constituency. When young children are involved, how will we help such parents who are precluded from receiving the green deal?
We do not expect there to be many cases in which people are unable to access the green deal and in which there are savings to be made. We must remember that the green deal only works on the golden rule. As a result of green deal measures, bills will be no higher—and ideally lower—in such cases. It will not be a conventional loan.
Many such families will probably be on prepayment meters, so they will be asked to pay as they go, on their own volition, not by direct debit. They will have to go to a payment point to make prepayments. People who use prepayment cards will be precluded from receiving the scheme because the green deal provider will not feel that it will get a return on its investment. If the Minister cannot clarify the matter now, will he say later how the few households he described—and I think there will be quite few in my constituency—will have their issues resolved?
The hon. Gentleman makes a fair point. We are particularly concerned about justice and fairness in relation to prepayment customers. We are working on proposals, which we will bring forward in the autumn, related to the types of groups that he identifies, who have previously been left behind by other schemes and programmes, however well intentioned. We are determined that the green deal will be as inclusive as possible, and that fairness will sit at the heart of the proposals. That is why we are working on a much more detailed response to the issues he raises. I can assure him with regard to a solution. Is it possible, practical, likely that there will be cases such as that, where green deal measures, for one reason or another, are not appropriate or applied, and simply ECO is delivered? Absolutely, yes, and that is specifically allowed for in the legislation. Therefore, we do not believe that the amendment is necessary.
‘(bac) enabling the Administrator to direct a transporter or supplier to structure the funding of its carbon reduction target such that no individual to whom the action may be targeted under subsection (bb)(i) is a net financial contributor to the carbon emissions reduction target.’.
The amendment seeks to introduce what might be termed the equivalent golden rule, as far as ECO and those likely to be in fuel poverty are concerned. I have to say at the outset that it is flawed. If I really knew what I was doing, I would have also put a similar amendment into the next clause relating to electricity markets. However, as Oscar Wilde said, an idea is not responsible for its disciples. Should the Minister be minded to take the idea on board—regardless of the person who proposed it—he will later be able to introduce an amendment to the relevant clause to complete the idea.
The underlying point of the amendment is that ECO will be a levy that affects the bills of those who eventually pay for that levy. There are issues relating to targeted arrangements, particularly for those people who would otherwise have benefited from the green deal and who, as I alluded to in relation to a previous amendment, would perhaps seek the changes, not because they would achieve lower bills under the central green deal, but because they would achieve a better level of comfort, thermal efficiency and heating in their homes. Therefore, the real prospect exists that as a result of those changes, and because of the imposition of a levy, people who have benefited in such a way could end up paying higher fuel bills.
The amendment would direct a transporter or supplier to organise funding of the carbon reduction target that is part of ECO in such a way that that does not occur. There is a variety of ways in which that could be done, and under the amendment it would be up to the transporter or supplier to undertake the necessary work. The Committee has previously discussed whether broader measures, such as rising block tariffs, could be introduced to spread the load arising from ECO in an equitable way. There is a serious concern about people who could go into fuel poverty, because of the imposition of the levy through ECO, to a greater extent than being taken out of fuel poverty because of actions taken under ECO.
There is a serious issue about the efficacy of the targeting that should be part of ECO, as it concerns those people who are in lower income brackets and who may well be or are in fuel poverty. As the Minister has already mentioned that such people are a prime target of ECO, I hope that he will accept the principle of the amendment, at least, and incorporate it into ECO’s implementation.
I appreciate the hon. Member for Southampton, Test raising that point, although it is difficult to be very specific now, when there is still a great deal to be determined about the size of ECO. We obviously need to do that in consultation with the Treasury.
Opposition Members wish to ensure that nobody is put in a situation in which their investment, either through the green deal finance or their up-front contribution, exceeds the savings generated by the measures, or in which the cost of ECO socialised across the whole customer base further pushes customers into fuel poverty. On the latter point, that is very unlikely. The CERT programme that we inherited from the previous Government is far from ideal, which is why we are moving beyond it and why we have reformed it as far as we could for its extension. It is rather opaque; it is not nearly as transparent and easily auditable as ECO will be, but at the moment we estimate that CERT costs about £1.3 billion a year, which averages out at about £45 per customer. We do not yet know the final annual size of ECO, but it is in the range of £1 billion to £2 billion. The important thing about ECO is that unlike CERT, which, as I have said, is more opaque and vague, it is a long-term programme, whereas CERT was initially one year and subsequently three years, and it had a one-year extension. ECO will be a decade-long programme that will give real strategic certainty as it rolls out to the energy companies and to those who are planning programmes predicated on ECO funding being available.
Regarding the regressive nature of funding ECO through a levy on fuel bills, does the Minister acknowledge that DECC’s own impact assessment in 2009 of extending the CERT target found that, in the short term, between 70,000 and 150,000 households would be driven into fuel poverty as a result of additional charges on domestic bills, but only between 21,000 and 31,000 would actually benefit? When we see that order of magnitude, it is clear that if a blanket levy is placed on all fuel bills, it runs a real risk of driving more people into fuel poverty than it pulls out.
The hon. Lady refers to the 2009 proposition concerning the CERT programme, which was inefficient; it lacked the green deal and it was not the ECO. With the combination of the green deal measures and a much greater whole-house approach—a much more ambitious programme of works rolled out at scale—we are dealing with something quite different. I do not know off the top of my head what we expect the numbers to be, but we are alive to the situation. The average combined energy bill is now somewhere between £1,300 and £1,500 for a family in the UK and many have significantly higher bills, particularly if they are in inadequate accommodation. The sum of money that we are talking about is a very small fraction of the overall cost and we have announced several measures to try to ameliorate the overall burden of rising fuel costs, in addition to the long-term solution of the ECO and the green deal.
To deal specifically with the ECO rather than with long-term financing that is wrapped up in the green deal, is the Minister in principle in favour of avoiding a regressive approach as a result of which the ECO element falls, wrongly, on those who are least able to pay? If so, does he intend to introduce measures to address that, or is his argument that the cost will be relatively small and part of a bigger range of things, so it will not have such an impact? That is what he seems to be saying. The purpose of the amendment is to ask whether he can introduce something that will avoid that regressive approach to financing the ECO.
The hon. Gentleman will know that we inherited from the previous Government a raft of measures such as CERT, which were simply levied across the consumer base. That is why, despite the deficit, the Chancellor took the view in his Budget that the renewable heat incentive, for which the previous Government had prepared, should not be funded from a levy on fuel bills. There is a limit to which such levies can be pushed before they become unfair and aggressive. We took the view that it would be fairer, and consistent with the coalition’s commitment to fairness, to fund it through general taxation. Likewise, the carbon capture and storage programme will not be funded by a levy; £1 billion will be funded from general taxation. We are alive to the hon. Lady’s wider point, and we have already taken steps to remove the renewable heat incentive from the fuel bill and on to general taxation, as well as the £1 billion carbon capture and storage programme.
I am grateful to the Minister for his response, and I acknowledge his two good examples of how the Government are trying not to make measures regressive, but why not follow the logic of precisely what he just said? If it does not make sense to put the cost of the RHI and carbon capture and storage on everyone’s bills in a blanket approach, surely more than anything else if we are trying to design a measure to tackle fuel poverty, it makes even less sense to do so regressively. Will the Minister follow the logic of the RHI and carbon capture and storage programme and do the same with the ECO?
Will the Minister also tell me whether his Department will do an impact assessment? He explained that the one I cited dates from 2009 and was with CERT, which was a different system, but what impact assessment is his Department doing, and what will the impact of the ECO be on both products?
I fully understand the hon. Lady’s point, and I think we are in the same place. That is why we have taken these measures. As far as the customer is concerned, whether something is paying for carbon capture and storage, the RHI or the ECO, the bottom line is how much it pushes up their bill. Additional burdens as a result of Government policy push up people’s fuel bills, and we are alive to the fact that we must not keep doing that, however well intentioned the programmes, because consumers are hurting.
I do not want to interrupt the Minister’s flow too much, but I want to pick up some earlier comments. I have mentioned many times outside this Committee the whole business of rising block tariffs. Has the Minister had an opportunity to think about how that might be changed, because it seems so desperately unfair and utterly ungreen if people pay so much for less?
We will come back to that, but on the important issue of fairness and equity, there is a limit, because of the deficit and the tight fiscal situation that we inherited, to the amount that we can shift on to general taxation. We take on board the point, and particularly the irony, that we cannot have a fuel poverty alleviation measure that in itself, even if only at the margin, risks tipping some families into fuel poverty. That is why we will consult on different options for payment as part of the ECO consultation. One option is to use a per-kW-hour-usage basis rather than a blanket basis in the same way as CERT was levied. We are determined, within the boundaries of what is practicable, and without making it too complicated, to avoid being regressive, and to avoid the mistakes of the past.
I know that my hon. Friend the Member for Wells will contribute to the consultation on the ECO, and we will welcome innovative ways in which to create a fairer way of funding the ECO, recognising the constraints and that there is a limit to how much we can shift on to general taxation.
I am also clear that we already have legal powers to require a qualifying measure to adopt a particular financial structure, or to prevent it from doing so. Therefore, the amendment seems unnecessary. For example, section 41A(5)(b) of the Electricity Act 1989 expressly enables the Secretary of State to make provision
“as to the action which qualifies”.
Therefore, the Bill gives us the necessary elbow room to distinguish in that way. I can assure the hon. Member for Southampton, Test that our intention is to design the ECO in the best way possible given the constraints, but we are mindful of his points, and they will inform the consultation and the resulting secondary legislation.
On that basis, I urge the hon. Gentleman to withdraw the amendment.
I thank the Minister for that encouraging response about how the ECO will be levied. I would have thought, however, that a starting point for the consultation should be that the ECO is not levied on a blanket basis. The consultation should not regard that as an option. Levying by kilowatt-hour is an interesting proposition, and I hope that that might be a centrepiece for such consultation. It is important, however, to frame the intention of an equitable outcome in the consultation, so that it does not simply ask what one would like to do across a range of different thoughts. Rather there should be a principle that there is no blanket levy, and there are ways in which that could be avoided. The hon. Member for Wells mentioned one larger way in which that could be done, and there are other methods, as the Minister suggested. It is important that the consultation is framed clearly as to what its outcome should be. I would welcome the Minister’s assurance that that would be the case.
I cannot prejudge exactly—we have not begun to write the document—but I will certainly take the hon. Gentleman’s points on board. It is certainly not our intention to lead the witness or to stifle the debate. We want the consultation to be genuine and to tap into the good ideas out there. I am sure that it will be framed in the best way that we can design to elucidate those sorts of responses. Obviously, we do not want to prejudge, and we must also be careful that choosing one particular option does not result in unintended consequences that the Committee has not yet spotted. That is the point of consultation and engaging with stakeholders.
‘(1) For the purposes of requiring energy suppliers to assist in combating fuel poverty by the reduction of home heating costs and to meet carbon dioxide reduction targets the Secretary of State must within twelve months of the passing of this Act make regulations establishing a scheme requiring energy suppliers to install specified energy efficiency measures in residential properties.
(2) Regulations made pursuant to this section must specify:
(a) the energy measures to be included;
(b) that priority for installation of those measures shall be given to the homes of persons living in fuel poverty;
(c) the carbon dioxide reduction target to be achieved as a result of those measures; and
(d) such other matters that are in the opinion of the Secretary of State required for the setting up and operation of the scheme.
(3) In this section:
“fuel poverty” has the same meaning as in the Warm Homes and Energy Conservation Act 2000.
New clause 39—Supplementing the Energy Company Obligation—
‘(1) The Secretary of State must, within six months of this Bill receiving Royal Assent, report to Parliament with proposals on the ways in which the Energy Company Obligation could be supplemented by—
(a) auction revenues from the European Union Emissions Trading System,
(b) revenues from the Carbon Floor Price, and
(c) such other funds as considered appropriate by the Secretary of State.’.
I want to speak about new clause 39, which is in my name. It drives at the central point that the ECO simply is not big enough and is not set within an overall strategy of eradicating fuel poverty. Not only that, as we heard in the previous debate, unless we go down one of the roads that the Minister has outlined there is a real risk, as it stands, that those in fuel poverty could effectively subsidise the well-off—if those well-off people happen to live in hard-to-treat homes.
The whole debate comes at a time when, following the ending of the Warm Front initiative in 2012-13, England will have no publicly funded energy efficiency programme for the first time since the 1970s. That is serious when we consider the problem of fuel poverty in this country. The bottom line is that the ECO is being spread too thinly. It is being asked to do two different things, which do not necessarily coincide. In other words, the same pot of money is for both treating the homes of the fuel-poor and tackling those hard-to-treat properties, and those two sectors will not always include the same group of people—not by a long way. I urge the Minister to look again at whether the ECO could be fully targeted at the fuel-poor and whether, within that, there could be a special focus on hard-to-treat homes. If looked at in overall terms, a £2 billion pot is not that much when it comes to treating the homes of the fuel-poor. Indeed, the Institute for Public Policy Research has estimated that between £30 billion and £60 billion are required to overhaul the homes of the fuel-poor. There is the contrast between that and an ECO pot of between £1 billion and £2 billion, plus the fact that it will not necessarily be used only for the fuel-poor.
The hon. Lady is not comparing apples with apples with those figures because, over a 10-year programme, the figure would not be £1 billion or £2 billion. If it was set at £2 billion, it would be £20 billion, which is not so very different from the IPPR figure.
I take that point. I did not mean to be misleading. The Minister is right: the £1 billion to £2 billion is per year; the £30 billion to £60 billion is over a number of years. None the less, taking the higher figure, there is still quite a difference between £20 billion and £60 billion and we still do not know how much of that ECO pot will go to the fuel-poor and how much might be diverted to hard-to-treat homes, of which a number will certainly belong to people who are well-off and certainly well-off enough to pay for their own retrofitting and so forth.
The purpose of my new clause is to help the Minister out by suggesting some other pots of money that could be tapped in order to supplement the money in the ECO pot. We should use revenues from the European Union’s emissions trading system and the carbon floor price because those would be more progressive and there would be a certain logic in using the money for those kinds of measures. The new clause would therefore commit the Secretary of State to make a full assessment of the case for the use of EU emissions trading revenues, the carbon floor price and any other funding stream deemed fit to supplement the ECO in order to promote energy efficiency take-up in low-income households where the green deal financing mechanism does not stack up.
The European Commission has itself proposed that at least 20% of the revenues from auctioning of emissions trading permits should be earmarked for a range of climate or fuel-poverty measures. So this would fall neatly into that overall European Union strategy. Until now, the UK Government have not been in favour of the Commission’s suggestion for hypothecation, arguing that it goes against Treasury policy. But that is in stark contrast to many other EU states including Germany, Hungary, Poland and others.
Let me echo the point about hypothecation. The Treasury has always been reluctant to do any kind of hypothecation, but the most successful environmental tax that I can think of is the landfill tax. It was acceptable because the money was seen to be ploughed back into the communities affected. It is one of the reasons why it was accepted and was effective. I know that this is beyond the remit of this—
This Minister and even his Department. However, it would be useful to have a comment from him about hypothecation because green taxes can be made acceptable to the public only if they are transparent and it is clear that one thing is being taxed to make something else cheaper and easier. I echo entirely the sentiment behind the new clauses tabled by the hon. Member for Brighton, Pavilion, even though I recognise that they are beyond the remit of this meagre Department.
Before the hon. Lady concludes, could I say that it is a helpful and modest new clause? She is simply asking the Secretary of State for Energy and Climate Change to report to Parliament on measures that could supplement the ECO funding. That seems very sensible. It does not tie his hands. It is not that he must do anything. I hope that the Minister is sympathetic to the new clause because in view of how limited the pot is at the moment it would be good to look at ways in which it could be supplemented to tackle things like fuel poverty. It is a very modest new clause.
I thank the hon. Gentleman. I am not often accused of tabling modest new clauses, and on this occasion I will accept it as a compliment. He rightly points to an important issue. Many of us have commented on the Minister’s responsiveness to suggestions and proposals. I hope that this will also be viewed as a helpful amendment and that he will be able to accept it, and the Secretary of State will therefore look at other ways to supplement the ECO pot.
I sum up simply by mentioning the seriousness of the situation. We know that 40,000 premature deaths each winter result from cold housing. In the 21st century, that is an indictment of how matters have been organised to date. Earlier in our deliberations, we talked about the film “Poor Kids”. I saw it only recently on iPlayer, but I am sure that all who have seen the programme will agree that we must redouble our efforts to ensure that young people do not grow up in atrocious circumstances, which will damage their life chances. The amendment would give us the opportunity at least to consider other ways of supplementing the ECO. I therefore hope that the Minister will accept it.
I wish to speak to new clause 23, which would ensure that the energy company obligation targets fuel-poor households.
The Minister said earlier that his Department is consulting on the scale and reach of ECO, and that it will have the dual purpose of helping fuel-poor households and hard-to-treat properties, in order to reduce emissions. However, we want ECO to be targeted exclusively at the fuel poor. ECO is paid by energy companies; ultimately, however, it is paid by their customers, including those living in fuel-poor households. It is not appropriate for the funding to be used by able-to-pay customers who live in hard- to-treat homes. There would be outrage if people knew that their ECO levy payments were going to households that could afford to pay for energy efficiency measures. Many fuel-poor households are hard to treat; as the Minister said, however, the two factors are not mutually exclusive. Targeting ECO exclusively at the fuel poor would therefore assist many in hard-to-treat properties.
I am sure that the Committee does not underestimate the scale of the task. The hon. Member for Brighton, Pavilion alluded to the documentary, “Poor Kids”, which I referred to last week. I reinforce the point; if any Members have not seen it, I urge them to watch it.
I continue the theme of the morning that only dull people are brilliant at breakfast, which may explain my next comment. I understand the essence of what the hon. Lady says, but I repeat what I said at an earlier sitting—that many people are property rich and cash poor. Is not the indiscriminate targeting of funds exactly what happened under the CERT scheme?
The point that my hon. Friend was making is that CERT, a levy introduced by the previous Government for the provision of energy-efficient measures, was a blanket levy.
I thank the Minister for that clarification.
As many Members have indicated, we need to learn from the lessons of the past and ensure that we do not repeat our mistakes. That is why we seek to ensure that ECO is as robust as possible, and that whatever is in the pot is used to help as many as possible of those who need assistance. I refer again to the “Poor Kids” documentary.
In this very consensual Committee—there is much cross-party agreement—I want to avoid the suggestion that the CESP and CERT schemes were outright failures. Far from it, they made great inroads in tackling fuel poverty. In respect of the question asked by the hon. Member for Winchester, does my hon. Friend agree that we need to learn how to refine and modify such schemes so that future schemes deliver the maximum benefit, going beyond what previous schemes had achieved despite the fact that they were groundbreakers in their time?
I thank my hon. Friend for his contribution.
I shall speak later about our concerns as to what will be in the ECO pot. As the hon. Member for Brighton, Pavilion said, the great concern is that there will be a gulf between what is in the pot and what is needed to assist those who live in fuel poverty. We want to ensure that the scheme is robust, and that it can help as many as possible of those who need assistance, especially as many energy companies are announcing massive increases in fuel prices, which are set to escalate as the years progress.
National Energy Action estimates that fuel poverty now stands at 5.5 million households, the highest level for 15 years. Different figures, of between 4 million and 5.5 million, have been shown for fuel poverty, but even if the figure were 4 million, that is 4 million households too many that spend more than 10% of their household income on energy bills. Urgent action is needed. Last week, a report by the Institute for Fiscal Studies found that all retired households increased fuel spending by 7% during cold snaps. The poorest 25% of those households also cut their food spending by the same proportion. However, the real tragedy is that things do not have to be that way.
The Government’s fuel poverty advisory group—FPAG—argues that fuel poverty is fundamentally different from other aspects of poverty and financial inequality. It differs significantly from general poverty, as appropriate levels of capital investment can deliver in many cases a permanent and sustainable solution. In January 2010, the Minister of State, Department of Energy and Climate Change, the hon. Member for Wealden, wrote on the Conservative party website that
“A Conservative Government would move swiftly to introduce our policies which will truly eradicate fuel poverty once and for all.”
It is true that the Government have moved quickly, but unfortunately we do not believe that they have been going in the right direction. They have been reducing support for the fuel poor rather than increasing it. In less than a year, the Warm Front scheme that previously provided more than 2 million homes with 21st century heating has been scaled back. We have also seen a cut in the winter fuel allowance by up to £100. The reduction in funding for the Warm Front scheme, which terminates in 2013, is of deep concern, given that heating and insulation improvements represent the most rational and sustainable approach in dealing with fuel poverty.
To echo a point made by the hon. Member for Brighton, Pavilion, when the scheme ends, it will be the first time in 30 years that there has not been a Treasury-funded provision to support those in fuel poverty. It is therefore essential that the Government ensure that the ECO programme does all that it can to meet the target of eradicating fuel poverty by 2016. The Minister and I have had many exchanges across the Dispatch Box at various DECC questions, and he has made some grand claims about the green deal and the effect that ECO will have on fuel poverty. He said:
“The green deal will be the game changer, and it will bring in billions of pounds.”—[Official Report, 16 December 2010; Vol. 520, c. 1035.]
On 19 May, he said that ECO
“is going to be much more effective than any measure that the Labour party introduced.—[Official Report, 19 May 2011; Vol. 528, c. 478.]
We want to ensure that the Minister makes good on those policies.
I was worried when the hon. Gentleman spoke on Tuesday about the 2016 target for eliminating fuel poverty, a target that is still more than four years away. The Government should be doing all in their power to reach that target. He said that the Government must have the means to do so, and that is what ECO could provide if it were adequately enshrined.
There are serious questions about how much funding will be made available through ECO, and whether it will be placed under the DECC levy control framework. Ministers have suggested that funding for ECO will lie between £1 billion and £2 billion a year, but we are still waiting to hear whether ECO will be placed under the same framework levy that must fund feed-in tariffs, the warm home discount and renewable obligations.
May I suggest to my hon. Friend that, recognising the difficulties that the Minister has outlined repeatedly about the financial package at the moment is exactly the reason why not only our amendments should be supported, but the amendments tabled by the hon. Member for Brighton, Pavilion? That would give the Government the opportunity to consider alternative sources if their hands are tied at the moment.
Indeed. We have seen signs in the past from the Government that the decision of the Office for National Statistics could be six months or many years down the line. On that basis, I would support the amendments tabled by the hon. Member for Brighton, Pavilion, and I hope that the Minister will consider the point. Can he confirm that, if the ONS determines in six months or a few years’ time that ECO should be placed under DECC’s levy control framework, it is unlikely that the level of ECO funding available would be above what is spent currently on CERT and CESP? If that is so, DECC will spend most or possibly even all the new ECO on carbon reduction rather than support for the fuel poor.
I suggest that that is also one of the fundamental challenges that the Minister now faces. I am conscious that he has said the Government will do everything possible within the limits that they have. However, given the point that my hon. Friend raises about feed-in tariffs and other things that fall within levy funding schemes, the Minister will, potentially, have a pot of the same size with many more demands on it, which will put him in difficulty in achieving what he wants on fuel poverty, microgeneration and everything else.
We are of course very concerned; in previous discussions the Minister has indicated that if the Office for National Statistics were to determine that ECO should fall in the levy framework he would seek to get the levy ceiling increased, in discussions with the Treasury. However, there is no commitment or definite confirmation from the Minister that that will happen, and we are concerned about what will be in the pot.
Significant concerns have been raised about how effective ECO funding will be if it is not targeted at the fuel poor. We received some written evidence from the End Fuel Poverty Coalition, which argued that if it is correctly designed
“the new Energy Company Obligation can make a significant contribution to a radical overhaul of the housing of vulnerable and low income households, however, the Government's current proposals will result in the ECO being spread too thinly.
Ministers intend for it to not only help the fuel poor but also subsidise expensive energy efficiency measures in households which are not fuel poor. ECO resources will be inadequate to achieve either of these objectives, let alone both.”
The Government’s draft ECO document clearly sets out those two key aims, saying that ECO will be entirely focused on the needs of lower-income people and those who are most vulnerable, and the properties that need the next most cost-effective measures that do not meet the golden rule, such as solid wall insulation. It states that in view of the scheme’s twin objectives, the powers under the Bill allow the establishment of two distinct obligations, one of which is set in terms of carbon emissions reductions, while the other is focused on reducing the cost of heating. It calls that an affordable warmth target.
I suspect that the Minister may be minded to reject the amendment, on the basis that those two aims would not be achieved without ECO funding extending beyond the fuel poor. However, that may not be the case. The Minister said on the first day of the Committee’s proceedings:
“Many of those in fuel poverty live in these houses that are hard to treat.”––[Official Report, Energy Public Bill Committee, 7 June 2011; c. 63.]
In fact, there are currently about 1.9 million fuel-poor households living in solid-walled homes in England alone. The Energy Bill impact assessment estimates, in its high scenario, that that there will be 670,000 solid-wall installations by 2016, so there are more than enough hard-to-treat fuel-poor households to ensure that that estimate is met.
Since we are currently carrying out only between 20,000 and 30,000 solid-wall installations per year, a limiting factor is likely to be industry capacity, not the availability of homes. Clearly, there is a real opportunity to achieve a reduction in fuel poverty and improve a significant number of hard-to-treat homes at the same time.
On the first day of Committee debate the Minister also said:
“Ultimately there will be a finite resource in any given year, and we must ensure that it is used effectively and that there is both a carbon element and a social element to it.”––[Official Report, Energy Public Bill Committee, 7 June 2011; c. 63.]
The amendment would be a win-win for the Government, allowing them to achieve those dual aims. In addition, delivering solid-wall insulation to fuel-poor households, through a full or high subsidy, is likely to have a knock-on benefit. The guaranteed take-up of full ECO funding would be likely to lead to quicker market maturation, and as a result the price of the measures would fall more quickly.
There is clearly a need for the Government to provide a significant level of support to low-income and vulnerable households. The amendment would ensure that those in the greatest need would be prioritised, so that they could benefit from the £488 that the Energy Saving Trust estimates they would save on their fuel bills by upgrading their homes above an F and G rating. Everyone in our society should have the right to live in a properly heated home. The Minister said that the proposals would be a game changer for fuel poverty. That is what the amendment is designed to be, and on that basis I hope the Minister will accept it.
As far as levies and imputed taxation are concerned, I am afraid that the landscape for the Minister’s ambitions for ECO is even worse than has hitherto been thought. The problem we start with is that, because ECO is likely to be classified as imputed tax by the ONS classification committee, it is likely to come within the Treasury’s proposed cap. I believe the sum total in the present spending round is £11.8 billion, including renewable obligations, feed-in tariffs and the warm home discount.
It is a matter of some conjecture, and I would say hope, rather than certainty, on the part of DECC that, should ECO be classified in the way I have described, the Treasury will kindly add additional room in the building of its cap to accommodate it, rather than simply saying, “Within the present spending round DECC will have to find the money it wishes to put into ECO from the £11.8 billion in the overall cap.” It would be nice to think—I sincerely hope this is the case—that there is a document in a safe somewhere that says, “Yes, for certain, DECC can have extra headroom in the cap we, the Treasury, have imposed on spending so that the ambition for, say, £2 billion a year for ECO can be accommodated within the overall cap,” signed “G.O.” at the bottom. The cap would then be £17 billion, rather than £11.8 billion, which would be generous of the Treasury under the circumstances. But the Treasury is not renowned, and certainly not under present circumstances, for its generosity in amending its caps in such cases.
There is a looming problem, to which a solution may exist, with the ambition of getting the level of the ECO to between £1 billion and £2 billion, as the Minister describes, within the present spending round. What is worse is that the present Treasury cap is generally regarded as including those things that the ONS has already declared to be within the category of imputed tax, which is not the case. Only one of the three things that are presently within the Treasury cap, and therefore in which the ECO might fall, has been declared by the ONS to be imputed tax and spend; the other two—FITs and the warm home discount—have unilaterally been declared by the Treasury, without reference to the ONS, as being imputed tax. That suggests that, rather than simply waiting for the ONS classification committee to come along and decide whether something is imputed tax, the Treasury is taking a far more draconian view. Under those circumstances, the idea that the Treasury would provide a generous new ceiling for imputed tax seems worryingly uncertain.
The last problem of Pelion and Ossa is that CERT has now been referred to the ONS for classification as imputed tax and spend.