Energy Company Obligation — [Nadine Dorries in the Chair]

– in Westminster Hall at 2:30 pm on 11th March 2014.

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Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport) 2:30 pm, 11th March 2014

It is a pleasure to serve under your chairmanship for the first time, Ms Dorries.

I am pleased to have secured this debate on an issue that is affecting literally thousands of my constituents and, I know, many more thousands of people in constituencies up and down the country. The debate is timely because last week the Government finally published their consultation document on the future of the energy company obligation.

I do not intend to focus on the Government’s impact assessment, because I want to speak about the effect that changes to the energy company obligation are having on my constituents in Nottingham South right now—constituents such as Ilona, one of the people in fuel poverty that the energy company obligation was designed to help.

Sitting suspended for Divisions in the House.

On resuming—

Photo of Nadine Dorries Nadine Dorries Conservative, Mid Bedfordshire

The debate will now finish at 4.26 pm. That means that we will start the wind-ups at 4.5 pm, if that is okay, which gives everyone else an indication of how long they have to speak.

I call Lilian Greenwood to speak.

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

Thank you, Ms Dorries for calling me to speak.

I was speaking about my constituent, Ilona. She lives on the Wollaton Park estate in one of the 500 “white bungalows”, or Crane Composite houses, that were built in the 1920s by the Nottingham Corporation as part of a bold experiment in new building techniques. The bungalows are specially constructed, with steel frames and pre-cast concrete walls. They are really distinctive and are now part of a conservation area. However, they are cold and hard to heat.

Ilona suffers from fibromyalgia and chronic sinusitis, and she desperately needs a warm house; what she has is a cold and damp house with terrible mould problems. Her landlord, Nottingham City Homes, says that the only way to make her house really warm is solid wall insulation. Since the changes to the energy company obligation, that possibility has become more distant.

Kate lives about a mile away from Ilona on the Lenton Abbey estate, which was built by the council in the late 1920s. The 900 houses on the estate are of conventional brick construction. However, as was normal practice at that time, they were built with solid walls, so there are no cavities that can be insulated. About 500 of the houses are now privately owned, with about one fifth rented out. Kate says that since NCH fitted new doors—front and back—to her house, it has been noticeably warmer. However, her house is still cold and difficult to heat, and she worries about her bills. Lenton Abbey is one of the neighbourhoods that NCH had prioritised for energy efficiency measures under its greener housing scheme. However, the changes to the ECO mean that acting on those plans may now be years away.

Ennis is in his 80s. He lives across the River Trent in Clifton. The local claim that the Clifton estate was once the largest council estate in the country may be open to question, but there is no doubt that Clifton is a large example of the post-war drive to build. It is said that the Wimpey “no-fines” construction method of concrete walls allowed for a construction rate of 30 homes per week. Unfortunately, despite the fact this design type was popular across the country, the resulting homes are poorly insulated. NCH manages more than 1,200 of these properties in Clifton, but there are more than 3,500 similar privately owned former council homes whose residents exercised their right to buy but now face the same problems as Ennis—cold, damp homes and high fuel bills.

Ennis has seen his neighbours on the Clifton estate benefit from solid wall insulation, thanks to Nottingham’s pilot greener housing scheme, which was launched in the north of the estate last September. He has heard what a difference insulation has made to his neighbours’ bills, and how warm and cosy their houses now feel. He has also seen how good the insulation looks, as hundreds of tenants and owner-occupiers alike have taken up the offer of solid wall insulation provided by the scheme during the past six months.

Sadly, for Ennis the future is uncertain, because he lives in the first street in the southern half of the Clifton estate. The scheme was due to launch there in January, until the changes to the ECO that were announced in December allowed the funder—British Gas—to pull out, leaving Ennis and thousands more Clifton South residents to look enviously at their neighbours’ homes when they walk down the street.

Photo of Chris Leslie Chris Leslie Shadow Chief Secretary to the Treasury

I commend my hon. Friend’s campaigning on this issue, which has clearly affected her constituents. My constituents in the Candle Meadow area have encountered similar stories, with some residents getting this insulation for free, but because of the Government’s changes, all of a sudden, other neighbours not getting it. This is incredible unfairness, which can be seen from house to house—those who have and have not benefited. I fully support my hon. Friend’s argument.

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

My hon. Friend is right. Clifton is the largest scheme in Nottingham, but Candle Meadow is equally important, albeit of a different property type.

Ilona, Kate and Ennis are just three of my constituents whose homes need to be made more energy efficient, but there are more than 20,000 solid wall, hard-to-treat properties in Nottingham and our city is not untypical of the position throughout the UK, which has more than 7.6 million uninsulated solid wall homes.

Nottingham council is committed to improving the quality of its housing stock and tackling the fuel poverty that affects more than one in seven households in our city. It has long understood that improving council homes has wider positive social impacts. I have spoken before in this Chamber about the council’s decent homes programme, known locally as Secure Warm Modern, which began in 2008 and which, when complete, will have delivered double-glazed windows, loft and cavity wall insulation and new boilers to more than 20,000 council properties.

A joint impact study by Nottingham City Homes and Nottingham Trent university’s business school found that improvements to the physical condition of properties led to improved outcomes for tenants and better security, health and comfort, and that it also impacted on the wider community, by reducing carbon emissions, providing employment opportunities and improving neighbourhoods. It was as a result of working with Nottingham City Homes to secure funding for the completion of decent homes that I began to understand the challenges involved in tackling our city’s hard-to-treat solid wall houses.

I first raised these issues with the Minister in July 2012, explaining that Nottingham City Homes could use the decent homes funding to lever in additional benefits from the green deal’s energy company obligation, if there was more certainty about funding.

Photo of Graham Stringer Graham Stringer Labour, Blackley and Broughton

My hon. Friend is making a cogent, coherent case for her constituents. Is she aware that only 4% of the money spent until October last year, for the country as a whole, had gone on solid wall insulation and that the worst cases of fuel poverty and coldness often exist in homes with solid walls?

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

My hon. Friend is right. Solid wall homes are associated with fuel poverty. Of course, they are more difficult to deal with, which is specifically why measures were needed to help tackle those hard-to-treat homes, when many councils, my own included, had done the easier work on lofts and cavity walls.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Environment, Food and Rural Affairs)

I compliment my hon. Friend on the case that she is making on behalf of her constituents, but will she acknowledge that, although solid wall external insulation is critical for some of the older housing stock in our urban and peri-urban areas, it is also critically important for our rural areas, where there is a predominance of solid wall homes, and that often elderly and vulnerable individuals feel now that it is much more difficult to obtain solid wall external insulation?

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

My hon. Friend has probably, like me, received a briefing from Calor, which has expressed particular concern about the impact in rural, off-grid locations.

In the Minister’s reply in July 2012, he praised Nottingham for its “progressive agenda” and looked forward to visiting the city in the near future to drive that agenda forward. In the event he did not visit, but he did meet me, along with representatives from Nottingham City Homes, to discuss our ideas and experiences to date. Following those positive and challenging discussions, a joint approach was developed between the city council, Nottingham City Homes and local energy efficiency charity, Nottingham Energy Partnership. They drew up the Nottingham energy saving neighbourhoods proposal, a detailed plan to maximise the insulation work on hard-to-treat homes, promote the green deal and spread benefits to private homes as well as social housing, beginning on the Clifton estate, but with the aim of transforming energy efficiency across more than 20 Nottingham neighbourhoods with hard-to-treat houses.

We were delighted to welcome the Energy Secretary to Nottingham last spring to see how the neighbourhood model had been developed and the potential for future works. He visited the Bulwell Hall super warm zone, where solid wall insulation had been rolled out to 350 council and 352 private homes. That project helped identify the factors for success that were incorporated into the energy saving neighbourhoods proposal: a large-scale project attracting funding from an energy company; the role of NCH as a trusted intermediary for council tenants, overseeing resident liaison and ensuring quality; the key role of Nottingham Energy Partnership, a local trusted and independent organisation, in contacting every private owner and facilitating private resident engagement; and support from the city council’s planning department in developing an attractive insulation solution to suit the area. It also demonstrated the potential to support Nottingham’s local jobs plan, employing more than 200 people and supporting local employment and the development of the solid wall insulation industry.

Responding to Nottingham’s energy saving neighbourhoods proposal, the Minister wrote:

“I was delighted to see the ambitious proposals you have developed to deliver the Green Deal across Nottingham, in particular your plans for a neighbourhood wide approach fits our vision for the delivery of the Green Deal.”

Although we were unable to persuade the Minister to provide financial support for the energy saving neighbourhoods proposal, when the Department launched its green deal communities fund the following July, we were delighted to see the similarities to our plan. It seemed clear that in Nottingham we were already pursuing precisely the sort of innovative, cross-tenure, area-based approach Ministers were looking for.

The scheme was launched in Clifton in September last year under the branding, Nottingham Greener HousiNG, and was an immediate success. As I explained in last Monday’s estimates day debate, the scheme offered external wall insulation at an affordable fixed price based on property type, so private residents paid a contribution of between £1,000 and £1,300 depending on whether they lived in a bungalow, mid-terrace, end-terrace or semi-detached house. Most residents chose to fund their contribution using savings or via informal help from family and 10% took up the option of a loan from Nottingham Credit Union, which was low cost and could be repaid early without incurring a penalty. None chose to utilise green deal finance, even though the option was set out alongside others available.

The remainder of the cost—around 85%—was funded by British Gas as part of its energy company obligation. The insulation works were rolled out street by street across the Clifton housing estate, to council properties and privately owned homes alike. As residents saw their estate being transformed and heard neighbours describe their warm homes and lower bills, demand continued to grow. Within weeks, hundreds of residents had signed up and by the end of November more than 90% of council tenants had agreed to have the work done and there was 65% take-up in the private sector, with more than 1,000 private residents or landlords having signed up and paid their contribution towards getting the work done.

The feedback from residents was overwhelming. People told me that their homes were warm for the first time ever and that they were saving money and were excited about the improved appearance of the estate. Those signed up were impatient for work to start on their homes.

The Energy Secretary’s statement on 2 December prompted high anxiety in Clifton, and that anxiety turned to despair when British Gas used the opportunity of the Government’s policy change to pull out of the Clifton scheme. Last week, the other Energy Minister, Michael Fallon, responding to the debate, said that I had “suggested” that our Clifton scheme was

“a victim of the changes taking place in the ECO arrangements.”—[Hansard, 3 March 2014; Vol. 576, c. 722.]

I did not suggest it, I quoted the statement from British Gas in which it said,

“In light of the Government’s proposed changes to the ECO, it was necessary for us to review our current ECO contracts. These changes mean we can no longer fund some projects and unfortunately this is the case with our planned programme with VolkerLaser and Nottingham City Homes”.

It could not be clearer. The Minister’s Government’s ECO changes have led to the collapse of our energy efficiency scheme. As a direct result of his policy shift, hundreds of my constituents in Clifton who have paid for solid wall insulation do not know whether they will get it.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I will respond fully in my closing remarks, but I do not want the hon. Lady to scare or alarm her constituents unnecessarily. I spoke yesterday to the chief executive of Nottingham city council, and we are working closely with Nottingham on a new bid for our green deal communities. Although I cannot announce the result of that bid for our green deal communities fund, Nottingham has made a robust proposal that aims to deliver hundreds of measures, if not more than 1,000 measures, of the type the hon. Lady describes in south Clifton. Far from being dead and over, the south Clifton scheme has every reason to be optimistic.

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

I thank the Minister for his intervention. Unfortunately, my constituents are both scared and alarmed. They will, however, welcome his indication that there is hope for the scheme in south Clifton. There are many more people across Nottingham South who do not know if or when they will get the help they need with their fuel bills. They continue to live in cold homes that affect their health and the health of their children.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Environment, Food and Rural Affairs)

My hon. Friend is being generous in giving way. In answer to the Minister’s intervention, it is not only householders who are concerned. I have met companies in the midlands and elsewhere that have said that, because of the changes, they are rethinking where they invest and what they prioritise. Although the Minister’s announcement might be very welcome, there is now a hiatus, which is a classic symptom of the Government’s policies—they are having to rejig their thinking to catch up with a misfortune of their own making.

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

My hon. Friend is right. I will address the impact on employment and on businesses in due course. Nottingham will, unfortunately, continue to experience excess winter deaths and excess winter admissions to hospital as a result of cold housing. As he says, hundreds of people employed in our greener housing project are at risk of redundancy, and some have already lost their jobs. New apprentices who are looking forward to long careers installing insulation face, at best, uncertainty about their future. The young people who had completed their initial training and were due to start year-long apprenticeships leading to national vocational qualifications are now back in the dole queue.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

My hon. Friend is making an important point. We all accept that programmes needs to be fine-tuned from time to time, which is inevitable with any Government programme, but we have been told that more than 600,000 fewer properties will be dealt with under the hard-to-treat cavity wall insulation scheme. Apart from the impact on the people living in the houses concerned, taking away 609,000 properties will obviously have a major impact on businesses.

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

My hon. Friend is right. It gives me no pleasure to tell the Minister that those are the effects of his changes to the energy company obligation. Right now in Clifton, the contractor VolkerLaser is working at an incredible pace to try to complete work for all those residents who have signed up and paid their contribution, but the 9 April deadline, when British Gas funding ends, is fast approaching. The Minister knows that. He met me and colleagues from Nottingham on 22 January to discuss the crisis we face. He promised to raise the matter with the chairman of Centrica, British Gas’s parent company. Can he tell us today whether he has held those discussions? If so, what was the outcome?

I also wrote to British Gas following our meeting to ask it to consider a grace period for private customers who have suffered financially, thereby allowing their properties to be completed beyond the 90-day notice period. In his reply, Chris Weston, the managing director of British Gas, said

“we cannot commit to an extension of the termination period”.

Does the Minister agree that those residents who have signed up and paid should have their contracts honoured? If British Gas will not provide that funding, is he prepared to step in to honour that commitment and ensure that my constituents receive the work for which they have paid at the price they expected?

The Minister also said in our meeting that Nottingham city council should amend its bid to the green deal communities fund, which has been increased to £80 million, and we followed his advice. As I anticipated, we have not yet had success, but I remain hopeful after his earlier comments. Can he say when the next tranche of green deal communities funding is expected to be announced?

When the Minister met us, he also suggested that the Government’s announced increase in green deal cashback might help to fill the gap left by the reduction in ECO funding. A few weeks later we learned that green deal cashback could no longer be used alongside ECO. I simply ask the Minister how we can plan for the future and work with him to deliver the energy efficiency measures that our constituents need, and that we all want to see, without some certainty on the policy and funding framework within which we are operating.

The Clifton scheme, which we believe is the largest area-based approach so far, has enabled Nottingham city council to learn valuable lessons about what works. Councillor Alan Clark, the portfolio holder for energy and sustainability, has led the city’s work, and he concludes that, to be successful, a scheme needs to: address the issue on an area-by-area basis; apply to all tenures equally; pay for green deal assessments, avoiding risk and up-front costs for households; identify a fixed price for works to bring certainty to residents; engage specialist contractors of the highest quality; and engage local councils as a trusted broker. Above all, there must be a stable national policy and funding regime.

Phil Angus, the manager of Nottingham Energy Partnership, puts it more bluntly,

“the Government’s stop start approach to funding policy is sending businesses to the wall along with hard working families left in the lurch”.

He illustrates the point with reference to a typical Clifton property for which the funding support available has changed, or is due to change, every few months as a result of policy changes since last December.

Ahead of the green deal’s launch last year, the Minister described it as

“the most transformational energy efficiency programme that this country has ever seen—a programme that is built for the long term.”—[Hansard, 16 January 2013; Vol. 556, c. 983.]

Clearly, as my hon. Friend Mark Lazarowicz said, any scheme has to be reviewed and revised in light of experience but, as Phil Angus says:

“How is any small business connected to domestic energy efficiency services supposed to plan ahead and maintain consistency with customers, supplier and workforce…is this Government on the side of business?”

VolkerLaser, the contractor that has been delivering the solid wall insulation in Clifton, surely has to conclude that the answer to that question is no. Here is what managing director Mike Weaver had to say about the effect of changes to the energy company obligation:

“The recent events…and the uncertainty in the market have had, and will continue to have a devastating effect on the VolkerLaser business. We have had to suspend our forward apprenticeship scheme and staff recruitment programme, denying up to 50 young people the chance to get ‘a start’ in this industry.

The whole business has a cloud of insecurity hanging over it and for a Managing Director who started this business over 20 years ago this is particularly distressing. VolkerLaser prides itself on retaining good staff, with a large number of long serving employees enjoying their 20th year alongside me. It is now impossible to map out our employees’ future and it is inevitable that if current conditions persist, there will have to be redundancies.

Due to the collapse of the funding market it is now extremely difficult to plan a future order book. The proposed changes to ECO have swung the market so much in the favour of the energy retailers that even if funding becomes available, it will come with onerous conditions which will place enormous risk on contractors and clients alike.

No one in this industry believes they are owed a living, but it would be good for once to operate on a level playing field. Our staff and the residents of Clifton need some security and some reassurance that ECO is not just another flash in the pan. Or, to put it bluntly, yet another initiative the government asks thousands of people to spend millions of pounds gearing up for, only to see it decimated in one fell swoop.

The impact of the proposed changes to ECO, and in particular the 100,000 solid wall minima, will be significant and will undo all of the good work the partnership has achieved to date. 42% of the staff on the Clifton Greener HousiNG initiative are residents of Nottingham; ten apprentices have been inducted so far and are now working towards a nationally recognised qualification; and countless sustainable job opportunities have been created with local SMEs.

With a doubling of the minima to 200,000 measures (or 8 million tonnes equivalent) thousands more residents will be guaranteed a reduction in their fuel bills and be afforded the opportunity to live in warm and energy efficient homes. With the certainty of funding going forward, more and more employment opportunities and apprenticeships would be generated for the benefit of Clifton residents and the local economy.”

I do not doubt that the Minister wishes to see more energy efficient homes; what I doubt are the policies and funding support he has put in place to deliver on that aspiration. He says that the ECO will lead to insulation of at least 25,000 solid wall properties a year, but at that rate it will take 304 years to complete the task. Although he ramps up green deal cashback to persuade people that they want to take up energy efficiency measures, his funding changes are denying energy efficiency measures to my constituents who desperately want them. That simply is not good enough.

As Sally Longford, one of Ilona’s local councillors in Nottingham, says:

“Many of my elderly residents living in the Wollaton Park estate cannot keep warm without paying ridiculous amounts to the energy companies. Even then cold patches on the walls attract condensation and mould, they deserve better.”

She is right. What hope can the Minister give me that they will get it?

Photo of Nadine Dorries Nadine Dorries Conservative, Mid Bedfordshire

Order. At the moment there are about eight minutes each for those who want to speak.

Photo of John Pugh John Pugh Liberal Democrat, Southport 3:20 pm, 11th March 2014

Thank you, Ms Dorries; that will be ample.

I congratulate Lilian Greenwood on her timely and effective presentation of the problems with the energy company obligation. I am increasingly in despair, and not just because of being a Liberal Democrat. I should like to be able to say that the green deal is great, and the ECO scheme is perfect, and that I support every detail of it without criticism or quibble; but I cannot. I should like to be able to say that the Government correctly understand the problems being experienced by people in the ECO scheme and that they are thoroughly engaged and are ironing out possible difficulties; but I cannot quite do that. I am grateful that the Minister responding to the debate is Gregory Barker, because if anyone can solve the problem he can.

I should love to be able to say that everything that is involved in managing a market composed of myriad private suppliers and big corporate giants, to environmental effect, is easy, but it is not. It is difficult, and I sympathise with the Minister. However, like him, I have lived through the solar panel trauma, when schemes hit the buffers and businesses crashed, projects were caught and there was boom and bust—white van man trying to cash in and good schemes being trashed or abandoned. I think that we all learned a lesson from that: in the green business, predictability helps an awful lot. We seem to have a similar problem now, although it is not necessarily the one that the hon. Member for Nottingham South touched on. I want to talk about the problem that the ECO scheme is creating for boiler suppliers—a topic that I have become familiar with simply because suppliers have brought it to my attention.

The phenomenon is similar to what happened with solar panels. There has been an increase in the number of suppliers and installers—I have looked at the Government stats—followed by what currently appears to be the sound of businesses collapsing and the stalling of installation.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

If we could replicate for insulation what happened in the solar industry I should be extremely delighted. The fact is that since we took those difficult decisions in 2011 we have reached the point where nearly 3 GW of solar are installed; almost 500,000 roofs have solar, compared with 15,000 in 2010; and we have the highest growth prospects for solar, with the cheapest installations, anywhere in Europe. Solar in the UK is a huge success, because we cut costs, bore down on the expense to the consumer, and as a result are getting genuine commercial deployment.

Photo of John Pugh John Pugh Liberal Democrat, Southport

I am delighted that the Minister can tell me that. I am a great enthusiast for solar panelling. If he can solve the problems with boilers I shall be even more in his debt.

It seems to me that the Government are not quite to blame for the problem I have outlined. It is almost an unintended consequence of the Labour fuel pledge, which led to a bit of a media panic about the green levy, which led to discussions between the energy companies and the Government. There may be some tacit agreements between the Government and the big six. I know not—it is above my pay grade. However, it is true at the moment that the big energy companies are substantially reducing their funding for boilers, from 25p per pound lifetime savings to something like 8p. The drop is sudden and dramatic.

There is some evidence that those companies do not want referrals, particularly in connection with fuel poverty. I am in possession of a letter from British Gas to Sefton, my local authority, which basically says “Don’t send us any more work at the moment. We are simply not going to commission it or progress it.” There is some evidence that some big companies have stopped commissioning altogether, and there is no doubt that the price has crashed. How should a small boiler supplier react to that? If he is severely exposed he goes bust; if he is very canny or unscrupulous he can start to fit boilers of substandard quality, which will not last, and will eventually need to be repaired and replaced. Another thing that he could do is target carbon savings rather than fuel poverty.

A large part of my constituency consists of Edwardian housing, with solid walls. We also have many old houses of the maisonette type, with old or no boilers. In those houses are many elderly people, including widows living alone, and the like. Companies in my constituency once did the jobs needed in such houses, but they no longer do them because they cannot be done without some financial support being offered; and customers in fuel poverty are precisely the ones who cannot do a deal of that kind. In rare cases that I know of, the company exercises a degree of charity and takes a hit on the job. I also have evidence that in some hard-to-treat large houses—we might call them mansions—where there is someone who meets the qualifying criteria in some way, the job will pay; obviously, putting a boiler into those places gives a substantial carbon saving and brings a better reward from the energy companies. A genuine case that was featured on “File on 4”—or it may have been “You and Yours”; I forget—involved a premier footballer profiting directly from the ECO scheme.

Clearly, something is wrong. I am not an expert—I know that there are experts present for the debate—but I know people who are. People in the trade tell me things and I am inclined to believe them. Deborah Judd, who runs a firm in Darlington, writes:

“It is so disheartening having to turn clients down who are exactly the sorts of people who need it. We’ve been going 20 years in June and now we just don’t see a future…In some cases, you can get paid £12,000 for fitting a boiler in a large house because the energy efficiency saving is so large. Realistically, that person can afford to replace their boiler themselves. We could fit 5 boilers in homes where people are in real need for that amount.”

I have similar evidence from a supplier in Blackpool, and from assessors and so on. People who appear to know tell me that there is a problem, and that it is analogous to the one that the Minister solved à propos of solar panelling.

Perhaps I can offer the Minister a solution rather than a problem. He needs to talk not to me, a relative ignoramus on the subject, but to the people who bring the problem to me, who are in earnest and have a genuine problem. Importantly—and this issue has come up previously—during the spring we must monitor how fuel poverty is addressed. Clearly, the targets might slip a long way before anyone notices. I suggest that because of the reduction applied by the gas and energy companies there is a perverse incentive to target big houses and big carbon savings, rather than people in fuel poverty.

My final point, and the point that will haunt the debate, was made by the hon. Member for Nottingham South when she summed up: we need stability in the market. If we are to get many small businesses working regularly to good effect with large corporates and funders—in this case the energy companies—and if we are to solve the problems of greenhouse emissions and fuel poverty, we shall need a strong element of stability and predictability in the market. I am concerned because at the moment the suppliers I know and talk to do not think we have that.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test 3:28 pm, 11th March 2014

The starting point for the debate must be the notorious Prime Minister’s Question Time at the end of November, half way through which he announced that there would be a green levy review. Sure enough, there was one; only, because it appeared that the review was thought of about two minutes before Prime Minister’s Question Time, the green levies were not reviewed but stayed roughly as they were. ECO was reviewed instead, and the result is that we are where we are now.

The document put out by the Department said:

“One of the major challenges for the ECO and Green Deal is the changing nature of the types of measures that need to be delivered. CERT, by focusing on delivering low-cost measures, has been very successful at installing simple loft and cavity wall insulation. From 2012 Green Deal finance will offer a route to deliver the remaining low cost loft and cavity wall opportunities at no upfront cost and without need for subsidy. However to meet our carbon budgets cost effectively, we will need to go far beyond just lofts and cavity walls, and move towards the next most cost effective measures.

However, some 7 million of the most difficult to treat homes require some form of solid wall insulation. The Committee on Climate Change recommended in their 2009 Report, ‘Meeting Carbon Budgets – the need for a step change’ that 2.3 million solid wall homes will need to have taken up solid wall insulation by 2022 in order for the UK to be on track to achieve carbon budgets. ECO support for these properties will help drive this market, and the supply chain to fulfil it, enabling us to unlock the resulting carbon savings more cost effectively.”

That was the prospectus that people bought into when they started doing work on ECO. In that context, the process of the review has been interesting, because it effectively boiled down to ECO having to take the bullet. In quick order, it was announced on 2 December that there would be substantial changes in how ECO would work, without an impact assessment. Only now has a consultation paper been released. It says that a number of the proposals have already been announced or foreshadowed in the Government’s announcement on 2 December. I am reminded a little of the referendum in Crimea, where first the outcome is announced, then a consultation is held on what the announcement should be. The measures in the 2 December announcement, which essentially stretch out like a lump of pizza dough the annual overall commitment of some £1.3 billion from two years to four years—however it may be wrapped up in decisions to borrow from some parts of the ECO programme to maintain others—starve elements of ECO of resources, particularly the carbon emissions reduction obligation.

That announcement, however, was wrapped up in something of a complication, because ECO finances are predicated on the achievement by obligated energy companies of a carbon obligation—that is, the obligation is discharged by the amount of carbon saved by the measures undertaken—and the estimated overall finances relate essentially to what it will cost, collectively, for that overall obligation to be discharged. Treatment costs for each hard-to-treat property, for example, add up to a cost per tonne of carbon saved, and if the companies have to discharge that obligation within a set period—initially for ECO, that is 2015—the price paid for each tonne saved will logically be higher than if the same level of obligation was over a more extended period.

Another issue is the extent to which the programme admits of access to measures, which, by their nature, allow for savings to be made at a lower cost per tonne of carbon dioxide saved. Those measures, however are supposed by and large to be covered by the green deal, whereby the cost of loans for measures is recovered from bills. As the original Department of Energy and Climate Change document says, ECO should be concerned only about the measures that go beyond those treatments. However, if such measures are allowed to count for ECO’s purposes instead of green deal purposes, inevitably a carbon obligation can be discharged by concentrating on those measures, rather than on the hard-to-treat homes specified in the original DECC document on ECO.

Indeed, the consultative document published last week recognises that. On page 28, it states:

“Taken together, the proposals are likely to see a greater focus on cheaper, easier measures and a correspondingly diminished role for Solid Wall Insulation in ECO delivery.”

It continues:

“However, the Government is clear that SWI represents a major challenge for the nation’s housing stock, with nearly eight million households of solid wall construction, of which only 3% per cent have wall insulation.”

The Government set a sub-target for solid-wall insulation that is about half the estimated target in the original ECO plans.

Of course, no one told the dozens of local authorities, housing associations, and insulating companies that that was in store. Trusting the word of the Department, they did exactly the right thing in getting the best result possible from the areas that ECO was supposed to concentrate on, namely the uplifting, area by area, of those hard-to-treat homes, using their local skills and considerable efforts in developing partnerships to do so. After all, we know that area uplift worked well under the community energy saving programme and the carbon emissions reduction target. There were better results overall in value per treatment—a large chunk of the target was reached area by area—than by searching randomly for individual properties to uplift.

I will add our local programme in Southampton to the pot. In November 2013, the council announced a £30 million programme to make energy improvements to more than 2,000 council properties in Southampton over the next 18 months. It included cladding of high-rise buildings, cladding of system built non-cavity homes, and a district heating scheme alongside. That would, by the way, create between 600 and 900 jobs, as well as safeguarding 300 jobs locally. That was a partnership between the city council, a property services company and an obligated energy company. That was all very rosy, except that as soon as the Government announcement was made and it rapidly became apparent to energy companies that the obligations as previously constructed were being thrown out of the window, they drew back from progressing the scheme. It may be that some of the programme can be saved, but the prospects of thousands of residents of Southampton having possibly life-changing reductions in their energy bills in the near future, of some of the worst insulated properties in the city being transformed and of carbon efficiency in buildings in the city taking a leap forward are possibly wholly and at least largely off the agenda right now. It is the same in many other places across the country.

Photo of David Mowat David Mowat Conservative, Warrington South

I am listening carefully to what the hon. Gentleman is saying, and he is making some good points. He is talking as though the ECO—or the CERO part of the ECO, which I think is the thrust of his comments—has been totally revoked. What has happened, however, is that it has been extended by two years. The fact is that we were at 7% completion after 67% of the time period. In a sense, are the Government not just reflecting what is happening on the ground in a sensible way and allowing things to happen a little more slowly? That could be called a failure, but it is sensible, notwithstanding what we heard about Nottingham. I did not follow what was said on ECO versus the green deal. I also do not understand the thrust of the hon. Gentleman’s comments.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

The hon. Gentleman misses the point about the carbon content of ECO and how that is stretched out over the time period. Energy companies can therefore decide that they do not need to undertake the obligation in the way they did previously. That is the crux of the matter and that is why the target has gone down from having 180,000 solid-wall homes by 2015 to having 100,000 by 2017. Even with those changes, it would have been possible to keep that carbon content by not invading the green deal with the changes to the proposals and by having a front-loaded system, which the Department could have worked out.

Photo of David Mowat David Mowat Conservative, Warrington South

I did understand that. The part of ECO that has been extended and strengthened is the part that looks at those in particular fuel poverty. The middle section, the carbon saving community obligation, has been strengthened. The hon. Gentleman is right that the CERO has been weakened, but that just reflects reality.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

The CSCO has not been strengthened. It has been stretched out at the same level over a longer time at the expense of the CERO, which has had to fund most of the money to enable the CSCO to remain even at its previous level. I do not understand whether the Department understood what it was doing when it made these changes. If it understood, stood by and did not put any remedial measures into the consultative document, it wilfully let a large section of ECO fly out the window, along with all the previous targets. If the Department did not understand what it was doing, that is possibly an even worse prospect. Either way, the programme could have been saved with a slightly different way of revising the ECO programme, but the Department allowed a large proportion of the work on solid-wall insulation and hard-to-treat cavity homes—we all know that they are an absolute imperative target for the country over the next period—simply to go to waste.

I hope that a number of these programmes can be retrieved in one way or another, but the fact is that we now have an ECO that is a shadow of its former self. In the process, it has left large numbers of people in hard-to-treat homes. Local authorities, housing associations, companies and people who thought they would get jobs are all bewildered as to what will happen. That cannot be a good outcome, when the review was supposed to ensure that affordable energy would be coupled with even more affordable energy through the insulation programmes. The final, savage irony is that a programme to save people a lot of money on their energy bills has been thrown out of the window by a green levies review that was supposed to save some people money on their energy bills. I hope we will not forget that when we debate this issue. I hope that the Minister can explain exactly what his Department was doing when it undertook the change and whether he will contemplate undoing some of these changes, so that the programmes can at least partly go ahead to do what they were originally intended to do.

Photo of Graham Jones Graham Jones Opposition Assistant Whip (Commons) 3:39 pm, 11th March 2014

It is a pleasure to serve under your chairmanship, Ms Dorries. I congratulate my hon. Friend Lilian Greenwood on her tenacity and on securing today’s debate.

In the brief time available to me, I want to concentrate on my constituency and the businesses in it. Hyndburn has some of the oldest, coldest housing stock in the country. Hyndburn council recently launched a warm homes energy company obligation scheme that is now under threat before it has even begun. The businesses in the green economy in my constituency that were innovating and creating jobs as result of the ECO are now concerned about their future and the ECO’s future funding.

The ECO is of particular help to places such as Haslingden and Hyndburn and cutting or even rolling back the scheme will have a disproportionate effect in a constituency such as mine. There is a perverse reality to the Government’s action in that the rolling back of the ECO will help my constituents not by insulating their hard-to-treat homes and saving them thousands on heating bills over decades, but through a comparatively small reduction in their heating bills.

Hyndburn has some of the poorest quality housing stock in the country, with 41.5% of total dwellings built prior to 1919—well above the English average of 23.6%. Some 60% is old, terraced stock and includes hard-to-insulate, Victorian, stone properties. The historic stone façade prohibits external insulation and insulating inside walls is difficult. How do people insulate the inside wall of a rear kitchen or a bathroom, let alone around bay windows and doors? The scale of the problem of cold homes in Hyndburn is chronic.

As a result of the age of the stock, 50.2% of category 1 hazards in Hyndburn are due to excess cold. Of category 2 hazards, the number of properties suffering from excess cold is a staggering 78.5%. Hyndburn borough council’s 2009 housing condition survey noted a 24.5% rate of thermal discomfort compared with the English average of 18.3%. As a result, fuel poverty, as one would expect, is at 20.4% compared with the English average of 13.9%.

The housing stock in my constituency is exactly the kind that is most in need of insulation and energy-efficiency measures. According to studies, nine out of 10 stone terraced properties of that age have hard-to-treat cavities that would benefit from the ECO. The prevalence of hard-to-treat cavities in Hyndburn is precisely why the ECO presented such an opportunity to my constituents and other local councils across east Lancashire to tackle insulation, fuel poverty and the UK’s climate change obligations. My constituency is a beneficiary of an ECO scheme, but the recently launched “Warm Homes Hyndburn” is now under significant threat.

Benefits come not only from insulating individual properties. Isothane Ltd—one of its directors is here today—is an innovative company located in Altham in my constituency and is a market leader in the insulation of hard-to-treat cavities. One of its products, a high thermal insulating foam with high bonding qualities, offers the insulation market a world-beating product. If supported, that type of company and product in the green economy can provide innovation and future green jobs.

The company is fully behind the National Energy Foundation’s opposition to the ECO reforms. The NEF believes that cuts to the ECO will mean not only poorer health conditions for people living in the uninsulated homes found in my constituency, but job losses in the energy efficiency industry. Isothane Ltd is engaged in several local authority projects that are in receipt of ECO funding and a reduction in such funding will clearly and directly impact on the company. The company and the industry are being hit not only by reductions in the ECO, but by how the ECO is funded, which is creating a huge disincentive. It is a double whammy. Mervyn Kirk at Isothane told me that

“Isothane has received no funding whatsoever for the work undertaken so far in preparation; publicity materials, canvassing and surveyors’ costs have all been paid direct” by the company. He continued:

“All ECO funding is claimed retrospectively, so any work undertaken in schemes such as this is at considerable expense and risk to the installer.”

That is an important point.

The insulation industry had been given a clear incentive and direction of travel by the Government and had begun to invest and to create employment. By letting energy companies off the hook, however, the Government have created uncertainty and, according to the National Energy Foundation, have put thousands of jobs at risk. The Government took the decision on the questionable premise that it will lead to energy bill savings. Why have the Government injected uncertainty and then proceeded to hold a retrospective consultation? Are they considering abandoning the reductions and reversing the policy or is the consultation a simple rubber-stamping exercise? The situation is resulting in misery for those people living in hard-to-treat properties in Hyndburn and Haslingden. They will no longer get insulation and will continue to spend way above the national average on energy bills; they are effectively being punished for living in such properties.

Mervyn Kirk also said:

“In general, when ECO funding levels were around £85+ per carbon tonne, the majority of properties were able to have specialist insulation installed at no cost to the occupant as long as we were able to encourage neighbouring properties to sign up, i.e. blocks of 3 or 4 properties together…but as funding dropped to around £60 to £75 per carbon tonne, this became unworkable. The funding levels have since plummeted further and there is no confidence about levels of funding for ANY hard-to-treat cavities beyond the end of this month.”

For the record, the month in question is March 2014—this month.

I was told recently by Michael Morrall of Dyson Insulations, which was managing the ECO project in Hyndburn and installing insulation, that because the borough of Hyndburn is so densely stocked with properties of random stone cavity construction, the hard-to-treat carbon emissions reduction obligation of the ECO previously made insulating cavity walls a “fantastic opportunity” to make a change to people’s lives. Cuts to the CERO obligation have driven down the available funding, which has drastically changed the viability of installing the measures without a substantial contribution towards funding shortfalls from occupiers or local authorities. It is worth putting on the record that Hyndburn council has experienced some of the deepest cuts in the UK and is one of only seven authorities to be given a temporary rebate to cap the cuts at the maximum possible, so I do not know where local authority funding will come from.

Mervyn Kirk of Isothane Ltd also said to me:

“As the available funding levels have been gradually reduced by the energy companies, the ability for us to offer free specialist insulation to address fuel poverty and improve energy efficiency standards in traditional terraced, stone-built property has become less and less viable. Hence the current situation where homes have already had surveys undertaken, but we can only install where the gap between ECO funding and costs are met elsewhere. In the Burnley target area”—

Burnley is a neighbouring authority of Hyndburn—

“there are too many properties requiring additional funding to be able to stretch the limited resources available.”

In effect, that means that the scheme will be wound down before it has started. In a deprived area with a cash-strapped local authority and stone-built terraced properties, that could effectively kill off the scheme.

The situation stands in stark and embarrassing contrast with what the Government have said previously. In a letter that I received late last year, the Minister stated, particularly of the “Warm Homes Hyndburn” scheme:

“These are just the sort of projects that will be required to tackle the challenge of effectively insulating hard-to-treat properties.”

Fast forward just four months, however, and the Government are actively and knowingly taking steps that take us in the opposite direction and make it more difficult to achieve energy efficiency in my constituency’s housing stock. It has been a monumental shambles from the Government—the only things that have been injected are cynicism, confusion, disappointment and anger into those affected by the changes. Why has the Minister’s position changed in the short time between writing to me before Christmas, when he said that such a scheme was required in Hyndburn, and now, when he is overseeing its whole demise? Did he consider the effects that such changes would have on constituencies such as mine, or was that just an afterthought?

I must finish on this. Did the Minister see “Newsnight” two weeks ago? It showed some of the worst housing in Britain in Hyndburn. I am sure that all who saw that were shocked that such conditions could exist in this country. People on benefits were living in stone-built terraced properties with rising damp and cold in every single room. Every window and every door was mouldy. Will the Minister come to Hyndburn to understand why the old ECO scheme was so important to my constituency? Will he visit Isothane Ltd to see the opportunities that the green economy brings?

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Foreign and Commonwealth Affairs) 3:50 pm, 11th March 2014

I congratulate my hon. Friend Lilian Greenwood on securing the debate. As other speakers have identified, unless problems relating to proposed changes to the energy company obligation are quickly addressed, there is a real danger that it will not help the households that it was set up to support. In the limited time I have available, I would like to mention concerns raised with my office by Toby Parker, the chief executive officer of Sustain, a successful Bristol-based small business that, as part of a range of services, delivers energy-efficiency programmes across the country under the energy company obligation.

Sustain was a leading provider under the previous energy supplier obligation regimes: the energy efficiency commitment, the carbon emissions reduction target and the community energy savings programme. When those came to an end, it invested in preparing for the ECO and the green deal. It recognised that getting those programmes up and running would take time, but, in the words of its chair, Julie Baddeley, in a letter to the Energy Minister last year, it took

“much longer, and was more complex, than any of us had envisaged”.

About 5,500 jobs were lost in the insulation industry nationally as a result of the poor transition from CERT and CESP to the green deal and the ECO, and a number of firms went to the wall. The constant chopping and changing causes considerable uncertainty in the sector. The Department of Energy and Climate Change has acknowledged that the recent proposed changes are creating uncertainty, which is affecting delivery on the ground and has resulted in a contraction in demand. That particularly affects areas outside London and the south-east, such as Bristol, where the market comprising small and medium-sized enterprises and sole traders is important for job creation and economic growth.

The energy companies are trying to reduce the costs of their obligations under the ECO, which the Government hope they will pass on to the consumer by reducing energy bills by between £30 and £35. Sustain, which is currently in contract negotiations with the energy companies, tells me that companies are stamping down on the price that they have to pay for carbon. Its chief executive says that the price is being pushed so low that it could have serious unintended consequences. First, it could reduce the quality of installations. He says that companies that work in a quality way will struggle to achieve results in that budget, which will, no doubt, lead to more complaints about poor quality work.

Secondly, the chief executive is concerned that, in all probability, customers benefiting from the carbon savings community obligation or the home heating cost reduction obligation will be expected to pay more towards the cost of those schemes, as the measures are not fully funded. He says:

“whether intentional or not, this will happen”.

Will the Minister provide assurances that that is not the Government’s intention and, if so, what steps he is taking to address that problem? Mr Parker says that, in an industry reeling from shocks, people are putting in suicide bids. In order to survive, companies are willing to deliver at those rates, but he doubts whether it is possible to have high-quality carbon reductions at rock-bottom prices.

Critically, Mr Parker has serious concerns about the effect of Government changes that have both reduced the CERO target for energy companies by 33% and also made it easier to achieve that target. That is pushing down both the volume and the price, with the result that many energy efficiency companies are questioning whether they can make the scheme work. He feels that either one or other of those changes would have resulted in a significant price reduction, but both taken together could pull the rug out from under the energy efficiency market. Has the Minister received similar representations from other companies? I am sure that Sustain is not alone in its concerns. What steps is he taking to resolve those concerns?

I would like to finish by making some wider points about the likely effect of the proposed changes to the ECO, which reflect some of the concerns raised by my colleagues. I am concerned that the problems derive from the Government’s decision to focus on reducing green levies on energy bills in response to the challenge set by Labour’s proposals for cutting energy bills. Essentially, the changes let energy companies off the hook as they do not need to spend a penny on delivering savings to the consumer. In fact, they place them in the driving seat in pressing for reductions to their obligations under the ECO, as it is for them to decide how much of any savings they make will be passed on to the consumer in reduced energy bills.

Changes to the ECO also fail to address one of the key reasons for energy prices, which is the fundamental lack of competitiveness in the energy market. We already know that the ECO is overly bureaucratic, poorly targeted and helping far too few homes. It is not sufficiently focused on those households that need it the most: less than half its funding actually goes to people in fuel poverty. The proposed changes will not improve that situation. The measures under review in the consultation suggest that the ECO will continue to favour those who can afford to part-fund measures, as well as those with larger properties.

The Government’s two flagship energy efficiency policies, the green deal and the ECO, are simply not strong enough devices for improving the energy efficiency of Britain’s housing stock and tackling fuel poverty. In the UK, we have some of the most draughty, poorly insulated housing stock in Europe. Statistics from the shadow DECC team show that a home in Dudley uses four to five times more energy than a typical house in Malmo, Sweden, where the temperature is 7° C colder on average. Figures from the Bristol-based Centre for Sustainable Energy show that there are 5,857 households living in fuel poverty in Bristol East alone.

Shamefully, 31,000 people died needlessly during the winter of 2012-13, 80% of whom were among the over-75s. That was a 29% increase on the previous year and it was estimated that a third of those deaths were caused by homes that were not warm enough. We have been lucky that this winter, although very wet, has been warmer so far.

As part of the recent cold homes campaign, I heard shocking stories from constituents. Some faced impossible choices between heating their homes and eating. I heard from one woman whose husband is extremely ill. Cold homes not only particularly affect people with a health condition, such as her husband, but deny people the most basic of comforts. In her e-mail, she said:

“all we would like is to be warm in our home”.

In this day and age, I do not think that that is too much to ask.

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Minister (Energy and Climate Change) 3:57 pm, 11th March 2014

It is a pleasure to serve under your chairmanship once again, Ms Dorries. I pay tribute to my hon. Friend Lilian Greenwood for securing this important debate. She is passionate about this issue and she was eloquent about what the Government’s changes to ECO have meant for her area. She was kind enough to invite me to visit the work in Clifton that she described today, which was a brilliant scheme. It was cross-tenure and cost-effective, it looked beautiful and it created local jobs. The only problem was that it was ending, owing to the decision the Government took before Christmas to cut back on ECO. At a time when so many people are concerned about rising energy bills, Minister, how can it make sense to cut back on insulation and energy-efficiency measures?

I welcomed the Minister’s earlier intervention. We should be clear that people who signed contracts in good faith but who have had those revoked owing to changes in Government policy should get that work done. Either the energy company should honour the obligation that it signed up to, or the Minister should step in to ensure that that work is done.

However, we know that the green deal for communities, or whichever funding pot the Government wish to use, simply cannot plug all the gaps created by the announced changes. A number of extremely good speeches today have highlighted the problem. I am sorry to hear that John Pugh is feeling depressed, although I note that there was a Liberal Democrat conference at the weekend that is almost certainly to blame for that. He raised a crucial issue: the functioning of the brokerage. That is slightly beyond the remit of the debate, but if the brokerage is providing prices to do a boiler job for less than £1,000 and, if at present, the rate is at 6p per £1 saved, that work cannot be done without either a contribution coming from the person receiving the work, or the work simply not being done to the requisite standard.

My hon. Friend Dr Whitehead, with his customary expertise, traced the fingerprints of blame to the notorious Prime Minister’s Question Time and the review of green levies. There is no doubt that this is one of the worst examples of policy being made on the hoof, with serious ramifications for people up and down the country.

My hon. Friend Graham Jones raised in particular some of the innovation in hard-to-treat cavities and the work of Isothane, a company with which I am also familiar. The Minister often says that he wants to create a market to end energy efficiency being generated simply by subsidy. I say to him that the innovation is taking place but will be undermined by the changes that are going through.

My hon. Friend Kerry McCarthy talked about job losses and the impact of the changes on SMEs. She articulated well the genuine sense of desperation that now exists because of the changes. Following the autumn statement I was disappointed by how the Minister and others in Government defended the changes, which have undoubtedly caused thousands of people to miss out on work that they were promised, and many people to lose their jobs, as well as causing consternation to businesses that have taken investment decisions based on Government policy. I would like the Minister at least to acknowledge the hardship that has been created. Selling the changes as a simple extension of the policy or a way of offering greater certainty to industry is, frankly, an insult to those people who have been adversely affected.

The only people who seem happy about the changes are some of the energy companies—I say some, because there are some that have been extremely good on reaching their obligations under the scheme. In the main, however, the changes are poor and short-sighted. In the brief time available, I will use the Government’s own impact assessment to outline just how bad the changes are.

The biggest change the Government have announced is on solid-wall and hard-to-treat properties. I think this information will answer the questions raised by David Mowat. The Government have not just reduced the CERO target, but have allowed cheaper measures to fulfil that obligation and added a permitted carry-over from over-delivery on previous schemes. The result is that ECO will not now deliver much at all for hard-to-treat homes.

I find it baffling that the Government have decided to make changes to the part of ECO that was beginning to show signs of progress, and that covered schemes such as the area-based scheme in Clifton, to which my hon. Friend the Member for Nottingham South introduced us. I ask the Minister to think back to our early exchanges on ECO. It was those sorts of schemes, surely, that he was citing in its defence. I know he is a fan of area-based schemes. There are obvious advantages in delivering energy efficiency on that scale—the costs are lower and more people take up schemes when they see the scaffolding go up. What is his assessment of how the changes will affect schemes such as those?

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Environment, Food and Rural Affairs)

My hon. Friend makes an important point. There has been a great deal of talk about large-scale, area-wide schemes, but there are other aspects that the Government ought to be supporting, such as the co-operative approach. I recently visited south Staffordshire community energy scheme, which worked in concert with the Energy Saving Co-operative and Lichfield district council. It focused on four properties initially but had a plan to roll the work out. There was tremendous success for the initial four properties, but that group is waiting for the Minister to give clarification before it can do any more, and so has stopped. The stability has gone.

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Minister (Energy and Climate Change)

I absolutely agree with my hon. Friend. I know that when the Minister responds he will say that the minimum target set for solid-wall insulation is just a minimum and could be exceeded, but, quite frankly, if we look at the cumulative impact of the changes, no more than that statutory minimum of solid-wall jobs will be done. I raised that point with him when we considered the Lords amendments to the Energy Bill and also at the most recent Energy questions. The impact of the changes means that the number of solid-wall jobs that are done will not be anywhere near what is needed.

As many Members have said today, that is a major problem for the UK, and no one will solve it for us. The Minister modestly suggested that he was responsible for the boom in the solar industry, and I agree that what has happened on domestic solar installations is absolutely brilliant—I am trying to get some solar photovoltaic panels on my own roof. He would surely admit, however, that part of that success has been the drop in unit costs that has come from other countries getting involved in manufacture, particularly China. That will not happen with solid-wall insulation or any hard-to-treat insulation. That is a problem for which we have to find a solution in the UK.

If the Committee on Climate Change wants us to do 200,000 solid-wall jobs a year, 25,000 a year is simply not good enough. My hon. Friend the Member for Southampton, Test hit the nail on the head when he said that if we look at the objectives, the key issue is that ECO was created to do that hard-to-treat work. The policy is constructed around starting to meet that challenge, yet mid-programme the Government have now changed the objectives, leaving us with a bit of a mess.

Photo of David Mowat David Mowat Conservative, Warrington South

I cannot let the hon. Gentleman go much further after his comments on solar. We have heard so much today from the Opposition about fuel poverty yet every time there is a Division in the House on whether we should take an option to reduce or increase energy bills, Opposition Members always vote for higher bills. Solar PV was a great example of that: when the Minister tried to reduce the solar tariff from six times grid parity to four times grid parity—something we did two years ago—to a man and woman the Opposition voted against the measure. Yet now they stand up and talk about fuel poverty. It is not rational and it will not do.

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Minister (Energy and Climate Change)

If we got into an extensive debate about the solar industry I am sure you would rule me out of order, Ms Dorries. If the hon. Gentleman is concerned about affordability of energy bills, one way that we can guarantee that bills will come down is if people use less energy. That objective is delivered through energy efficiency measures, insulation and the kind of work that was going on in Clifton until the Government made the changes. To withdraw from that work in order to deliver cheaper bills is surely illogical.

Photo of David Mowat David Mowat Conservative, Warrington South

I completely agree that greater energy efficiency is the best way of reducing energy bills. We are an outlier in terms of the efficiency of our housing stock—although not in terms of our energy costs, which makes the Opposition’s freeze proposal even more opportunistic. The point I was making is that whenever we vote on energy costs the Opposition vote for them to be higher and as a result are not credible.

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Minister (Energy and Climate Change)

I completely disagree. We could and should have a lengthy debate about energy companies overcharging as that issue is obviously there—people can see that and our policy is designed to rectify it. That makes the changes to ECO even more illogical. The Government have reacted to our policy, which is sensible and which a lot of people like a great deal, by trying to cut back on energy efficiency, to try to claim that energy bills will be cheaper. If the Government are serious about lowering bills, surely the obvious way to do that is to continue with energy efficiency measures. It is illogical for them to cut back on efficiency to claim that they are saving people money on their energy bills.

In the time available I will address two further points. My next point is about the impact the changes to ECO will have on jobs. The impact assessment predicts that there will be between 7,000 and 14,000 fewer jobs as a result of the changes. That has already begun to happen and a lot of companies have already contacted me about the measures they have had to take. In particular, apprenticeships have suffered a great deal—that is certainly the case in Nottingham. When I visited a scheme there, the apprentice I saw was working on his own property—a marvellous bit of PR from the scheme, but it was brilliant to see such work taking place. Those people should have lengthy careers ahead of them, given the amount of work we need done by the industry they have gone into. For them to miss out or lose their jobs because of Government changes to policy is extremely unfair. So far, the Government have not acknowledged the impact on jobs at all, despite the fact that the impact assessment does. I hope the Minister will comment on that.

The changes severely reduce the Government’s commitment to tackling fuel poverty. When CERO was predominantly concerned with delivering solid-wall and other hard-to-treat measures, the funding would naturally have gone to low-income areas, in particular social housing estates built at a certain time to certain construction standards. However, now that low-cost measures are to be included, will the Minister say what safeguards will be put in place to make sure that the funding does not go to households that could afford to pay? That would be incredibly disappointing, given that one of the already disappointing features of ECO was its modest ambitions for reducing fuel poverty.

The Government are simply not ambitious enough about energy efficiency. The energy companies know that the Government will not hold them to account for failing to meet their obligations. I note in particular that whereas before the changes a fine could be levied on energy companies for failing to meet their targets, they will now no longer face a fine, but simply a rule-based system for increasing targets. It seems that the energy companies will be let off the hook again.

The changes to ECO are poorly judged and fatally undermine much of the original purpose of the policy. I do not accept or understand the Government’s claim that they will lead to a bill reduction of £35. The changes will have severe ramifications for the green deal. The failure of the green deal and ECO to dovetail as they were intended to—their “limited blending”, as the impact assessment puts it—serves only to highlight that further. The Government have again caved in to the energy companies when instead they should be rectifying the serious problems in our energy market, and ensuring that we meet the challenge of improving the UK’s dreadfully insulated housing stock.

The people losing out from this decision by the Government, whether in Nottingham or Southampton, or the other examples given by hon. Members today, are often those who need help the most, and who have been told they were going to receive it, only to learn that the Government have let them down again. The figures are stark: 14,000 lost jobs, 440,000 fewer homes insulated and 2.2 million tonnes in carbon savings forgone. The ECO is this Government’s policy, the changes are this Government’s changes, and the consequences, be they in lost jobs, work that now will not take place or the decimation of the solid-wall supply chain, are also the responsibility of this Government. Ministers have got it badly wrong. They need to accept that and think again.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change 4:09 pm, 11th March 2014

It is a pleasure, Ms Dorries, to serve under your chairmanship today. I congratulate Lilian Greenwood on securing this debate and creating an opportunity to discuss our policy on driving home energy efficiency in some of the most difficult to treat properties and some of our poorest and most vulnerable households. She and I may not always agree on the best mode of delivery, but I admire her tenacity on this issue.

I want to reiterate the point that I made in my earlier intervention. I am not in a position to offer guarantees or to spell out details today, but I had a positive conversation with the chief executive of Nottingham city council yesterday. I am pleased with the constructive way that they worked with my officials at the Department of Energy and Climate Change following the meetings that the hon. Lady helped to facilitate. The council is looking more positively at the green deal and working to submit a bid under the green deal for communities, and I look forward to announcing the result of those bids. I am glad to say that there has been a strong response from more than 80 local authorities. We have already announced the first tranche of street-by-street roll-out of the green deal and it is receiving a positive response.

I want to make a general point. The thorough retrofit of Britain’s housing stock is a challenge and is not easy. The hon. Member for Nottingham South and Tom Blenkinsop, who speaks from Labour’s Front Bench, are absolutely right. I am absolutely committed to the street-by-street roll-out. It is the engine for delivering whole-home retrofit in the most cost-effective way, but I am afraid that that was totally absent from the points raised by the Opposition. I commend them on their concern for the fuel-poor and the will to improve the housing stock of their constituents, but it is at best misinformed and at worst disingenuous to pretend that there is some bottomless pit of money when they represent the party that left us with the biggest peacetime deficit in our country’s history and brought us to the edge of financial ruin. What is more, during the last Parliament they drove up the number of fuel-poor people, which peaked in 2009—the last year of the Labour Government—at 5.5 million. Since then, on any measure, that number has fallen under the coalition Government and, according to the latest figures, it now stands at around 4.5 million.

It is wrong to suggest that energy efficiency is a universal panacea. I am a huge advocate of energy efficiency, but it is delivered at a cost, and it is not fair to deliver policy ambition on the backs of the fuel-poor. ECO is funded by consumers—every single customer. It is not funded by general taxation, and to some degree it is, like the CERT and carbon capture and storage programmes, which Labour introduced, regressive because it falls on the fuel-poor as much as the wealthy. It is unfair to disregard the cost of those programmes.

The coalition Government have acted clearly to reduce the cost of Labour’s levies on fuel bills to help to lighten the load of the fuel-poor and hard-pressed consumers. We removed from bills the cost of the £1 billion CCS programme, which the Leader of the Opposition introduced when he was Secretary of State for Energy and Climate Change, and now fund it more fairly and equitably from general taxation. We removed from domestic bills the cost of the renewable heat incentive, the final part of the domestic scheme, which will be launched in the spring, to the tune of hundreds of millions of pounds. Likewise, we responded to the escalating cost of ECO.

The Opposition must make a choice. Are they in favour of the £50 reduction in energy bills, or are they not? They owe it to their constituents and voters to make it very clear whether they will put those costs back on to energy bills. Are they saying that they would restore the ECO measures and in so doing drive up bills by at least £50 instead of freezing them? There are hard choices to make. Of course, we all want retrofit of the housing stock. I think we could all agree on the desirable measures, but they come at a cost and we must be fair to everyone and talk about how they will be funded.

It is true that it seems inequitable or unfair to cut the cost of ECO, which means that some people will wait longer for improvements to be installed, but bills will fall for millions of people. The improvements we are talking about will be installed in the homes of a few thousand people. We must be realistic. Progress was made under the last Labour Government, but they left millions of homes requiring substantial intervention to bring them up to what we would all regard as 21st century standards.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Does the Minister accept that ECO is a carbon-saving obligation in the first instance, the funding of which follows? It would have been possible, even if the overall funding envelope had been kept as it was, to make changes in the carbon obligation in such a way that these programmes might have been saved. That is an entirely different point from the one he is making about whether one should abjure savings on energy bills as a result of trying to keep costs up overall.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I think we are talking slightly at cross purposes. Let me correct the idea that the ECO target has been obliterated, killed or put to bed, as anyone who listens to the Opposition could be forgiven for believing. The fact is that ECO has not reduced certainty; it has increased it. Labour’s CERT programme was year on year. It ran for 12 months, and was then extended for another 12 months. It was a hand-to-mouth programme. ECO now offers unprecedented transparency and long-term certainty for the insulation industry because we have extended it and guaranteed it up to 2017.

We have not simply stretched the target from 2015 to 2017. From 2013 to March 2015—27 months—we expect to deliver a saving through the scheme of around 14 megatonnes of carbon. In the period April 2015 to March 2017, to which we have extended the scheme, an additional 12.4 megatonnes will be saved, a cumulative total of 26.4 megatonnes, not 14 megatonnes. It is wrong to say that we have not extended ECO or that we are not offering long-term certainty against which companies in the supply chain can invest and set their business model.

We have given a clear message to companies in the supply chain that we cannot simply install the measures regardless of cost. We cannot reach our ambition to install solid-wall insulation at current prices, which is why we are trying to create a competitive market and to introduce new private sources of finance. We are trying to introduce greater competition and innovation to drive down the cost of the measures.

Although it is very early days for the green deal and ECO market, we are seeing real pressure on costs, not from the big energy companies but from the disruptive new entrants—the small and medium-sized enterprises, family business and entrepreneurs that are coming into the market. We should celebrate the fact that prices for solid-wall insulation are coming down. I have seen companies that are not only bringing down the cost of these measures but increasing the quality of the product, and the quality and choice of the offer to consumers. [Interruption.] The fact is that I have seen a lot of solid-wall insulation where what people end up with is homes that look like they have been airlifted from East Germany. The people who do it take out all the character and just put on some uniform fascia. In fact, what people increasingly want is choice. They do not want to see character obliterated from their home. They want to see improvements. I am glad to see that we are getting that sort of innovation into the scheme.

I understand where the Opposition are coming from in their desire to retrofit homes. I understand their ambition to improve the efficiency, warmth and comfort of homes, but unless they can cost that out and be honest with the electorate about how much it will cost and how much of the burden will fall on the fuel-poor and on hard-working families, they are just a pressure group; they are not worthy of being considered the Government. We are making those choices and laying out the whole picture for the electorate. We have to balance the costs to hard-working families with the benefits to the few that will receive ECO.

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Minister (Energy and Climate Change)

The Minister is saying that solid-wall and hard-to-treat measures cannot be economically funded through this programme. Given that this policy is his own policy, when did he become aware that it was unworkable to try to deliver those kinds of measures under the scheme?

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

No; I obviously did not explain this properly. What I am saying is that we could not do the whole lot, the 7 million or so—I think that that is the figure, off the top of my head—properties that need to be done at this price, so what we are doing, as we work with other technologies, is getting the market going, using the green deal communities subsidy and the cashback that we have announced to jump-start the market and to fund the amount that we judge we can afford. That is in order to get the market working and to bring forward innovation; and as the market gets going, so we will see the price come down. We should use Government policy as a lever to drive down the cost, just as we have used Government policy in support of feed-in-tariff technologies as a means of driving down cost; and as costs come down, that should not be passed across in inflated profits to installers. It should come across in benefits to consumers, whether they are bill payers or people who are purchasing the technology. That is at the heart of the green deal.

We are trying to move away from the model that was used under Labour, in which there was 100% subsidy. Basically, what that meant was a glorified lottery. Millions of homes were substandard, and each year a lucky few thousand would win the lottery of insulation and get every single measure fully funded. I do not begrudge those home owners or people in the rented sector who had their homes upgraded, but that is not the fairest way of doing it. Yes, there are those who are fuel-poor who will never be able to make a meaningful contribution. We must accept that, but most people who fall into this category are capable of making a meaningful contribution to something that will add considerably to the value of their home.

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

My constituents back in Nottingham who are listening to these comments will probably be shouting at their radios and televisions. They will say to the Minister, “We are making a contribution to the cost of getting our homes insulated and we are precisely the sort of hard-working families that the Minister talks about.” They might feel somewhat let down by the sort of comments that he is making.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

No. I refer back to my earlier comments: I think that there are grounds for optimism for the hon. Lady’s constituents. She is right: we have had to bear down on the cost of delivering ECO. However, we have put in place other measures, which will allow schemes such as that in Nottingham to go forward. We have already announced—

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I will not now, as I have very little time left. We must ensure that we deliver value for money, but the hon. Lady is right: a number of her constituents are making a contribution. It is not easy to say exactly what the right level of contribution is, but I think that the principle is important and I salute the work that is going on in Nottingham, as I said. I am increasingly optimistic that schemes such as that and many others across the country will be able to be rolled out, as a result of our green deal communities fund and the increased cashback prices that we have put in place. Those have been warmly welcomed by the supply chain. We have seen a very substantial increase in the cashback offer. Up to £4,000 per household is now available for solid-wall insulation. That is up from £650. It is not a bottomless pit or a blank cheque. It comes from a pot that we judge we can afford in order to get the market moving. We will announce shortly a further tranche of long-term incentives that will encourage people to improve the energy efficiency of their home. That will show that the coalition Government are a genuine partner in that move and that we are trying to build a long-term, sustainable market for energy efficiency improvements.

However, part of that must be green deal finance working together with private finance, subsidy through the ECO and other pots. There is no silver bullet; there is no easy answer, but the situation is simply not as bleak as it is being painted by the Opposition. I understand that every time the Government change policy, that is a challenge for any business that depends on Government policy. We do look, wherever possible, to avoid unnecessary changes and to provide certainty, but the very fact that we have now extended the ECO scheme out to 2017 and put the cashback measures in place, together with the fuel poverty strategy—the first time that anyone—

Photo of Nadine Dorries Nadine Dorries Conservative, Mid Bedfordshire

Order. I call Mr Tom Blenkinsop. Will other hon. Members please leave the Chamber quietly?