Warm Home Discount Regulations 2011
Lord Marland
That the Grand Committee do consider the Warm Home Discount Regulations 2011.
Relevant document: 17th Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland)
My Lords, I beg to move that the Committee has considered the draft Warm Home Discount Regulations 2011.
These regulations build on the voluntary agreement negotiated by the previous Government with energy suppliers. I applaud them for bringing forward the primary legislation in the Energy Act 2010, which has allowed us to make this scheme a reality.
For over five years, the numbers of households in fuel poverty has risen. It is estimated that in 2010, 4 million households were living in fuel poverty in England. The Government are committed to tackling fuel poverty and supporting low-income and vulnerable consumers to heat their homes affordably. The warm home discount scheme enabled by this instrument will help this to happen.
We are aware that fuel poverty is an issue that is best tackled via many angles, not just one. That is why there are four proposed elements to the warm home discount scheme. The first is the core group. A specified financial benefit of at least £120 per annum will be provided to households in receipt of certain elements of pension credit. Receipt of pension credit guarantee credit, which goes to some of the poorest pensioners, is one of the best ways to identify this group. We consider this group to be at high risk of fuel poverty. Over half of all fuel-poor households contain someone over 60, and over 80 per cent are in the lowest three income deciles.
The second group is the broader group. The same financial benefit specified for the core group will be provided to a broader group of households, who are fuel poor or vulnerable to fuel poverty. We have specified a number of state benefits that energy suppliers could choose from to identify those eligible for broader group support. Suppliers would also be able to propose additional criteria for approval by Ofgem, which would target support at those in or at risk of fuel poverty.
The third group involves the legacy spend. This will give a smooth transition from the voluntary agreement, which is an agreement that has been in place for the past three years between the Government and energy companies. It provides financial assistance to vulnerable consumers but the agreement ends this month. The amount of spending by suppliers on these legacy forms of support will decrease over the course of the scheme, as the amount of spending on rebates for the core and broader groups increases. The warm home discount scheme builds on the success of the voluntary agreement, and allows the Government to provide stronger support for the people who need it.
Lastly, there are the industry initiatives. Suppliers will be able to fund some activities in addition to the provision of direct financial support, which will benefit households in or at risk of fuel poverty. The scheme regulations detail which forms of support can be funded and include activities that improve targeting of the available support or those that provide energy advice to consumers. Through the scheme, those participating energy suppliers will provide support worth up to £1.1 billion over the next four years. But we must ensure that the resources we have are used effectively to tackle the problems underlying fuel poverty.
On 14 March, the Secretary of State launched an independent review of the fuel poverty target and its definition, led by Professor John Hills. Our intention is that suppliers’ contributions to the policy will be proportionate to their market share. Further regulations will be laid to allow a reconciliation mechanism to guarantee this, should the House support these scheme regulations. Subject to support from Parliament for the data-matching regulations due to be tabled later this year to help identify the core group, we estimate that around 2 million low-income and vulnerable households will be assisted by the scheme annually. On that basis, I commend this instrument to the Committee.
Baroness Maddock
My Lords, I welcome what the Minister has said, and these regulations, but I have some questions that I hope he will be able to help me with. I should also declare an interest: I am a vice-president of National Energy Action, a charity which campaigns to help people in fuel poverty. I know that the Minister himself, through the passage of the Energy Bill, is very committed to trying to alleviate fuel poverty in this country, but I wonder if he can help me.
The Minister estimated that 2 million households a year will benefit from this scheme, and he also explained that there will be legacy households from the voluntary scheme. Can he tell us how much of an overlap there is between these two groups? Maybe this is in the documents that go with the order—I did have a look at them, but I was not able to find this myself.
Also, following the Budget there was a lot of peripheral discussion about the fact that the upgrade on the winter fuel allowance that had been in place temporarily for two years was not continuing. I appreciate that the Minister may not be able to do this today, but is it possible to say what percentage of pensioners who get the winter fuel allowance are likely to be helped by this scheme? It is fairly important that we get that message out, given that there has been publicity in local papers about how terrible it is that people are losing their extra £50, or, if they are over 80, £100. It seems that many of the people who will find it hardest should benefit from this scheme, and it would be helpful if we could get those figures out.
I turn to my other question. Other than the pensioner or elderly group, will the Minister tell us more about how he sees other vulnerable groups, and who are they? I understand that the main concern of this is to protect the health and welfare of elderly people, but there are of course other vulnerable households—as indeed the noble Lord mentioned. I am thinking particularly of low-income families with young children, or people who have long-term disabilities or illnesses which mean they need to be kept warm.
I welcome this, I hope that the regulations that go with it later on are fairly speedy in coming, and I look forward to the answers from my noble friend.
Lord Jenkin of Roding
My Lords, like my noble friend I, too, welcome these regulations. They bring a little more certainty to what has hitherto been a rather uncertain variety of schemes.
My main concern has always been how the suppliers are intended to identify the householders that they are supposed to help. My noble friend will remember that we had some discussion about that on the question of the Green Deal. It is on these energy discounts and what have previously been called rebates on bills that the problem has been at its most acute. I do not need to go over the detail of this, but when we first debated the CERT scheme—it must be nearly four years ago—two things were evident. One was the considerable hostility of the industry—the suppliers—to becoming involved in this sort of activity. I think attitudes have dramatically changed, and I find in talking to industry representatives a clear recognition that helping those who are most likely to suffer fuel poverty is indeed very much part of their social obligation. I welcome this change of heart; a variety of factors have contributed to it and I do not necessarily need to go into them.
The second problem, as I said, has always been that of identifying the households. We pressed former Ministers very hard on this and eventually secured a clause in the Pension Bill which allowed Ministers in the Department of Work and Pensions to supply the names of pension credit pensioners, as households likely to be most in need. Given the problem that had been identified—I will forbear from giving a quotation in Latin, because that now is rather frowned upon in this House.
Lord Jenkin of Roding
Right: Parturient montes, nascetur ridiculus mus. The mountains heaved in childbirth and what came out was a ridiculous mouse. We had asked for far more clarity on how these fuel poverty households were to be identified and my discussions with the industry then revealed that they were wasting a very great deal of time and money on going from house to house trying to find out who they were. Of course, they got much better at it; they began to recognise—as, indeed, most people’s common sense would say—that there are areas in which you will find a much higher concentration of fuel poverty houses, but they also found that quite a number were not eligible for help because they had already had Warm Front help and this added to the problem. This is nothing new; it has been going on for some time.
We have here, as my noble friend has described, two main groups; the core group and the broader group. I very much welcome, because it meets the demands that have been made over the years, Part 1 of Schedule 2 of the order, headed:
“Eligibility criteria: descriptions of persons satisfying Condition 1”
—that is, the core group. Instead of having what had hitherto been either a tiny pensioner group or a fairly indeterminate criterion, we have, in these four sub-paragraphs, descriptions of the kinds of households which should form part of the core group. I very much welcome that; some progress has been made. However, as I think my noble friend Lady Maddock said—we are promised further regulation on data sharing—it is all a question of data sharing and what is legitimate under the general law.
Paragraph 4.3 of the Explanatory Memorandum says:
“It is also intended to make further Regulations under section 142 of the Pensions Act 2008 to authorise, and prescribe safeguards in connection with, the sharing of data between electricity suppliers and the Secretary of State. The purpose of the data sharing will be to facilitate the exercise of the Secretary of State’s powers under Part 3 of this instrument”—
these orders, these regulations—
“by enabling the Secretary of State to identify which of a supplier’s customers are recipients of state pension credit”.
Is there any advance in this? Are we in any way going beyond the state pension credit households who are going to be identified so that suppliers can know precisely who they have to help? I had thought, to begin with, that this was going to be an extension of the defined criteria, but I think, if I can put it this way, that it is still the same ridiculous mouse, in which case, what is the purpose of the further regulations? What are we to expect from those?
I will not quote them but I have figures here of what the industry has been doing under the voluntary scheme introduced by the last Government, which clearly has been very helpful. However, I welcome this tighter scheme which is now coming into operation as a result of these regulations. My noble friend gave the figure of £1.1 million. I have the chart here of how that is going to be made up and how the amounts on the core group and the broader group are going to increase over the next four years. There are much smaller sums of money in the broader group, which is interesting. The legacy spending, as he said, is going down so that the figures broadly balance. Then there is evidence of the figures for the legacy spending cap and the industry initiatives cap, with the total for each year rising from £250 million in 2011-12 to £310 million in 2014-15. Those figures add up to the figure we gave of £1.1 million.
Baroness Smith of Basildon
My Lords, in his introduction the Minister said how he applauded the last Government. He commented in your Lordships’ House during our debates on the last legislation that he looked forward to being held aloft as he left the Chamber. He may not quite have achieved that on this occasion but he has had a pretty good stab at it and we welcome these regulations. Given that it comes from legislation passed in the Energy Act 2010 by the last Government, it will come as no surprise that we agree with the broad thrust of the order because it builds on that voluntary agreement which has been so successful in supporting those who are fuel poor. The Minister will be aware of the commitments made by Ed Miliband, then Secretary of State of State for Energy and Climate Change and now Leader of the Opposition, when he said he would bring forward legislation to make such support compulsory and to target resources at the most vulnerable consumers. The legislation was brought forward, along with other measures to deal with fuel poverty such as Warm Front and winter fuel payments, for two reasons—to deal with the issues of those that are fuel poor and the issues of those who live in unhealthy and cold conditions. We have heard from our previous debates on the Energy Bill the impact that can have on homes and families. There is an individual cost but also an environmental cost. So for those reasons I welcome the regulations. However, I did not imagine when the legislation was brought forward that the regulations would be with us today against a backdrop of winter fuel payments having been cut in the Budget and of Warm Front being drastically cut by two-thirds and phased out completely after two years. Although we will see the introduction of the Green Deal and the energy efficiency measures, which we welcome, we do not know yet if and when those measures will apply to the public rented sector. That makes the responsibility of getting this right today all the more important.
We agree with much that is in the order, and certainly with the principles behind it. The Minister spoke of four key elements, including support measures and who might be eligible for a rebate as part of the core group. We, too, favour that support being extended to a wider group. I understood that the wider group comprised those who were at risk of fuel poverty, but the Minister in his opening speech said that it was those who were fuel poor and those who were at risk of becoming fuel poor. That seems to be an admission that the core group will not pick up everybody who is fuel poor. I would be grateful if he would say something more about that. The voluntary agreement ends in the next few days. The legacy spend is an appropriate way forward. The proposed model of industry initiatives allows some of those non-financial benefits such as energy advice to continue.
There is considerable agreement in principle, but I will raise some questions that I hope the Minister can satisfy me on. They are not dissimilar to the questions raised by other noble Lords. I understand from the debate yesterday in the other place that there will be a further order concerned with data collection and protection issues that might arise from identification of the core group. This will concern sharing information with the DWP. One concern with the process of sharing information is whether it will fully identify everybody who will be eligible for support. What action will be taken to ensure that as many people as possible in that group are reached? Given that the information will be shared with energy companies, what restrictions will be placed on its use, and how will they be enforced or policed to ensure that they are abided by?
I am also interested—I know that we have a further order on this—in the reconciliation mechanism for energy suppliers in the core group. Further regulations have been published, but perhaps I have missed the Explanatory Notes to those regulations. I do not know whether they have been published yet. How will the reconciliation mechanism be funded, and what consultation has there been with energy companies prior to the order being published? The main concerns with the broader group arise out of the identification and funding of that group. The core group is specifically identified, but the broader group is not. That is appropriate, and I understand why the Government want to allow greater flexibility to suppliers to support a wider range of vulnerable households. I am aware that they understand that energy companies will need guidance on this. However, I am still not clear how the energy suppliers will identify those who need support. Will support be available to assist them? Will the Government enlist help from third-party organisations, and, if so, will they in turn have any support to help them work with energy supply companies to identify who is entitled to a rebate and support?
The Minister will be aware also of some of the concerns of those helped by organisations such as Macmillan Cancer Support. For those who are terminally ill, the additional cost of heating their homes is significant. It is a serious worry for people. Macmillan's research has identified that one in five people with cancer turns off the heating when they most need it because they are worried about, or cannot afford to pay, their bills. That causes concern both to the NHS and to your Lordships' House. Every health and social care professional is convinced that having an adequately heated home is crucial to a patient's recovery. Why was the decision taken to exclude people with terminal illnesses from the core group? I do not think that it is a matter of costs, because they are relatively small; perhaps there is another reason. It would be helpful to have further information on that.
Another area I would like to explore with the Minister is whether the Government have made any assessment of whether those who benefit under the current voluntary agreement could lose support under the new arrangements. It would be helpful if there was some kind of review of the scheme as it progresses to assess whether or not that is the case; and, if it is, what action can be taken to address the unintended consequence of losing support in moving to a statutory requirement.
I want to raise a couple of other issues, of which I have given the Minister notice, so it will be easier for him to address the points in Committee. On page 3, in the Interpretation, the Introduction there is a list of those who are eligible for a rebate. They are:
“a man and a woman who are married to each other … [or] not married to each other but are living together as husband and wife … two people of the same sex who are civil partners”,
and in the same household, or,
“two people of the same sex who are not civil partners of each other but are living together as if they were civil partners”.
These are couples who have a relationship. But what about other couples, siblings who may be living together, for example? Would they not be eligible for the same support as couples who have a civil partnership, or marriage, or are living as if they did? Two friends sharing a home in the same way as a married couple or civil partnership couple seem to be excluded under the interpretation. Any information or advice that the Minister can give me on that would be helpful.
Finally, it was helpful when the Minister spoke of the work of Professor Hill, which will be incredibly valuable to the work of the Government on energy efficiency and fuel poverty. I understand that there are discussions about him being asked to look at redefining fuel poverty. The only way we should take people out of fuel poverty is by addressing the core issues, not be redefining fuel poverty. Can the Minister can ask Professor Hill to look at this issue and come back to us on whether it can be done through this order or in some other way? I raised this during the Energy Bill as well. In terms of pre-payment meters, Save the Children has identified what it calls a poverty premium issue: those who earn the least, and have the greatest need, pay the most. If you are paying through a pre-payment meter you pay around 8 per cent to 10 per cent more in energy bills. Six per cent of households have pre-payment meters and 25 per cent of those households are fuel poor. That may not easily fit into the broader group, but it would be helpful if that could be looked at, as the broader group is being defined. One way out of fuel poverty is to stop charging those that have the greatest problem the most money for their fuel.
I assure the Minister that we welcome the proposals. I am not sure that they fully plug the gap that is needed to address the fuel poor, particularly the rise in energy prices. We are seeing the numbers of those who are fuel poor increasing. It will certainly help, however, and I entreat the Minister to keep the operation of this scheme open and under review, so that if we do find that there are gaps where we are not addressing the crucial issue, we can come back and ensure that this does fully undertake the role that the Government are seeking for it in these regulations.
Lord Marland
My Lords, I am grateful as always to the input from my noble friend and those on the opposition Benches. Again, I would like to thank opposition Members for giving me some indication of the angle that they were coming from in terms of questions. It is extremely helpful. These are detailed questions which I will seek to address now, but clearly, for some points, it may be useful if we put something in writing at a later stage for clarification; as always, I am happy to make officials available for further clarification.
I shall deal first with my noble friend Lady Maddock, who has unrivalled knowledge in this field through her work in the charities sector. She quite rightly asked about the overlap between the groups. I can assure her that we put in place arrangements to allow suppliers to continue to provide benefits to customers, receiving help under the current voluntary agreement through the legacy spending section. The amount of funding available, which I think is the figure that she would like to know in relation to the first scheme, is about £140 million. This would allow that continuation and assistance.
What percentage of those pensioners who receive the existing winter fuel allowance will be helped by the scheme? The noble Lord, Lord Jenkin of Roding, was alluding to this question as well. There are 12 million such pensioners, and in the first year we anticipate that 800,000 people would benefit, which is roughly 6.5 per cent—I say despite my failure at the old-fashioned maths O-level—and 1.3 million towards the end of the scheme, which is just over 10 per cent. I hope that is a satisfactory figure.
My education continues with the noble Lord, Lord Jenkin of Roding, talking to us in Latin. I am very grateful in this particular instance that he did do a translation—I did Latin O-level, but it needs some brushing up. I notice the noble Baroness opposite did not need to have it translated for her.
Lord Jenkin of Roding
If it will help my noble friend at all, I can tell him that it was a line from the poet Lucretius.
Lord Marland
You see, you learn so much in these debates, don’t you? I am so glad that the noble Baroness opposite showed me that she knew exactly what we were talking about, whereas on these Benches we have to be educated.
That takes me away from the thrust of his real question, which was how suppliers identify households in the criteria. As he rightly says, if you read the document, page 18, Part 1, Schedule 2 outlines how we have got to the criteria— I sound like the noble Lord, Lord Jenkin, now, because he normally quotes references from here. Are we going beyond the state pension households? Obviously, we would like to. It is very important to await the findings of Professor Hills to find out what the fuel poverty criteria is going to be, because that is where our focus and attack has got to be. I am grateful for the support from the Benches opposite, and I am delighted that we will listen to what Lord Hills—not Lord Hills, not yet—Professor Hills has to say before we really attack this subject.
Again, I am grateful to the noble Lord, Lord Jenkin, for pointing out the table— although I have lost it now among all this paper—which clearly shows the application of funds. I will be very happy to provide that to anybody who has not seen it because it shows quite clearly the distribution of funds to these groups.
The noble Baroness, Lady Smith of Basildon, asked four or five questions, but fundamentally whether this will this pick up the fuel poor. I refer to the remarks I have just made: clearly, the whole point is to take people out of fuel poverty, to stop this figure of 4 million, which is running slightly out of control at the moment, and grind it to a halt.
Her first question was about the identification of the core group in terms of the collection and protection of data. We have a data-matching organisation on hand to carry out a comparison of names and addresses, energy suppliers and customers. Names and addresses would be held by the DWP on pension credit recipients. Where the data matches, each energy supplier would be told which of their customers have matched and are therefore eligible for the rebate. The purposes for which this shared data may be used are set out in the scheme’s regulations. I hope that helps answer that question.
The core group is of course focused on pension recipients. These are some of the poorest pensioners. We know that over half the fuel poor are pensioners and over 89 per cent of the fuel poor are in the lowest three income deciles, which is very useful information to bear in mind.
The noble Baroness then asked for information about the reconciliation mechanism. The mechanism will be necessary only to share the costs of providing help to the core group. This is because each supplier will have to provide help to all its eligible customers identified by the Secretary of State thorough the data-match and suite processes, and the spread of customers is unlikely to be equal.
We then moved on to identification of the border group and why the terminally ill were excluded. The regulations are clear that the suppliers should target those in fuel poverty, as we have just said. That should include low-income families but we should also be very mindful of the terminally ill, the disabled or the long-term sick because they are the ones who find it most difficult to cope with this problem, and I can give the noble Baroness an assurance that that is very much in the forefront of our mind.
There was a very good question on voluntary agreements. We put voluntary agreements in place to allow suppliers to continue providing benefits to customers receiving help under the voluntary agreement through the legacy spending section of the scheme. However, we believe that the core and broader groups will take more people out of fuel poverty as well as providing clearer and more predictable benefits. We therefore propose that the legacy spending should be transitional and that suppliers should have to manage their spend over the scheme period.
The noble Baroness’s final point was about two people living together who were not married or in civil partnership being eligible. The rebate will be paid to either member of the couple where one of them satisfies the eligibility criteria and is also the electricity bill payer. The regulations set out the meaning of the word “couple”, which is well worth knowing. The definition is that generally used for benefit purposes: two people are treated as a couple if they are married, not married but living together as husband and wife, in a civil partnership or not in a civil partnership but living together as if they were. And if you can get to the bottom of that, you will be much the wiser.
The question of pre-payment meters is a valuable one. Over 80 per cent of the fuel-poor use the pre-payment method, so it is very important that we work with that. The pricing mechanism is a matter for Ofgem, which has recently produced a review that is available. I am happy for our department to put one in the post to the noble Baroness for some light bedside reading when she is enjoying a weekend off.
Sorry, did I say that the fuel-poor used pre-pay meters? Over 80 per cent of the fuel-poor do not use pre-payment meters.
I am grateful to noble Lords for their input, as always, and it is fundamental, as we have said on many occasions, as those who have listened to our energy debates in the past will know, that we should focus on getting people out of fuel poverty. This Government are determined to concentrate on that issue, as I know were the previous Government. That is where the warm homes discount can make a difference. I commend the order to the House.