Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) (Amendment) Regulations 2013
Baroness Verma
That the draft Regulations laid before the House on 10 December 2012 be approved.
Relevant document: 15th Report from the Joint Committee on Statutory Instruments
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma)
My Lords, the Government are today bringing before the House amendments to the Green Deal framework regulations. We have been further developing the framework over the past few months, in readiness for the full launch later this month. This has resulted in a number of SIs being developed and laid before the House. These changes are necessary to optimise the legal framework and are taking advantage of learning we have already gained.
However, before we begin to debate, I would like to take the opportunity to speak about the Green Deal—the transformational energy efficiency programme. I am delighted that it will be going live next week, unlocking unprecedented opportunities for both consumers and businesses alike. The Green Deal will provide a stable, transparent and long-term policy framework which consumers can trust and in which businesses can invest. It will allow consumers to pay for some or all of the cost of energy-saving property improvements through savings on their energy bills. The Green Deal can be used to lever in billions of pounds of private investment to improve the energy efficiency of UK properties. It will empower small and medium-sized businesses to enter a new market as well as offer consumers more choice and innovation than before. There has already been interest from industry in getting involved in the Green Deal and it is exciting to see a steady stream of participants becoming approved and using the Green Deal quality mark prior to launch on 28 January.
We already have 462 installer organisations registered, and 2013 is already off to a flying start with local authorities playing an active role in helping to kick-start our “go-early” initiative. The Government have supported this by providing £22 million to stimulate early demand for the Green Deal in seven core cities and to help other local authorities drive energy efficiency-boosting initiatives. Our cash-back scheme, worth £125 million, launched on 14 January will reward households taking early action to improve their properties through the Green Deal. Households making a number of improvements could receive more than £1,000, and £2.9 million will be spent on a communication campaign that will help to build understanding and trust in the Green Deal.
I will now introduce the statutory instrument that will form the basis of our discussion. We are making a small number of amendments to the Green Deal framework regulations which, subject to the outcome of today’s debate, will come fully into force on 28 January 2013. The framework regulations create an authorisation regime to regulate the conduct of Green Deal market participants and ensure that consumers are protected. They cover conditions that must be met when a Green Deal plan is established and how it should be disclosed. The amendments we propose will make enhancements to the Green Deal framework. We have increased the frequency of some reporting requirements from annually to monthly for all Green Deal participants. These include the number and value of plans, cancelled plans, and the number of resolved and outstanding complaints. This is to ensure that we can monitor compliance to protect customers without imposing undue burdens on business and to protect the reputation of the Green Deal itself.
Other changes enable us to streamline key processes. We are improving the clarity of our complaints system by defining when a complaint should be directed to Green Deal assessors and when to the providers. Further to ensure effective policing of activity in the market, Green Deal accreditation bodies have been added to the list of organisations that can report a breach of regulations by a participant to the Secretary of State.
In addition, an important technical update is being made to the circumstances under which an energy performance certificate must be updated by the Green Deal provider or customer. These include where an energy efficiency measure has been removed, where the provider has changed and where the liability of the bill payer to make payments has changed. This update will ensure that customers and businesses have access to up-to-date energy efficiency information for their property.
The regulations will help to improve the energy efficiency of homes across Great Britain, reduce our carbon emissions and, crucially, help households to manage their energy bills. I commend them to the House.
Lord Grantchester
My Lords, I thank the Minister for her explanation of the regulations. As we have said on previous occasions, Labour continues to support the objectives of the Green Deal as a vital part of energy demand reduction and energy efficiency improvements for meeting greenhouse gas emission targets and achieving energy security and climate change mitigation.
With little time before next Monday’s launch of the Green Deal, the Government must react swiftly to urgent criticisms of the costs of the scheme to potential consumers. Up-front charges, high interest rates for finance, and penalties, are all increasing the reluctance of households to take up Green Deal plans. At a time of rising energy prices, falling living standards and stretched budgets, the Government must not allow scheme charges to undermine the confidence of consumers in going ahead with very necessary home improvements. Not only would a successful Green Deal cut long-term energy bills for households, it would reduce the nation’s energy demand and save the planet from excessive carbon emissions.
The amending framework regulations are accepted as part of the refining process to improve the operation of the Green Deal, with provisions regarding energy performance of buildings certificates, reporting requirements for the progress of the Green Deal and provisions regarding enforcement. We expect further amending regulations—I hope they will be few in number—as the Green Deal rolls out and experience is gained. The Green Deal has been a long time in gestation, and we will all welcome the official launch next week on 28 January. After raising a few points on the regulations, perhaps it would be an opportune time to reflect on the Green Deal and ask the Minister for her forecasts and assessments, and for us to pass comments, with constructive criticisms, on the likely uptake outcome.
The regulations regarding the energy performance of buildings certificates are largely technical and non-controversial. They will help to make sure that information following Green Deal plans is up-to-date and accurate. Schedule 2 of the regulations lists the new monthly reporting of information requirement for Green Deal providers. This will greatly assist in monitoring the progress of the Green Deal and will provide necessary statistics for analysis. However, one of the most controversial aspects of the Green Deal concerns cancellation charges and penalty charges for early repayment. It is generally regarded as one of the key parameters influencing the consumer’s final decision on whether to go ahead with a Green Deal plan. If these charges are disliked completely or labelled disagreeable, it may well be that the Green Deal plan may not be taken up. Why are reports regarding these questions not part of the monthly requirements? Will the Minister clarify that paragraph 1(g) of Schedule 2, on page 7 of the regulations, which specifies,
“the total number of green deal plans cancelled in the previous month”,
refers to plans already started?
Perhaps I might suggest some additional reports, for example of the total number of Green Deal plans proposed but not taken up. Another report could be of the total number of cancellation charges levied, together with the average fee. On the issue of amounts repaid early, covered in paragraph 1(f), could a requirement be included to monitor the number of early repayments bearing charges, and the average charge?
On the cancellations, it would also be useful to know what element or measures in a Green Deal plan of many actions were not going to be proceeded with. Does the Minister agree that this information may be critical in assessing consumer confidence? Will she look at how this could be added to the regulations, which, by convention, are not amendable? If she rejects this requirement, how does she propose that this controversial aspect will be monitored? Information must not just be for business-gathering purposes; it must also inform policy and help corrective action.
The Minister in the other place, in response to my honourable friend Luciana Berger, said that penalty charges could happen only when a Green Deal provider would make a loss as a result, and that the onus is on the provider to prove the case. Where is this in the regulations? How will the provider make the case? To whom will the current consumer have a course?
Another controversial aspect concerns up-front fees. When Labour raised the cost of assessments with Ministers during the passage of the Energy Act in 2011, Ministers replied that it was expected that companies would not charge for assessments. However, from a Guardian newspaper report, it appears that Ministers are wrong. Consumers will face charges of up to £150 as an assessment fee, whether or not they take out Green Deal plans. The report states that British Gas will charge £99 for its experts to go into homes and judge what measures, such as fitting cavity wall insulation, would be most appropriate for each property. Two of the companies contacted by the Guardian say that they would refund the full assessment fee or part of it if works were carried out by them. Does the Minister accept the YouGov poll that found that 51% of consumers concerned about up-front costs rated them the biggest obstacle to making energy-efficiency improvements to their homes?
The third element of the regulations concerns improving the clarity of the complaints process by imposing sanctions and including the Secretary of State in the process, yet the regulations do not say what the sanctions are. Will the Minister clarify whether they have been included elsewhere and that it has escaped me? It is important to know and agree what powers and sanctions are being given to the Secretary of State. In a debate on these regulations in the other place, the Minister stated that he believed the expected cost to be £335 per complainant to the ombudsman, and that the costs would be borne by the Green Deal provider. Will the Minister confirm this figure and say whether there would be any judgments at all whereby the cost or some part of it ended up being paid by the complainant?
Will the Minister clarify the process of consultation? Were the measures in the regulations consulted on with the public in a discrete fashion and in a discrete consultation process? I have read the Explanatory Memorandum, which seems to suggest that the regulations have arisen from consultations and events generally from November 2011, closing a year ago on 18 January 2012. Will the Minister please clarify?
A few further considerations arise from the debate on these regulations last Monday in the other place, and indeed the Minister has echoed those remarks. In his opening remarks, Greg Barker, the Minister in the other place, said that things had already got off to a flying start in October with the Go Early initiative. Is this the initiative that resulted in just five assessments? Is this the initiative that highlighted problems in the software for assessments? Will the Minister confirm whether the Minister in the other place was correct to state, as she indeed has done today, that £22 million had been provided to stimulate early demand in seven core cities? In the press release a figure of £12 million was put forward. While a test or pilot is to be recommended, this seems to be a soft launch. Was there a reason why the important city of Liverpool was excluded from this list?
The Minister in the other place went on to speak about the cashback scheme, worth £125 million, launched on 14 January. I am surprised that this is a government scheme when, according to Ministers, “the market will provide”, and other matters seem to be a commercial matter for the Green Deal Finance Company. Already this scheme seems to have been amended. Can the noble Baroness confirm whether the £1,000 maximum level referred to has indeed been lifted and that, with a budget of £125 million, it really is the early-bird scheme? Will Liverpool be excluded from this?
A third element in the opening remarks of the Minister in the other place and of the noble Baroness concerned the £2.9 million budget for a communication campaign about public relations. The Minister in the other place admitted that it was not a huge amount in the scheme of things as it would be used in a focused way. Can the Minister clarify what will be its focus?
The Minister in the other place mentioned that the firm Freud had been retained. Does this mean that the Government did not go out to open tender for this contract?
In previous debates we have all acknowledged the ambitious plan and the huge difficulties that the Green Deal faces. Unlike a commercial operation, the Government have to do their thinking aloud as they make the regulations to set out the parameters on which commercial companies must make this a success. However, this allows the Government to hear when we offer advice and give warnings. I am not sure that they are listening well enough when it comes to the influence of certain aspects of the take-up of the Green Deal plans on consumers. We have debated previously the influence of the interest rate on whether consumers assess the Green Deal as a good deal. Against a bank rate of only 0.5%, 7%, or even 6.9%, does not seem a good deal, especially when it will, in effect, double the amount of repayment over a 25-year period. This is a completely different circumstance to a short-term payday loan and, like a mortgage, there is the security of the loan being advanced to improve property on a state-sponsored scheme.
In a debate on Monday, the Minister acknowledged that my honourable friend Luciana Berger was right: we need a competitive interest rate. Today the Sun has badged the scheme “Green plight—Flagship eco loans a ‘rip off’”. The Minister said that DECC and the Green Investment Bank are putting money into the Green Deal Finance Company. Can the noble Baroness tell the House how much the department is putting in and what this amount is being spent on? Can she confirm that the Green Deal Finance Company is a not-for-profit body in response to government encouragement, and that the interest rate is subject to government approval and will not be available elsewhere on the high street? Am I correct to expect confirmation of the interest rate tonight?
I have taken up a great deal of the House’s time but, just prior to the launch of the Green Deal, perhaps I may mention that there are further features still causing anxiety, such as the interplay between the Green Deal and the ECO, whereby any lack of uptake in the Green Deal could become compulsory under the ECO. There are still also questions over the golden rule and possible mis-selling fears.
I would like the Minister to answer as many as possible of the questions raised and not be sidetracked instead into further reflections if her time is pressing. Can she commit that her department will look at these issues and place any missing answers in the Library of the House? If she has further time, it would be a useful moment just before launch to get the Minister’s future expectations on her department’s figures for take-up over the coming years, the number of future job creations and what will constitute success in her eyes for the Green Deal.
I am sure we will return again to these points and others, such as the role smart meters could play, but I wish the Minister a successful launch next Monday.
Baroness Verma
My Lords, I thank the noble Lord for his very warm welcome of the Green Deal. I expect he will be by my side when the launch goes ahead next Monday. The invitation is there for the noble Lord to join me, as it is for the noble Baroness.
The noble Lord has posed a huge number of questions and I have tried to note down as many as possible. However, the likelihood is that I may have to write to him on some of them.
I shall start by responding to the noble Lord’s point about high interest rates. As he will be aware, the rate is to be set by the Green Deal Finance Company and no doubt will reflect a safe and competitive level. The rate has not yet been confirmed, but I expect that to be done in the next day or so. The noble Lord will have to wait just a little longer for a response to that question. However, I take on board his point that the rate has to be competitive. That fits in with our wish to try to ensure that we meet the golden rule, which he rightly raised—namely, that no bill payer should pay more than what he or she is currently paying. That is absolutely the right way to look at this.
The noble Lord asked about early repayment penalties. Perhaps I can reassure him that we have also looked closely at these. I can tell him that the repayment formula and the penalty compensation payback are based on the consumer credit legislation that is in place, and we are not doing anything different from what is already in the marketplace.
The noble Lord asked about the forecast for take-up rates of the Green Deal. I would say to him that it has been very promising and there is a great deal of interest in it. However, as he recognises, we are proceeding with a soft launch because we want to ensure that people understand what the Green Deal is and that all the systems needed to deliver it are fully tested and in place. The noble Lord is right to say that when the Green Deal is taken up, many households will see a great difference in their energy consumption and it will impact on their energy bills—something which I know, like me, he is keen to see come down.
The noble Lord asked about monthly reporting, and we agree that this is an important element. The industry and providers have also welcomed it. He listed a number of other things that he would like to see included on the monitoring list. I may have to take those queries away simply because I was not able to write down all his points quickly enough. I shall read the report and come back to him with details of what is already part of the monitoring that has been put in place.
On the point about whether a householder who takes up a case will have their costs attached, I can assure the noble Lord that that will not be the case. If a complaint is lodged, it will be dealt with by the providers, and through DECC we will find ways of ensuring that a householder is not penalised.
The noble Lord mentioned the £125 million provision for early take-up; the cashback facility. We are expecting keen interest and we think that the £125 million for early take-up is a good way of encouraging people to take advantage of the scheme very early on. Perhaps I can link the rest of the work that we have been doing with our core cities to the £22 million referred to by the noble Lord. He referred to the fact that a newspaper had reported that it was £12 million. We have given out £12 million to seven core cities; we expect Liverpool to be added to the list of core cities. That is the £12 million, but another £10 million was also provided to local authorities outside the core cities to promote demand—hence the £22 million.
The noble Lord spoke about the expectation of job creation. We are very positive that this will generate up to 60,000 jobs in this sector, up from the 26,000 that are in place at the moment. We see this as a very positive scheme. I have listened very carefully to the noble Lord, who has, by and large, welcomed what we are doing with the Green Deal.
The noble Lord asked about the assessment costs. This is a market-based mechanism and we expect a range of models to develop. Some providers may offer assessments that have no upfront costs; others may charge, but it will be up to individuals whether to go with the first assessment or to shop around. This is something that all consumers do anyway. We encourage shopping around so that the consumer gets the best deal possible.
The noble Lord asked about the sanctions that the Secretary of State could impose. Of course, this very much depends on the circumstances. There could be a financial penalty on the provider, a compliance notice, or the withdrawal or suspension of authorisations for providers, assessors or installers. There are a number of safeguards that the Secretary of State has the power to use.
The noble Lord also asked whether Freud Communications was appointed through competition. The simple answer is yes, there was a competition. Freud was the preferred bidder.
The noble Lord asked a number of other questions that I physically was not able to note down. I am sure that the officials in the Box will have taken note of them. On those, I ask the noble Lord to allow me to write to him and put a copy in the Library. Overall, going through my own list of what I was able to note down, many of the points the noble Lord raised have been answered. I thank the noble Lord for his warm welcome of this SI and I commend—
Lord Grantchester
I thank the noble Baroness for attempting to answer so many quite detailed questions at very short notice. While we have this opportunity before the Green Deal is launched, perhaps I can tempt her to reflect and share with us how her department views success—what does success of the Green Deal look like? That would be really interesting to understand before it starts on Monday.
Baroness Verma
My Lords, if I had a crystal ball I would be able to tell the noble Lord lots of things. My own view is that, having talked to consumer groups and the industries within the sector, this is going to revolutionise the way in which people think about how to make their homes much more energy-efficient. It is about raising awareness. While we are rolling this out, we are very keen to ensure that consumers take control and have responsibility over what happens in their own properties. This approach is much more holistic. It is not just about short-term planning on, say, loft insulation; it is about looking at the whole property. I think consumers will be quite encouraged that this will be a long-term gain for them and their properties, and of course on their bills.
On that note, if I have satisfied the noble Lord, I commend these regulations to the House.