Electricity and Gas (Energy Company Obligation) (Amendment) Order 2017
(7 years, 7 months ago)
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Lord Prior of Brampton
That the Grand Committee do consider the Electricity and Gas (Energy Company Obligation) (Amendment) Order 2017.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)
My Lords, I am pleased to open the debate on this draft order. The ECO order exercises powers set out in the Gas Act 1986 and the Electricity Act 1989 which allow obligations to be placed on energy suppliers in Great Britain.
In the Prime Minister’s first speech of her term in office, she recognised the hardships faced by poorer households in Britain—hard-working families, who,
“can just about manage but … worry about the cost of living”.
As part of the response to that dilemma, the Government are committed to helping households in fuel poverty or on lower incomes living in homes which are expensive to heat. That is why this order is before the Committee today. It will also make an important contribution to the Government’s clean growth plan and to reducing carbon emissions.
We are making amendments to the existing ECO order, which covers the period from 1 April 2015 to 31 March 2017. The amendments extend the current scheme from 1 April 2017 to 30 September 2018 to enable reforms to be introduced, while also allowing industry time before further improvements are made through a new longer-term scheme from 2018 to 2022. Planning ahead to 2022, beyond the life of this Parliament, reflects announcements on funding made in the 2015 spending review. This longer-term confirmation of funding is designed to give greater certainty to energy suppliers, installers, local authorities and other energy stakeholders.
Lord O'Neill of Clackmannan (Lab)
My Lords, this order is something of a curate’s egg. There are a number of aspects that one would be quite happy with were it not for the fact that one player in this whole scheme is absent: the Government. They are changing some of the regulations and arrangements but they are providing no money themselves, unlike the Administrations in Belfast, Cardiff or Edinburgh. Therefore, we have to say in the first instance, on the objective of moving the starting time by six months, from 12 to 18 months, if we are to get a better scheme, that might be very well. However, it is a delay, in fact from 2015, when the opportunity to introduce an improved scheme first arose.
It begs the question: why is there a delay? If it is because the Government are wrestling with the complexity of it, I submit that they have had plenty of time to do that. I know from the briefing I received from National Energy Action—of which I happen to be the honorary president, and therefore declare a limited, non-pecuniary interest—that this estimable charity has somewhat mixed feelings, which reflect my own. The Government seem to be doing a little bit with one hand, and then taking it away with the other. When we see the reduction in boiler replacement, it is not because the job is nearly ending—that we have completed the replacement of inefficient boilers—but simply because the Government take the view that it costs too much.
There is also the fact that if you want to make households more conscious of the benefits of energy efficiency, a dramatic change such as the replacement or introduction of a boiler is of critical significance in this change of thought process. We know that in many respects the households that are most disadvantaged are those which have so many problems that trying to be energy efficient is very much a kind of finger-in-the-dyke operation, and they need assistance. Very often, when we are able to secure the replacement boilers, we get a change of step and a greater willingness to help.
It is also fair to say that we have insufficient sums to meet even the most modest of home improvements. We are told by a number of bodies—including, for example, the Committee on Fuel Poverty, the Committee on Climate Change, and Policy Exchange—that even to meet the very modest target of getting households to EPC E level by 2020 will require £1.9 billion. To get households to EPC D level by 2025 will cost £5.6 billion. To get all households up to EPC C level by 2030 will require £12.3 billion. These are large sums. However, what the Minister is talking about seems to be nowhere near what is required to reach these households. Indeed, it has been suggested that a baby born today into inadequate housing would probably be about 75 before their home was properly heated.
A number of the changes are sensible and not unwelcome. However, the Government cannot get away with the platitudinous nonsense the Minister spoke at the beginning of his speech when he quoted the Prime Minister. If the Prime Minister really wants to help hard-working families and do something about this kind of household, the Government will have to use central taxation as a mechanism to do it. It is not enough just to express pious hopes and, on occasion, go for cheaper options. That seems to be at least part of the thinking behind a number of the changes in this measure.
Therefore, as I say, this is a curate’s egg. This Committee does not have the opportunity to overturn or amend it. I know that it has been the subject of fairly wide consultation but I do not think that all the organisations that were consulted would necessarily embrace everything in the order. Therefore, as I say, my welcome of it is highly qualified and I am somewhat disappointed. An opportunity has been missed here—and not because the Government have rushed into this. They have had since 2015 to get something done and the best that they can come up with is this rather feeble list of changes and a further six-month delay in bringing about many measures that would be regarded as improvements. We cannot take any consolation as some of the less desirable aspects of this measure will continue for some time.
As I say, I think that this is a missed opportunity for the Minister. He and I are old friends from Select Committee days in the Commons. I am trying to chastise him as gently as I can as I know that he is new to the job and I expect that his influence over the drafting of this order was probably minimal. However, I would like to think that in the months and years that he may still be in the job he will be able to come up with something better before too long.
Baroness Maddock (LD)
My Lords, something is better than nothing. We on these Benches, at least, welcome this measure, although there are many “buts”. There is no doubt that improving the quality of existing homes can play a very important part in increasing warmth and comfort and help to make fuel bills far more affordable, particularly for vulnerable occupants. However—I think the Minister recognises this—it is also a highly cost-effective way of reducing carbon emissions and saving energy. In addition, ambitious energy efficiency savings programmes can capture substantial macroeconomic benefits.
I remember taking through the House of Commons a Private Member’s Bill that became the Home Energy Conservation Act 1995, and saying that the job creation potential in making homes energy efficient was enormous. I regret that some 20-plus years later, we are still grappling with this issue and people are still living in fuel poverty. As the noble Lord said, people born into fuel poverty today will probably still be in fuel poverty at the end of their lives. That is very sad.
Lord Grantchester (Lab)
I thank the Minister for his comprehensive introduction and explanation of the order. The ECO is now the only government instrument to increase overall carbon emissions reductions targets for households and overall home heating cost reduction targets by a statutory obligation on the largest energy suppliers to install energy-efficiency measures for households in Great Britain. I approve of the order today and support the measures, as far as they go, to promote energy efficiency and the reduction of fuel poverty. Improving the quality of the housing stock is a highly cost-effective way in which to reduce carbon emissions, save energy, improve the lives of the fuel poor and capture substantial national economic benefits. However, I cannot disguise the widespread disappointment in the Government for their inability to meet their legal target to end fuel poverty by 2017. Comments around the Committee today have reflected that view.
The Government are now extending the ECO scheme in this intermediary fashion for a further 18 months, to September 2018, before introducing further measures to end fuel poverty by the end of the scheme in 2022. The increasing focus on fuel poverty is to be encouraged, but reducing the annual spend by 25% from £860 million to £640 million reveals a lack of political will and the required proper funding. The Committee on Fuel Poverty has estimated an investment requirement of £20 billion to improve fuel-poor homes in England to at least EPC rating C by 2030. The Committee on Climate Change considers that the current funding is less than half that which is required to meet these now delayed commitments.
The Green Deal has been a failure, improving only 15,000 homes. Last year, the Conservative Government scrapped the 2016 zero-carbon homes policy. The UK ranks bottom, 16 out of 16, in western Europe for the proportion of people who cannot afford to heat their homes adequately. While welcoming the change on balance towards better funding of energy efficiency measures, the cap on the installation of mains gas qualifying boiler replacements under the affordable warmth arrangements leaves a big gap in the provision needed to replace or repair existing gas boilers.
A big factor for being in fuel poverty is living in a home off the gas grid. The worst properties are located off the grid and are more likely to be located in rural areas. Over the last Parliament, the number of major energy-efficiency measures installed in homes fell by 76% as total investment fell by 53% between 2010 and 2015. The implications have been particularly crucial to the NHS. Of the 43,900 excess winter deaths calculated for 2014-15, at least 14,000 deaths can be attributable to the cold homes crisis.
Are the Government confident that electricity companies can access the necessary data to target expenditure effectively? The data-sharing powers need critical assessment. Hospitals need to join up outpatient care with fuel poverty initiatives for patients at risk of recurrent visits. Local authorities must act on their duties to enforce and monitor housing standards, and basic energy-efficiency standards should form a critical part of existing licensing requirements. Additional national energy-efficiency programmes are urgently needed to support the upgrading of lower rated properties, notably for the installation of first-time central heating. My noble friend Lord O’Neill and the noble Baroness, Lady Maddock, have highlighted how the Government are alone among UK Administrations in not providing additional funding towards this important policy. The National Infrastructure Commission and the Government must respond and act on the strong case for domestic energy efficiency to be regarded as a nationally important infrastructure policy.
I shall ask only one or two important questions on this order. These amendments are an extension to the present scheme and delays to meeting targets have been recognised. Will the Minister make clear how the statutory fuel poverty commitment will be met, with milestones along the way? Lastly, what additional energy-efficiency programmes are under consideration by the Government? What is the timing of any policy plan development between April 2017 and the end of this intermediary period in September 2018? In approving the order, I urge the Government to recognise their shortfall in ambition in tackling fuel poverty and the energy efficiency of homes.
Lord Prior of Brampton
My Lords, I accept that noble Lords who have spoken regard this order as a curate’s egg and that it does not go as far as they would like. I will try to address the more general questions raised by all three noble Lords. The Government feel that the supplier obligations have proven to be remarkably successful, but we have probably pushed them as far as they can go. That is why we have decided to cap the supplier obligation at £640 million. The noble Baroness, Lady Maddock, and the noble Lord, Lord O’Neill, think that we should go further. If I might slightly oversimplify it, I think I am right that the noble Lord, Lord O’Neill, feels that we should consider raising taxation more generally to solve this issue, whereas the noble Baroness, Lady Maddock, thinks that we could take money from other areas that we are spending money on to put more money into this area.
To start with the noble Lord’s point, our response is not to increase central taxation. He mentioned a figure of £12 billion, and the noble Lord, Lord Grantchester, came up with a figure of £20 billion to 2030. That level of increased taxation is simply not an option—at least not for our Government. Our response to the issues that the Prime Minister has focused on is not to raise general taxation, but to try to address the issue by improving the productivity of the country, which is why we have an industrial strategy. Frankly, to load a lot more general taxation on to our economy cannot be a way to improve productivity. I do not know whether that view will be shared by the leader of the Opposition—who knows these days?—But it is certainly not an option for us to raise central taxation. The noble Baroness, Lady Maddock, said that there must be other areas that we could take money from.
Baroness Maddock
For example, we know that people who live in cold or damp homes, particularly elderly people, cost us a huge amount in the health service. Over the years, NEA has run various schemes and has looked carefully at this. That is one area where we could look to see whether we could get some money because it will save money in the long run.
Lord Prior of Brampton
I understand that argument, but it would take five minutes to have a whole list of other parts of the population, whether it is people who have mental health problems or learning difficulties or old people who are lonely. There are lots of people we would like to do more for and from whom there will be knock-on benefits to the NHS, social services and the like. As the noble Baroness will know well, the trouble with politics is that choices have to be made. It is very easy to say that we should take more money from this group and give it to that, but if only life was so simple.
Lord O'Neill of Clackmannan
I am almost reluctant to make this point because it is a wee bit unkind and it is not the Minister’s fault. We know that the Government have problems with raising taxes. We have seen that in the past two weeks in the context of national insurance contributions. There was a willingness to raise taxes, but they discovered that they were raising the wrong ones as far as their supporters were concerned. Perhaps between now and next November the Minister can look afresh at what sources of revenue could be secured to help the fuel poor and to meet the Prime Minister’s pious words about helping hard-working families who are unfortunate enough to be living in hard-to-heat homes.
Lord Prior of Brampton
I understand where the noble Lord is coming from. I repeat, our approach is diametrically opposite to his. We do not want to raise taxes from any group of citizens in this country when the alternative is to try to improve productivity. He will know from the time when he was chairing the Trade and Industry Select Committee in the other place that productivity has been, and is still, a huge issue for this country. I do not think that he seriously thinks that we are going to improve productivity by taxing hard-working British people. That is a choice that we have to make. His party, during those long-off, rosy days when Tony Blair was Prime Minister, had in a sense got the message that there is a direct relationship between high taxes and successful economic growth. Raising taxation along the lines that he described is simply not an option for this Government at this time.