Arrangement of Business
The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)
My Lords, welcome. Your Lordships know the drill, but if there is a vote, a bell will ring and we will adjourn proceedings for 10 minutes. Then we will come back here and kick off once again.
Electricity Capacity (Amendment) (No. 2) Regulations 2025
Lord Wilson of Sedgefield
That the Grand Committee do consider the Electricity Capacity (Amendment) (No. 2) Regulations 2025.
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
My Lords, these regulations were laid before the House on 3 June 2025.
I am most grateful for the opportunity to join this Committee’s proceedings today. This instrument seeks to make technical improvements and changes to the capacity market scheme, the Government’s main tool for ensuring security of electricity supply in Great Britain.
The Committee may recall that in December 2024, the Government published the clean power action plan, setting out that the capacity market must be reformed to provide clear and viable routes to decarbonisation for unabated gas, enable low-carbon flexible capacity, and incentivise investment in existing capacity. As set out in the clean power action plan, by 2030, unabated gas will account for less than 5% of total generation. However, we will need sufficient flexible capacity to meet system need, such as when renewables are not generating. While we continue to rely on unabated gas as the main mature, reliable technology capable of providing the flexibility needed to balance the system, we are committed to driving deployment of low-carbon alternatives and providing routes for unabated gas capacity to decarbonise in future. Before I turn to the provisions in greater detail, I will first outline some background to the capacity market.
Great Britain’s capacity market was introduced in 2014 and is designed to ensure that sufficient electrical capacity is available to meet future predicated demand, to maintain security of electricity supply. The capacity market is a well-established, technology-neutral scheme in which existing and new-build electricity capacity receive revenue based on capacity.
Participants secure agreements through auctions which require them to make capacity available at times of system stress. It is our main tool for ensuring security of electricity supply. It provides all forms of capacity with the right incentives to be on the system to deliver when needed. It covers generation, storage, consumer-led flexibility and interconnection capacity.
Through capacity market auctions, held annually, one year and four years ahead of delivery, the capacity needed to meet future peak demand under a range of scenarios is secured, based on advice from the capacity market delivery body—the National Energy System Operator.
Since its introduction in 2014, the capacity market has contributed to investment in just under 20 gigawatts of new, flexible capacity needed to replace older, less efficient plants as we transition to a net-zero economy. To date, the capacity market has been successful in ensuring that Great Britain has adequate electricity capacity to meet demand and continues to be required to maintain security of supply and provide investor confidence. To ensure that the capacity market continues to function effectively, regular adjustments are made to the implementing legislation, based on the day-to-day experiences of operating the scheme and wider developments in the energy sector.
This draft instrument makes changes to nine regulations to deliver technical improvements and changes that support the functioning of the capacity market which have been identified and explored through consultation. This will ensure that the regulations remain clear for market participants and that the legislation remains up to date to enable us to better deliver this security of supply mechanism.
The draft instrument does this by making several revocations to expired provisions relating to the scheme, which include revoking references to transitional auctions which are no longer applicable, the temporary standstill period which occurred in 2019, and time-limited relief given to scheme participants in relation to coronavirus.
The draft instrument will also introduce a new process to establish a decarbonisation pathway for unabated gas plants currently in long-term capacity market agreements. It will allow gas plants to exit their agreements without penalty and transfer to a dispatchable power agreement, facilitating conversion to gas-fired power with carbon capture and storage once the technology is available. This will better align the capacity market with the Government’s clean power objectives and provide gas plant operators with a future decarbonisation route for their assets.
The Government conducted two robust public consultations on the measures in this instrument. The first considered reforms to the capacity market to strengthen security of supply and enable flexible capacity to decarbonise. The second considered reforms to modernise the capacity market and improve the participation and delivery assurance of consumer-led flexibility. Both these government consultations were published towards the end of 2024.
Respondents were broadly supportive of the proposals included in the instrument. A number of technical amendments to the capacity market rules were consulted on at the same time as the regulations and have also been made. These support the implementation of the regulations for the capacity market and were laid before the House on 3 June 2025.
To conclude, this draft instrument introduces a number of technical changes that will enable the continued efficient operation of the capacity market, so that it can continue to deliver on its objectives. These reforms will be critical if we are to achieve clean power by 2030. They will improve security of supply by ensuring the modernisation of the capacity market and making the legislation as clear as possible for all scheme participants. They will also support decarbonisation of unabated gas and enable the rapid acceleration of low-carbon flexible capacity. I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I have only one brief question in thanking the Minister for moving this statutory instrument so eloquently. In his opening remarks, he referred to the responses to the consultations, particularly the first. I quote paragraph 7.2 of the Explanatory Memorandum:
“42 responses were received from a variety of stakeholders… Respondents were broadly supportive of the proposals”.
In times gone by, responses to consultations were published on the internet; I do not know whether that is still the case. That the respondents were “broadly supportive” indicates that some of them were not supportive. Can the Minister clarify? I just wonder what criticism there was and for what reason, if any, the Government did not revise the statutory instrument in any way. Otherwise, they are very sensible regulations, and I support them.
Baroness Coffey (Con)
My Lords, I have a couple of quick questions for the Minister. I completely understand why trying to move off gas is a clear policy of the Government, as reaffirmed in its recent 2030 plan. However, gas is, without doubt, the cheapest way of heating a home. I want to get an understanding of what financial impact this is likely to have on household bills. I could not see anything in the accompanying notes. My sense is that it is good news for trying to get away from gas as a source, but bad news for households in the costs of heating their home and food.
Earl Russell (LD)
My Lords, these Benches welcome these amendments. This is an important step in our journey towards a full, clean and secure energy future. We are generally supportive of the intent behind the amendments, particularly their aim to accelerate the decarbonisation of our electricity supply.
At the heart of the regulations is a new mechanism designed to allow unabated gas plants to exit their existing capacity market arrangements without penalty. This is a significant change. Previously, capacity providers with a long-term agreement faced termination fees if they left early. This was a disincentive for them to decarbonise from their scheduled expiry, which was often as late as the 2040s.
This instrument now enables these plants to transition to a bespoke support mechanism under a dispatchable power agreement, or DPA, which is categorised as a CCS CfD—a contract for defence related to carbon capture and storage. This managed termination mechanism, set out in new Regulation 34A, aims to allow these plants to retrofit carbon capture equipment, thereby aligning with the Government’s objectives for clean power 2030. This addresses what the Government say is a clear need, identified through stakeholder feedback, for clarity on decarbonisation pathways and penalty-free exits. We welcome this as a way forward.
Furthermore, we welcome the cleaning up Part 3 looking at the removal of redundant provisions from the Electricity Capacity Regulations 2014, the Electricity Capacity (No. 1) Regulations 2019 and the Electricity Capacity (Amendment etc.) (Coronavirus) Regulations 2020; those are all sensible changes, so we welcome the clarification on that.
I will ask the Minister a couple of questions. First, I want understand a little more about the demand side for these measures. Although the consultation response talks about it being broadly supportive, particularly regarding the timing and the appeal route for refusal notices, can the Minister say a bit more about what the true extent of the demand is? It talks about capacity for the exit pathway being 4.4 gigawatts. By my calculations, that is almost two-thirds the electricity consumed by London, so that is a big amount of electricity. If the Minister can just say a little more about the demand side for these changes, that would be helpful.
Can the Minister also say a bit more about at what stage the Government might be in terms of any negotiations with any capacity providers to transition under these regulations? Are the Government in any talks at the moment, and are there any moves once these regulations come into force? How do they intend to review and monitor these regulations? What would success look like for the Government, and how will they be reported back to Parliament, if they are?
I note that the regulations do not include a statutory review clause for these specific amendments and that the broader CM regulations are subject to five-yearly reviews. Obviously, this is a fast-moving space; carbon capture technology is new technology, and other new technologies are coming online. How will the Government review the impact of these regulations in this fast-moving market between now and the five-yearly review period? That is not a criticism of what the Government are doing—I generally support this direction—but this is a fast-moving space with new technologies. If the Minister could clarify those couple of points, it would be greatly appreciated.
Lord Offord of Garvel (Con)
My Lords, I thank the Minister for introducing the draft Electricity Capacity (Amendment) (No. 2) Regulations 2025 today.
We have a responsibility to protect future generations, and there is a shared determination across these Benches to confront climate change. That is why today’s regulations will contribute to decarbonising our energy system to reach our net-zero aspirations. However, while net zero remains a laudable ambition, it must surely be achieved in a manner that protects our energy system and ensures that energy remains affordable for households and businesses.
Surely it is time to stop kidding ourselves that this is a just transition when it is clearly not. Can we please instead begin to focus on an affordable transition? His Majesty’s loyal Opposition firmly believe there is nothing just about a clean power target of 2030 if it results in overreliance on intermittent renewables that are manufactured abroad, which means losing jobs overseas and hiking costs for UK customers.
It is right that we have an ambition to produce the cleanest possible energy system in the UK. To do so, we must avoid ideological extremes at either end of this debate and find a middle way that is agnostic about where energy is sourced, so long as it is affordable, reliable and, yes, as clean as possible. In particular, with reference to these regulations, we must retain an element of natural gas, which is so crucial to our domestic heating system.
Lord Wilson of Sedgefield (Lab)
I thank noble Lords for their comments and their general support for these regulations, which, as I said in my opening remarks, are technical in scope. This Government are steadfastly committed to maintaining our electricity security and creating viable routes for unabated gas plants to decarbonise. As I have set out, the capacity market is our main tool for ensuring security of electricity supply and has already secured the majority of Great Britain’s capacity needs up to 2028-29.
The Government continue to believe that the capacity market is an effective insurance mechanism providing secure and affordable electricity that families and businesses can rely on. The Government remain committed to ensuring that the right policy tools are in place for delivering a secure and affordable electricity system as we transition to net zero. This includes regularly assessing the performance of the capacity market and exploring improvements to the scheme. This instrument seeks to establish a first decarbonisation pathway for unabated gas plants in long-term capacity market agreements, allowing them to exit the agreements without penalty to transfer to a dispatchable power agreement and facilitating conversion to gas-fired power with carbon capture and storage once the technology is available. This will better align the capital market with our clean power objectives and provide gas plant operators with a future decarbonisation route for their assets. This instrument also seeks to improve the clarity of the legislation by revoking provisions in the secondary legislation that are now redundant.
I want to respond to some of the questions. I welcome the support of the noble Baroness, Lady McIntosh of Pickering. All responses to the consultation were considered when finalising these proposals. On her question on the specifics of the consultation, a few respondents noted market volatility, speculative bidding behaviour and the impact of auction dynamics. One response noted that the proposal created an unfair commercial advantage.
In response to the questions posed by the noble Baroness, Lady Coffey, these changes to the capacity market will allow us to maintain security of supply in a way that is cost effective for consumers. We are not expecting the changes to increase the cost of the capacity market, so there will be minimal impacts on consumers.
I also welcome the support of the noble Earl, Lord Russell. In terms of demand to convert the power of CCUS, the managed exit pathway is subject to transport and storage capacity, value for money and affordability. Subject to this SI being made, plant will be able to utilise this pathway from the first transfer notice window after January 2026, with the first opportunity for unabated gas plants to leave the capacity market being in October 2027. Approximately 4.4 gigawatts of capacity is currently eligible to use this pathway, subject to successful bilateral negotiations. The next stage of the CCUS programme includes further building out of the first two track 1 clusters: HyNet and the East Coast Cluster. I welcome the support of the noble Lord, Lord Offord, for these measures.
Energy security is a priority for the Government. The capacity market is an effective insurance mechanism and is worth paying for, providing security and affordable electricity that families and businesses can rely on. The alternative, not doing something, would cost us more than doing this. The capacity market is the UK Government’s main tool for ensuring continued security of electricity supply. The capacity market is technology neutral, providing incentives for all forms of capacity, including generation, storage, consumer-led flexibility and interconnection, to be on the system to deliver when needed. To date, the capacity market has contributed to investment of about 19 gigawatts of new flexible capacity needed to replace older and less efficient plant as we transition to a net-zero economy. Once again, I thank noble Lords for their points in this debate.
Electricity and Gas (Energy Company Obligation) (Amendment) Order 2025
Lord Wilson of Sedgefield
That the Grand Committee do consider the Electricity and Gas (Energy Company Obligation) (Amendment) Order 2025.
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
My Lords, this order was laid before the House on 11 June. This Government remain steadfast in their commitment to ensuring that homes are warmer, more energy efficient and more affordable to heat. At the heart of this endeavour lies the warm homes plan, a comprehensive and long-term strategy to reduce energy bills, alleviate fuel poverty and enhance our national energy security. I am pleased to note that this plan is underpinned by a significant investment of £13.2 billion, as announced by the Chancellor. This funding will support the deployment of insulation, solar panels, heat pumps and other technologies that will help households reduce their energy consumption and costs.
However, it is not enough to look to the future. We must also ensure that the schemes we have in place today are delivering as effectively as possible. The energy company obligation, ECO4, and the Great British Insulation Scheme, GBIS, are central to our current efforts. These schemes place obligations on larger energy suppliers to deliver energy efficiency improvements that result in measurable bill savings for households. ECO4, as noble Lords will know, focuses on whole-house retrofits for vulnerable and fuel-poor households. GBIS, by contrast, is designed to deliver one or two insulation measures to a broader group of households, including those not eligible for other forms of support.
Since their respective launches, these schemes have delivered tangible results. ECO4 has supported over 248,000 households with more than 800,000 measures. GBIS, launched in 2023, has already reached 80,000 households. These are not insignificant achievements. Nevertheless, it has become clear that GBIS in particular is not on track to meet its original delivery targets. Despite recent improvements, the pace of delivery has remained below expectations. Without intervention, we face the very real prospect of underdelivery, leaving thousands of households without the support they need.
That is why this statutory instrument introduces a series of mid-scheme changes which are both necessary and proportionate. The most significant change is to allow up to 75% of a supplier’s GBIS target to be met through the reassignment of annual bill savings achieved under ECO4. This is not, I emphasise, a lowering of ambition; it is a pragmatic adjustment that reflects the realities of delivery while preserving the integrity of the GBIS.
To ensure fairness and consistency, a conversion factor will be applied to reassigned savings. This will ensure that the GBIS remains on time, on target and within its original cost envelope. I would also like to reassure noble Lords that these changes will not result in any additional cost to consumers; the funding is already accounted for under the price cap set by Ofgem.
In addition to this core change, the instrument introduces several other improvements. These include updates to technical standards, greater flexibility in the combination of insulation measures and a new requirement to provide households with information about smart meters. These changes are designed to enhance the effectiveness of the schemes and to support our broader fuel poverty target.
Turning to consumer protection, I must address the issue of non-compliance in the installation of solid wall insulation, which my noble friend Lord Hunt brought to the attention of the House earlier this year. I am pleased to report that the expanded programme of checks, overseen by Ofgem, is progressing well. Where issues have been identified, they are being addressed.
We are also developing a more coherent and robust framework for consumer protection, which will be set out in full as part of the warm homes plan in October. This will address the current fragmentation in oversight and provide greater clarity and assurance for households.
As I conclude, I thank the Secondary Legislation Scrutiny Committee for its consideration of this instrument which ensures that the GBIS and the ECO4 scheme deliver what they were designed to deliver: warmer homes and lower bills. I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I once again thank the Minister for presenting and introducing the statutory instrument before us. I declare my interest as honorary president of National Energy Action, which, as I think the Minister will realise, is based in Newcastle, not a million miles from where he used to represent.
I welcome the fact that the regulations propose to upgrade homes. I understand that upgrades and renovations such as this will attract VAT. The impact assessment does not show whether VAT has been applied. I am having a little campaign. I cannot launch it here because I have already launched it, but I would like to refer to it, if I may. It is not party policy, so it is my own little personal campaign, but our Front Bench here may want to adopt it as our policy.
If we were to reverse VAT and put VAT on new build, zero-rated VAT on renovations would mean that we would have an increasing supply of older housing stock, which, I imagine, is just the type of housing stock that the Government intend to benefit from the proposals here. Therefore, the question is to what extent will VAT be attracted and why do the figures in the impact assessment not show whether VAT is included? If the figures are VAT-free, VAT will have to be added to them, obviously increasing them by 20% under the current plans.
I will make a general comment about the warm homes discount that I was able to share with the Minister’s predecessor and that I wish to share with him in his new position. I welcome the fact that there is a warm homes discount. I regret that the sum involved, £350—I said this under the last Administration, when my own side were in government, and I repeat it now for the benefit of the current Government—has been that figure for a considerable time. Why have the Government chosen not to increase it for those who are clearly identified as being in the deepest of fuel poverty? That figure, I understand, is not being increased, but the Government have decided to give to a broader new raft of homes the smaller amount of £150.
Baroness Coffey (Con)
My Lords, these regulations come about as a consequence of a consultation. Unusually, it was only a four-week consultation, which is not unprecedented but surprising, especially recognising that it happened in November. It closed in December, and here we are in July debating these regulations. I appreciate that it may have felt targeted, but I wanted to get a sense from the Minister of how Ofgem has worked with the energy suppliers or indeed the public on why, in effect, there has been such a failure in the delivery of those targets.
I do not know the council tax of band of the Minister’s house but mine is a B. I tried to get this GBIS. I am in a pretty old house that is leaky when it comes to heat and similar. I thought I would test this scheme out because, like anybody else, I was impacted by the energy shock. It took a long time to register and get a potential appointment. But before they would even come out to the house, I had to sign an agreement that they could make any changes to parts of my house that they deemed necessary in order to put in some loft insulation, including me agreeing automatically to installing Xpelair fans in various rooms and many other things. So, I have to say, I just stopped. There was no way I was going to sign up to a predetermined agreement when somebody had not even seen my house.
My concern is the following. I have been working on fuel poverty for a long time as a parliamentarian. I set up the APPG in the House of Commons many years ago, and I managed, when I was a Minister, to make sure we got a law through to open up the data exchange across government. That meant that we could provide a considerable amount of data, particularly affecting rural homes, in order to access all this ECO, because, as the Minister may be aware, quite often with these schemes half the budget ends up going on trying to identify who could be eligible for them. That law was supposed to change that. I feel, at times, that the energy companies continue to talk the talk on fuel poverty but, when it comes to delivering and achieving a significant reduction in fuel poverty right across our country—that would be a noble achievement—they complain that it is all a bit too complicated. For what it is worth, that is not good enough. Ofgem is not challenging enough. I do not expect the Minister—especially the fabulous Minister in front of us now—to deal with every bit of this, but he should expect more from Ofgem, which is admittedly a non-ministerial department.
There were 122 responses to the consultation, as it well set out. I would like to try to understand the impact of these changes. Having floor, loft and cavity insulation coming together in a whole package is probably sensible, but how are the Government going to hold the energy suppliers to account to deliver financially, not just what is convenient for them? The summary of the responses sets out, “It is very difficult for the companies to meet their obligations”, rather than focusing on the whole purpose of this, which is to reduce energy consumption and bills. So at the moment, I cannot see any analysis of why this will make a difference and how we will not just be in the same place next year with energy companies.
I also want to get an assessment of the rural data definition changes and a sense of how many households, and homes, will as a consequence no longer be covered in rural areas. I appreciate that they will be updated every 10 years, but I do not know what rules the ONS has applied in reclassifying a home as being in a rural area or not.
As I said, I do not have much confidence in the energy companies delivering even these changes. It looks to me as though they will continue to wring their hands. It feels like this is moving the goalposts. I appreciate that these changes in legislation may be seen as being pragmatic, but what reporting will the Government provide to Parliament as a consequence to see that this will make the difference that it is supposed to make?
Earl Russell (LD)
My Lords, from these Benches we generally support the draft regulations. We commend the stated commitment of this Government to deliver warm homes that are cheaper to heat and to tackle fuel poverty. We have some of the highest energy bills and some of the coldest, dampest and worst-insulated homes in Europe. Cold homes not only waste energy and contribute to global warming needlessly but cause problems for people on budgets and low incomes and with ill health.
We generally welcome the warm homes plan in the spending review, with its ambitious £13.2 billion of investment, and the crucial steps towards reducing our energy bills and strengthening our energy security. We particularly welcome the rollout of solar panels, heat pumps, batteries and insulation.
We particularly welcome several targeted practical changes introduced by this draft instrument, targeting those in need of most support. The most significant change allows 75% of the energy suppliers’ £1 billion Great British Insulation Scheme target to be met through the reassigned ECO4 delivery pathway. This appears to be a pragmatic approach. The Explanatory Memorandum clarifies that this is necessary because the GBIS would otherwise have severely underdelivered, and this is seen as the way to maximise savings and get this done. Further, it reassures us that this will not increase consumer bills, as it is using existing funds and will be a good means of reassigning support and continuity in the ECO4 supply chain. This is considered better value for billpayers, as ECO4 is cheaper to contract.
We welcome the flexibility to enable greater allowance of installation measures, especially for low-income households. We welcome the plans to encourage the uptake of smart meters, and we welcome the updating of technical standards.
I have just a couple of questions for the Minister. A lot of previous schemes have not quite delivered as intended. Indeed, even here, a scheme that would have underdelivered is having its resources rolled into a new scheme. So, specifically how will this new programme be monitored to ensure that it actually works and delivers in practice, and does not fall foul of some of the issues that have plagued past schemes?
The Minister spoke about the issue of quality control with past schemes. I very much welcome the fact that 90% of that work has now been done—that is a tremendous achievement. But, again, under this new scheme, how will we make sure that the quality of the work delivered for households is up to the standards that we require and does not cause any further problems?
The Minister said that the Government are planning to bring forward larger-scale reforms for the warm homes plan. Is the Minister able to say anything more about that today or will we just have to wait for that?
We recognise that allowing the 75% of the ECO4 delivery for GBIS targets is pragmatic, but what measures will happen with the remaining 25% of the GBIS target? I do not want that bit to be forgotten about, so how will the Government set about making sure that that is delivered and that those houses are not forgotten about?
How do the Government plan to report on the delivery of this new scheme and make sure that it is delivering? How will the Minister report on the uptake of smart meters under this scheme? We recognise the measures that are being taken to encourage consumers to do that and that the Government are using the contact through the insulation measures to do that. Generally, we welcome what the Government are doing here.
Lord Offord of Garvel (Con)
My Lords, this order makes modest changes to the energy company obligation—ECO—scheme, and I was pleased to see the Minister in the other place recognise that ECO4 and the GB Insulation Scheme have been a key part of the effort to upgrade homes across the country. These schemes were introduced under the previous Government to support better insulation of energy customers’ homes, and I am pleased that the Minister has recognised the success of the previous Government in this area. We will not oppose this statutory instrument.
The previous Government announced that more than 300,000 homes would get insulation installed under GBIS, and they said that this could potentially save families up to an average of £400 a year on their energy bills. Claire Coutinho, then the Secretary of State, said that the introduction of GBIS would help hundreds of thousands of people, including some of the most vulnerable in society, get the upgrades their homes need while cutting their energy bills. So this is a Conservative initiative, and we are pleased to see that this Government are building on that track record.
It is concerning that some of the insulation installed under the schemes has not met the appropriate standards, and Ministers are right to tackle this as a matter of urgency. Can the Minister confirm what proportion of the identified issues has now been solved, and can he confirm that no energy customer should be out of pocket as a result of this remediation work?
We know that high energy costs are one of the greatest challenges in our economy at the moment. High energy bills contribute to growing household costs for families, but they are also holding back businesses and stifling growth. One of the key reasons that the UK manufacturing sector is finding it so difficult to grow at the moment is high energy costs, so we would welcome the Government’s continued commitment to energy efficiency and insulation—this is positive work—but we also need to tackle head-on the challenges we face on energy prices, and that means supply-side reform. We must urgently address the energy baseload challenge and get the right mix of cheap energy from all sources so that households and businesses across the UK can thrive.
We support steps to improve household insulation, but can the Minister take this opportunity to set out what steps the Government are taking to tackle energy prices more broadly for households and businesses in the UK? Can he comment on further investment—for example, new nuclear and long-term energy storage—towards that objective? What assessment have Ministers made of the impact of spikes in wind energy production on the cost of energy to consumers? We egregiously pay wind turbine operators to turn off the supply of energy when it spikes, and when we find ourselves in periods of no wind and no sun, we pay exorbitant sums to emergency energy suppliers, which burn gas as a peak supply instead of baseload. What steps will Ministers be taking to review the overall situation so that we can not only deliver better-insulated homes as part of this but, as another key part, drive down the costs of energy for families and businesses?
Lord Wilson of Sedgefield (Lab)
I thank noble Lords for their contributions, questions and general support for these technical adjustments to regulations. This Government remain firmly committed to supporting the households that need it most to live in warm homes with lower bills, while ensuring value for money and maintaining high standards of consumer protection. The instrument under discussion introduces targeted amendments to ECO4 and GBIS. These changes will help energy suppliers meet their obligations, improve scheme delivery and ensure that more households benefit from warmer, more affordable homes. Importantly, the measures will do so without increasing costs to bill payers and will support the continuity of the energy efficiency supply chain.
I thank the noble Baroness, Lady McIntosh, for her questions and her involvement with the NEA, which is obviously based in the great north-east. She asked about VAT; there is no change to VAT status due to this SI. VAT is applied to all retrofit work including that under ECO4 and GBIS. The figures in the impact assessment include VAT.
On her points about the warm home discount, we estimate that expanding the scheme in this way would offer support to an additional 2.7 million households, so around 6.1 million in total for this winter, 2025-26. Around one in four households with the required energy cost exceeding 10% of their after-housing-costs income currently receive a £150 rebate. By extending the scheme to all households on means-tested benefits, this figure will rise so that about 45% of such households will receive the rebate. Extending the scheme will also almost double the number of households with children that receive the warm home discount to about 1.9 million.
The noble Earl, Lord Russell, mentioned the timing of the warm homes plan. The Government are working hard to develop the warm homes plan as a unified, forward-looking approach that will revamp the delivery and consumer protection model. Such extensive changes necessarily take time to develop, as we are looking to make far-reaching and robust improvements to deliver this key government priority at scale.
I thank the noble Baroness, Lady Coffey, for sharing her experiences. While I am not aware of the specifics of her case, there is no specified single approach to engaging with customers in ECO4 or GBIS. We do not specify that there needs to be a legal agreement in place between installers and households before an assessment. The approach is that it is down to individual installers in the supply chain to engage with customers. We are looking at reforms to the consumer journey as part of the warm homes plan, which I hope will consider the points that the noble Baroness made.
Again, I welcome the support for these measures from the noble Earl, Lord Russell. He asked a number of questions, and I will write to him with fuller details on some of them.
I thank the noble Lord, Lord Offord, for his support for these measures. He asked a number of questions across the energy space. He will appreciate that nuclear energy storage and the other issues that he raised are wider than the measures we are here for today. All I know is that we need to decarbonise the grid. We need to move towards clean energy by 2030. We also need to invest in nuclear, which we are doing in small modular nuclear, and in wind and solar farms. We need just to have sufficient gas to make sure that the grid and security of supply are there. We are moving in the right direction, as I said earlier. The alternative is to do nothing, but that would make the situation worse.
Baroness Coffey (Con)
I asked the Minister two specific questions about the number of rural households affected by this change. I appreciate that he may not have that number to hand but I am very happy for him to write to me. The other question I asked was about the performance—what these changes will do—and how Parliament will be regularly informed about the impact of the changes that we are voting on today.
Lord Wilson of Sedgefield (Lab)
I do not have the figures in front of me about the number of homes in rural communities and how they are affected. However, I can say that we are aware that rural properties face additional costs in installing energy efficiency measures. This may be because these properties are more likely to be older and have traditional solid walls and floors—including my house, which is exactly the same, and probably the noble Baroness’s house—and because they are in harder-to-access areas, making them more expensive to treat. That is why, across GBIS and ECO4, rural off-gas properties in Scotland and Wales, for example, will receive an uplift of 35% to reflect the additional energy costs these households are known to experience more acutely. I will write to the noble Baroness with the figures. As for updating the House, I am sure that as these regulations evolve, we will be doing that in due course over the months to follow.
Legislative Reform (Disclosure of Adult Social Care Data) Order 2025
(2 days, 6 hours ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Baroness Anderson of Stoke-on-Trent
That the Grand Committee do consider the Legislative Reform (Disclosure of Adult Social Care Data) Order 2025.
Relevant document: 26th Report from the Delegated Powers and Regulatory Reform Committee
Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)
My Lords, this Government are committed to rooting out public sector fraud wherever it persists. It is a pervasive crime that takes money away from vital public services and enriches those who steal from the taxpayer. This draft legislative reform order builds on initial work carried out by the last Government.
All of us accept that the scale of fraud in the adult social care sector is significant, taking vital public money away from the most vulnerable. In 2020, the Chartered Institute of Public Finance and Accountancy estimated that there was £240 million of adult social care fraud in 2019-20. Examples where fraudsters can target adult social care services include where individuals fraudulently claim a personal support budget from more than one local authority at the same time, and where individuals hide undeclared capital or property ownership in relation to helping fund adult social care, putting the burden on local taxpayers. Of course, there can also be errors in the system: for example, where deceased care home residents can still be in receipt of direct payments from a local authority. There can even be extreme cases of fraud linked to this, whereby individuals siphon money from the accounts of deceased individuals given in error. These are examples of the kinds of fraud that the legislative reform order will help tackle.
The draft order will help prevent fraud and error in the adult social care system by resuming the sharing of adult social care data across local authorities in England and Wales. This will allow the National Fraud Initiative, which I will refer to as the NFI, to use this data in its data-matching activities to identify and prevent fraud and error in the adult social care system. This will generate an estimated £2.3 million in prevented fraud loss across the UK every year. The NFI has been operating since 1996, with a long history of identifying and preventing fraud on behalf of public bodies. The NFI specialises in data matching, which involves comparing two or more sets of electronic data to detect potential fraud. Since the NFI began, it has detected, prevented and recovered a total of £2.9 billion in fraud and error.
The NFI’s most recent data matching exercise between 2022 and 2024, which took place over a two-year period, prevented, detected and—importantly—recovered £510 million across the UK, the NFI’s best ever result. It is vital to protect public funds that the NFI can appropriately access to the relevant data sources.
This draft order will amend paragraph 4 of Section 9 of the Local Audit and Accountability Act 2014—the LAAA—to add a provision that exempts “matched adult local authority social care” data from a restriction on disclosure. The draft order will also amend an equivalent provision of Section 64D of the Public Audit (Wales) Act 2004—the PAWA—to ensure that the draft order has effect in Wales.
The data matching programme the draft order seeks to reintroduce is not new. Adult social care data matching was previously undertaken by the NFI on behalf of local authorities and generated annual fraud savings of £2 million across the UK since 2009. However, this ceased when an amendment to the National Health Service Act 2006 in 2016 meant that local authority social care data became included in the definition of “medical purposes” under the NHS Act in new subsection (12A) of Section 251, inserted by the Cities and Local Government Devolution Act 2016.
Consequently, local authority social care data became included in the definition of “patient data” under the LAAA 2014 and the PAWA 2004, which refers to data held for “medical purposes” in Section 251 of the NHS Act. This means that the results of data matching using local authority social care data—now classed as patient data—could only be shared with “relevant NHS bodies”. Local government in England and Wales was not designated as relevant NHS bodies for the purpose of data sharing, even though local government is responsible for the provision of social care. This consequence was wholly unintended.
Local authorities are overwhelmingly supportive of this draft order. Some 90% of 137 local authority consultation respondents support this amendment and want this data match to be re-established and subject to approval by your Lordships’ House. Data matching will commence this autumn. The draft order will therefore restore the legislative status quo and again allow the NFI to share matched adult social care data with local authorities and tackle adult social care fraud. I beg to move.
Baroness Finn (Con)
My Lords, I begin by thanking the Delegated Powers and Regulatory Reform Committee for its excellent report on this order, which was published on 13 June. I am also grateful to the Business and Trade Committee in the other place for its own report, which was published earlier this month.
As the Minister explained, the order seeks to take us back to the status quo before the passage of the Cities and Local Government Devolution Act 2016, which included an amendment to the NHS Act 2006 that prevented the further sharing of this data with local authorities. We do not oppose this order but have a number of questions for the Government.
The order is being made under a power to amend primary legislation under the Legislative and Regulatory Reform Act 2006. We have concerns about the growing use of Henry VIII powers by successive Governments, and particularly this Government, who previously committed to use these powers more sparingly. When such powers are used, it means that lower levels of scrutiny are possible. This is one of the many reasons why we are so grateful to the Delegated Powers and Regulatory Reform Committee—the DPRRC—for its excellent work.
The 2006 Act is clear that the powers to amend or repeal primary legislation granted to Ministers by that Act are limited to specific circumstances. In this case, the DPRRC has agreed with the Government that the order meets the tests set out in Section 1 of the 2006 Act: namely, to remove or reduce burdens created by legislation. In its report, it noted that the previous Government began this work—I noticed that the noble Baroness mentioned that too—and that in response to the 2023 Cabinet Office consultation, which was targeted at local authorities, 90% of respondents were supportive of this legislative change.
We also share the Government’s objective to tackle fraud and error in bringing forward these changes. It is absolutely essential that the Government seek to tackle fraud and error across the public sector, and we have been working—I hope constructively—to improve the provisions of the Public Authorities (Fraud, Error and Recovery) Bill. This legislative order is predicted to deliver £4.6 million in recovered fraud and error every two years. The Government are absolutely right to seek to recover taxpayers’ money whenever it is lost to fraud and error provided it is practical and proportionate to do so.
Baroness Anderson of Stoke-on-Trent (Lab)
I would thank your Lordships, but actually I am going to thank just the noble Baroness, Lady Finn—and the noble Lord, Lord Moynihan, for his for his constructive, supportive presence, as well as my noble friend Lady Blake. I thank the noble Baroness for the points she has raised. She is absolutely right. We are seeking to work collaboratively and constructively on the fraud Bill to make sure that every penny of public money that can be reclaimed is indeed reclaimed, as is appropriate. This is public money, taxpayers’ money. It is only right and proper that we take full responsibility for how we spend it, making sure that fraudsters do not get money they are not entitled to. It is vital we take robust action to tackle adult social care fraud. This draft order provides a way in which we can do just that.
I shall respond directly to the points made by the noble Baroness, Lady Finn. The reason why we opted for a legislative reform order is its primary function of amending primary legislation independently of a parliamentary Bill to reduce burdens on public bodies. This draft order will reduce financial and administrative burdens on local authorities by supporting them to prevent adult social care fraud and deliver financial savings. Legislative reform orders fulfil a specific purpose of repealing, replacing or amending legislation that imposes burdens on any person, including a business, voluntary organisation or charity. Legislative reform orders are also subject to greater parliamentary scrutiny than other SIs in the level of committee scrutiny and debate. We felt this was appropriate given that the draft order focuses on adult social care data, which is in a special category. However, we also wanted to make sure we were doing it in a timely and cost-effective way, which is why we did not want to wait for the primary legislation function.
With regard to the impact of the order, the noble Baroness made an incredibly important point. One way in which I justified why I was working on this last night on the way back from my “minimoon” in Paris, when my husband said to me, “Your minimoon is now over,” was by pointing out that the measure would get his local authority £25,000 extra per annum for local expenditure. The national fraud initiative involves regular public reporting and will set out the benefits all the way through. With regard to ongoing engagement, the Government actively participate in engagement with local authorities and will continue to do so on this measure.
The noble Baroness made an excellent point about the £300 uplift in the likely cost. In England especially, for every £300 that local authorities are going to spend, they will get an 83:1 return. I think that most fair-minded people will consider that to be a good use of public funds. We will continue to work with all local authorities. In England, £25,000 per local authority is expected to be reclaimed every year. For Wales, the figure is £7,000. On the savings being monitored annually, they are subject to audit.
On the third point raised by the noble Baroness, NFI fees are consulted on in advance of each biennial exercise and are regulated under the Local Audit and Accountability Act 2014. I believe that answers all the questions raised by the noble Baroness and commend the order.