Energy Bill [HL]

Baroness Northover Excerpts

Wednesday 19th January 2011 Grand Committee

[Lord Grantchester]

My Lords, we are very encouraged that the noble Lord, Lord Teverson, is looking more widely than the simplistic interpretation of the Green Deal to make the greatest benefits available. We share his reflections on how local authorities can utilise their wide influence in the housing market to achieve added benefits.

As my noble friend Lord Whitty said, we were anxious when we looked at the drafting of the new clause that we should not overcomplicate the situation, because local authorities are involved in so many different facets of the local market, either as landlords, with other landlords or, under the wording of the new clause, acting as an agent for the building improver. We are concerned that that role needs to be clearly thought through: how they are working and interfacing with the different participants in the plan. For example, they may, through a housing association or through their managing agents, take on side or even employ an assessor in their area. That would put them straight in as a participant in the whole complex matrix of these arrangements.

However, we largely go along with the thrust of the noble Lord, Lord Teverson. Yes, we see that an added impact may be needed to bring the greatest benefits. To be fair, local authorities will be thinking how they can help their residents along the Green Deal plan to bring the greatest benefits to their communities. Under subsection (3) of the new clause they may be able themselves as landlord to offer rebates or think about incentives, but we think that if they are achieving added benefits by economies of scale, that may well be sufficient to provide incentives that will encourage a greater take-up of the Green Deal. We support the thrust of the amendment tabled by the noble Lord, Lord Teverson, and we would like the Minister to take it away to think about it, or tell us today what role she envisages in the matrix of the participants in the Green Deal that local authorities could be encouraged to take up.

[Baroness Northover]

My Lords, this group of amendments addresses the role of local authorities in relation to the Green Deal. We are very grateful to noble Lords for laying the amendments. We want and expect local authorities to exploit the opportunities that the Green Deal presents to them and to their residents. As the noble Lord, Lord Teverson, says, local authorities are indeed natural allies in this—as are housing associations, as the noble Lords, Lord Moynihan, Lord Dixon-Smith and Lord Whitty, observed.

I shall speak to Amendment 12 first. Section 2 of the Local Government Act 2000 already provides local authorities with a power to take any steps which they consider are likely to promote or improve the economic, social or environmental well-being of their local community. Local authorities are empowered to undertake a wide range of activities for the benefit of their local area and to improve the quality of life of local residents, businesses and those who commute to or visit the area. So certainly this could include local energy efficiency initiatives.

Moreover, the Green Deal will provide strong natural incentives and varied opportunities for councils to engage with and deliver it, in particular, the incentive of attracting new and additional sources of finance into their local areas to benefit local residents. Councils may, for example, choose to become Green Deal providers themselves operating on a commercial basis. Others may want to form partnerships with Green Deal providers working with them to ensure the widest possible availability and take-up of offers in their community. As trusted local brokers with knowledge of their housing stock, local authorities will be attractive partners for Green Deal providers. They will therefore be in a good position to negotiate advantageous programmes for their residents—for example, to deliver economies of scale and incentives, as the noble Lords, Lord Teverson and Lord Whitty, noted.

Many local authorities are currently working with the energy companies and others to deliver the community energy saving programme, which specifically targets whole-house, community-wide delivery of energy efficiency measures. We are carrying out a formal evaluation of this programme, which will complete in March of this year. That will therefore feed in. Anecdotal evidence to date suggests that CESP is delivering projects ranging from 100 to 1,200 properties, and because of this is achieving significant economies of scale. This experience is informing and will continue to inform the development of the Green Deal.

As the noble Lord, Lord Teverson, notes, a number of local authorities already use council tax rebates as incentives. British Gas has worked with around 70 councils to offer a rebate on council tax bills for households who take up their CERT cavity wall or loft insulation offers. The rebate is funded by British Gas, although in some instances the council also match-fund. Local authorities will also often contribute resources for marketing, such as council-branded leaflets. Rebates, which are limited to one per household, vary from £50 up to £125 depending on the council involved. However, I note the comments of the noble Lord, Lord Jenkin, on CERT and fuel poverty.

We fully expect local authorities to build on this experience and work with Green Deal providers and others to deliver schemes to whole communities. We are working closely with local authorities to understand and develop the roles that they might play in delivering and promoting the Green Deal and how to disseminate good practice, including thinking about how best to enable and incentivise such methods in delivering the Green Deal

Moving on to Amendment 31, the well-being power in the Local Government Act 2000 could already enable local authorities to propose, plan and deliver energy efficiency measures and programmes for their communities, and we will explore this further with CLG Ministers. Indeed, many councils already have a strong track record in delivering in this area, working in partnership with energy companies and others. As I have noted, the Green Deal will further incentivise this, and we are aware of a number of councils which are already considering how they might deliver the Green Deal. The noble Baroness, Lady Maddock, has a long track record in this area, and I note her concern to ensure that the take-up of this scheme is as wide as possible, building on the work of the Home Energy Conservation Act.

This Government fully support local residents in having a strong influence over their local council. I note that that principle underpins this amendment. My right honourable friend the Secretary of State for Communities and Local Government has brought forward the Localism Bill to provide councils and local residents with a greater ability to deliver local priorities without necessarily having Whitehall direction on what they must do or how they should deliver locally. For example, the general power of competence proposed in the Localism Bill is based on a fundamental assumption that local authorities should be free to act in the interests of their local communities, except where restricted by statutory limitations or restrictions. We believe that freeing local councils to act and working to create the right incentives is the way to ensure that local authorities and local residents take up the opportunities presented by the Green Deal and the future energy company obligation.

While we are sympathetic to these proposals in terms of local government involvement in the Green Deal, incentives to use the Green Deal, and encouraging take-up, all of which are extremely important, we hope that the noble Lord will withdraw his amendment. But I hope that noble Lords will be reassured by our continuing exploration of the role of local authorities in this area and by our recognition of how important they are in this regard, and how best to encourage take-up of this scheme.

[Lord Grantchester]

My Lords, we are continually told that we are not in normal times at the moment. What confidence does the noble Baroness have that local authorities, under the present budgetary controls, will take up the empowerment clauses about which she has just told us?

[Baroness Northover]

As the noble Lord will have noted, obviously there are economies of scale when local authorities are dealing with this. Therefore, there is the incentive in that of being able to provide for local residents a better deal if they access these funds and we expect that they would see this as the route to go down. All these areas will, of course, be looked at carefully to try to ensure that the Green Deal is as effective as possible, which is what we all, in any party, even in these tight financial circumstances, wish to see.

[Lord Teverson]

My Lords, I thank my noble friend for that response. I am delighted to hear that local authorities have a number of those powers already. I omitted to declare that I am a member of a housing authority in terms of Cornwall Council, so I should declare an interest in that now, although I have absolutely no influence on what that council does, being a back-bench member of the opposition there. This important area is key to the success of this scheme. I am delighted that the Government recognise that and I am sure that we will have more conversations about this prior to Report stage. In the mean time, I beg leave to withdraw the amendment.

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[Lord Grantchester]

Perhaps we may be indulgent for a few minutes more. We looked at Clause 9 to see how it fits with Clauses 10 and 11 in referring the confirmation of plan, and how this applies in England, Wales and Scotland and in updating information. I speak only to Clause 9; the point is echoed in Clauses 10 and 11. Together with my noble friend Lord Whitty, our antennae prick up when under Clause 9(3)(c) appears the imposition of a requirement to pay a fee. That is replicated in a similar fashion. Perhaps the Minister could clarify why there is a fee, the level to which he thinks a fee may be appropriate and who will be liable to pay that fee under this clause.

[Baroness Northover]

I am informed that mention is made of this simply for administrative purposes. Your Lordships will note that Clause 9 provides that framework regulations may allow a fee to be imposed. No doubt that is simply an enabling thing, but if I am wrong about it I shall come back and clarify.

[Lord Grantchester]

I thank the Minister—that is most helpful. It has opened up the possibility of a dialogue so that we can understand better.

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[Lord Grantchester]

Perhaps I may ask the indulgence of the Committee yet again, rather than introduce a specific amendment. I want to pick up the principle as outlined in Clause 12. It has a crossover into Clause 13. It relates to our discussion of the disclosure of a Green Deal plan in connection with the sale or letting out. I well understand the clause and go along with the thrust of it. Previously in Committee, we identified that there could well be an energy plan put forward on a property in respect of which the Green Deal plan is a subset. We wonder whether it would make sense for the Minister and his team to go away and think about whether, if an energy plan attaches to a property, it may be attached to a Green Deal plan such that there is clarity on the property that passes from one occupant to the next. That seems sensible to us. If under energy conservation a landlord, tenant or bill payer may undertake a wider energy plan of which an element of the Green Deal may not apply, it would make sense if that could attach to the disclosures under Clause 12.

[Baroness Northover]

I thank the noble Lord for raising that. This relates specifically to a Green Deal plan. I am sure that anyone selling a property in the circumstances that he mentioned may want to emphasise the additional work that has been done. This relates specifically to the Green Deal in trying to ensure that there is transparency and clarity for anyone buying a property or anyone taking up a tenancy on a property. It places an obligation on sellers, landlords and licensors of properties to disclose the existence of a Green Deal plan. It is fairly specific, with the intention that there is the clarity and transparency that the Opposition and the Government are keen to see.

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[Baroness Maddock]

My Lords, I suggest that, if we were not repealing the Home Energy Conservation Act, it is precisely under that Act that the figures could be got together by local authorities.

[Baroness Northover]

My Lords, we fully support the underlying principles of these amendments, which are all about ensuring transparency—and maybe even Westminster prestige, as the noble Lord, Lord O’Neill, has indicated. The Green Deal is the Government’s flagship energy efficiency scheme, and much will hang on its success, so it is right and proper that Parliament should have the information it needs to hold the Government to account. Of course decisions need to be based on evidence, which demands proper analysis.

Amendment 17 proposes an annual report. The Government are already obliged to report annually to Parliament on progress towards our legally binding carbon budgets, as referred to in response to the reports of the Committee on Climate Change. These reports include a sector-by-sector account of the carbon savings achieved; and the Green Deal, once under way, will be a key element of these reports. As my noble friend Lady Parminter recognises, we have argued that the aim of this amendment is already provided for through these existing reporting arrangements; but I note her reaction to that argument.

Amendment 20DA seeks to enhance reporting requirements for the Green Deal. Again, we believe that the principle of this amendment is sensible and laudable, although we feel that the case for specific reporting from Government may be stronger for the energy company obligation than for the market-led Green Deal. This is the subject of Amendment 30A, which we will discuss later. I would point out to noble Lords—and we will be coming on to this later as well—that the Green Deal will be reviewed early in its life. Therefore I believe that the issues raised by the noble Lord, Lord Davies, will be addressed as part of that review. While still agreeing with the principle of these amendments, it is important that we do everything we can to encourage the take-up of the Green Deal, as we all wish to make sure that this is as widespread as possible.

We will be publishing a report on meeting the fourth carbon budget this autumn, which will provide this type of whole-economy assessment. The costs of particular technologies are assessed through extensive consultation, so we believe that the aims of this amendment are provided for already by published impact assessments. However, we hear what the noble Baroness, Lady Maddock, says about learning from past experience and proper analysis. We note what noble Lords have said and are indeed very supportive of the principles of what they are aiming to do. In the mean time, we hope that noble Lords will be willing not to press their amendments and that we can discuss this further.

[Baroness Parminter]

I thank my noble friend for that very positive and reassuring reply, in terms of understanding both the spirit in which the amendment was tabled and what we hoped to achieve. I am certainly happy to withdraw.

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[Lord Grantchester]

I support my noble friend in his Amendment 18 and his proposal regarding early repayment penalties under Amendment 19. My noble friend and other noble Lords spoke strongly about this issue when it was discussed earlier. The Minister replied that, if this provision was taken out, it could lead to an awkward situation in which it would be open for different people to charge different levels of fees. Perhaps the Minister could take this away. If she could propose that no penalty fees would be levied in this situation under the Bill, that would sort the problem out and not leave it to the providers to decide. If it is not covered, there would be a disparity in the fees and penalties that could be levied.

[Baroness Northover]

My Lords, Clause 30 allows regulations to be made that set out when and how a bill payer’s liability to make Green Deal repayments can be cancelled or suspended. Amendment 18 would prevent the regulations from making provision for a procedure to be followed for securing such suspension or cancellation of the repayments. Noble Lords have made the point about this being proportionate and not abused.

An example of when the bill payer’s liability might be cancelled is where the bill payer had chosen to make full early repayment of the Green Deal finance arrangement. In such an eventuality, there may be a need to include an administration fee. I will turn to why that might be in a minute. As discussed earlier, such a fee would be calculated in line with the rules of the Consumer Credit Act for the domestic Green Deal and in line with the regulations that we propose to set out in secondary legislation for the business Green Deal. This clause also gives us the flexibility to introduce a payment suspension mechanism for the bill payer in appropriate circumstances.

The legislation permits an administration fee to be requested for the arrangement of payment suspension. This is essential to balance the needs of the property owner to have flexibility while minimising the loss that the provider of finance might incur. The details of this—for example, when such a fee might be requested and the level of such a fee—will be subject to consultation later this year.

Amendment 19 would remove the ability to set out in regulations what should be payable in the event of early repayment of the Green Deal being required, including how any fee should be calculated. The effect of this amendment would be to prevent the regulations setting out the rules on early repayment from being set out in Green Deal plans.

The domestic Green Deal is subject to the early repayment rules set out in the Consumer Credit Act, which prevents consumers from being charged unreasonable fees when they repay early. However, business Green Deal providers are not subject to any existing regulations on early repayment fees. This amendment would remove the ability for the Government to set out regulations limiting the fees that can be charged when a business is required to repay the Green Deal early.

Early repayment fees are an important protection for the investor providing the finance. They have invested their money expecting a particular rate of return over a particular period. Being able to claim some compensation when an early repayment is made is an important element to keep the cost of finance low. This practice is not uncommon in the mortgage market.

However, we do not want Green Deal providers to charge disproportionate fees when early repayment is required, so the ability to set out some rules around this in secondary legislation is important. There is a danger that these amendments could remove that protection, which I think is far from the intention of the mover of the amendment. I hope that noble Lords will be reassured by my explanation and, on that basis, that the noble Lord will withdraw his amendment.

[Lord Whitty]

My Lords, I understand and accept part of that argument. These regulations are going to be subject to consultation. It may be appropriate that in some circumstances an administration fee is charged. A reference was made to the mortgage market, but in that context this is not just an administration fee but effectively—the noble Baroness used the term “compensation”—a major disincentive to people repaying their mortgage early. There is a certain amount of consumer dissatisfaction about this from people who, under all other calculations, would repay their mortgage early but who have been put off so doing by the size of the early repayment charge. I do not know that the analogy with the mortgage market is particularly helpful; I would hope that, at a maximum, any fee would reflect the real cost of the administration of cancelling early rather than the potential loss. After all, the finance provider would get the money back and could then reinvest it in as good a deal as they could. I do not think that the compensation issue should arise in these circumstances.

My main point is that this is primary legislation. The noble Baroness referred to the fact that this is subject to consultation. I suspect that the issue of fees will arise during that consultation among potential providers and finance companies as well as among consumer groups. The fact that the Bill is written in this way suggests that the procedure must include provision of a fee. Clause 30(2)(a) refers to,

“the procedure to be followed for securing a suspension … including the payment”,

as if the payment is an obvious matter. Similarly, paragraph (d) says, “including a fee”, not “a possible fee” or “there may be a fee involved”. It is worded as if the regulations are going to have to provide for a fee.

I would prefer to keep that open until we come to the consultation on the regulations. I think that in this case the primary legislation—I am using the opposite argument to the one to which the ministerial Bench usually resorts, which is that we do not have to prescribe so much in primary legislation because we can leave it to the consultation on regulations—is too prescriptive or could be seen to be too prescriptive.

[Baroness Northover]

Perhaps I may reassure the noble Lord that what is being sought here is a balance between bringing providers in and the very important aim of encouraging people to take up these schemes and for them not to think that their fingers are going to be burned if they pay off what they owe early. What underlines these provisions is the attempt to find a proportionate way to deal with that and to protect people through this legislation. However, as my noble friend Lord Marland has indicated, we will be discussing the subject of fees further.

[Lord Teverson]

Clearly, one of the points where someone might want to repay is when there is a transfer of the debt—for example, when the house is sold and the next person takes it on. Is the Government’s proposal for an exit fee or whatever to apply all the way through or does that particular circumstance make a difference?

[Baroness Northover]

I may need to come back to noble Lords on that but, as I understand it, if people choose to repay early the expectation is that they would pay a fee. However, I do not think that I have fully answered what the noble Lord has asked, so I will need to come back to him to clarify that.

[Lord Whitty]

In view of the hour and the fact that we will be returning to this, I beg to withdraw.