Electricity and Gas (Energy Company Obligation) Order 2023

Debate between Lord Lennie and Baroness McIntosh of Pickering

Tuesday 20th June 2023 Grand Committee

[Baroness McIntosh of Pickering (Con)]

My Lords, I thank my noble friend for introducing the order this afternoon, which I warmly welcome. I declare my interest as honorary president of National Energy Action, based in the north-east, an organisation with which I think my noble friend is very familiar. It welcomes the scheme but has one or two issues that it would like to understand better.

I ask my noble friend about the background to how the scheme has been introduced, because it could lead to unfairness in how the money is distributed. In particular, a potential flaw is that the targeting of the scheme is quite loose: it is not tight enough sufficiently to help fuel-poor households, which he said is the purpose of the order. For the majority of the scheme, households are assumed to make a financial contribution to the cost of the measures, which may effectively make a large proportion of the scheme inaccessible to the lowest-income households, which cannot afford to make such contributions. The way in which the policy is funded is therefore potentially unfair. Coupled with the rather loose targeting, this means that low-income households may effectively subsidise higher-income householders’ home upgrade.

I give my noble friend an illustration. The UK Government are assuming that £80 million will be provided in customer contributions over three years to support funding of the scheme. That is based on the assumption that uptake is not disproportionately affected by the level of contribution required. The assumption apparently originated from research based on a survey of 1,000 owner occupiers who fell within the general eligibility criteria. I put it to my noble friend that that may not be representative of low-income households, which I understood was the purpose we are trying to achieve with the order before us.

Similarly, research quoted in the impact assessment assumes that three-quarters of home owners will be willing to contribute towards insulation measures, with almost half willing to contribute £500 or more. Once again, I put it to my noble friend that it is extremely likely that households unwilling or unable to contribute fall into the category of the most financially vulnerable, and therefore in most need of the support given by the scheme.

Those two examples point to the potential for this not being what the Government intended. On vulnerable households, I think my noble friend described the purpose as extending support to households in the least energy-efficient and lowest income bands. I would like to query my understanding. Could the targeting have been better and could we have directed the funding more clearly to those in that bracket?

I warmly welcome the fact that support is being extended to off-grid rural households in Scotland and Wales. Can my noble friend assure me that the grant to English homes in that bracket for the home upgrade funding that he referred to will be as high as for those in Scotland and Wales?

[Lord Lennie (Lab)]

My Lords, this has nothing to do with the instrument, but I begin by congratulating the noble Lord, Lord Callanan, on his efforts to recruit Sadio Mané to play for Newcastle United when he was recently in Senegal. As a fellow Newcastle United season ticket holder, I can pass on the warm thanks of all fans of Newcastle United. I suppose more unites us than divides us when it comes to being “Howay the lads” fans.

The draft order proposes a Great British insulation scheme, which would require licensed gas and electricity suppliers to promote the installation of energy-efficiency measures, such as loft or cavity wall insulation, across Great Britain. The Department for Energy Security and Net Zero explains that while ECO4 aims to deliver full-house retrofits for low-income and vulnerable households, the new scheme seeks to encourage rapid installation of the most cost-effective, mainly single insulation, measures and to extend support to a much wider group of households in the least efficient and lower council tax banded homes. These are worthy aims.

The department expects the scheme, as the Minister said, to provide around 376,000 insulation measures in 315,000 homes by the end of March 2026, which coincides with the ECO4 scheme’s end date. The department also says that Ofgem, which will administer the scheme, will be required to submit monthly reports on progress to the Secretary of State on suppliers’ performance. What will the Government do if performance is not on target overall? Are there any plans to push beyond the initial target, if performance suggests that this could be possible? Will Ofgem report on the income distribution of household delivery?

Those suppliers required to participate in the ECO4 scheme are also required to participate in the Great British insulation scheme, so the same domestic gas and electricity supply data is being used as under the ECO4 scheme. Were there any issues with the use of this data? If so, have they been addressed and overcome?

Unlike the ECO4 scheme, a minimum level of delivery of the obligation will be set for each of the three phases of the Great British insulation scheme. It requires each obligated supplier to achieve at least 90% of its home heating cost reduction obligation and low-income minimum requirement for phases A and B through measures completed before the end of each phase, with the total obligation required to be met by 31 March 2026. Suppliers will have performance requirements across each phase of the scheme—a new development from ECO4. This is of course a good thing, but how will the performance in each phase be monitored and enforced?

The instrument also sets a low-income minimum requirement. This will ensure a minimum level of support through the scheme for those on the lowest incomes and the most vulnerable—the low-income group, as it is known—while allowing the remaining support to be targeted at a much larger pool of people now challenged by higher energy bills, in other words the general group. There is no upper limit on the amount of a supplier’s home heating cost reduction obligation that can be met through the measures delivered to the low-income group.

The low-income minimum requirement is defined by the instrument as 20% of the overall obligation, and that 20% must be delivered using the standard low-income eligibility criteria. Assuming the distribution is equal, 20% of 315,000 homes is 63,000 low-income households. Given that this scheme will be paid for by all customers but that the much larger benefits will be felt only by benefiting households, does a 20% minimum not feel somewhat low? I appreciate that it is only a minimum, but is there any incentive for the participants to deliver above this 20%? How was this amount reached? Do the Government have an estimate for where they expect this to fall across the whole scheme?

The home-heating cost reduction target is set at a level that assumes that households in the general group —as in Article 12 of the order—will collectively contribute £80 million, as the Minister said, towards the cost of installing the insulation measures, which is equivalent to 10% of the £800 million scheme budget earmarked for this group. This reflects that households in the group will generally have higher incomes and be able to contribute. Any contributions will in practice be a matter for agreement between the customer and the installer, reflecting the measure’s type and property issues.

For the purpose of the home-heating cost reduction target, should a participant elect to go beyond the minimum 20% for the low-income group, would the general group be significantly more burdened by the total contribution required? For example, if, across all providers, the general group averages only 40% of the overall makeup, which I understand is unlikely but a possibility, is it correct that this group would then be required to double their joint contribution to the £80 million home-heating cost reduction target, compared to if it made up the maximum of 80%?

Domestic premises cannot receive more than one insulation measure under the Great British insulation scheme. As long as it is installed on the same day as, or after, the insulation measure is completed, owner-occupied premises in the low-income group can also receive heating control measures under the scheme. The heating control measures must be completed within three months of the insulation measure.

The majority of responses to the consultation addressed the fact that private rented sector households are ineligible for heating control measures, or for cavity or loft insulation, if they are in the general group. These measures are excluded as landlords have responsibilities to maintain and improve their housing. Is that a good enough reason? Why is it acceptable for lower-income households to have to choose between unaffordable bills or a lack of heat because they are renting, if their landlord is not adequately improving their property? For clarity, if a participant offers a combination of an insulation measure and heating control measures to either a household in the general group or a non-owner-occupied household in the low-income group, would the cost be expected to be apportioned between the scheme and the payer or would that not be a feasible option?

Another aspect of the instrument is targeted encouragement to support the development of innovative products and installation techniques. This is of course welcome. Has any assessment been made of the potential impact of this encouragement? What counts as an innovative product or installation technique? Perhaps the Minister can enlighten us on that.

The 2021 Sustainable Warmth strategy announced plans for the expansion of ECO to run from 2022 to 2026, with an increase in value from £640 million to £1 billion per year. This obligation is expressed in terms of outcomes, not expenditure. The obligation is for notional annual bill savings of £224 million to be achieved by 31 March 2026. Part 10 of the instrument amends the 2022 order. Most of the changes are made to enable heating measures that are of benefit to ECO4 households in achieving annual cost savings, and reducing their overall energy bill, to be installed in a wider range of circumstances.

Labour’s warm homes plan would upgrade the energy efficiency of about 2 million homes per year. It would upgrade all 19 million homes that need it and help families to save up to £500 on their energy bills. The target of 315,000 homes under this scheme does not really compare. Do the Government accept that this is a drop in the ocean of what is needed? As part of the Labour green prosperity plan, the warm homes plan would give families the grants and loans they need to upgrade the energy efficiency of their homes, cutting their energy bills and emissions. Labour’s national plan would save households £500 a year, cut national gas imports by up to 15% and create over 206,000 full-time equivalent jobs in retrofitting industries.

Trade (Australia and New Zealand) Bill

Debate between Lord Lennie and Baroness McIntosh of Pickering

Report stage
Tuesday 14th March 2023 Lords Chamber

[Lord Lennie (Lab)]

My Lords, I have two amendments in this group, Amendments 1 and 6. I was thinking that the noble Lord, Lord Purvis, would be here, but maybe the noble Lord, Lord Teverson, will cover for him in his absence—he may arrive while I am speaking, who knows?

I begin by thanking the Minister both for being available between Committee and Report and for facilitating a meeting with Mr Phil Goff, the New Zealand high commissioner in the UK earlier in the Bill’s passage; both were very helpful indeed. Amendment 1 would require a review by the Trade and Agriculture Commission, the TAC, before regulations implementing the procurement chapters can be made. The TAC, as we know, is the independent committee of expert specialists in a number of fields—animal and plant health; animal welfare; environmental standards and so on. Its role is to scrutinise a new free trade agreement once it is signed and to inform Parliament whether measures in the new free trade agreement are consistent with UK levels of statutory protection. The noble Lord, Lord Purvis, has arrived.

Last year, the then Secretary of State for International Trade, Anne-Marie Trevelyan, received confirmation that the Australia and New Zealand trade deals were indeed within that consistency, so one might wonder why we are putting down this amendment. It is not to score political points, or to attack the Government, but to ask TAC to consider the procurement chapters of these two free trade agreements. The TAC would need to be fine-tuned to do this by importing necessary expertise. In Committee in the other place, representatives of TAC agreed that it is only as strong or as weak as the parliamentary scrutiny process around it. We can see no reason to limit it to the agricultural aspects of agreements and not to extend TAC to look at procurement as well. Incidentally, it is regrettable that TAC’s role is limited to post the signing of deals, but that is not the concern of this amendment.

Amendment 6 would require an impact assessment of regulations made under Schedule 1 within 12 months, and every three years thereafter. These trade deals are not short-term, one-off deals: while predictions can be made in advance, they are generally vague or broad and wide of the mark, so impact assessments would consider what the actual situation is after time has passed, to better inform the future, and on a rolling basis. This would provide insight into the effect of these deals and help us learn lessons for the future. Whether the Government like it or not—I think they do not like it—these agreements set precedents for future trade deals. A number of concerns have been raised about these deals and it would be sensible to keep them under formal review and readjust expectations as we gain more knowledge. For example, on employment rights, the TUC has commented that the agreements do not contain commitments to ILO core conventions, and an obligation for both parties to ratify and respect those agreements.

On climate change, it is deeply concerning that vital commitments made to this House on climate change in regard to the Australian deal are not being upheld. Alok Sharma MP, COP 26 president, said on 1 December 2021, that the Australia deal

“reaffirms both parties’ commitments to upholding our obligations under the Paris agreement, including limiting global warming to 1.5°.”—[Official Report, Commons, 1/12/21; col. 903]

This final agreement does not uphold that important commitment. In other areas too—the NHS, small businesses, regions and particularly animal welfare, which I think the noble Lord, Lord Purvis, will speak about in a minute—there are further problems. So, an impact assessment set against these concerns would be very helpful to assess the deals and prepare the UK for future negotiations. I beg to move.

[Baroness McIntosh of Pickering (Con)]

I am delighted to follow the noble Lord, and I shall speak to Amendment 3 in my name. I congratulate my noble friend the Minister for the close interest he has taken in listening to my concerns—most recently in a phone call on Sunday evening. I apologise for intruding on his weekend.

My concerns in the background, and my reason for tabling Amendment 3 at this stage, are twofold. One, as the noble Lord opposite alluded to, is the need for an impact assessment, particularly looking at the impact of implementing the procurement chapters of these free trade agreements with Australia and New Zealand. What will the impact be on farmers, and indeed on the market for food within the United Kingdom, particularly in relation to lamb and beef? Secondly, in relation to the impact on the market for food, the impact assessment I am calling for must consider the production and food safety standards.

I am trying to impress upon my noble friend and the Government the plight of upland hill farmers, many of whom are tenanted farmers. I am most familiar with those based in North Yorkshire, where I had the honour to represent two different constituencies for a total of 18 years; I grew up in the Pennines in County Durham. Peculiar to those areas of the north of England is that perhaps 50% of the farms are tenanted. They also have very poor land but it does lend itself to grazing, and over the years they have done this extremely well. Therefore, they have thrived through our membership of the European Union and, most recently, the Basic Payment Scheme, through spring lambs and fat-store cattle.

I was particularly concerned to see in an article dated 5 March that it is estimated that in this financial year alone, the typical grazing livestock farm in the English uplands faces a drop in farm business net profit income of almost two thirds, to approximately £16,300. I would like to pay tribute to the work of Julia Aglionby, professor of practice at the University of Cumbria’s Centre for National Parks and Protected Areas. She predicts that the income will recover slightly to almost £23,000 over two years, before slumping back to £16,700. The ballpark figure is going to be between £16,300 and £16,700.

On that basis, the NFU fears that it is not going to be cost effective, as we move from the Basic Payment Scheme to payments for environmental and public goods, for farmers to farm in the uplands, certainly in the north of England, with which I am most familiar. So, they face a drop in farm income. Coupled with that is what I see as unfair competition and the lack of a level playing field. My noble friend Lord Inglewood will remember from our days in the European Parliament this elusive level playing field that we thought we would obtain at some stage in the European Union; it never happened, but I see it becoming more and more elusive as we go forward.

So, the purpose of this amendment is to look at how we can ensure, through proposed new subsection (2) of Amendment 3, that our standards of food production and safety will be met going forward. The NFU is concerned that there are no enduring safeguard mechanisms —that the mechanisms in place are for up to a maximum of 15 years.

I would like my noble friend the Minister to acknowledge when he sums up that, in its impact assessments for the two agreements, the Department for Business and Trade has modelled agriculture, forestry, fishing and semi-processed foods, which include the beef and sheep meat sectors, and these are estimated to see a fall of 0.35% in one agreement, and a minus 1.16% reduction in gross value added, respectively, relative to the base line, over the long run as a result of the FTA. We have to accept that some farmers will take the view that we are doing a deal with the devil.

Australia and New Zealand are very good producers of food. They have large tracts of land on which to produce their food, and they are going to come after our markets very aggressively. Regarding my noble friend’s department’s impact assessment, I accept there may be other areas under these agreements that may benefit, such as automobiles and whisky—which is close to my heart, coming as I do from Scotland—but I am here to argue for the plight of the hill farmer and the upland farmer, who are feeling very beleaguered as we speak.

Another source of concern that I hope my noble friend will address is how these imports are going to meet my test under proposed new subsection (2) in Amendment 3. I have had a note from the Food Standards Agency concerning the percentage of food coming into the UK from third countries, including EU countries, as “checked at port or point of entry”. As we will recall, imports from the EU, which may include Brazilian, Australian and New Zealand imports, have been temporarily suspended at our borders; I think they are due to be phased in toward the end of this year. But imports from Australia and New Zealand through the EU are not being checked at our borders at the moment.

What is concerning me more is that all imported high-risk food and feed from non-EU countries is subject to control at our borders. This includes 100% documentary checks to ensure that the consignment originates from both a country and establishments that are approved to export to this country, and food and feed safety assurances contained with the Export Health Certificate have been correctly completed, meeting our safety requirements. Additional identity and physical checks will be carried out, and the frequency of such checks vary between—if the figures are correct—1% and 30%.

The FSA says that typically, meat and dairy products fall into the 30% frequency, while fish and fish products fall into the 15% frequency, and highly refined products of animal origin fall into the 1% frequency. Lamb and beef fall within the 30% checks, so we are taking an awful lot on trust at our borders from non-EU countries —an example being Australian and New Zealand meat imports—under the terms of a free trade agreement.

The final thought I would like to leave my noble friend with is that the checks undertaken by local authorities in England are a sort of last-chance saloon; at the moment they are patchy, and I hope that enough resources will be made available to them. Those are my main concerns. This is yet another agreement which is asymmetrical in nature, and we are doing a deal which is going to be far more in the interests of Australian and New Zealand farmers than our own. Unlike other free trade agreements, it does not allow for a safeguard measure, so it is putting our own producers of meat, particularly lamb and beef, at risk. It also lays us open, both as domestic producers and consumers, to substandard foods coming in.

Those are the concerns that lie behind Amendment 3, and I very much look forward to hearing some reassurance from my noble friend when he comes to respond.