Electricity and Gas (Energy Company Obligation) (Amendment) Order 2025

Lord Wilson of Sedgefield Excerpts

Wednesday 16th July 2025 Grand Committee

Moved by

[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.

--- Later in debate ---

[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.

Motion agreed.