Energy Efficiency Measures: Net Zero Buildings

Alan Brown Excerpts

Wednesday 26th February 2020 Westminster Hall

[Philip Dunne]

I am grateful for that example. The Minister should be willing to show some flexibility and consider the councils that want to make progress, because it could have an impact on builders’ inclination to develop to a higher standard within a particular area. In my view, these matters should be determined by self-regulating local authorities.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

There are ambitious councils, but is the right hon. Gentleman not concerned that, were regulations determined by councils, developers would be drawn to the councils that do not impose higher standards, where their profit margin would potentially be higher?

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[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is pleasure to serve under your chairmanship, Mr Pritchard. Like everyone else, I congratulate the right hon. Member for Ludlow (Philip Dunne) on bringing forward the debate. I also congratulate him on his new role. He is clearly passionate about the environment. I wish him well in holding the Government to account, which I am sure is more fun than being an actual Minister. It was interesting that he started with five green pledges for Lent. Similar to the saying about puppies, those pledges could be for life and not just Lent. We can reflect on that.

The right hon. Gentleman set the scene very well, including the scale of the issue that faces us in achieving net zero for domestic buildings, and fact that the decline in emissions has stalled in recent years. It certainly struck home to me that about 20 million of 29 million homes have an EPC rating, and of those more are rated D than A, B and C combined, although I suggest that those figures are not reflected across the UK. I will give some statistics later.

I agree completely about the need to decarbonise our heating system. The bigger picture there goes hand in hand with the need for the UK Government to invest in carbon capture and storage and hydrogen production, with projects such as the Acorn project up in Peterhead. The right hon. Gentleman rightly highlighted the big challenge of rural off-gas-grid homes. That is a big challenge for the Government and I, too, look forward to hearing the Minister’s response on that and on the issues about the renewable heat incentive coming to an end. Looking at the bigger picture, that ties in with the loss of the feed-in tariffs for solar. There is now a 20% VAT uplift in solar. All those measures are prohibiting energy efficiency measures that would reduce energy demand and therefore the carbon emissions from homes.

There was a good statistic about the fact that if we achieve the EPC band C overall, that would be the equivalent of the removal of six Hinkley Point C power stations. We should bear in mind that the Hinkley Point C capital cost alone is about £22 billion. That shows how much money could be saved with direct Government investment to bring the entire housing stock up to spec. In the long run it provide value for money. The right hon. Gentleman highlighted the critical issue with the EPC regime, and favouring lower costs over carbon emissions. The hon. Member for Strangford (Jim Shannon) touched on that as well, so it is clearly something that needs to be resolved. It would be good to hear what the Minister says on that and the five recommendations that were made.

The hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) spoke about lighting fires, which took me back to my childhood when we had coal fires in the house and there would be ice on the inside of the single-pane windows when I got up. There is one blessing: things have moved on in the last 30 to 40 years. We also heard from the hon. Member for Henley (John Howell) on the big issue of cancelling the zero-carbon homes initiative and the fact that retrofitting will cost five times the original capital outlay. That again shows that changing decisions costs more money in the long run. The Government should look at the bigger picture. Of course, no debate would be complete without the hon. Member for Strangford giving us the Northern Ireland view within the UK context. He made some critical points.

It really is a no-brainer that greater energy efficiency measures can only assist in reducing carbon emissions at the point of use, as well as generation demand, further reducing overall carbon emissions. Energy efficiency can help to reduce fuel poverty and can be part of the green industrial revolution, creating additional jobs in various insulation techniques. Obviously, it is needed to get to our net zero target by 2050, so I must ask why the UK Government are not doing more in that field.

One simple positive measure that the UK Government could pursue is removing the 20% tax threshold on energy efficiency home improvements. Independent research by the Federation of Master Builders demonstrates that cutting VAT on energy efficiency improvements will not only improve the housing stock and generate thousands of jobs but significantly boost the UK economy by bringing empty properties back into use and reducing the incidence of fuel poverty. I suspect that it is too much to hope for that measure to be included in next month’s Budget, but the Minister should be talking about it with Treasury colleagues.

Others Members touched, implicitly or directly, on the fact that direct Government investment in energy efficiency is crucial. The UK Government need to follow the lead of the Scottish Government. Now, I would say that, but organisations in the sector say it as well. The energy companies say it, as do many third sector organisations. The BEIS Committee said it in its 2019 report, “Energy efficiency: building towards net zero”, as did the Committee on Climate Change in its 2019 progress report to Parliament, titled “Reducing UK Emissions”. The BEIS Committee report stated:

“We note that Scotland’s investment of four times more than England cannot be explained by a less efficient dwelling stock: the latest housing survey data demonstrates that homes in Scotland actually have greater insulation levels than in England. For example, in 2017, 49 per cent of homes in England had insulated walls, compared to 60 per cent of homes in Scotland… Scotland has made much faster progress in improving the energy efficiency of its fuel poor homes than England, where in some bands, progress has stalled.”

It was good to hear the hon. Member for Caithness, Sutherland and Easter Ross acknowledge the work of the Scottish Government on that.

Statistics show Scotland’s relative success: 44% of Scottish homes were rated as EPC band C or better in 2018, compared with just 34% in England, and only 20% in Wales. In Scotland, the proportion of properties in the lowest EPC bands of E, F and G has more than halved since 2010, going from 27% to 12%. In England the figure is higher, at 16%, and in Wales it is 20%—although the Scottish figure is measured slightly differently. It is therefore little wonder that the BEIS Committee concluded:

“The Government appears indifferent towards how public per capita spend in household energy efficiency in England compares to other parts of the UK”

and

“the governments of the devolved nations treat energy efficiency as a much higher priority than the UK Government.”

The Committee’s description of the UK Government as “indifferent” is particularly damning. I would like to hear what the Minister has to say about that, and how the Government will address it going forward.

The Committee on Climate Change confirmed that policies are not currently in place to deliver the UK Government’s ambition to improve all homes to at least EPC band C. The CCC stated that regulations for the private rented sector prioritise costs for landlords over the costs for tenants to operate their heating systems, and that minimum standards for social housing are required. It then observed that the Scottish Government, by contrast, are demonstrating how an effective policy package for energy efficiency improvements in buildings might be delivered by setting out a comprehensive framework of standards, backed by legislation. That legislation includes private rented sector regulations, phased to set a date for when new tenancies have to comply, and a backstop date for all private rented properties. The Scottish Government also set a higher cost that landlords in the private sector might have to shoulder. There are proposals for all owner-occupiers to be required to meet EPC band C by 2040, with incentives to try to do it by 2030. In the social rented sector, the revised standard published in June 2019 requires all social housing to meet EPC band B by the end of 2032, and sets a minimum floor of EPC band D from 2025, below which no social house can be re-let.

It is time for the UK Government to follow suit and put in place a proper framework covering the private rented sector, social housing minimum standards and owner-occupiers, as the Scottish Government have. The Scottish Government backed those measures up by spending from 2009 to 2021 what is predicted to be more than £1 billion, and £145 million this year. If the Government invest in a long-term energy efficiency investment programme, it will create jobs, allow the programme to be delivered at best value, avoiding spikes in cost, and be part of the green industrial revolution.

Some 27 million homes need their heating systems decarbonised, so it is crucial that they are as energy efficient as possible. The Government have one live scheme for home insulation measures: the energy company obligation scheme. Yet the Committee on Fuel Poverty states that those measures do not target the right people, so that needs to be reviewed as well.

Another spin-off of energy efficiency measures can be the regeneration of social housing stock. We tend to think of energy efficiency measures as internal insulation, but they include external cladding. When external cladding is installed and re-rendered it can transform the appearance of housing schemes—I have seen that first hand in my local authority, where I was formerly a councillor.

The BEIS Committee also said in its report that the UK Government must not only match Scottish levels of funding but create a joined-up strategy, and that the

“weight of stakeholder evidence suggests that Scotland designating energy efficiency as a national infrastructure priority has helped to improve its policy impact, making energy efficiency policy better designed and funded, longer-term, as well as more comprehensively governed and targeted, than in England.”

Hopefully the Minister will acknowledge that, and step up to the plate by following suit.

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[The Minister for Business, Energy and Clean Growth (Kwasi Kwarteng)]

It is a pleasure to take part in this debate under your chairmanship, Mr Pritchard. I thank my right hon. Friend the Member for Ludlow (Philip Dunne) for bringing forward this important and timely debate, and congratulate him on his election as Chair of the Environmental Audit Committee. My first outing in this role was in front of his Committee—under a different Chair, who sadly was not re-elected. However, I am pleased to see that my right hon. Friend has taken her place.

I have taken part in a number of debates about these issues. This one covered many policy areas, including power generation, which is not really what the debate is about, but I will start with my right hon. Friend’s specific points about heat and the energy efficiency of homes. He presented five challenges, and I will address each individually.

First, my right hon. Friend mentioned zero-carbon heating beyond the RHI. We are absolutely committed to seeing how we can support the renewable heat incentive beyond the date on which it expires. He also mentioned the future homes standard. My hon. Friend the Member for Henley (John Howell) raised the fact that the zero-carbon homes target was scrapped. The Government feel that the future homes initiative is much more realistic and better in terms of reducing carbon emissions in houses than the initial zero-carbon scheme. That scheme allowed for offsetting, whereas the future homes standard will concentrate on lowering absolutely levels of emissions. I think that is a much better way of approaching the problem, but I am happy to discuss that with him later.

The third item mentioned by my right hon. Friend is really key to the debate: incentives for householders to contribute in some way to upgrading the energy efficiency of their homes. When we look at the totality of buildings in the UK in terms of their carbon emissions, the vast majority—about two thirds—are owner-occupied homes: those inhabited by people who have either paid off a mortgage or currently have one. It is a big challenge to raise the energy efficiency of those homes. Drawing on his professional background, he spoke about the ability to have consumer finance and incentivise people to make such large investments. On that note, the Government have already started: we have a £5 million green finance initiative, working with banks to provide finance for precisely the reasons he mentioned.

[Alan Brown]

Surely the £5 billion of green finance is a bigger package that will not be going to individual householders. If it was, it would be like the green deal scheme, which the Government had to terminate because it was not working right.

[Kwasi Kwarteng]

It is an initial step. In Germany, KfW has a consumer finance piece that gives small loans for green initiatives. We had a green deal; my personal view and, I think, the Government view is that it did not work principally because the interest rate was too high. However, that does not discredit such initiatives.

I was struck that the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) mentioned the Labour party manifesto and its commitments on houses. It was extraordinary but unsurprising that although she mentioned all the jobs that would be produced and carbon emissions, she did not say how much the policy would cost. That is a critical part of the debate. As my right hon. Friend suggested, a huge amount—in the order of £65 billion—needs to be invested in the next 10 years. That will not all come from the Government; some will come from consumers, who will rightly invest in making their homes more secure. Investments in those houses are not lost money; they will enhance property values, so they make commercial sense in many ways.

[Mr Virendra Sharma in the Chair]

The fifth specific point mentioned by my right hon. Friend was the EPC scheme. It is not a perfect measure, but it does capture something about what we are trying to do. It has an indicative value in forcing up the standards we expect not only of the Government but of private sector landlords, as was mentioned in the debate. In that space, I can announce that we are already consulting on tightening standards in the private rental sector. We aspire for private landlords not to get properties to EPC band E but to make investments to improve their properties to band B or C by 2030. That is a significant improvement and a step in the right direction.

The debate has shown that we still have a big task. The hon. Member for Kilmarnock and Loudoun (Alan Brown) highlighted the achievements of the Scottish Government, but he will appreciate that of the 27 million homes in the UK, 24.2 million are outside Scotland, in England, Wales and Northern Ireland. While I appreciate the successes of the Scottish Government, we cannot see it simply as a competition. In fact, colleagues of his in the devolved Administration are always telling me, “We have got to work together and co-operate.” They want negotiations, discussions and policy evolution in partnership with the Government in Westminster. That is a welcome development. I have meetings and calls with Ministers in the devolved Administrations and I have just spoken on calls to Diane Dodds and Edwin Poots, the newly appointed Ministers in Northern Ireland. This cross-UK approach is the best method.

There are so many other issues we could talk about. We clearly need joined-up policy in this area. We cannot improve the energy performance of our buildings without engaging with our friends at the Ministry of Housing, Communities and Local Government. I was struck that that Department, which has responsibility for the performance of local authorities, was barely mentioned, which led me to believe that BEIS has the sole answers to all these questions. I wish that were true, but we do have to participate and engage with colleagues across Government in Treasury and MHCLG.

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[Kwasi Kwarteng]

If she will not barrack me, I can say that we do have policies addressing fuel poverty. We have the energy company obligation, which we are completely committed to, and we committed billions of pounds in our manifesto to address fuel poverty specifically.

[Alan Brown]

Will the Minister give way?

[Kwasi Kwarteng]

I have two minutes in which to wrap up and allow my right hon. Friend the Member for Ludlow time to conclude the debate, so, with due courtesy and respect, please allow me to finish my remarks.

I am pleased that we had the debate and I am sure we will have more of them. This will probably make too much work for me and my officials, but I suggest we could debate specific issues raised this afternoon such as EPC standards, widening consumer finance and publicly owned building strategy—there are so many issues. Salix, the finance company focused on providing funding to upgrade public buildings, was not mentioned in the debate. There are many different avenues and I am sure that hon. Members in the Chamber will come to subsequent debates to discuss them more fully.