Draft Electricity and Gas (Energy Company Obligation) (amendment) Order 2017

Alan Whitehead Excerpts

Wednesday 22nd March 2017 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hanson. I thank the Minister for his Panglossian commentary on the measure. The Opposition do not want to stand in the way of these detailed regulations. I am sure the hon. Member for Lichfield, having looked in detail at the explanatory memorandum, will note—

[Michael Fabricant]

Was the hon. Gentleman looking, as I was, at the schedules? I think that, like me, he is a chartered engineer. I am slightly disappointed that there was no integration, but merely fractions involved.

[Dr Whitehead]

Regrettably, the hon. Gentleman has not done his homework about my qualifications—I am not a chartered engineer—but he makes a valid and important point about the appendices. I draw his and the Committee’s attention to an earlier part of the explanatory memorandum, which enjoins us to pass this measure because:

“The 31st March 2017 is the latest that the instrument can be brought into force, as otherwise the period set for meeting all of the targets under the 2014 Order would come to an end on 31st March 2017 and a failure by any supplier to fully meet their targets by measures installed before that date would be a breach, which could lead to enforcement action by the Administrator.”

We are discussing this order a week before we are in breach of that order. The Government are to some extent trading on Her Majesty’s Opposition’s generosity of spirit and warm-heartedness. We are sailing very close to the wind in terms of the management of the measure. The Minister might wish to have a word with his business managers to ensure that nothing like this happens again. We really should not be discussing the measure so close to that date, as we would be in breach if there were any hiccups or halts in its progress through the House.

Although I said that we do not want to stand in the way of the regulations, I am not mollified about their overall thrust. We need to be clear that the regulations will represent a reduction on the reduction in the ambition of the ECO as far as energy efficiency measures are concerned, both for those in fuel poverty and for the climate change purposes of increasing energy efficiency in properties. They are an endorsement of the collapse of the energy efficiency measures going into all homes, and even with the change of emphasis toward the fuel-poor and those receiving measures under the carbon emissions reduction obligation, other parts of the ECO have in effect been removed.

The draft regulations represent a diminution of measures to assist with fuel poverty to such an extent that, even according to the explanatory memorandum, we will barely meet the Government’s own targets, reset from previous fuel poverty targets—people in fuel poverty living in properties not worse than EPC band E by 2020 was a substantial revision of previous targets. The Government are therefore almost failing to reach their own new target in the regulations, and they are certainly endorsing a substantial reduction in measures overall.

The reduction in measures is to such an extent that, were we to look over the past five years on a graph, we would see that the measures peaked in 2012, largely as a washover of the previous Labour Government’s obligations—the carbon emissions reduction target and the community energy saving programme—to be followed by a precipitous and cliff-like fall of 80% in energy efficiency and home improvement measures up to 2015. Today’s measures, as outlined by the Minister, represent a further reduction in the ECO from £860 million per annum under the previous obligation, which was itself a reduction in ambition from the original £1.2 billion, to £640 million a year. That is for the interim scheme, and I understand that is also to be the limit for the longer term scheme, if we ever get to consultations on that in the not-too-distant future.

Under the new regime, that will be the limit of ambition for all energy efficiency measures in homes. That was not quite as the Minister set out today in terms of the progress of the obligation. As hon. Members will recall, the cut in green obligations was imposed in response to the infamous “get rid of all the green ****” period that the previous Prime Minister oversaw. As it happens, ECO measures bore the brunt of those cuts, which is why we have less money available for the ECO now, not only for today’s interim scheme, but for the scheme after 2018, assuming it happens—I will make some comments on that in due course.

We are barely reaching fuel poverty targets. I welcome the important emphasis on fuel poverty in the measures—a substantial and welcome shift of fuel poverty-focused measures up from 30% to 70% of measures within the ECO as a whole—but I emphasise that that is within an overall reduction of the pot. The consequence of that is that the measures under the CERO part of the ECO scheme reduce substantially and carbon saving community obligation measures disappear entirely. The measures under CERO represent a reduction, in that smaller pot, from 34% to 30% of the total. That is very important in terms of the treatments of properties that might be available under ECO, in terms of the energy efficiency climate change targets.

Those targets are fairly stark. In the fourth carbon budget, which was adopted and accepted by the Government, the Committee on Climate Change considered that 2.2 million solid wall treatments by the early 2020s should be included in that, to make the contribution to energy efficiency climate change targets. Hon. Members may want to reflect on the targets that are in this measure today: 32,000 treatments envisaged in the 18 months up to 2018. If extrapolated, and even if that amount is maintained over the full period of the next ECO, when it succeeds the interim measure we are discussing this morning, that would mean we would fall short of the target, which was agreed by Government, by 1.8 million treatments. That is an astonishing shortfall. That is not a question of falling slightly short—it is effectively extinguishing any serious consideration of those targets over the period, which is potentially catastrophic for our ability to meet our obligations under the carbon budgets.

The Minister will be aware that there is feverish work going on at the moment in the basement of his Department looking at how a low carbon plan can be drawn up. It has repeatedly been put off and delayed. There are assurances that it will come out later this year. I understand that there are people in the Department at the moment with towels around their heads working out how on earth a low carbon plan can possibly meet the terms of the fourth carbon budget, in terms of what the Government are presently undertaking. The complete failure in this measure to get to grips with solid wall insulations is one area where those towels will have to be tied much more tightly around heads.

Does the Minister intend to review the figure and the mechanisms behind it when looking at the longer term ECO? As set out in the 2015 autumn statement, that is scheduled to take us on from 2018 to 2022. If he is not looking at reviewing those measures, what explanation might he offer for this abject failure to get to grips with solid wall insulation? Are there any other measures that he might be thinking about that could get us back on track as far as those treatments are concerned?

I would also like to ask the Minister about the very wise consultation response that came forward to him. I am sure the hon. Member for Lichfield will also be aware that there is a passage on the consultation at the back of the explanatory memorandum. It indicates that those people who were consulted thought that local authorities should be involved in identifying 20% or more placements for treatments, particularly as far as the fuel poverty element of ECO is concerned. That was an overwhelming endorsement in the consultation of the role of local authorities in identifying and assisting those treatments at local level. There was also an overwhelming endorsement by those obliged suppliers themselves, who have for a long time said how difficult it was to find people in those fuel poverty categories, in order to apply treatments, and the substantial additional burden of finance that often placed on them.

[Michael Fabricant]

Would it not be fair to add that this is just during the testing period, as it says in the explanatory notes? The Government can then come back with the alternative percentage.

[Dr Whitehead]

The hon. Gentleman anticipates my next paragraph. The explanatory statement mentions that this is a testing period. The whole of the obligation we are discussing is essentially a transitional testing period from the old ECO to the new ECO.

Bearing in mind that both those responding to the consultation and those obliged suppliers all thought that local authorities should have a much more substantial, economical and effective role in bringing forward people in fuel poverty who require treatments, why have the Government, even in this transitional period, limited that role to 10%? Is there a reason that the Government have decided it should be 10% for local authorities, when the evidence overwhelmingly points in the opposite direction? Do the Government not trust local authorities to identify those people, or do they believe that what the obliged companies are saying is not so, and that it is a walk in the park to find people in fuel poverty, so that the arrangements can proceed as before? If the Minister is not able to say anything today about that 10% figure, what is he going to do during the period of transition, pointed out by the hon. Member for Lichfield, to appraise whether local authorities can have a greater role? Can he assure me that when we are able to look at the detail of the later ECO, that will be reviewed and that the position of local authorities in deciding who gets treatment and how it can best be related to obliged suppliers can be established on a coherent basis?

I do not wish to detain the Committee further, but I do emphasise that the Opposition consider the measures to be woefully inadequate for those in fuel poverty and to address wider concerns about climate change. If we had the opportunity, we would fundamentally revise their scope and extent in order to make a proper impact on fuel poverty and the overwhelming imperative of getting energy efficiency under control in the context of concerns on climate change.

--- Later in debate ---

[Jesse Norman]

I am happy to look at the hon. Gentleman’s suggestion. On the point I was making to my hon. Friend the Member for Reigate, we are not starting from the position he described. That position has the effect of disguising costs. The reason why we have carbon emissions issues is precisely because of the externalities built into previous models of industrial development. Those substantial costs were not included in the true cost of production of the goods and services concerned. It is simply untrue to suggest, even by implication—I am not suggesting my hon. Friend was suggesting this—that there had been some Elysium or status beforehand in which costs were explicit and are now not; there were costs before that were not explicit and there may be costs now that are not. From a Government standpoint, there is no hiding of costs as regards expenditure by either consumers or the Government.

Let me say a couple of other things. The overall energy market approach my hon. Friend describes was well outlined recently in a report by the House of Lords Economic Affairs Committee, as he may know. It remains an important part of the accountability of Government that we respond to it and are aware of it as an alternative. However, it is worth saying that it would do nothing as such to alleviate the issues of fuel poverty that concern us today. In my judgment, it is not an answer to say that local authorities are somehow a go-to alternative. The truth is that the delivery of those and related measures by local authorities has historically been quite mixed.

On the setting the 10% figure, that was designed, based on the consultation, to allow for a period of experimentation during the transition period, precisely to assess whether that number could be raised in line with the suggestions that have been made. The number involved—even at 10% of £45 million—is not a trivial amount of supplier obligation. I think that is a reasonable and proper justification.

I will say a couple of things about the matters raised by the hon. Member for Southampton, Test. He asked why we were presenting the order so late. I share his concern about that. My preference would be for measures to be presented to Parliament as early as possible. The difficulty has been—in part, this refers to a couple of earlier points—last year’s changes in Government and knock-on effects, which have delayed the process. It is certainly not something that any Government would want to make a habit of, so I take the point.

I have a couple of comments to make in response to what the hon. Gentleman said about a reduction on a reduction: first, the number of homes in fuel poverty has continued to fall since 2010, and it is clear that the measures continue to have a powerful effect. It is also important to bear down on consumers’ bills. If the hon. Gentleman wants to introduce specific costed proposals for restoring the funding that he criticises the Government for reducing, it is incumbent on him to state by how much he would be prepared to put it up, and how much he would be prepared to burden taxpayers or consumers. In addition, we expect, by September 2018, to have met a target of 850,000 homes insulated. That leaves 150,000 by 2020, which is in line with the manifesto commitment made in 2015. The Government believe that they are on track.

As for the fourth carbon budget, the hon. Gentleman was talking about totals—and the challenge for the Government is to meet the fourth carbon budget in total. The support and advice that the Committee on Climate Change offers is always welcome and of interest to us, but the focus is on the total. The hon. Gentleman painted a beguiling picture of towels being tightened and retightened in the bowels of the Department; but I think it is fair to describe the process of aligning all the different carbon saving measures required to meet the budgets as complex and difficult. That is what the clean growth plan, which will be published in due course, will do.

[Dr Whitehead]

Does the Minister want to add anything to the phrase “in due course” with reference to the clean growth plan?

[Jesse Norman]

I thank the hon. Gentleman for that tempting invitation, but I can say that “due course” will be due, and a matter of course; so the answer to his question is no.

As to whether there will be a review of the long-term effects of the ECO, we anticipate that there will be a consultation later this year—I can give the Committee some clarity on that—in line with thinking about what the further process will be after 2018-22. I have addressed the issue of the figure of 10% in relation to affordable warmth, which we have discussed.

Among other key elements worth picking out is the question of the proportion of fuel-poor homes in band E, or above, in England, which is expected to be about 92% by the end of the extension. That will be up from 88% three years ago. Again, that underlines the progress that has been made.

This has been an interesting and useful debate and I thank hon. Members for their speeches. As I said, the scheme has helped to deliver more than 2 million energy saving measures to more than 1.6 million households, including 1.2 million measures to 900,000 low-income and vulnerable consumers. At a time of rising energy bills, the Government think that it is right for support to be targeted to those most in need. At the same time, the amendments being made to the existing order should reduce the cost of the scheme to bill payers to about £25 a year from the current level of £34 to £35—and nearly £60 at the time of its launch in 2013.

With the amendment order the ECO is expected to provide 545,000 households with more energy saving measures. We will thereby give a balance of improvements and continuity to consumers and the energy efficiency industry for 18 months, before further change is made through a longer-term scheme, from 2018 to 2022.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Electricity and Gas (Energy Company Obligation) (Amendment) Order 2017.