Warm Home Discount Scheme (Northern Ireland)

Amber Rudd Excerpts

Monday 2nd March 2015 Commons Chamber

[The Parliamentary Under-Secretary of State for Energy and Climate Change (Amber Rudd)]

I congratulate the hon. Member for South Down (Ms Ritchie) on securing the debate on extending the warm home discount scheme to Northern Ireland. Fuel poverty remains a huge challenge, as she rightly says, and the coalition is committed to tackling the problem and to helping the people affected, especially those on low incomes and in vulnerable households.

To help us to meet the challenge of fuel poverty head on, the Government have introduced a new, more accurate “low income, high cost” measure of fuel poverty in England. This enables us to deliver effective policies that can cut bills and increase comfort for those on low incomes living in the coldest homes. We have a range of policies in place, including the warm home discount, that address the contributing factors of fuel poverty through either increasing income or reducing energy bills.

I want to provide some context for the warm home discount scheme and tell the House how it operates in Great Britain. The powers for the warm home discount scheme are set out in primary legislation—the Energy Act 2010—and it is delivered by suppliers within Great Britain. Introduced in 2011 through secondary legislation, the warm home discount scheme requires electricity suppliers with more than 250,000 domestic customer accounts to provide financial support in respect of energy costs to their vulnerable customers. This winter, the customers eligible for that financial support received a £140 rebate on their electricity bill.

Since we launched the scheme, around 2 million households in or at risk of living in fuel poverty across Great Britain have benefited from lower energy bills each year. As a result of the success of the warm home discount, this Government have extended support to 2015-16, with a spending target of £320 million. This is in addition to the £1.1 billion that has been spent over the first four years of the scheme and will continue to support the people most in need.

Fuel poverty in Northern Ireland is devolved to the Northern Ireland Executive, who decide their own fuel poverty objectives and policies. However, in looking at the feasibility of extending the warm home discount scheme to Northern Ireland, we can see that a number of factors would affect that arrangement. As I said, the powers for the warm home discount scheme were set out in primary legislation in the Energy Act 2010. However, the powers extend only to Great Britain, so any extension of the scheme to Northern Ireland would require a change in primary legislation.

The energy market in Northern Ireland is different from the one that operates in Great Britain. There is also a difference in the nature and number of customers in fuel poverty. Northern Ireland operates in an all-island energy market that is separate from that of Great Britain. It is at a different stage from the GB market in terms of energy market regulation and competition.

The warm home discount scheme applies only to the largest suppliers, based on their domestic market share across Great Britain. The same rules apply in all regions so as not to create market distortions. In Northern Ireland, only the largest supplier would meet the current participation threshold for the scheme. That would mean customers of smaller suppliers would be ineligible, which could lead to a distortion of the single energy market.

I also want to highlight the importance of maintaining a balance between helping those in fuel poverty and ensuring that energy costs are kept as low as possible for everybody. The warm home discount scheme is funded by energy suppliers, which we expect to pass the costs of the scheme on to customer bills. The question from the hon. Member for North Down (Lady Hermon) was about the source of funds, and the simple answer is that the funds are only collected from bills in Great Britain—they are not currently collected from the Bills in Northern Ireland, which is unique in the UK in that respect.

Replicating the GB scheme in Northern Ireland could be done but would pose particular problems. Given the high proportion of households in fuel poverty in Northern Ireland, making them all eligible would have a high overall cost. For example, if Northern Ireland were to replicate the impact of the warm home discount scheme in Great Britain, for one in 13 households benefiting we could expect an increase in energy tariffs of 2%. However, if coverage of the scheme extended to include all fuel poor customers in Northern Ireland, the costs of the scheme would add almost £59—a 9.8% increase—to each household electricity bill.

A different means of funding such a scheme may be needed for Northern Ireland. Northern Ireland already has a number of schemes in place that provide support to the fuel poor, including the sustainable energy programme, the warm homes and affordable warmth schemes, and the boiler replacement scheme. Those are in addition to the availability of cold weather payments and winter fuel payments. Also, the recent downward pressure on oil prices will come as welcome relief to the many customers in Northern Ireland using oil for heating purposes

I understand that Power NI, the main supplier in Northern Ireland, has announced a tariff reduction of 9.2% to take effect from 1 April 2015. This will be a two-year tariff and is estimated to reduce a typical domestic consumer bill by approximately £50 per year. Alongside the downward pressure on heating oil and gas prices, it should result in a reduction in the extent and severity of fuel poverty.

The hon. Member for South Down raised the issue of covering administrative costs. For her information, the Department for Work and Pensions administrative costs cover only a small proportion of the cost of administering the scheme. Most costs, including the administrative costs, are borne by the suppliers. My officials in the Department of Energy and Climate Change regularly meet Northern Ireland Executive officials to discuss fuel poverty issues. However, as fuel poverty is devolved to the Northern Ireland Executive, they decide their own fuel poverty objectives and policies.

Fuel Poverty remains a huge challenge in both Great Britain and Northern Ireland and needs to be tackled. However, the differences between our energy markets and the way we measure fuel poverty mean that we need to consider different policies to best meet the needs of those we are trying to reach.

[Ms Ritchie]

The Minister has clearly stated that her officials meet Northern Ireland Executive officials to discuss fuel poverty and fuel poverty objectives. What specific issues have been discussed in the recent past between her officials and officials in the Department for Social Development in Northern Ireland about the mitigation of fuel poverty?

[Amber Rudd]

I thank the hon. Lady for that question. Obviously, the key point that is relevant to what we are talking about is how we could advise or assist in some equivalent measure, which is exactly what she has raised with us today. In preparation for this debate, we had further discussions. The hon. Lady talked earlier about trying to keep the dialogue open, and I wish to reassure her that we are always keen to work with the Department of Enterprise, Trade and Investment in Northern Ireland and to share with it all that we have learned about trying to administer this scheme in the best way to reach the constituents who, as she has clearly set out, are so vulnerable to high energy costs: the vulnerable, the disabled and the pensioners, who often do not go out.

Although I do not have the answers here today about how the scheme could be extended to Northern Ireland, because, as I have said, it is a devolved matter and has separate payments, I would like to reassure the hon. Lady that we are always keen to work with our counterparts in Northern Ireland and we will be keen to continue to do that. I hope I have shown that we will work with them wherever we can to make sure that fuel poverty is eradicated in Great Britain and Northern Ireland by any means possible. I commend her for raising this issue today.

Question put and agreed to.