Energy Bill [HL]

Baroness Smith of Basildon Excerpts

Wednesday 22nd December 2010 Lords Chamber

[Baroness Smith of Basildon]

My Lords, I have enjoyed this wide-ranging and interesting debate, with impressive contributions from many noble Lords who have recognised expertise, experience and real commitment on the issues before us. I look forward to working with your Lordships in Committee and at further stages of the Bill to ensure that amendments—suggestions were made by the noble Baronesses, Lady Finlay and Lady Parminter—are made to strengthen and improve the outcomes of the legislation.

I thank the Minister, who has been described as one of the “green-obsessed government Ministers”—a mantle that I think he might wear with some pride—for introducing what was called a,

“cuddly … bunny of a Bill”,

and for his willingness to be open, to engage and to discuss the Bill both inside and outside the Chamber. That is very welcome.

Probably on behalf of all your Lordships who have spoken, I also thank the many groups, organisations and individuals who have supplied briefings and information and who have been willing to enter into discussion. Their input has been invaluable and very welcome, as I am sure it will continue to be as we move through the Committee stage.

The noble Lord, Lord Grantchester, spoke of the broad provisions of the Bill. As the House is aware, we welcome the Bill and support its broad thrust. We welcome the principles both of energy efficiency and of energy security. Although we consider that there are significant weaknesses in the legislation that is brought before us today, I am confident that, with the commitment and expertise in your Lordships’ House and with the Minister’s willingness to engage, we can improve the Bill and send it to the other place knowing that your Lordships have made significant improvements.

I should like first to reinforce the points made by my noble friend Lord O’Neill and the noble Baroness, Lady Noakes—with whom I do not often agree on these issues. They were absolutely right to raise concerns about the use of secondary legislation. This Bill contains 54 individual provisions for delegated legislation. That is a substantial proportion of the Bill and the detail of how the essential provisions will operate. I appreciate that in many cases it is necessary to bring forward delegated legislation, and I welcome today’s report from the Delegated Powers and Regulatory Reform Committee which raises issues of parliamentary scrutiny, which we shall refer to and continue to debate in Committee. It may assist your Lordships if I ask the Minister to say whether, where possible, he can bring to the Committee drafts of statutory instruments when we are discussing the relevant clauses. I think that that would greatly help us in our deliberations.

In my comments today I shall deal mainly with Part 1 of the Bill, but I also want to refer to the comments that have been made on Part 2, particularly on energy security. My noble friends Lord McFall and Lord O'Neill both emphasised the strategic needs that the Bill is seeking to address, and I was particularly struck by my noble friend Lord McFall's comments on local response. I think it would be helpful to examine that approach further in Committee.

My noble friend Lord Hunt set the Bill into a policy context, and his examples of housing in Germany were particularly apt for us as we consider the Bill at the moment. My noble friend Lord Giddens made a very important point about how this fits into the wider government policy issues, on which we have recently had numerous debates in your Lordships' House. I think the only way in which the Jevons paradox which he mentioned can be addressed is by considering the Bill in the context of the other policy issues not only across the Department of Energy and Climate Change but across government. My noble friend Lord Lea made similar points about context.

The bulk of the Bill deals with the Green Deal. We strongly support the aim to reduce carbon by tackling energy efficiency in existing homes. However, we have concerns about how we can achieve these objectives, as well as concerns about what the Bill does not do. Those concerns have been expressed by the noble Lords, Lord Jenkin and Lord Teverson, and by my noble friend Lord Grantchester in his opening speech.

The scale of the challenge facing us is enormous: 27 per cent of the UK’s CO₂ emissions come from energy use in homes. There is enormous potential to reduce. There are 26 million homes in Britain, half of which were built before the 1960s and 5 million of which are Victorian terraced properties. So for the industry to deliver the quantity of work needed there will need to be significant participation in the Green Deal. However, it is not yet clear that the incentives in terms of the carbon and financial costs and benefits to householders will be sufficient to drive up the level of participation. Business needs the confidence and the level of take-up to ensure that it can invest and guarantee the training and skills that are required. As noble Lords have said, another issue is the levels of interest rates, which are of great concern to consumers and installers alike. Without a low interest rate householders will be paying the full unsubsidised rate for measures such as cavity wall and loft insulation that were previously available at low or no cost under successive supplier obligations.

The Government's impact assessment is a weighty document but I have taken a more detailed look at how the Green Deal operates and will affect cavity wall insulation, which is one of the most cost-effective measures. In the assessment we find that the number of homes that will benefit from cavity wall insulation will reduce. In 2009, 560,000 homes benefited from the installation of cavity wall insulation; but in the following two years the number will increase to nearly three-quarters of a million. At the annual conference of the National Insulation Association earlier this month, the members were rightly optimistic about the figures for those two years and the potential for growing the business and taking on and training new staff. However, there was profound pessimism about the position from the time that the Green Deal begins in 2012. It is bitterly disappointing that, as they were gathering in a mood of great optimism, the Government published the Green Deal impact assessment with predictions for the number of cavity walls due to be insulated post-2012 as at least 40 per cent lower than those they expect to deliver in the next two years. The most optimistic figure in this document is for half a million in 2015, which is lower than the figure for 2009.

So, far from delivering the promised one-quarter of a million new jobs that the Secretary of State for Energy and Climate Change has heralded, the insulation industry—the part of the construction industry which is supposed to deliver the bulk of the Green Deal in its initial years—will be getting smaller rather than bigger. I am sure that that is not the intention. However, it appears even from the Government's own figures that they have no confidence that the Green Deal will deliver more insulation than has been delivered under existing arrangements. The Government's forecast is that it will be delivering less. The most optimistic scenario, even for existing homes which are not suitable for cavity wall insulation, is woefully inadequate.

If the Green Deal is to be as effective as we want it to be, there needs to be a higher take-up. Looking at how we achieve that has to be a priority in our Committee deliberations and we should examine what further measures can be taken. Examples could include earlier use of renewables and, as referred to by the noble Lord, Lord Hunt, ensuring that those undertaking the work and assessing installations are appropriately trained.

Perhaps I may also take up issues raised by noble Lords relating to the plight of the fuel poor. The Government have recognised that the pay-as-you-save element of the Green Deal is not appropriate for those households that are fuel poor, vulnerable to fuel poverty or financially disadvantaged. The latest data from Ofgem suggest that 2.5 million households are in debt to their energy supplier. How will they be able to access the Green Deal, which will increase their energy bills?

For those households which, because of the cost of energy, are the most likely to underheat their homes, the benefits of energy efficiency are in the form of a warmer and healthier living environment rather than in monetary savings. For obvious reasons, those households normally have a poor credit rating and may have existing debt problems. They cannot benefit financially from the Green Deal as they cannot fulfil the golden rule in financial terms, even though they benefit in better warmth. The noble Lords, Lord O’Neill and Lord Judd, raised the social and health costs of proceeding in this way. The people concerned are likely to be private sector tenants.

The new energy company obligation is the main mechanism for assisting disadvantaged households in improving heating and insulation. It will be the only source of assistance for those households following the swingeing cuts and the ending of the Warm Front scheme at the end of 2012-13. As I said in a previous debate on Warm Front, we will support any mechanism that effectively deals with this problem. The ECO could be effective, provided it meets certain criteria. We will work with the Minister to ensure that the scheme is sufficiently well funded and that a disproportionate share of resources is not diverted to households that are able to pay but live in hard-to-treat properties.

A great number of noble Lords, particularly the noble Lords, Lord Teverson and Lord Best, and the noble Earl, Lord Cathcart, raised concerns about the private rented sector. We will see little progress in the private rented sector for some time. The private rented sector accounts for around 14 per cent of the housing stock and has some of the most difficult-to-treat problems. It has a disproportionate number of homes with the worst energy rating that will cost in excess of the limits currently being suggested to improve.

The Government’s own Fuel Poverty Advisory Group calculated that 19 per cent of private tenants live in fuel poverty, and the impact assessment for the Bill shows that 42 per cent of those in the worst private sector properties are in fuel poverty. As the noble Lord, Lord Best, indicated, a substantial coalition of 30 organisations is calling for the Government to introduce a legal minimum standard of energy efficiency for private rented homes and for it to be an offence to re-let a property which does not meet this standard until it is improved. We do not want to see the private rented sector lose properties. There would have to be financial help, greater incentives and information for landlords to improve their properties.

We welcome the Government’s recognition that this is a serious problem, but I fear that the measures being brought forward are inadequate—they are not even guaranteed to come into force. Both landlords and tenants need certainty. The Minister was forceful on this matter in his opening comments, which I welcomed. However, under the Bill as it stands, there will be a review of the sector after a year of the Green Deal. Then, if take-up is not sufficient and it does not impact on the number of properties available to rent, the Secretary of State “may” make regulations to require private landlords to make improvements to their properties. It is almost a triple lock against action. The earliest date on which regulations could be made is April 2015, so we are years away from seeing any significant improvement in the private rented sector. Clearly, this is insufficient, and we offer the Minister our full co-operation in seeking to address the problems that exist here.

Perhaps I may mention local government—I declare an interest as another vice-president of the Local Government Association. I hope that we will be able to explore with the Minister the role of local government in supporting the Government’s objectives. We need to look further at both the practicality and the effectiveness of councils’ duty to enforce against landlords with low energy effectiveness. I welcome the commitment that the new duty will be funded by government, but there remains again a lack of clarity given that so much will be finalised in secondary legislation and not until after 2015.

It is very difficult for local authorities and landlords who do not know whether there will be a duty to act post-2015. Although it is not part of the Bill, the impact assessment states that the Government intend that F- and G-rated properties will be targeted and will give local authorities access to the EPC database. Councils will then have to use other data—for example, council tax information—to locate those properties that are privately rented and are rated F and G. There are concerns that about whether a fine is the appropriate remedy for a landlord who does not comply. The tenant will still be living in a home that is energy inefficient.

Many of the organisations seeking to improve the Bill are concerned that the powers here are too weak to ensure that landlords comply and that unless improvements are made we will see very little progress in the housing sector, which has the capacity to make the greatest difference.

If it helps the Minister, I can inform him that 39 per cent of F- and G-rated properties can be improved to band E for less than £1,500 and to improve all band F- and G-rated properties to a minimum of band E for private rented homes would take 150,000 homes out of fuel poverty. That is 25 per cent. Those are huge gains and a real opportunity for the Minister to make a substantial difference. I know that local government stands ready to work with him and assist in this.

We welcome the commitment to give consumers information on energy bills about the cheapest tariff. That should be meaningful information that assists the consumer. We welcome the proposal on smart meters. I have previously raised in debates in your Lordships' House the need for smart meters to be compatible and interoperable for all energy companies. When I raised that before the Minister agreed to look at it. If he is able to update the House it would be appreciated.

Noble Lords have raised a number of consumer protection issues that I feel will need greater clarity as the Bill progresses. I raised some of them with the Minister and his Bill team and I am grateful for their assurances that they will look into them. I know that the Minister is aware of the need for consumer confidence and trust in the energy sector for these proposals to work. The Minister will no doubt be aware that in October this year npower agreed to compensate nearly 2 million of its customers who were overcharged for gas in 2007 and paid around £70 million in compensation. That was after a campaign by the energy consumer advocate, Consumer Focus. Although it is not in the Bill, I hope that the Minister will take on board the importance of a strategic body to represent consumers and I hope that we can return to this issue again.

On the issue of the Coal Authority, I thank the Minister for bringing forward the provisions in the Bill. It is entirely appropriate that a body that is established by primary legislation should be changed only by primary legislation. He will be aware that this body, the Coal Authority, is also listed in Schedule 7 to the Public Bodies Bill. He may be aware that I have tabled an amendment to that Bill to delete the reference to the Coal Authority. Given that we now have the legislation before us quite rightly in this Bill, in the true spirit of Christmas will he support my amendment and perhaps get his ministerial colleagues to do likewise as the reference is no longer necessary?

Finally, I thank all those who contributed to the debate today. I am looking forward to the Committee as the clear will in the House on all sides is to ensure that the Bill achieves its stated objectives. I will not attempt to joke as my noble friend Lord Giddens was able do, but I wish the Minister and everyone who has taken part today a lovely Christmas and an enjoyable new year and I look forward to working with your Lordships on this Bill to make 2011 the year of warmer homes and energy efficient homes.