Fuel Poverty (England) Regulations 2014

Baroness Verma Excerpts

Thursday 27th November 2014 Grand Committee

Moved by

[Baroness Verma]

That the Grand Committee do consider the Fuel Poverty (England) Regulations 2014.

Relevant document: 10th Report from the Joint Committee on Statutory Instruments

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)]

My Lords, I am pleased to open this short debate on the Fuel Poverty (England) Regulations 2014. Before I go into the detail of the regulations, I will set out their context. They are the result of three years’ detailed work, which has sought to overhaul the framework for tackling fuel poverty in England. Since taking office, this Government have been clear in their aims to understand the problem of fuel poverty, measure it effectively, and put in place a suitable, ambitious and meaningful target for change, supported by a strategy to meet that target. Since 2010, we have seen a consistent fall in the number of homes in fuel poverty, but the cost of energy remains a real problem for many people. We must address the issues over the long term.

This journey began from first principles with the independent review of fuel poverty, led by Professor Sir John Hills and published in 2012. Professor Hills concluded that fuel poverty is a distinct and serious structural problem, requiring an ongoing targeted effort to properly address it. Indeed, fuel poverty is driven not only by low income but by the characteristics of the homes we live in. His review also highlighted that, while the previous 10% indicator used to measure fuel poverty was well meaning, it was fundamentally flawed. Its sensitivity to energy prices meant that the official figures often suggested significant progress in alleviating fuel poverty, while masking the real problems faced by those on low incomes living in the coldest, least energy-efficient homes.

The Government have been determined to learn these lessons and we have acted. In 2013, we confirmed that we would adopt the low income, high costs indicator of fuel poverty in England, which finds a household to be fuel poor if it has an income below the poverty line—including if meeting its required energy bill would push it below the poverty line—and if it has higher than typical energy costs. In essence, it means that fuel poverty is an additional problem faced by some low-income households that have the highest energy costs. This measure also takes into account how a home is used. For example, it now captures specific heating patterns for people who need to spend more time at home, which often includes households with young children, the elderly or the disabled.

Measuring fuel poverty properly really matters. The major advantage of the low income, high cost indicator is that not only will it allow us to judge the scale of the number of homes affected, but it will enable us to understand it through the fuel poverty gap, telling us how badly affected each household is. This means that we can prioritise households in the most severe fuel poverty—those which we will want to help first. The indicator will allow us to home in on the factors that mean that low-income households face higher costs, the most notable of which is the energy efficiency of the property they live in.

Last year, the Government published the Framework for Future Action. We laid out a set of principles to guide progress: prioritisation of the most severely fuel poor; supporting the fuel poor through cost-effective measures; and ensuring that vulnerability is reflected in policy decisions. These strategic principles are useful tools for assessing the effectiveness of current policies and shaping their future development so that the Government can use their resources in the most effective way.

Our current policies are already making a difference. For example, since 2011, the Warm Home Discount has meant that more than 2 million households receive a discount on their energy bill each year. More than 480,000 low-income and vulnerable households will be warmer after having received measures under the energy company obligation.

The new definition of fuel poverty has now enabled us further to shape existing policies to take into account a new understanding of the problem. For example, we are amending ECO to incentivise the delivery of affordable warmth measures to non-gas fuelled households, as we discussed in our previous debate.

Significantly, through the Energy Act 2013, we amended the Warm Homes and Energy Conservation Act 2000 to remove the previous fuel poverty target, create the necessary legislative framework for our new approach and place a duty on the Secretary of State to set out a clear objective and way forward for tackling fuel poverty.

Today’s debate marks the most important step in this process. These regulations set out the form of the fuel poverty objective, the level of ambition to be achieved and the date by which this must be done. The new statutory target aims to ensure that as many fuel-poor homes in England as is reasonably practicable achieve a minimum energy efficiency rating of band C by 2030. This is because improving the energy efficiency of properties is the best way to lower energy bills in the long term. Reducing energy waste will help to protect fuel-poor households from future bill rises. It will also help to improve the energy efficiency of the wider housing stock in line with the UK’s carbon budgets.

Importantly, the target will be based on a minimum threshold rather than an average and will focus on those fuel-poor households where improvements can be made at least cost. This approach is very much in keeping with our first principle—to help the worst-off first—and has overwhelming support from fuel poverty stakeholders, including National Energy Action and the independent advisory body, the Fuel Poverty Advisory Group.

The target metric—the energy efficiency standard for measuring progress—is based on the standard assessment procedure but with an adjustment so that current policies that have a direct impact on energy costs, such as the rebate delivered by the Warm Home Discount, are accounted for. This recognises that important tool in helping people to keep warm.

It is important that this is a long-term goal because fuel poverty is a long-term structural problem. Action will require the support of successive Governments if we are to deliver the necessary energy efficiency improvements to fuel-poor homes in England. The 2030 timeline is also in line with the UK’s existing carbon budgets.

We are setting a statutory goal that aims to see as many fuel-poor homes as is reasonably practicable reach an energy efficiency standard that currently fewer than 5% of fuel-poor homes enjoy. It is a standard that will help people keep warm and cut bills, making a real difference to the lives of fuel-poor households.

The average energy efficiency rating of all homes today is band D. For fuel-poor homes, the situation is worse: they have an average of band E. To put this in context, if you are fuel poor and live in a band F or G home, this means that you could typically face energy bills of £2,100 to stay warm. But if you lived in a band C home, this could be only £1,000, or £1,200 if you lived in band D.

To get as many fuel-poor homes as is reasonably practicable to a minimum of band C will require a range of actions, such as the installation of energy-efficiency measures and bill rebates to help households with energy costs. It will mean trying to ensure that fuel-poor homes have sufficiently insulated walls and lofts. Some homes could see the installation of central heating systems for the first time, while others could receive an upgrade to the most efficient boilers available or potentially have a heat pump installed.

The Warm Homes and Energy Conservation Act also requires the Secretary of State to publish a strategy for achieving the new target. In this strategy, the Secretary of State is required to specify interim objectives and target dates for achieving them. These interim milestones will be important, given the long-term nature of the target, so that we can monitor progress.

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[Baroness Verma]

Again, I thank the noble Lord, Lord Whitty, for his response and, again, I start by saying that we will disagree on most of the points he has raised because I think that these measures do address what he and the Government both recognise as being embedded structural issues that we have needed to address for a long time.

The noble Lord said that 2030 is a long way away, but these interim measures will ensure that at each juncture we will be able to see whether or not progress has been made, so that we are able to revise the way in which we are addressing a long and deeply embedded issue. Looking at households within a particular banding will enable us to measure far better those people who we are beginning to reach. There will always be areas that need improvement, and that is why it is absolutely right for the Government to take stock from time to time and look at who is benefiting and who is not, along with monitoring how well the programmes are working.

The noble Lord said that we need more scrutiny. We have committed to an annual fuel poverty debate. Regular reviews of the framework will be carried out, and we are reforming the Fuel Poverty Advisory Group. All that will hold us to account. It is really important that, whatever we do, we work towards the end mission: a firm principle which ensures that those who need help the most get help first. By implementing these measures, that is exactly what we will try to deliver.

I will write to the noble Lord about the fuel poverty gap and set out in a little more detail how through these measures we will increasingly be able to target homes by extending the ECO to 2017, which we considered in the previous debate. The fuel poverty gap underpins the principle that we need to help those who are worst off first. I had hoped that I had set that out quite clearly in my opening remarks, but I suspect that there are areas on which the noble Lord requires further clarity. I will read Hansard carefully to see whether there are any points which he feels I have not responded to fully.

The noble Lord also said that the ECO has deficiencies. A larger share of the ECO will be available to low-income households than ever before. Through the ECO we are seeking to evolve and improve on how we reach out and ensure that households are given help. We have made changes so that between now and 2017 there will be a greater drive to ensure that measures are in place for the most vulnerable households. However, it is right to say that there is always more to be done. We need to keep on looking at this issue and make sure that we are doing everything we can.

I think that if the noble Lord reads Hansard tomorrow, he will see that I have addressed some of his questions in my opening remarks. Ultimately, the Government have taken action in order to reach out and ensure that the long-term goal for all homes to be energy efficient is met. We should be able to drive energy costs down. We discussed in the previous debate the programme to bring forward smart meters, which will add another tool. Standing still and not implementing these measures would actually have increased bills, so the Government have gone a long way towards trying to reduce costs to the consumer. We have listened very hard to what consumers have said. While we believe firmly that we must reduce our carbon footprint and our carbon emissions, that must not be done at any cost. It cannot be done so that those who can least afford it feel the greatest pain.

Of course, I will write to the noble Lord with further detail on any points that I have not responded to here, and I commend the regulations.

Motion agreed.