Barry Gardiner
Main Page: Barry Gardiner (Labour - Brent North)Energy Bill [Lords]
Barry Gardiner Excerpts(12 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text
Gregory Barker
Yes. I have a great deal of sympathy with that point. We believe strongly that high-pressure sales tactics, which cold callers sometimes use illegally, should be prevented. When I referred previously to cold calling by assessors, that is the kind of activity to which I was referring and is, I think, what the hon. Member for Brighton, Pavilion was thinking of too.
Barry Gardiner (Brent North) (Lab)
Will the Minister also ensure that when the new measures under the green deal are being touted door to door, there will be no opportunity for the simultaneous selling of energy?
Gregory Barker
That is a good point. We certainly do not anticipate that assessors would be able to go door to door, give an assessment and then have people sign up there and then. There will be a cooling-off period. We considered in Committee whether an assessor could also be a representative of a commercial organisation or company. We came to the view that that could be possible, but that there would have to be a clear distinction between the roles they performed. An assessor would have to make their assessment on a uniform format and to the same standard right across the industry, so that it could be taken to other providers of green deal services. We would encourage all consumers to get a competitive quote before committing. If consumers wish to go with the first person who knocks on their door or the first person whom they invite in to make an assessment, it is obviously their right to do so. However, we are building in apparatus to ensure that that is not encouraged.
Barry Gardiner
I am grateful to the Minister for giving way again; he is being extremely generous. Will he confirm whether he believes it would be possible under the legislation for an assessor, who is there to give impartial and independent advice about one’s energy consumption, also to be a representative of an energy company and to engage in the selling of energy to the consumer? It would be dangerous if the legislation permitted that.
Gregory Barker
Is the hon. Gentleman suggesting that an assessor would knock on someone’s door, undertake a green deal assessment and, at the same time, encourage them to switch to another tariff? [Interruption.] He is suggesting that they would switch hats and do that. I do not expect that to happen, not least because the assessment must be independent. However, there can be a degree of cross-selling, provided that the independent assessment is truly independent. However, I shall clarify that when we come to the technical detail of the Bill. I understand that what the hon. Gentleman describes is possible, but energy company practice would be covered by the regulations, such as the code of practice. We shall have an opportunity to look at the detail of what they can offer under the code of practice, but I would expect that type of activity to be strongly regulated.
However, it would not be impossible—indeed, it would not necessarily be a bad thing—for people to be able to switch to a better tariff at the same time as they were considering their energy usage. We are encouraging consumers to switch. Far too many families in this country are on the wrong tariff and do not take advantage of the cheaper tariffs that are available, often from their own supplier, particularly by switching to a direct debit. I would therefore not want to rule out the possibility of a consumer taking a green deal assessment and, at the same time, switching to a cheaper, more appropriate tariff. Indeed, that might seem quite sensible, but it will be covered by the code of best practice.
Barry Gardiner
Although I agree that it should always be open to people to switch to a cheaper tariff, I am sure that the Minister would agree that energy advisers operate in an independent capacity and therefore engage with the consumer in a capacity of trust. Will he therefore ensure that if any energy adviser offers advice about switching tariffs, they will have to offer independent advice and will not be able to give it as a tied agent? Otherwise, there will be a perverse incentive for the energy companies to use a new doorstep sales technique, which will involve getting through the door as an independent adviser, switching hats—which will not always be obvious to the consumer—and then selling their own product.
Gregory Barker
I will need to consider that more carefully, because we accept that assessors can be part of commercial organisations. It is not a requirement of the green deal legislation—we went through this in detail in Committee—that they have to be totally impartial and that someone else should act as a salesman. For example, gas boilers have to be fitted to the high and rigorous standards set out in CORGI guidelines, and that work must be done independently. When we take our cars for a service and MOT, that must be done impartially and to a certain standard; yet at the same time, those doing that work are selling a service. Indeed, there are several examples of where it is quite possible for professional bodies to undertake professional services independently, transparently and to a uniform format, but where at the same time they have opportunities to sell.
Indeed, that is part of the attraction of the green deal. There is a quid pro quo at work: we are using the power of the market to scale-up the deployment of energy efficiency. Although we hope to go for an ambitious and large-scale eco-subsidy to work with the green deal, ultimately we are talking about a private sector proposition. We are creating a new market, but the investment that will drive take-up will come from the private sector, and obviously those making that investment will be attracted by more than just lagging. That is a good thing, because it will drive innovation and drive prices down as it increases competition, opening up energy services from the big six companies to a new array of retailers and, we hope, small and medium-sized enterprises and local groups. Competition will be good, but for competition there must be something for people to compete for. I hope that that reassures the hon. Member for Brent North (Barry Gardiner), but I will perhaps come back a little later to the point that he has raised.
Government amendment 30, which relates to the impartiality of green deal assessors, is a result of a commitment I made in Committee, given that so many Members were seeking reassurance on this point. It clearly sets out our intention to ensure the impartiality of the assessment process, and I urge the hon. Member for Brent North to look at it closely. We believe that it should be possible for assessors to be employed by a green deal provider, allowing for a more holistic service for consumers, but that should not interfere with the impartiality of the assessment process. The code of practice for assessors will therefore include robust requirements for green deal assessors to act in an impartial manner and declare to consumers any links that they have with green deal providers—or, indeed, energy companies. That is vital in order to retain consumer confidence in the information that they are being provided with.
Barry Gardiner
The Office of Fair Trading will regulate the contracts. Has the Minister been in contact with his counterpart in the Department for Business, Innovation and Skills to check on the reduction in the number of officers who are able to enforce the measures? The process will put a considerable new responsibility on to the OFT.
Gregory Barker
I have not raised the matter in person, but my officials are working closely with a number of Departments—including, importantly, BIS—on that important element of the green deal proposition. We are satisfied that the OFT will have sufficient resource properly to monitor the green deal, and we will keep that under review as the green deal rolls out.
I will deal now with new clause 10 and the consequential amendment 36. The new clause has been tabled to replace the Opposition’s amendment on green deal apprenticeships, which we accepted in Committee—a great personal victory for the hon. Member for Liverpool, Wavertree (Luciana Berger). As I said at the time, it is important that we take expert drafting advice on any amendment to a Bill, however well intentioned it might be. I reiterate that we fully support the creation of apprenticeships in green deal-related trades, and we will be happy to report to Parliament on our progress, as the hon. Lady requested. We believe that the new clause captures the spirit of her amendment; it simply clarifies a couple of technical matters regarding the exact nature of the new obligation. It requires the Secretary of State, before making the first framework regulations, to report to Parliament on the steps that he has taken to encourage green deal installation apprenticeships. I hope that that satisfies the hon. Lady.
Taken together, these are important measures in what will be the most ambitious home improvement programme since the second world war, and I hope that the whole House will support them. There are other amendments in the group that I have yet to address.
Andrew Percy
I thank my hon. Friend. I am aware of his work in this area. He has said exactly what I am going on to say. It is important to ensure that the scheme is as attractive as possible to the poorest households, which, as he knows, are at the greatest risk of fuel poverty.
The alternative to a single scheme interest rate is risk-based pricing. In my view, green deal finance providers must not be able to price green deal finance packages based on the perceived default risk of the original occupier, given that the work done will stay with the property probably long after that household has moved on, sold up or moved to a different private rented property. It would be unfair and illogical to allow that to happen, given that there is no way of predicting the default risk of any future occupants. We cannot price with accuracy on that basis.
Barry Gardiner
I perfectly understand the hon. Gentleman’s point that the debt will be tied to the property and that the rate should be based on an average, but does he not accept that there is a very real tension between the need to persuade householders to embark on the green deal in the first place, which will happen only if they can see financial gain for themselves over the period that they propose to occupy the property, and the potential financial gain to the average family in the future? His proposal may create tension between the ability to sell the property and fairness to subsequent occupiers.
Andrew Percy
That, of course, is exactly what the golden rule is designed to protect against. My concern is that we offer residents—people living in the properties now—an equal interest rate across the whole area. We need to avoid people in more affluent areas being encouraged to take up the green deal by a lower interest rate than is offered to people in poorer areas or those perceived to be a higher credit risk, particularly tenants. There is a risk that landlords might be put off the green deal if they perceive that the cost is based on the occupancy of a particular tenant.
Barry Gardiner
The hon. Lady will remember that when the financial services regulations were introduced, banks had to declare up front whether they were providing information and advice to their customers in an independent capacity or as a tied agent for themselves. Does she agree that it is also important in terms of the green deal that people who have gained a householder’s trust and entered their home on the basis that they are providing impartial and independent advice do not, once inside the front door, switch hats and start offering advice as a tied agent of another service provider?
Caroline Lucas
I completely agree. Trust is crucial if the green deal is to be successful. We want people to be talking about it, telling their friends and neighbours how great it is; we want there to be a real buzz and momentum behind it. If there are just a couple of cases of such mis-selling, the whole process will be undermined.
I also seek to extend the same consumer protections for the repayment of a green deal loan to energy advice services or energy plans that are not specifically green deal plans. If a householder decides after the initial green deal assessment to pay for the services up front without the need for a green deal loan, they ought to be eligible for the same kinds of protection they would receive if repaying the loan in a different way. If the clause in question is left in its current form, regulations regarding protection and redress will hang not on what a consumer buys, but on how they pay for it. That is perverse. If the consumer pays up front, the protections and regulations will not cover them. Only if they take the green deal loan will they have those protections. If people are not protected until they have signed a contract, how will that help consumers during the advice and contracting stage when they may not have decided to pay for green deal services yet, let alone how to pay for them? Also, who can the consumer complain to about pressurising sales tactics if they walk away before they have signed the contract? Will consumers choose the financial option that is best for them if they have to use green deal finance to get ongoing support from the advice line and redress scheme? I hope the Minister will address those questions in summing up.
My final concern in relation to this group of amendments is about the comparability of green deal quotes. It is vital that consumers are in a position to make an informed choice about which green deal is best for them, and that could be nigh impossible if the different quotes received are hard to compare. I should like the Minister to address this by ensuring that all green deal quotes are provided in a way that makes them very easy to compare with one another, to judge and to assess.
I have detained the House for some time so I shall conclude. My final amendment in this group would give consumers the right to choose which energy bill their green deal loan repayments would be applied to. In 78% of occupied British buildings, heating and hot water are provided by natural gas, so that is the fuel most likely to be reduced after a green deal makeover. It therefore seems logical for customers’ gas bills, where possible, to carry green deal loan repayments because if the golden rule is working, their gas bills will not become more expensive after the green deal repayments have been applied. It is there that the advantage of the green deal will be most apparent to householders.
If the repayments are added to electricity bills, those electricity bills are not likely to fall so much after a green deal makeover unless a home’s space and water are heated by electricity, but far fewer homes are heated by electricity than by gas. That means that in the vast majority of cases, green deal customers will potentially have lower gas bills but higher electricity bills. That makes it harder to see whether the golden rule is working and risks undermining the central pay-as-you-save principle, as well as eroding customers’ confidence in the value of the deal. I hope the Minister will therefore consider allowing consumers to choose which bill they want their green deal payment to be applied to so that their management of the green deal is as straightforward as possible.
Barry Gardiner
I am delighted to follow my hon. Friend the Member for Brighton, Pavilion (Caroline Lucas), who has made a very informed speech about exactly the points at the heart of the measures. I, too, want to address the green deal to dig out more about the golden rule and the energy company obligation. We all agree that it is right that energy efficiency improvements should be provided at no up-front cost. That is a good thing that we all support across the House and want to see implemented. As has been pointed out, however, the loans will be provided at commercial rates through the green deal and will attach to the property, not the householder, for up to 25 years.
The golden rule has been introduced to require that all green deal loans are less than the repayment cost resulting from the installation of the measures. The qualifying energy efficiency improvements will be determined through the energy performance certificate. This means that any savings will be estimated and based on standardised use. As a result, there are no guarantees that actual savings will match or better the estimated savings, as I pointed out to the hon. Member for Brigg and Goole (Andrew Percy). The Bill’s central premise is that consumers will save more on their energy bills than they will repay in loan costs and that that will be enough to drive consumer demand. However, the Bill provides little detail about how demand for the green deal will be driven beyond that basic finance mechanism other than through the introduction of the new ECO, which will underpin the deal and subsidise properties that require energy efficiency improvements but for which the golden rule would not be met.
It is estimated that the green deal will reach more than 40 million homes by 2020 and a further 12 million by 2030. That amounts to the retrofitting of 1.7 million homes a year—that is 4,800 a day—between 2012, when the green deal starts, and 2020. The Committee on Climate Change has estimated that, between 2012 and 2022, we would need to insulate 8.3 million lofts, 5.7 million cavity walls and more than 2 million solid walls to meet the UK’s carbon budget. The Government’s expected take-up of those measures, through the green deal and the extension of the carbon emissions reduction target, misses those requirements by 3.8 million lofts and 2.7 million cavity walls.
Although I support the aspiration behind the green deal, it is difficult to see how it can be achieved under the proposals. Indeed, the Committee on Climate Change’s third progress report to Parliament concluded that the Government proposals should help to strengthen incentives for the take-up of energy efficiency measures. However, there is a significant risk that they will not adequately address the range of financial and non-financial barriers. I do not want to talk the measures down because Members on both sides want them to work, but it is important that we are realistic about their likelihood of success.
The economies of energy efficiency retrofits at today’s energy prices simply are not attractive, as my hon. Friend the Member for Brighton, Pavilion has pointed out, because of the gap between projected returns based on current energy prices and the cost of borrowing—a gap that can be met only if substantive subsidies are applied. Recent analysis by E3G has highlighted that at today’s prices and with the commercial interest rates that the Government intend to apply to green deal financing, the golden rule cannot be met on a 25-year loan. The Government have quite rightly identified that the up-front costs of improvement and access to capital are significant barriers to the uptake of energy efficiency, but we should be clear that the green deal alone will not overcome them. Without intervention to limit the cost of borrowing, consumer demand for green deal programmes could be very low indeed.
Furthermore, access to capital is not a universal problem. For those who can afford them, savings, mortgage extensions and personal loans have long been readily available to provide up-front capital for energy efficiency investments, yet they have not been used on any scale, despite the fact that many people are able to procure those borrowings at 5% or 6%, let alone at the 11% that the Government are suggesting. Financing through the green deal simply does not stack up for the rational investor, and particularly for low and middle-income households.
Let me give an example. The annual energy bill for an average household is calculated at £1,029 a year. A good whole-house retrofit would be expected to save approximately 50% on the average energy bill—in this case, just over £500 a year. Solid wall insulation was identified by the Committee on Climate Change as the main energy efficiency measure that could usefully be financed by the green deal, but according to DECC’s own analysis, the capital cost of solid wall insulation ranges between £7,600 and £12,600. Let us take the cost of £12,600 and the maximum saving of £500 a year; in fact, DECC’s analysis estimates that solid wall insulation would save only £400 a year, but I give it the extra £100. Through the green deal, if we pay back £500 a year, through the savings on the energy bill for that average house, against the £12,600 loan over 25 years, we still do not pay back the full amount. That deal fails the golden rule.
An energy company obligation is being introduced to subsidise the difference, reducing up-front costs to the point that they are less than the energy savings. The Committee on Climate Change estimates that up to £17 billion of support will be required through the ECO to insulate 2.3 million solid walls by 2022, but the Government estimate that the total ECO support will be only £1 billion. The fact that the golden rule cannot be met even before the cost of finance is factored in is a matter of huge concern.
The Government have calculated that the green deal’s financial cost will be cheaper than a market personal loan, but they concede that it could mean rates of up to 11%. At today’s energy prices, to drive demand by meeting the green deal’s golden rule, 25-year loans would need to be offered at rates of 2% or less. E3G’s recently published analysis concluded that a £15,000 loan at 0% over 25 years for changes that delivered a 50% energy saving and lifetime savings of £2,461 could meet the golden rule in year 8, but that the same loan offered at just 2% would incur losses of £1,747 over that 25-year period, whereas a similar £15,000 loan for changes that delivered just a 35% energy saving would not break even at all even with interest at 0%.
Luciana Berger
It is helpful at this point to refer to the Treasury levy cap, which has not yet been mentioned. We will not know for some time whether the Office for National Statistics will determine that the ECO should be considered in the same vein as the warm homes discount, the feed-in tariff and the renewable obligation. If it does, the ECO could be even more constricted and less than the figures that my hon. Friend is talking about.
Barry Gardiner
The shadow Minister is absolutely right that there has yet to be clarity on the issue, and clarity is vital. If we are to meet the targets that the Committee on Climate Change has set and the budgets, we must know that sufficient funds are available for the ECO to meet those targets. At present, my analysis and other analyses are quite clear that up to £22 billion is required, although an absolute cap of £1 billion might be provided under the ECO. As my hon. Friend suggests, that £1 billion might prove not to be a full £1 billion after all.
On new clause 9, the Secretary of State for Energy and Climate Change has estimated that the green deal will lead to employment in the sector increasing from 27,000 jobs currently to something approaching 250,000 jobs by 2020. That involves the creation of 27,875 jobs every year from the start of the green deal until 2020. Double the number of jobs that currently exist must be created every year. We heard earlier at Prime Minister’s Question Time about the latest unemployment figures and particularly the problems of youth unemployment. Of course, if those jobs were created, we would all welcome them, but there must be a doubt about these provisions.
In opposition, the Prime Minister called for a revolution in skills and training, so that the skills system responds far more effectively to the needs of individuals and businesses in a greener economy, but the recent green economy road map recognises the importance of that and refers to the introduction of new skills for a green economy and the grouping of sector skills councils to help businesses understand the changing skills requirement. It is crucial that that new grouping of sector skills councils supports the development of the additional 27,875 jobs every year between now and 2020. It would be of considerable interest to the House if the Minister explained what financial provision will be made to the sector skills councils to enable that sort of expansion—a tenfold expansion—to take place in the next nine years.
Gregory Barker
I should like to start by thanking the hon. Member for Brighton, Pavilion (Caroline Lucas) for tabling amendments 49 and 50 and my hon. Friends the Members for Manchester, Withington (Mr Leech) and for Brigg and Goole (Andrew Percy) for tabling amendment 28.
Amendment 49 would require that any energy efficiency services provided or products sold by green deal participants, in addition to those paid for with green deal finance, should be subject to the green deal regulatory framework. It is important to note that the green deal is an innovative form of finance agreement that is attached to the meter and therefore passes between bill payers. I think that we all understand that. So it needs specific protections, which are not necessarily relevant to those who do not take out the green deal.
I should like to assure hon. Members that we intend to require customers to be made fully aware of the difference between offers that fall under the green deal scheme, with all its specific safeguards, and those that fall outside. However, many of the forms of mis-selling that rightly concern the House can be prosecuted already under existing general consumer protection legislation. We will not accept companies using green deal accreditation as cover for less appropriate goods and services.
Amendment 50 would ensure that recommendations and estimated costs and savings are clearly and transparently communicated to the consumer as part of the green deal plan, thus enabling customers to compare offers. I should like to reassure hon. Members that we intend to require green deal providers to set out clearly how the proposed savings and costs meet the golden rule principle, as enabled by the power in clauses 4 and 5. I urge hon. Members to look specifically at clause 5.
In addition, the Consumer Credit Act 1974 will apply to domestic green deal plans in full, bar a few essential amendments, thus ensuring robust consumer protection, and it already regulates the provision of information to consumers who enter into credit arrangements.
Gregory Barker
Such people can certainly access the advice line. If people choose to pay in full and not to take finance agreements, they will not be any less covered by the accreditation of all green deal service providers and the protection and warranties that go with all green deal products. We must not forget that the green deal is not just about financial arrangements where consumer protection kicks in. We will set out in further detail in secondary legislation, which hon. Members will thoroughly scrutinise, and go to great lengths to ensure that there is a rigorous consumer protection element to the accreditation of all services that are green deal applicable. That will apply whether or not they are financed by consumer credit. Obviously, all products must be specified and approved for use under the green deal to ensure that they meet the golden rule.
Barry Gardiner
I welcome the fact that the Minister has said that customers and consumers will be protected by consumer credit legislation, and I welcome the fact that robust secondary legislation outlining further protections will be put in place. Will he tell the House at this stage whether he believes that consumers will be protected by the legislation that applies to the financial services industry so that an adviser can act either as a tied agent or as an independent agent, but not mix and match the two roles—at least not in the same consultation? If that protection is not provided by existing legislation, will he ensure that it is introduced in the secondary legislation to which he referred?
Gregory Barker
We will have to disagree on this. I understand the protections that the hon. Gentleman is trying to insert into the Bill, but I take a slightly more optimistic view of the potential both for introducing competition in the green deal process and for home improvement.
The biggest driver for take-up—and this is different from the German experience—is not concern about climate change and, surprisingly, it is not even concern about saving money on energy bills. The consumer research that our stakeholder forums have commissioned is revealing, because the majority of consumers said that the biggest factor in their taking up the green deal would be a desire to make their home nicer. That may seem counter-intuitive and surprising, given the high cost of energy, but more than half of respondents indicated that home improvement was the driving force. We need to harness that, and it is little wonder that people failed to respond to energy companies that were not in the home improvement game. They will be responsive, however to new entrants to the market such as B & Q, Marks and Spencer, John Lewis and so on, which excel in offering aspirational consumer propositions. Many people will seek to improve their house, and see no contradiction in making improvements by purchasing new wallpaper and carpets while, at the same time, undertaking energy improvements. I regard this not as an either/or conflict, but as an opportunity to ride on the back of that motivation. Rather than offering a hairshirt proposition, we should harness the inherent instincts of the British public to improve their home, and make it both nicer and warmer.
I welcome the arrival in the market of a host of new players offering additional propositions for home improvement that fall outside strict energy efficiency measures, because that will draw in more people and catch their interest, but—and it is an important but—we must ensure that the integrity of the independent assessment is upheld. We must ensure that there is no inappropriate cold calling or hard selling in the home, which is why we will thoroughly review the measures that are in place. If the evidence shows that they are not sufficient, we will introduce strong codes of practice and ensure that assessments are thoroughly independent. However, I do not share the pessimism of the hon. Member for Brent North (Barry Gardiner), or his reluctance to introduce the two measures alongside each other. As long as that is done in a thoroughly transparent and responsible way, it could be a benefit, rather than a negative.
Barry Gardiner
The Minister has said that in his view the green deal is market driven—that is a fundamental difference from the German scheme—so investment by commercial companies will propel the scheme forward. He is telling the House that, in a sense, it is driven principally by the profits that those companies will make. It is not driven by the imperative of increased energy efficiency, or by the need to meet the carbon budgets set by the Committee on Climate Change, or by the need to address fuel poverty. It is driven by the profit motive. I am willing to capture the drive that the market can bring, but the focus of the scheme, as set out by the Minister, is fundamentally wrong.
Gregory Barker
I know that the hon. Gentleman is not quite an unreconstructed, planned-economy socialist, but he is confusing means with ends. The purpose of the green deal—our starting point and our end point—is to meet our carbon budgets and fulfil our legal and statutory obligations under the Climate Change Act 2008, which was introduced with the support of Members in all parts of the House. For decades, we have singularly failed to drive effective home energy efficiency and, come to that, energy efficiency in the business and industrial sectors. Given the size of the deficit and the burden on the public purse, we are living in cloud cuckoo land if we imagine that we would drive down carbon emissions and transform home and business energy efficiency if we left the private sector untapped. We will achieve our objectives only if we harness effectively the power of the private sector. Of course, people will make profits, but provided that that is transparent and fair, I do not have a problem with it. It is called job and wealth creation, and spreading that widely. We do not have enough wealth creation in the UK—we need more—and the green deal will be an incredibly important vehicle in helping us to rebalance our economy and making us more efficient.
We should not ignore that, but it does not detract from the fact that the central aim of the legislation is to allow us to meet our stretching carbon reduction targets. The coalition is absolutely committed to doing so, and the green deal is the means to that end, so we should not confuse the two as the hon. Gentleman did.
Amendment 28, which was tabled by the hon. Member for Manchester, Withington and my hon. Friend the Member for Brigg and Goole, seeks to ensure that we have powers to place restrictions on interest rates that can be offered as part of the green deal plan. I understand the concerns that my hon. Friend the Member for Brigg and Goole articulated in his thoughtful speech, but I can assure him and other hon. Members that clause 5(1)(b) already provides the power—we accept the point that the hon. Gentleman is making—to limit interest rate structures that can be applied to green deal plans. It will not be possible to create a valid green deal plan, unless it specifically complies with the conditions contained in, or made under, clause 5.
The green deal is a market mechanism, and the golden-rule principle will create a natural incentive to drive down costs, so the Government do not intend to place restrictions on the level of interest charged. However, we are considering broader restrictions to ensure that green deal plans are equitable not just for the first but for all subsequent bill payers. This could mean limiting interest rate structures offered to domestic customers to those with the greatest likelihood of the golden rule being met in the first and subsequent years, and we will be consulting on what is quite a complicated area, not just with stakeholders in the financial services sector, but with all concerned stakeholders.
I would certainly welcome the thoughtful input from Members on both sides of the House into this important area of how we ensure we get the most competitive interest rate for the consumer. I invite my hon. Friend the Member for Brigg and Goole, the hon. Member for Manchester, Withington, and other hon. Members who have spoken in the debate and expressed legitimate concerns, to meet my officials so that we can ensure that we take notice of their concerns and take advantage of some of their ideas. I hope that I have been clear throughout proceedings on the Bill that we do not have a monopoly on the best ideas. As we develop the fine detail of the green deal, I am more than happy to work with them.
We recognise that the interest rate is only one of the drivers of affordability. We do not want unnecessarily to focus just on the interest rate. The actual cost of the products, particularly things like solid wall insulation, will be a key driver. Replacement windows are in a very exciting place. For the first time, because of technical innovation and the increased thermal value of new glazing, and because prices are coming down, we can anticipate that we will be able to include glazing in windows. Consumer-facing home improvements will come within the remit of the green deal, and make it much more attractive. The green deal will not just be about out of sight, out of mind, hidden interventions in a household, but about things that people will really value on a day-to-day basis.
Gregory Barker
I am afraid that the hon. Lady is wrong. We have a huge degree of engagement with consumer groups. All the obvious consumer groups have been involved heavily in formulating different parts of the green deal, and that work is ongoing. I have not seen the particular research she mentions, but we have certainly had involvement from Which?, Citizens Advice and Consumer Focus, as well as from sophisticated investors and institutions in the City of London. I do not expect offers to appear until October next year, and it is most unlikely that ambitious new entrants in the market will declare their hand so far in advance: they will wait to see how the market shapes up and look at their competitors before revealing their offers. That is my expectation, which is based on observing what else happens in the market, rather than on what stakeholders have said to me at DECC.
Barry Gardiner
The Minister has explained candidly that the ECO is a regressive measure that will be imposed on general utility bill payers and that it will be an additional cost for them. He has also alluded to the fact that the Government removed the cost of carbon capture and storage from those bills on coming into office. Will he give an undertaking that the additional amount he proposes to impose on bill payers through the ECO will not be greater than what he and his Government have already taken off bill payers through their previous measures? He talks of securitisation in the bond markets, but will he explain how a default rate can be estimated, given his assertion that there will be no possibility of defaulting on that part of the bill?
Gregory Barker
The default rate will be the same as the standard default rate for electricity bills generally, which is a very low percentage. It is probably higher in the present economic circumstances, but when averaged out over a decade, it is very low compared with other instances, and it will not be extrapolated out of that. On the ECO, the hon. Gentleman seems to be trying to have his cake and eat it. The bottom line is that there is no magic source of money; it all has to come from somewhere and ultimately that is the taxpayer and the consumer, who are basically the same person in this context. We have to be very responsible and we are constantly looking for ways to lighten the load for hard-pressed consumers, who are concerned about rising energy costs.
We will publish in the autumn our expectations of how DECC policies, taken together, will impact on consumers through to 2020. The results of the early work are extremely encouraging. These things must be seen in the round—one strand of policy cannot be taken out as though it was part of a Woolworths pick ’n’ mix. We have to take the energy efficiency measures, the levies and our other measures to encourage greater competition in the energy sector as a whole. We will publish that in the autumn, when I am sure the hon. Gentleman will have an opportunity to quiz the Secretary of State.
Gregory Barker
The hon. Lady makes an indisputable point. We are mindful of the mistakes made by the previous Labour Government, which resulted in a succession of levies being put on consumer bills without any thought to the long and short-term impact on the vulnerable. That is one reason why we saw such a steep rise in the number of people living in fuel poverty, which increased by millions during the last Parliament alone. It is a difficult balance to strike, and I can understand why Ministers took those decisions, because they had to find the money from somewhere. We are certainly very mindful of the point she raises, which is why, as the hon. Member for Brent North said earlier, we have taken steps to remove the levy for CCS and the renewable heat incentive levy from the bills. The Treasury will insist on clear value for money and due consideration of the impact on those who are least able to pay when we finally settle on the exact figure of the ECO, which will replace the CERT funding.
Amendment 27 tabled by the hon. Member for Brighton, Pavilion, and amendment 45 tabled by the hon. Member for Manchester, Withington, deal with the collection of green deal payments. Allowing either energy bill to be used to collect the green deal charge looks attractive. I asked the very same questions myself and got exactly the same initial response as the hon. Lady, but the devil is in the detail and close analysis reveals significant problems. Requiring gas suppliers as well as electricity suppliers to facilitate the collection of green deal charges, which seems the obvious thing to do, given that heating is the larger element, substantially increases the implementation costs.
I really pushed back on that in the early stages of policy implementation, but our findings indicate that it could increase the implementation costs by up to 50%, which would ultimately be passed on to consumers, mainly because most energy suppliers have separate gas and electricity billing systems. Introducing a choice between collection of the green deal charge via electricity or gas, however desirable—I am all in favour of greater consumer choice—would require regulating two groups of companies rather than one, which would increase the risk of implementation failure and potentially cause a delay to the launch of the green deal in autumn 2012. Auditing payment flows would also be more difficult, because there would then be two possible routes through which the funding might flow.
The idea of allowing the occupier of a property with a green deal plan to switch collection methods at any point also prompted considerable concern in the industry. It would increase the possibility of billing inaccuracies, which in extreme cases could increase disconnections, which I know we all want to avoid, as well as increase the overall risk premium and push up interest rates, which we obviously want to keep as low as possible. I will return in a minute to the issue of disconnection.
That leaves collection only by electricity or by gas; fundamentally, it comes down to an either/or situation. I agree with the hon. Member for Brighton, Pavilion that gas seems the obvious choice, but collection via gas bills would automatically exclude the possibility of billing in that way the 4.3 million households that are off the mains gas grid when they access green deal finance for energy efficiency measures. Many of those properties are in rural communities, and it is important to the coalition that the green deal be available to both rural and urban communities. In contrast, almost all properties in Great Britain are connected to the electricity grid.
The change proposed would also raise the possibility of customers paying summer gas bills that are significantly higher than those before the green deal plan was taken out, which could be very difficult for many low-income families who are prepayment customers and not used to paying large amounts on their gas bill over the summer months. Many breathe a sigh of relief as they reach spring and have that little extra give in the family budget as a result of not having constantly to load their gas prepayment meter. It would be most problematic for prepayment customers on gas, who would then be expected to carry on paying charges equally through the summer, when normally they do not.
We still have a lot more work to do to deal with the iniquity of billing, whereby people on prepayment meters and low incomes often end up paying a higher tariff, so for the foreseeable future it makes sense to ensure that the charge is levelled out across the electricity bill, where we see far fewer lumpy payments, spikes and troughs.
Barry Gardiner
Does the Minister accept that, if we are really to reduce fuel poverty, we need to place the first units on the cheapest tariff, so that those who use least energy pay least for it, instead of, as happens now, their paying most for the first bundle and paying less the more they consume? They should pay least for the smallest amount and, as they increase their consumption, pay more per unit.
Gregory Barker
I am of course familiar with that argument of rising block tariffs, but that too has unintended consequences, which often hit pensioners in particular. However, I think I would be ruled out of order if I lurched into a discussion of tariffs, which are not necessarily the subject of the amendments before us.
We are left with collection via electricity bills as the only practical solution. The Government accept that that requires measures to strengthen the cognitive link between the green deal charge and energy savings, which in many cases will be realised on the gas bill. That is why the Government plan two requirements to increase the link between the two. First, for the 14.8 million households that receive their gas and electricity from the same supplier, the Government plan to introduce a requirement on energy suppliers to provide a combined energy bill, with the charges for gas and electricity supply and the green deal charge clearly identified on the front page. Secondly, the Government will introduce a requirement for electricity suppliers to reproduce the estimated savings from the green deal assessment on the green deal customer’s annual energy statement.
On the issue of disconnection, it is important that the green deal charge is treated in the same way as normal energy bill payments, so that defaults are kept to an absolute minimum and low-cost finance can be offered. I do not expect the green deal to increase disconnection, given the protection of the golden rule principle.
Gregory Barker
As the Bill Committee and, in particular, the Chairman of the Environmental Audit Committee suggested I do, I have already met Lord Turner of Ecchinswell and the Committee on Climate Change to discuss how it might inform the guidance that the Government are preparing to help local authorities cut carbon emission in their areas. I expect that the framework and the guidance that the CCC provides will help to answer, at least in part, the hon. Lady’s question. I expect a formal proposal from the CCC shortly; when we met, Lord Turner certainly took on board how crucial it is that the Committee’s advice be completed early next year, so as to feed into the permissive guidance for local authorities being developed by the Department for Communities and Local Government.
Barry Gardiner
Will the Minister undertake to make Lord Turner’s advice available to Members who sat on the Bill Committee and, indeed, to my hon. Friend the Member for West Ham (Lyn Brown), so that we might see exactly how it will operate?
Gregory Barker
I am very happy to do so. Indeed, I am sure that Members will have further ideas on how to build up the advice that we give local authorities. Given that it will go to councils of every political party, it is important that it is seen to be thoroughly objective, so a sense of co-ownership would indeed be very helpful.
New clauses 7 and 18 and amendment 24 deal with the ECO and fuel poverty. The hon. Member for Brighton, Pavilion (Caroline Lucas), who tabled new clause 7, may recall what I said in Committee in response to a similar amendment: that the Treasury is responsible for the allocation of public funds. Putting a duty on the Secretary of State to report on potential uses of central Government revenues would, I am afraid, conflict with the Treasury’s responsibility. I assure her, however, that the Government are taking great care to ensure that their policies in the round will be up to the task of delivering our climate change and fuel poverty objectives. The ECO is a key part of this, and we will make sure that it has the right level of ambition to achieve our goals without putting an unduly heavy or inequitable burden on energy bills. On that basis, I hope that the hon. Lady will not press the amendment.
Amendment 24, tabled by the hon. Members for Liverpool, Wavertree and for Ogmore, and new clause 18, tabled by the hon. Member for Brighton, Pavilion, focus on data sharing. Although I understand the intent of the proposal, we do not need it now because the existing warm home discount scheme will provide the six major energy suppliers with the details of more than 600,000 older poorer pensioners this winter and information on thousands of further customers over each of the three subsequent years. That information will be used to provide a £120 rebate this winter to those customers, but it can also be used to provide the customers with additional advice, including information about the ECO. Additional powers for further data sharing are therefore not necessary at this time.
The forthcoming ECO consultation will report on the likely impacts of the policy, as will the accompanying impact assessment. The type of statutory duty that amendment 24 would introduce is not necessary for the purpose of showing the intended impact that the ECO will have on fuel poverty and the energy efficiency of properties. I can therefore assure the hon. Members for Liverpool, Wavertree and for Ogmore that the intentions of the amendment are already met in full.
Amendments 2 to 8, 19, 47 and 48 deal with the private rented sector provisions. These were tabled by the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith), the hon. Members for Manchester, Withington (Mr Leech), for Brighton, Pavilion, for Leeds North West (Greg Mulholland), for Foyle (Mark Durkan), for Liverpool, Wavertree and for Ogmore, and my hon. Friend the Member for Hove (Mike Weatherley). Amendments 6, 7, 19, 47 and 48 relate to timing issues, and I will consider those first, albeit briefly.
As we debated in Committee, we are providing landlords with a firm legislative position. The tenants’ energy efficiency regulations must come into force no later than 1 April 2016. Under those regulations, tenants will be able to ask for consent from their landlord to make relevant energy efficiency improvements such as those funded under the green deal or ECO, and their requests cannot be unreasonably refused. Amendments 7 and 48 propose that the regulations on tenants’ right to request should be introduced sooner, but as well as regulatory certainty, we need to provide landlords with a reasonable period in which to prepare and get up to speed with the regulations. The dates we have chosen strike a balance between pursuing greater energy efficiency benefits and giving landlords time to prepare.
I draw the House’s attention to the latest survey, published this week, which clearly shows that two thirds of landlords are keen to act and take up the green deal, and that only a relatively small minority—fewer than 20%—are dragging their feet. There are grounds to be optimistic that landlords are not resisting this agenda. We have set the dates of 2016 and, as a backstop, 2018, but I cannot reiterate strongly enough—
Barry Gardiner
On a point of order, Mr Speaker. Have you received a request from a Treasury Minister to make an urgent statement to the House about the news that the Treasury is about to sue the European Central Bank, as that is being reported in the media at the moment?
Mr Speaker
No, I have not. The hon. Gentleman is ahead of me. He has heard of information of which I have not heard. I have, however, now heard of it, and I am grateful to him.
Third Reading
Queen’s and Prince of Wales’s consent signified.