Energy Company Obligation

Lilian Greenwood Excerpts

Tuesday 11th March 2014 Westminster Hall

[Lilian Greenwood (Nottingham South) (Lab)]

It is a pleasure to serve under your chairmanship for the first time, Ms Dorries.

I am pleased to have secured this debate on an issue that is affecting literally thousands of my constituents and, I know, many more thousands of people in constituencies up and down the country. The debate is timely because last week the Government finally published their consultation document on the future of the energy company obligation.

I do not intend to focus on the Government’s impact assessment, because I want to speak about the effect that changes to the energy company obligation are having on my constituents in Nottingham South right now—constituents such as Ilona, one of the people in fuel poverty that the energy company obligation was designed to help.

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[Nadine Dorries (in the Chair)]

The debate will now finish at 4.26 pm. That means that we will start the wind-ups at 4.5 pm, if that is okay, which gives everyone else an indication of how long they have to speak.

I call Lilian Greenwood to speak.

[Lilian Greenwood]

Thank you, Ms Dorries for calling me to speak.

I was speaking about my constituent, Ilona. She lives on the Wollaton Park estate in one of the 500 “white bungalows”, or Crane Composite houses, that were built in the 1920s by the Nottingham Corporation as part of a bold experiment in new building techniques. The bungalows are specially constructed, with steel frames and pre-cast concrete walls. They are really distinctive and are now part of a conservation area. However, they are cold and hard to heat.

Ilona suffers from fibromyalgia and chronic sinusitis, and she desperately needs a warm house; what she has is a cold and damp house with terrible mould problems. Her landlord, Nottingham City Homes, says that the only way to make her house really warm is solid wall insulation. Since the changes to the energy company obligation, that possibility has become more distant.

Kate lives about a mile away from Ilona on the Lenton Abbey estate, which was built by the council in the late 1920s. The 900 houses on the estate are of conventional brick construction. However, as was normal practice at that time, they were built with solid walls, so there are no cavities that can be insulated. About 500 of the houses are now privately owned, with about one fifth rented out. Kate says that since NCH fitted new doors—front and back—to her house, it has been noticeably warmer. However, her house is still cold and difficult to heat, and she worries about her bills. Lenton Abbey is one of the neighbourhoods that NCH had prioritised for energy efficiency measures under its greener housing scheme. However, the changes to the ECO mean that acting on those plans may now be years away.

Ennis is in his 80s. He lives across the River Trent in Clifton. The local claim that the Clifton estate was once the largest council estate in the country may be open to question, but there is no doubt that Clifton is a large example of the post-war drive to build. It is said that the Wimpey “no-fines” construction method of concrete walls allowed for a construction rate of 30 homes per week. Unfortunately, despite the fact this design type was popular across the country, the resulting homes are poorly insulated. NCH manages more than 1,200 of these properties in Clifton, but there are more than 3,500 similar privately owned former council homes whose residents exercised their right to buy but now face the same problems as Ennis—cold, damp homes and high fuel bills.

Ennis has seen his neighbours on the Clifton estate benefit from solid wall insulation, thanks to Nottingham’s pilot greener housing scheme, which was launched in the north of the estate last September. He has heard what a difference insulation has made to his neighbours’ bills, and how warm and cosy their houses now feel. He has also seen how good the insulation looks, as hundreds of tenants and owner-occupiers alike have taken up the offer of solid wall insulation provided by the scheme during the past six months.

Sadly, for Ennis the future is uncertain, because he lives in the first street in the southern half of the Clifton estate. The scheme was due to launch there in January, until the changes to the ECO that were announced in December allowed the funder—British Gas—to pull out, leaving Ennis and thousands more Clifton South residents to look enviously at their neighbours’ homes when they walk down the street.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

I commend my hon. Friend’s campaigning on this issue, which has clearly affected her constituents. My constituents in the Candle Meadow area have encountered similar stories, with some residents getting this insulation for free, but because of the Government’s changes, all of a sudden, other neighbours not getting it. This is incredible unfairness, which can be seen from house to house—those who have and have not benefited. I fully support my hon. Friend’s argument.

[Lilian Greenwood]

My hon. Friend is right. Clifton is the largest scheme in Nottingham, but Candle Meadow is equally important, albeit of a different property type.

Ilona, Kate and Ennis are just three of my constituents whose homes need to be made more energy efficient, but there are more than 20,000 solid wall, hard-to-treat properties in Nottingham and our city is not untypical of the position throughout the UK, which has more than 7.6 million uninsulated solid wall homes.

Nottingham council is committed to improving the quality of its housing stock and tackling the fuel poverty that affects more than one in seven households in our city. It has long understood that improving council homes has wider positive social impacts. I have spoken before in this Chamber about the council’s decent homes programme, known locally as Secure Warm Modern, which began in 2008 and which, when complete, will have delivered double-glazed windows, loft and cavity wall insulation and new boilers to more than 20,000 council properties.

A joint impact study by Nottingham City Homes and Nottingham Trent university’s business school found that improvements to the physical condition of properties led to improved outcomes for tenants and better security, health and comfort, and that it also impacted on the wider community, by reducing carbon emissions, providing employment opportunities and improving neighbourhoods. It was as a result of working with Nottingham City Homes to secure funding for the completion of decent homes that I began to understand the challenges involved in tackling our city’s hard-to-treat solid wall houses.

I first raised these issues with the Minister in July 2012, explaining that Nottingham City Homes could use the decent homes funding to lever in additional benefits from the green deal’s energy company obligation, if there was more certainty about funding.

[Graham Stringer (Blackley and Broughton) (Lab)]

My hon. Friend is making a cogent, coherent case for her constituents. Is she aware that only 4% of the money spent until October last year, for the country as a whole, had gone on solid wall insulation and that the worst cases of fuel poverty and coldness often exist in homes with solid walls?

[Lilian Greenwood]

My hon. Friend is right. Solid wall homes are associated with fuel poverty. Of course, they are more difficult to deal with, which is specifically why measures were needed to help tackle those hard-to-treat homes, when many councils, my own included, had done the easier work on lofts and cavity walls.

[Huw Irranca-Davies (Ogmore) (Lab)]

I compliment my hon. Friend on the case that she is making on behalf of her constituents, but will she acknowledge that, although solid wall external insulation is critical for some of the older housing stock in our urban and peri-urban areas, it is also critically important for our rural areas, where there is a predominance of solid wall homes, and that often elderly and vulnerable individuals feel now that it is much more difficult to obtain solid wall external insulation?

[Lilian Greenwood]

My hon. Friend has probably, like me, received a briefing from Calor, which has expressed particular concern about the impact in rural, off-grid locations.

In the Minister’s reply in July 2012, he praised Nottingham for its “progressive agenda” and looked forward to visiting the city in the near future to drive that agenda forward. In the event he did not visit, but he did meet me, along with representatives from Nottingham City Homes, to discuss our ideas and experiences to date. Following those positive and challenging discussions, a joint approach was developed between the city council, Nottingham City Homes and local energy efficiency charity, Nottingham Energy Partnership. They drew up the Nottingham energy saving neighbourhoods proposal, a detailed plan to maximise the insulation work on hard-to-treat homes, promote the green deal and spread benefits to private homes as well as social housing, beginning on the Clifton estate, but with the aim of transforming energy efficiency across more than 20 Nottingham neighbourhoods with hard-to-treat houses.

We were delighted to welcome the Energy Secretary to Nottingham last spring to see how the neighbourhood model had been developed and the potential for future works. He visited the Bulwell Hall super warm zone, where solid wall insulation had been rolled out to 350 council and 352 private homes. That project helped identify the factors for success that were incorporated into the energy saving neighbourhoods proposal: a large-scale project attracting funding from an energy company; the role of NCH as a trusted intermediary for council tenants, overseeing resident liaison and ensuring quality; the key role of Nottingham Energy Partnership, a local trusted and independent organisation, in contacting every private owner and facilitating private resident engagement; and support from the city council’s planning department in developing an attractive insulation solution to suit the area. It also demonstrated the potential to support Nottingham’s local jobs plan, employing more than 200 people and supporting local employment and the development of the solid wall insulation industry.

Responding to Nottingham’s energy saving neighbourhoods proposal, the Minister wrote:

“I was delighted to see the ambitious proposals you have developed to deliver the Green Deal across Nottingham, in particular your plans for a neighbourhood wide approach fits our vision for the delivery of the Green Deal.”

Although we were unable to persuade the Minister to provide financial support for the energy saving neighbourhoods proposal, when the Department launched its green deal communities fund the following July, we were delighted to see the similarities to our plan. It seemed clear that in Nottingham we were already pursuing precisely the sort of innovative, cross-tenure, area-based approach Ministers were looking for.

The scheme was launched in Clifton in September last year under the branding, Nottingham Greener HousiNG, and was an immediate success. As I explained in last Monday’s estimates day debate, the scheme offered external wall insulation at an affordable fixed price based on property type, so private residents paid a contribution of between £1,000 and £1,300 depending on whether they lived in a bungalow, mid-terrace, end-terrace or semi-detached house. Most residents chose to fund their contribution using savings or via informal help from family and 10% took up the option of a loan from Nottingham Credit Union, which was low cost and could be repaid early without incurring a penalty. None chose to utilise green deal finance, even though the option was set out alongside others available.

The remainder of the cost—around 85%—was funded by British Gas as part of its energy company obligation. The insulation works were rolled out street by street across the Clifton housing estate, to council properties and privately owned homes alike. As residents saw their estate being transformed and heard neighbours describe their warm homes and lower bills, demand continued to grow. Within weeks, hundreds of residents had signed up and by the end of November more than 90% of council tenants had agreed to have the work done and there was 65% take-up in the private sector, with more than 1,000 private residents or landlords having signed up and paid their contribution towards getting the work done.

The feedback from residents was overwhelming. People told me that their homes were warm for the first time ever and that they were saving money and were excited about the improved appearance of the estate. Those signed up were impatient for work to start on their homes.

The Energy Secretary’s statement on 2 December prompted high anxiety in Clifton, and that anxiety turned to despair when British Gas used the opportunity of the Government’s policy change to pull out of the Clifton scheme. Last week, the other Energy Minister, the right hon. Member for Sevenoaks (Michael Fallon), responding to the debate, said that I had “suggested” that our Clifton scheme was

“a victim of the changes taking place in the ECO arrangements.”—[Official Report, 3 March 2014; Vol. 576, c. 722.]

I did not suggest it, I quoted the statement from British Gas in which it said,

“In light of the Government’s proposed changes to the ECO, it was necessary for us to review our current ECO contracts. These changes mean we can no longer fund some projects and unfortunately this is the case with our planned programme with VolkerLaser and Nottingham City Homes”.

It could not be clearer. The Minister’s Government’s ECO changes have led to the collapse of our energy efficiency scheme. As a direct result of his policy shift, hundreds of my constituents in Clifton who have paid for solid wall insulation do not know whether they will get it.

[The Minister of State, Department of Energy and Climate Change (Gregory Barker)]

I will respond fully in my closing remarks, but I do not want the hon. Lady to scare or alarm her constituents unnecessarily. I spoke yesterday to the chief executive of Nottingham city council, and we are working closely with Nottingham on a new bid for our green deal communities. Although I cannot announce the result of that bid for our green deal communities fund, Nottingham has made a robust proposal that aims to deliver hundreds of measures, if not more than 1,000 measures, of the type the hon. Lady describes in south Clifton. Far from being dead and over, the south Clifton scheme has every reason to be optimistic.

[Lilian Greenwood]

I thank the Minister for his intervention. Unfortunately, my constituents are both scared and alarmed. They will, however, welcome his indication that there is hope for the scheme in south Clifton. There are many more people across Nottingham South who do not know if or when they will get the help they need with their fuel bills. They continue to live in cold homes that affect their health and the health of their children.

[Huw Irranca-Davies]

My hon. Friend is being generous in giving way. In answer to the Minister’s intervention, it is not only householders who are concerned. I have met companies in the midlands and elsewhere that have said that, because of the changes, they are rethinking where they invest and what they prioritise. Although the Minister’s announcement might be very welcome, there is now a hiatus, which is a classic symptom of the Government’s policies—they are having to rejig their thinking to catch up with a misfortune of their own making.

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[Lilian Greenwood]

My hon. Friend is right. I will address the impact on employment and on businesses in due course. Nottingham will, unfortunately, continue to experience excess winter deaths and excess winter admissions to hospital as a result of cold housing. As he says, hundreds of people employed in our greener housing project are at risk of redundancy, and some have already lost their jobs. New apprentices who are looking forward to long careers installing insulation face, at best, uncertainty about their future. The young people who had completed their initial training and were due to start year-long apprenticeships leading to national vocational qualifications are now back in the dole queue.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

My hon. Friend is making an important point. We all accept that programmes need to be fine-tuned from time to time, which is inevitable with any Government programme, but we have been told that more than 600,000 fewer properties will be dealt with under the hard-to-treat cavity wall insulation scheme. Apart from the impact on the people living in the houses concerned, taking away 609,000 properties will obviously have a major impact on businesses.

[Lilian Greenwood]

My hon. Friend is right. It gives me no pleasure to tell the Minister that those are the effects of his changes to the energy company obligation. Right now in Clifton, the contractor VolkerLaser is working at an incredible pace to try to complete work for all those residents who have signed up and paid their contribution, but the 9 April deadline, when British Gas funding ends, is fast approaching. The Minister knows that. He met me and colleagues from Nottingham on 22 January to discuss the crisis we face. He promised to raise the matter with the chairman of Centrica, British Gas’s parent company. Can he tell us today whether he has held those discussions? If so, what was the outcome?

I also wrote to British Gas following our meeting to ask it to consider a grace period for private customers who have suffered financially, thereby allowing their properties to be completed beyond the 90-day notice period. In his reply, Chris Weston, the managing director of British Gas, said

“we cannot commit to an extension of the termination period”.

Does the Minister agree that those residents who have signed up and paid should have their contracts honoured? If British Gas will not provide that funding, is he prepared to step in to honour that commitment and ensure that my constituents receive the work for which they have paid at the price they expected?

The Minister also said in our meeting that Nottingham city council should amend its bid to the green deal communities fund, which has been increased to £80 million, and we followed his advice. As I anticipated, we have not yet had success, but I remain hopeful after his earlier comments. Can he say when the next tranche of green deal communities funding is expected to be announced?

When the Minister met us, he also suggested that the Government’s announced increase in green deal cashback might help to fill the gap left by the reduction in ECO funding. A few weeks later we learned that green deal cashback could no longer be used alongside ECO. I simply ask the Minister how we can plan for the future and work with him to deliver the energy efficiency measures that our constituents need, and that we all want to see, without some certainty on the policy and funding framework within which we are operating.

The Clifton scheme, which we believe is the largest area-based approach so far, has enabled Nottingham city council to learn valuable lessons about what works. Councillor Alan Clark, the portfolio holder for energy and sustainability, has led the city’s work, and he concludes that, to be successful, a scheme needs to: address the issue on an area-by-area basis; apply to all tenures equally; pay for green deal assessments, avoiding risk and up-front costs for households; identify a fixed price for works to bring certainty to residents; engage specialist contractors of the highest quality; and engage local councils as a trusted broker. Above all, there must be a stable national policy and funding regime.

Phil Angus, the manager of Nottingham Energy Partnership, puts it more bluntly,

“the Government’s stop start approach to funding policy is sending businesses to the wall along with hard working families left in the lurch”.

He illustrates the point with reference to a typical Clifton property for which the funding support available has changed, or is due to change, every few months as a result of policy changes since last December.

Ahead of the green deal’s launch last year, the Minister described it as

“the most transformational energy efficiency programme that this country has ever seen—a programme that is built for the long term.”—[Official Report, 16 January 2013; Vol. 556, c. 983.]

Clearly, as my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) said, any scheme has to be reviewed and revised in light of experience but, as Phil Angus says:

“How is any small business connected to domestic energy efficiency services supposed to plan ahead and maintain consistency with customers, supplier and workforce…is this Government on the side of business?”

VolkerLaser, the contractor that has been delivering the solid wall insulation in Clifton, surely has to conclude that the answer to that question is no. Here is what managing director Mike Weaver had to say about the effect of changes to the energy company obligation:

“The recent events…and the uncertainty in the market have had, and will continue to have a devastating effect on the VolkerLaser business. We have had to suspend our forward apprenticeship scheme and staff recruitment programme, denying up to 50 young people the chance to get ‘a start’ in this industry.

The whole business has a cloud of insecurity hanging over it and for a Managing Director who started this business over 20 years ago this is particularly distressing. VolkerLaser prides itself on retaining good staff, with a large number of long serving employees enjoying their 20th year alongside me. It is now impossible to map out our employees’ future and it is inevitable that if current conditions persist, there will have to be redundancies.

Due to the collapse of the funding market it is now extremely difficult to plan a future order book. The proposed changes to ECO have swung the market so much in the favour of the energy retailers that even if funding becomes available, it will come with onerous conditions which will place enormous risk on contractors and clients alike.

No one in this industry believes they are owed a living, but it would be good for once to operate on a level playing field. Our staff and the residents of Clifton need some security and some reassurance that ECO is not just another flash in the pan. Or, to put it bluntly, yet another initiative the government asks thousands of people to spend millions of pounds gearing up for, only to see it decimated in one fell swoop.

The impact of the proposed changes to ECO, and in particular the 100,000 solid wall minima, will be significant and will undo all of the good work the partnership has achieved to date. 42% of the staff on the Clifton Greener HousiNG initiative are residents of Nottingham; ten apprentices have been inducted so far and are now working towards a nationally recognised qualification; and countless sustainable job opportunities have been created with local SMEs.

With a doubling of the minima to 200,000 measures (or 8 million tonnes equivalent) thousands more residents will be guaranteed a reduction in their fuel bills and be afforded the opportunity to live in warm and energy efficient homes. With the certainty of funding going forward, more and more employment opportunities and apprenticeships would be generated for the benefit of Clifton residents and the local economy.”

I do not doubt that the Minister wishes to see more energy efficient homes; what I doubt are the policies and funding support he has put in place to deliver on that aspiration. He says that the ECO will lead to insulation of at least 25,000 solid wall properties a year, but at that rate it will take 304 years to complete the task. Although he ramps up green deal cashback to persuade people that they want to take up energy efficiency measures, his funding changes are denying energy efficiency measures to my constituents who desperately want them. That simply is not good enough.

As Sally Longford, one of Ilona’s local councillors in Nottingham, says:

“Many of my elderly residents living in the Wollaton Park estate cannot keep warm without paying ridiculous amounts to the energy companies. Even then cold patches on the walls attract condensation and mould, they deserve better.”

She is right. What hope can the Minister give me that they will get it?

[Nadine Dorries (in the Chair)]

Order. At the moment there are about eight minutes each for those who want to speak.

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[Gregory Barker]

No; I obviously did not explain this properly. What I am saying is that we could not do the whole lot, the 7 million or so—I think that that is the figure, off the top of my head—properties that need to be done at this price, so what we are doing, as we work with other technologies, is getting the market going, using the green deal communities subsidy and the cashback that we have announced to jump-start the market and to fund the amount that we judge we can afford. That is in order to get the market working and to bring forward innovation; and as the market gets going, so we will see the price come down. We should use Government policy as a lever to drive down the cost, just as we have used Government policy in support of feed-in-tariff technologies as a means of driving down cost; and as costs come down, that should not be passed across in inflated profits to installers. It should come across in benefits to consumers, whether they are bill payers or people who are purchasing the technology. That is at the heart of the green deal.

We are trying to move away from the model that was used under Labour, in which there was 100% subsidy. Basically, what that meant was a glorified lottery. Millions of homes were substandard, and each year a lucky few thousand would win the lottery of insulation and get every single measure fully funded. I do not begrudge those home owners or people in the rented sector who had their homes upgraded, but that is not the fairest way of doing it. Yes, there are those who are fuel-poor who will never be able to make a meaningful contribution. We must accept that, but most people who fall into this category are capable of making a meaningful contribution to something that will add considerably to the value of their home.

[Lilian Greenwood]

My constituents back in Nottingham who are listening to these comments will probably be shouting at their radios and televisions. They will say to the Minister, “We are making a contribution to the cost of getting our homes insulated and we are precisely the sort of hard-working families that the Minister talks about.” They might feel somewhat let down by the sort of comments that he is making.

[Gregory Barker]

No. I refer back to my earlier comments: I think that there are grounds for optimism for the hon. Lady’s constituents. She is right: we have had to bear down on the cost of delivering ECO. However, we have put in place other measures, which will allow schemes such as that in Nottingham to go forward. We have already announced—