Warm Home Discount (Miscellaneous Amendments) Regulations 2021

Lord Grantchester Excerpts

Tuesday 18th May 2021 Grand Committee

[Lord Grantchester (Lab)]

I thank the Minister for a clear explanation of the regulations before the Committee. From these Benches we are happy to approve the instrument, as it extends the warm home discount for another year. As it has been a successful scheme, what is there that we could not welcome in the extension for at least a further year, with a government commitment to continuing the scheme until 2026, albeit that new arrangements, with details and provisions as yet unknown, are envisaged to come into place from that point?

The scheme, now in its 11th year, will continue to provide a guaranteed £140 for to help those in fuel poverty and in vulnerable circumstances with their fuel bills. Before I challenge any assumptions or possible intentions of the Government in shaping the future scheme, let us recognise that these regulations maintain existing benefits with minor improvements in some respects. They maintain the overriding approach agreed by participants in the consultation: to allow as many eligible consumers as possible to receive support within the funding envelope. That this funding envelope has been increased to £354 million—the noble Baroness, Lady McIntosh, has a higher figure—in line with the rises in inflation is another important benefit. The regulations maintain the current £6 billion total debt write-off cap provision, while introducing a £2,000 cap for individual debt write-off—although how far that is used to write off historic bad debt from previous versions of the scheme with unfortunate outcomes is one for specific case-by-case analysis.

Nevertheless, I have some questions around this individual cap. How many individual cases of bad debt have been eliminated and from what total? Was there evidence of disparity in higher bands of debt across any analysis of banding debts with the number of individual cases? It would be interesting to understand whether the element of previous and new bad debts was being eliminated, with the stress for many vulnerable customers recognised and dealt with realistically. Further recognition can be given to the improvements in these regulations, removing restrictions on energy suppliers that prevented them providing additional financial assistance through industry initiatives to domestic consumers eligible in the core and broader groups—with rebates, advice and specified activities, including benefits for smart meters and consumer protection requirements for boiler installations to be provided under the TrustMark scheme.

It is also encouraging that the regulations include provisions such that when a voluntary or compulsory smaller electricity supplier grows to pass the relevant supplier threshold and becomes a larger energy supplier its core group rebates, undelivered previously, are utilised consistently with the fully obligated suppliers and that all funds for rebates are used to help those in need. However, some benefits and improvements, unfortunately, still need consideration and further development.

For example, when a supplier fails and its licence is revoked, the scheme’s obligations on that licence also fall, meaning that there is no obligation on whoever steps in as a supplier of last resort—or SoLR. If I understand the regulations correctly, if they had included provision that whoever this might be could deduct such a technical overspend from future scheme years, they could incentivise any supplier of last resort to take on the spending obligations of failed suppliers voluntarily. The provision would bring greater consistency with that regarding suppliers whose growth is allowed for, as I have mentioned. The scheme would be further improved. Can the Minister say whether I have this correct and see whether it could be addressed in future years?

It was also unfortunate that a consultation proved negative towards the proposal that supplier participation thresholds should be changed. While respecting the view that, given the pandemic and the disruptions it has caused throughout 2020, the main elements of the scheme should remain consistent in this one-year extension, it causes competitive issues and distortions. Some smaller energy suppliers can offer lower tariffs as they do not have to take part in a scheme. There are also consumer issues; a consumer may switch to a smaller supplier on price and then lose the benefit that he or she could be entitled to and receive with a larger supplier. Does the Minister have any figures or evidence on this latent cost?

The consultation also adjudges as unimplementable the proposal to require failing suppliers to provide data on unpaid rebates and industry initiative spending to TrustMark, to integrate it with its framework operating requirements. This can be extremely frustrating for participating consumers who miss out through no fault of their own. While we understand the practicality of the measures and the direction of travel for future regulations, will the Minister take the issue back to the department and can further consideration be given for future developments?

Many operability improvements also included in the measure could well be mentioned. All these measures will come with compliance costs and administrative burdens, which impacted businesses can recover under the scheme through charges to domestic consumers. The impact on the public sector is also discussed as very small—around £2 million for scheme year 11, in a total estimated cost of £10 million. However, the impact assessment fails to examine the added cost that will be passed on to consumers by energy suppliers. Can the Minister provide any details on the measure’s effect on consumer pricing? What is the status quo cost of the discount scheme on pricing and what may be the added cost specific to this extension?

I would like the Minister to address some other serious issues. The Energy White Paper of 2020 sets out the commitment to make and keep energy bills affordable, and to ensure that households in fuel poverty are not left behind in upgrading energy efficiency ratings on their homes, with the long-term reductions in energy costs this would bring.

One feature of the regulations is that they categorise one-off energy rebates to many vulnerable households as improvements in energy efficiency and progress towards reaching statutory energy efficiency targets. However, as has been stated by other contributors to this debate, rebates are not necessarily delivering lasting benefits in the same way as would be provided by energy efficiency improvements. The sustainable warmth part of the warm home scheme can mask a lack of progress on increasing levels of domestic energy efficiency in fuel-poor homes. The future design of the scheme must correct this interpretation. It is regretted that the green homes grant was such a dismal failure and had to be scrapped merely six months after its launch.

How will the Government align the warm home discount scheme with their legal commitment to net zero? What plans do they have to address the urgent problem of below EPC standard band C homes, especially those of the fuel poor with generally less available income? What is the Government’s view of Scotland’s wider interpretation of the 10% indicator in assessing fuel poverty? What are their plans and what thoughts do they have on reassessing and redesigning the scheme?

The Minister said in her introductory remarks that 1.2 million households received the £140 rebate. How many do the Government expect to receive the rebate in the next year? What will success look like to the Government in addressing the route to eliminating fuel poverty by 2035? What measures will the Government put in place to ensure that net zero is delivered fairly to those living in fuel poverty? When will the promised consultation start and when will the Government lay out their proposals?

Already there are concerns when the Government talk of refining the scheme towards better targeting of the fuel poor when the budget was already constrained from providing better financial assistance to more households that already miss out on their entitlements. This inevitably means that there will be some losers and that some households will receive less help than they currently do. Can the Minister confirm that industry initiatives will remain a key part of the current and future schemes? Will the department look at how the budget could be expanded for this element that seeks to help consumers understand and utilise their entitlements? It would provide a welcome boost of confidence to the industry to develop these initiatives.

There is much here for further consideration in my approval of the continuation of the warm home discount scheme.