Warm Home Discount

Lord Hunt of Kings Heath Excerpts

Monday 3rd March 2025 Lords Chamber

[Earl Russell (LD)]

My Lords, I welcome this Statement—in particular, the clear commitment to provide a one-off payment for next winter. These payments will help with continued rising household energy costs, as the energy price cap has risen again by 6.4%. Until we break our dependence on gas for 30% to 40% of our electricity generation and 85% of our home heating, we will remain at the mercy of the volatile international markets.

Indeed, households are set to pay over £800 more per year for their energy compared with the winter of 2020-21—a 77% increase. The UK has spent £140 billion on the international gas market since the war in Ukraine started, for no long-term energy security or reduction in the energy bills being paid. That is 10 times the total GB Energy budget to date.

We have 6 million households living in fuel poverty today, and most of them have been for some time. We have some of the worst-insulated homes in Europe and some of the highest energy bills. High energy bills are a continued legacy issue and are, in part, a direct result of the last Government’s failure to do more to transition to renewable energy earlier. Progress is being made on the transition and we welcome this.

The Climate Change Committee is absolutely clear and unequivocal. Politicians who oppose action on net zero will make their constituents poorer by driving up their energy bills. Although we welcome these measures, we ask the Minister to go further and introduce this much-needed help now, to provide help for those who need it now, and not to make people wait until next winter.

We also call on the Government to scrap the energy price hike for the nearly 10 million pensioners who lost their winter fuel payment and to provide more help to other vulnerable groups, particularly those with disabilities. The estimated cost is about £130 million. We also call on the Government to ensure that all energy companies sign up to a single social tariff as soon as possible, to provide a long-term, stable mechanism for helping to reduce fuel poverty.

We need to do more to smooth the energy price costs as we drive over the energy transition speed bump in the road ahead. We have constantly called for an emergency 10-year home insulation programme. Domestic home heating is still 77% gas powered. We need a huge and urgent increase in the number of heat pumps installed.

Finally, I want to ask about long-term reforms and for some clarity on the direction of travel on measures to reduce our energy bills, and in particular about electricity market reform, which feels like an idea whose time has come. Does the Minister agree? When can we expect progress?

Our electricity prices are linked to the global fossil fuel market. Natural gas prices thus set the UK market electricity price. Will this Government look at the option for decoupling electricity market structures so that we have one rate for gas and one for electricity? Is it not time to stop the artificial inflation of the price of our home-generated renewable electricity, so that the savings can be passed on to our bill payers?

Will the Government publish reports on these matters? Will they also look at reforming contracts for difference?

I am disappointed that we do not have consensus on climate change, but my hope is that we could have consensus on electricity market reform as a measure to save bill payers money.

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, I thank noble Lords for their comments on the Statement on the warm home discount. The noble Lord, Lord Offord, is right, of course, that this comes as there is an increase in the energy price cap. In a sense, we are repeating the debates we have had over the last few months.

The noble Lord, Lord Offord, talked about the Government having an ideology. But it is not an ideology; it is about the stark facts of climate change, the impact it will have on us and the lessons we learn from the Russian invasion of Ukraine and the impact that has had on our energy security.

We believe that the way to proceed is to move to home-grown clean energy as soon as possible. It is interesting to see the change in stance of the Opposition. After all, it was the noble Lord’s party that took through legislation enshrining net zero by 2050. There is the work of the noble Lord, Lord Deben, who chaired the Climate Change Committee for some 10 years with great distinction, the work the then Government did on COP 26 in Glasgow, and the growth in the green economy over the past few years. It is a pity that we seem to have lost that consensus.

The noble Lord will know that Governments never speculate on future energy prices, but we have said that we are determined to cut bills as far and as fast as we can and that a figure of up to £300 by 2030 remains our objective. On levies, of course, policy costs associated with bills are expected to increase over time and clearly, the last Government used levies extensively, but as low-carbon capacity expands—renewables, CCUS, nuclear-hydrogen—those costs will drive reductions in electricity wholesale prices. It is worth reflecting on the advice we have just received from the Committee on Climate Change on the seventh carbon budget, because that makes a similar point: although there are some initial clear up-front investment costs, in time the benefits of having cheap renewable energy will come to the fore in terms of the costs that have to be borne by the consumer and by businesses.

I very much agree with the noble Earl, Lord Russell, on the net zero policies that need to be taken forward. He is absolutely right about the challenge we face with our housing stock, and the requirement to do everything we can to help transform it. He will know that we have the Warm Homes Plan. We have already kick-started delivery of it with an initial £3.4 billion over the next three years towards heat decarbonisation and household energy efficiency. We published a consultation in February this year on improving the energy performance of privately rented homes, and we have announced a raft of policies to support heat pump uptake. However, there is a long way to go, and it represents a major challenge.

On a social tariff, we are working closely with other government departments to unlock data that will enable us to target support more effectively to those who need help with their energy bills. My honourable friend the Minister for Energy Consumers is leading a working group with Energy UK and other stakeholders to see how we can take further sustained action on improving the affordability and accessibility of energy.

On energy market reform, the noble Earl’s point is well taken. We are launching a comprehensive review of the energy regulator Ofgem. We want to establish Ofgem as a strong consumer champion, driving up standards for households and business consumers, both now and as energy use evolves with smart and green technology. That should not be taken as criticism of Ofgem; it is more that we see future potential to develop Ofgem’s role.

On reform of the market more generally, we are considering two key reform options to enhance the efficiency of the electricity market by strengthening locational price signals better to match supply and demand—either a reformed national pricing model, or zonal pricing. This work is being undertaken. I take the noble Earl’s point about the relationship between electricity and gas, and we are looking at that issue too. On the overall position of price to business/price to consumers, in the long run, we must charge on with our aim to get clean power as quickly as we possibly can. That is the way to get long-term stability.

[Baroness Young of Old Scone (Lab)]

My Lords, I welcome the Statement about the measures that the Government are taking to help hard-pressed families keep warm and to alleviate fuel poverty.

I want to make just two points. On the electricity market reform, I would press the point made by the noble Earl, Lord Russell. Governments have been talking about electricity market reform for over two years now. The link with the gas market has become so dysfunctional that I must press the Minister for some urgency on this.

I would also like to raise a question on an area that is not covered by the Statement but is a vital part of ensuring that people do not remain in fuel poverty: new-build homes. We are going to build a considerable number of new-build homes, and the future homes standard 2025 is about to be introduced on a serial basis, but it rather misses the opportunity of going further. All new homes should not just have heat pumps and improved ventilation and insulation but should come fully equipped with solar panels, a battery wall and an electric vehicle charger.

Putting those in at the beginning may mean a small increase in a house price but trying to retrofit them immediately afterwards means a big sum for many households. Can the Minister give us some assurances about pressing the pace on electricity market reform and geeing up the future homes standard?

I advise the Minister not to be upset when the volume housebuilders make a song and dance about this. They made a huge song and dance in the middle of the last decade about energy-efficient and zero-carbon homes. The Government seemed to be about to ignore that and the housebuilders got on with getting ready for zero-carbon homes, but then, at the last minute, George Osborne pulled the rug out from underneath that. This Government can, perhaps, do rather better at facing up to the reality of needing these homes built to the highest possible standards.

[Lord Hunt of Kings Heath (Lab)]

My Lords, those two points from my noble friend are well made. On what is, in essence, mandation in relation to new homes, these points have been strongly put to my department. We are still in discussions across Whitehall in that regard, but I very much take and understand the point that she raises.

In relation to energy market reform, my noble friend urges me and my colleagues to get a move on. Our publication in the autumn has made significant progress in helping us to narrow down how reformed national and zonal pricing could be designed and implemented. We are working with stakeholders on the impact of these reforms. Clearly, they are pretty significant, but we are not delaying this. We have not put this into the long grass; we understand the importance of it.