Warm Home Discount (England and Wales) Regulations 2022

Lord Lennie Excerpts

Monday 20th June 2022 Grand Committee

[Lord Teverson (LD)]

My Lords, it is a great pleasure to follow both the noble Baroness and the noble Lord, who asked excellent questions, particular the question about park homes. There are some 85,000 residents in park homes in this country, and they do not always have the sort of landlords we would like them to have. They are a big issue generally.

Although I welcome this secondary legislation in principle, it is worth noting that this is a reflection of a policy failure over decades, in that we have such a requirement to help people with energy bills because our housing stock is nowhere near the standard it should be. All this, including the £15 billion being spent by the Treasury on the cost of living, specifically around energy issues, is about standing still rather than investing in the future. I know the Minister will say that the Government are investing, but it is a trickle in comparison to what we need. Past Governments have been equally bad at resolving that. This is a symptom of a policy failure over decades in this country.

I shall ask a couple of technical questions on this and will then come on to one or two other things. The figure that rather shocked me—it may be because I misunderstand it—is in paragraph 7.2 on page 3 of the Explanatory Memorandum:

“The Impact Assessment models an improvement to the fuel poverty targeting rate of the scheme from 39% to 47%.”


Does that mean we have moved getting it wrong to 61% from to 53%? I would like to understand that. I remember going through these statutory instruments for Governments, and I understand the problem of trying to target these things correctly and that somehow the statistics or working with data from other departments does not work. But it is worth understanding whether that figure is what I understand it to be and how we improve that for the future because, my goodness, if that is it, we certainly need to improve it.

The next page refers to an algorithm that there were the largest concerns about. We all know the problem with algorithms. They can be great things but, as the Department for Education found out on A-level results, they can be disastrous. I am interested to understand what that issue was and whether it was resolved or was altered in the final prospectus.

Like the noble Lord, Lord Best, what I do not understand—the Minister will forgive me if I have missed it—is how private renters get their money back from prepaid meters. It seems straightforward when the core group are just paid the electricity on their bills. What happens in terms of prepayment meters?

I want to ask about one more thing before a more general point. This is for England and Wales; it talks about Scotland coming on later on but Northern Ireland is not mentioned. Northern Ireland has a much higher rate of fuel poverty than England and Wales—18% historically, though I am sure it will be a lot larger by the end of this year. We do not have a functioning Executive or Assembly in Belfast. Can the Minister say whether the Government will have to legislate directly regarding schemes over there or are schemes that have already been agreed carrying on? Clearly, fuel poverty is a big issue in Northern Ireland.

Lastly, I have a more general question for the Minister. We had an announcement today—it came through on the news—that, rightly, the Government wanted to protect the additional money paid by consumers to retail energy companies that tended to get washed out when they went bankrupt. The answer seemed to be—I know that news reporting is not necessarily accurate—to ensure that the balance sheets of these companies were better in order to solve it. If a company goes into administration, it goes into administration; the balance sheet is washed out automatically in that case. Why cannot we put that money into an escrow account or find some way in which that can be isolated from the company and remains the consumers’ money in trust? I do not understand why that is not a way forward. If the Minister could give me some clue on that, I would be very grateful.

[Lord Lennie (Lab)]

My Lords, I thank the Minister for bringing these proposals, which are an improvement on the previous scheme. I also thank noble Lords for their contributions, in particular the noble Baroness, Lady McIntosh, who represented the NEA’s concerns about the core group 2 and how some of them will miss out, on the way that the scheme is set up, on the funding sufficiency—or insufficiency—and on the prepayment customer concerns, which the noble Lord, Lord Teverson, also raised. The noble Lord, Lord Best, is an expert on the private rented sector. We share his concerns about that; I will come on to that in what I have to say. The overall theme of the noble Lord, Lord Teverson, is that it represents a failure in public policy that we have to have this scheme in any place, but here we are: we have to have it and this is, as I have said, an improvement.

The Government have said that they intend to bring forward a new set of reconciliation regulations “later this year”, which is better than “when Parliament has time” or “in due course”, but can the Minister be a little more precise about when “later this year” means?

On the criteria and the algorithm used to estimate energy costs, how satisfied is the Minister that the algorithms used will not lead to an education-type embarrassment for the Government and, therefore, a failure in terms of there being lots of customers who potentially would benefit from this scheme but may then miss out? Have the Government included all eligible households, including persons with a disability, in their revised six criteria for the new scheme?

The scheme has an impact on energy suppliers, the authority and the Government. The energy suppliers are likely to recover their costs from their customers, which is estimated to be £19—a £5 increase on the former scheme. The authority and the Government are likely to incur costs of approximately £22 million for their work in issuing notices and identifying customers eligible for core group rebates. The Secretary of State will conduct a review or partial review of the scheme, and the authority will review participation of suppliers in the scheme and publish an annual report. This is welcome.

However, Labour would introduce legislation to uplift the warm home discount for 9 million working families and pensioners during the present inflationary crisis. As the noble Lord, Lord Teverson, and the noble Baroness, Lady McIntosh, pointed out, this is an extraordinary time for energy costs. I am not saying that it could have been predicted but Ukraine is upon us and, therefore, more may well need to be done in the lifecycle of this scheme.

Core group 2, which has replaced the broader group, will not now have to apply for inclusion in the scheme, which is welcome. However, there will be households beyond that group who remain in fuel poverty, such as those in rented accommodation. They may be on low incomes and with disputed levels of energy use, particularly when they have no access to what proportion of the payment they make to their landlords is for energy supply. They may not be receiving benefits, which would usually give them automatic inclusion. It may be impossible for them to contest their exclusion. The Minister’s observations on this would be very welcome.

If an energy company goes into administration or disappears entirely, will the supplier of last resort take on the full obligation of the failed supplier or are there now no small-enough energy suppliers left—that is, those with 50,000 customers—that can go bust? Have they all gone bust already? The recovery of the scheme from customers will mean that, in some cases, energy companies will be recovering money from those who have received the warm home discount, thus giving with the one hand and taking away with the other. Would Minister like to comment on that?

The overall scheme is likely to add to the rise in the socialisation of the expenses of suppliers of last resort, resulting in a probable £100 contribution to the increased price cap. Have the Government considered whether the scheme should be covered by Exchequer funding or by a wider group of people contributing, not just individual customer payers?

In welcoming the progress the Government have made with these changes to the scheme, there are a number of observations on which I would welcome the Minister’s response.

[Lord Callanan (Con)]

I thank all noble Lords who have contributed to this debate. The context is that, this year, as we all know, we have witnessed an extraordinary increase in the cost of energy. The Government recognise that millions of households across the UK may need further support with the cost of living, in particular energy bills. That is why the Government have so far announced additional support this year worth more than £37 billion, including targeted support for many of those in the groupings we are talking about today—those on the lowest incomes.

All domestic electricity customers in Great Britain will receive £400 off their bills from October through the energy bills support scheme. Meanwhile, more than 8 million households across the UK in receipt of means-tested benefits will also receive £650 as a cost of living payment. Further payments will be made to pensioners and disabled people. The Government remain committed to helping low-income and vulnerable households heat their homes over the coming winter. Although energy efficiency measures provide long-term assistance in reducing energy bills, as the noble Lord, Lord Teverson, reminded us, there is a clear need for direct financial support now. In this context, the warm home discount remains a key part of our overall approach to tackling fuel poverty.

This is the largest expansion of the scheme since it began. In 2021-22, the energy envelope was worth £354 million across Great Britain; in 2022-23, it is rising to £523 million. This scheme will ensure that 2.8 million households in England and Wales receive a rebate off their energy bills each winter right through to 2026. That means that around a third more households than previously will receive a rebate each year. In addition, most will receive their rebates automatically. This means that households will have much more certainty about receiving the payments when they need them most. A large part of my postbag has been people writing to their MPs and then on to me if they have not been selected as part of the core group 2 element; people do not understand how the scheme works.

The Government have recognised the need for certainty about the support to households in Scotland. We recently consulted on an extension and expansion of a separate warm home discount scheme in Scotland. That was as a result of the Scottish Government not being able to make their minds up about whether they wanted to be part of this scheme, not because of any delays on our part. The Government will publish the response shortly and lay the regulations for the scheme in Scotland as soon as possible.