Lord Marland
Main Page: Lord Marland (Conservative - Life peer)(13 years, 10 months ago)
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Earl Cathcart
My Lords, this is the first time that I have spoken in Committee, so I should declare that I am a landlord in the private rented sector. The assessors will obviously need paying, but who pays for that? Is it the household or is the cost added to the Green Deal and then paid off over time?
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland)
My Lords, I welcome the noble Lord, Lord Davies of Oldham, who seems to be indispensable to the Labour Party at the moment—two Questions and then running in here and doing this. I congratulate him on the energy and commitment that he shows to this great House. I just warn him of the words of the noble Lord, Lord Winston, who said that statistically, out of the Members of your Lordships’ House, 140 would die from a heart attack. All of us clutched our chests at that time. Seriously, I welcome him and thank him for leading from the opposition Benches. I send the noble Baroness, Lady Smith of Basildon, our good wishes as she sees her medical experts. I hope that we will welcome her back next week. I also thank all those noble Lords who are here, as usual, making their very good and committed contributions. I say just for reference that the noble Lord, Lord O’Neill, and I rarely disagree on things, as he always makes very valuable remarks for us to listen to. I do not want us to be under any illusion on that front. Some valuable points have been raised and I shall try to pick them up as we go through.
Clause 4 is central to the Green Deal. It sets out key conditions that must be met before a Green Deal plan can be taken out on the property. In so doing, it defines the circumstances in which the Green Deal can be offered to the customer, which is fundamental. Subsections (2) and (3) require that an accredited Green Deal assessor has assessed the property in accordance with standards. To comment on the remark made by the noble Lord, Lord Oxburgh, if an assessor has failed, he has clearly failed the assessor regulation; all the usual consumer protections are in place and the householder would be entitled to use another assessor, as people would be able to in anything. To pick up on what the noble Lord, Lord Whitty, said, standards are completely fundamental, as we have said on several occasions. I worry—as he does, rightly—about the bad publicity that might ensue if we do not do this properly. That is why the noble Lord’s valuable comments are correct.
In many cases, we envisage the Green Deal provider employing or contracting the assessor. The assessor would identify the potential for energy savings using the standardised methodology. This assessment will be used by the provider as the basis of an offer of Green Deal finance. Subsections (4) and (5) require that an accredited Green Deal provider—the body seeking to contract for the work—should give the customer an estimate of the savings on the energy bills that are likely to result from the proposed energy efficiency improvements and over what period these are likely to accrue. The Green Deal provider is required to base these estimates on a standardised methodology to be set out in regulations, thereby ensuring consistency and rigour in the process.
Earl Cathcart
I asked my noble friend whether the cost of the assessor could be rolled up within the Green Deal loan. The assessor may charge £100 or £120 plus VAT, which, if the cost is up front, may be a deterrent to the very people whom we want to take up this deal.
Lord Marland
Noble Lords have made good points about how we should evaluate this. I am sure that many young women will feel well advised by my noble friend Lord Jenkin of Roding about how they should dress in a cold climate; we should encourage them not to wear skimpy clothing in these snowy conditions.
The central point is a good one and we must look closely at it, but we are talking about companies that are used to dealing with the consumer. It is not as if they are going to pass a standard accreditation not having been used to dealing with the consumer. We would not want to prescribe to a Green Deal provider such as British Gas or Centrica how it should interrelate with the customer, because there are all sorts of customer protections available. The Consumer Credit Act quite clearly lays down the relationship between the consumer and the provider. Whereas we must ensure at all turns that this is not taken advantage of, and that there is a creditable method, it is up to the providers to come up with the method so that, in turn, the consumer has recourse against them, to challenge them if that method is wrong. The noble Lord, Lord Oxburgh, has much greater experience than I have in these matters, but I have experience in the insurance industry—I think that he mentioned life insurance. I could point to many life insurance predictions made by actuaries that are utterly wrong, so we have to be very careful about being overly prescriptive in this area.
It is hard to think too far out—I speak as a consumer myself—because most of us at the time are thinking about today: what we can save today, what we can do to benefit our housing today and what the effects are. A lot of us sit and think that prices may well go up; we live in a world where prices have traditionally gone up as, traditionally, have taxes, as most people think. That is not an excuse, but it is the mental approach that I personally would take to this Green Deal. I take on board the general points that everyone has made. It is vital that we protect the customer. This is fundamental to the Green Deal and the approach that we are taking. All of us in this Room feel exactly the same and, as we take this Bill through its various stages, the standard words that go underneath the Bill will be “consumer”, “assessment”, “accreditation”, “customer” and “must be protected”.
Lord Oxburgh
Does that mean that the form of the recommendation to the consumer will not be prescribed and that this will be up to the assessor? It is important to know to what extent and how far the procedure is to be standardised.
Lord Marland
The methodology for the golden rule will be standardised and it is fundamental that it is. That is a good cornerstone from which to start. I hope that that answers the noble Lord’s question.
Lord Dixon-Smith
My noble friend has not touched on the question of the cost of the finance.
Lord Marland
I would rather pick that up later on, when we come to Amendment 15. If the noble Lord does not mind, I would be happy to deal with it then. As for rolling up the costs of the assessor, we would not encourage that, but there may be a framework in which it could happen. We will need to look into that further.
Lord Davies of Oldham
My Lords, the Minister will be relieved to hear that I do not have a great deal to add, as he has quite a bit to answer from his noble friend Lord Cathcart, who has identified issues which concern us all. Whether the answers come down in relation to the landlord or in any other respect, there are anxieties also about the tenant. We need a clear position with regard to that. We have our uncertainties and I am grateful to the noble Earl for having identified those.
The noble Lord, Lord Whitty, will accept what the noble Lord, Lord Jenkin, had to say about the fixed rate of interest. I once had a friend who took out a fixed-rate mortgage with a London authority just two years before the oil price rise in the 1970s. We can all recall inflation running at staggering figures at that time and interest rates going well into double figures. If you had a fixed-rate mortgage of 2 per cent, you reaped considerable advantages from that. With regard to a scheme that has any length of time attached to it, the question of fairness over a period of time has to be addressed.
My noble friend Lord Whitty raised the obvious question of what those costs will be and the interest which will bear upon the initial person living in the property. Consumer rights need to be safeguarded. We want clarity on that point too. Our amendment requires clarity on the changeover, to which the noble Earl, Lord Cathcart, also referred, with regard to whether the relationship between the improver and the person paying the Bill could change to the disadvantage of one or the other. How will the scheme work to guarantee that there is fairness over the considerable period of time involved in this exercise? That was the burden of the questions addressed earlier today.
I do not really need to add my voice to this matter because, if my noble friend Lord Whitty and the noble Lord, Lord Jenkin, are worried about the word “fee”, I am too. I, too, had also identified that. So that is a question for the Minister to answer. Is he not lucky to be in the place that he is?
Lord Marland
I thank the noble Lords very much. Just before I respond to the amendments put forward by the noble Lord, Lord Whitty, among others, I want to clarify some comments on the previous amendments relating to Clause 4 about the Green Deal providers deciding how they would apply parts of the Green Deal, such as the assessment or the golden rule. I hope that I did not give the impression that firms could pick and choose. I hope I gave the impression that customers could pick and choose. Nevertheless, I want to be clear about that and that the prescribed methodologies for these steps, including expected savings, are very much part of the Bill.
I hope that I highlighted the beneficial flexibility, which experts and customer insight will have to present information in a useable format, as well as communicating accurately in line with the regulation. I want to emphasise another important protection. It covers all credit arrangements. Let me put on record that for consumers the Green Deal will need to meet the requirements of the Consumer Credit Act with only limited exceptions. For example, all communication on the terms of the plan would need to meet responsible lending rules.
I turn to the excellent amendments in the name of the noble Lord, Lord Whitty. Clause 5 sets out requirements for what terms must and must not be present in a Green Deal plan. In doing so, it builds on Clause 4 by further specifying the basis on which a Green Deal can be offered. Clause 5 ensures that, through the terms of the plan, key consumer protections are in place about the financing as well as the advice, the measures and the installation. Subsections (2) and (3) ensure that no charge over any person’s property may be taken away by way of security. Early repayment cannot be required of the bill payer, except in conditions to be set out in regulations, and a bill payer’s liability for maintaining Green Deal repayments cannot be extended beyond the period for which they are the bill payer for a property. This ensures that the Green Deal does not become a personal loan and remains a charge on the energy bill.
The noble Earl, Lord Cathcart, wishes us to expand on this point, particularly on when the property becomes vacant. As regards the person then liable for the bill at the end of a tenancy, that obligation would usually revert to the owner. Clause 2(10) also makes provision for where there is no energy bill because supply and connection charges have been suspended. We will provide in regulation that the person who would otherwise be the bill payer, usually the owner, is liable for the charge. I hope that that answers the question posed by the noble Earl.
I have just been passed a note saying, “Be fast if you can” and I am trying my best. I thought that I was being quite fast. Amendment 13A proposes a further element to the terms of the plan to provide for confirmation of the ownership and maintenance of the Green Deal improvements.
The Deputy Chairman of Committees (The Countess of Mar)
My Lords, I think that we should restart, but I should say that there is very likely to be another Division immediately after this one is decided. I will try not to interrupt the noble Lord, Lord Marland, in the middle of a sentence this time.
Lord Marland
I shall start the sentence again. I will rely on Hansard, as I always do, to dig me out of any holes that I have got into.
Amendment 13A proposes a further element to the terms of the plan to provide for confirmation of the ownership and maintenance of the Green Deal improvements when the bill payer and improver are different people. I am grateful to noble Lords for raising that issue. It may need to be provided for within the terms of the Green Deal plan. However, I resist the amendment on the basis that we have already provided for further compulsory conditions to be specified in the framework regulations under subsection (1)(b). If the issue needs to be addressed, we already have the power to add it to the terms of the plan.
The Deputy Chairman of Committees
I appreciate that. I am afraid that I had to call the noble Lord, Lord Marland, between the two Divisions. I recognise that there is a problem when we get Divisions back-to-back like this. I have given some leeway; I gave about five minutes on the last Division.
Lord Marland
Amendments 13 to 16 all deal with the financial terms of Green Deal plans. However, before I address the amendments, let me put on record that the Consumer Credit Act applies to the Green Deal plans in full bar a few essential amendments in the Bill in Clauses 23 to 27. This provides a high starting point for consumer protection. Clause 5 gives the Secretary of State power through regulation to put additional protections into the Green Deal regime.
Amendments 14 and 16 are closely related to the Consumer Credit Act. Amendment 14 seeks to apply one specific aspect of the CCA: the presentation of the terms of the plan. This means that Green Deal providers would need to set out the total credit payable, the amount of the regular payments, and the annual percentage rate—APR—calculated in accordance with the rules. However, it is not necessary to include the amendment, as the relevant legislation already applies in full to Green Deal arrangements for consumers.
The purpose of Amendment 16 is to remove the ability to set out, in secondary regulations, how the fee for early repayment should be calculated. The effect of the amendment would be that no provisions about early repayment fees could be set out in regulations for Green Deal plans. Domestic Green Deals would be subject to an early repayment rule, which would be set out in the Consumer Credit Act. However, business Green Deal providers are not subject to any existing regulations on early repayment fees. This amendment would remove Government’s ability to set out regulations limiting the fees that can be charged. This means that the business Green Deal providers could be free to determine their own fees for early repayment of the Green Deal and could lead to inappropriately high fees being charged. For small businesses in particular, that could be a concern when signing up for the Green Deal. I therefore respectfully request that the noble Lord withdraw the amendment to allow us to put in place in secondary legislation the appropriate protections for businesses taking out Green Deal plans.
Lord Jenkin of Roding
Can my noble friend give some indication of what level of fee—I made the point about early repayment, perhaps a successor owner wishing to pay off the whole bill and not have it hang over them—he thinks is likely to be charged under the arrangements that my noble friend has outlined? There really is an argument for keeping that as low as possible.
Lord Marland
I totally agree with my noble friend Lord Jenkin. There is always an argument for keeping everything as low as possible. However, we are not at the stage of the Bill where we should be able to predict or prescribe how additional fees are charged. I think I have spoken to that; I hope that my noble friend feels that I have. We have a lot of discussion, dialogue and consultation to have with the financial institutions who may well be providing that finance.
Lord Moynihan
To assist the Minister on this, can he clarify to the Committee that the Government intend for there to be the flexibility that my noble friend is looking for?
Lord Marland
I am grateful to my noble friend Lord Moynihan for assisting me in this regard. Absolutely—we have to allow the framework to take its course and we have to be open to consultation and views to find the best method of dealing with this.
Earl Cathcart
My Lords, I am not sure that my noble friend answered my questions quite as fully as I might have hoped. I asked whether the suspension provisions in Clause 15 might apply to the landlord of a vacant property. It seems that repayments of the Green Deal are fixed at the outset—or am I wrong? Is there flexibility? What happens if one tenant does not use much energy and the next one does? Does the Green Deal repayment change under any circumstances? What if a tenant defaults on paying his energy bills, does the landlord become liable?
I am not asking the Minister to answer everything now—I do not want to regurgitate my previous remarks—but would he consider writing to me once he has considered the issue?
Lord Marland
I am grateful to my noble friend for asking me to explain again. A lot of this will be picked up in the group of amendments that relate to the rental sector. When we reach that point we will be able to clarify the situation.
Lord Whitty
My Lords, I am grateful to the Minister for spelling out some of this, but I am still puzzled by bits of it. For example, there is the reference to the consumer credit regulations. He seems to be saying that they apply by default, but then referred us forward to Clause 23, which provides for some exemptions from it. It is not clear, as his words implied, that all such credit arrangements are covered by the Consumer Credit Act, except where specifically excluded. As he said himself, some of the organisations which will be Green Deal providers—with whom the householder actually has the deal, as distinct from the financial vehicle behind it—are not covered by the Consumer Credit Act. I am not necessarily asking for a detailed reply at this point but it would be useful for the Committee to have spelt out how and to whom the Consumer Credit Act applies and what, if any, are the exemptions referred to in Clause 23.
Lord Marland
Perhaps I may clarify that question for the noble Lord. Our legal advice is that the protection is in place. I am happy to debate the subject with him afterwards, but that is our legal advice.
Lord Whitty
It would probably be helpful to us to have that legal advice—or the gist of it—in writing, otherwise we may return to this.
The issue in Clause 13, equity between the original occupier signing up for the Green Deal and a subsequent occupier, is still important. I agree that aspects can be covered by secondary legislation or the code of conduct, but it is obviously key that any potential payment needs to be spelt out—this is where it links to Amendment 16 with relation, for example, to an exit fee. If you sign up for an agreement, and there is an exit fee included, you are going in with your eyes open—or you should be if everything is transparent and spelt out. However, the agreement is not with the person who may subsequently pay the exit fee; other things being equal, on acquiring the property, a subsequent owner will have calculated that it is better to pay off the debt early. If there is a fee attached that is not included in the deal, it is important that contingency is covered. Transparency, caveat emptor and a search on acquiring the property or taking up the tenancy or lease must all be taken into consideration, but if a subsequent owner is to be liable for such fees down the line this must be spelt out.
To some extent, I accept the view that Amendment 15 is not appropriate in that it would prescribe a fixed rate of interest. On the other hand, it is difficult to calculate, even within the range of outcomes we discussed on the earlier amendment, whether the golden rule works unless you have some understanding of the interest implied in the total package. Some will be marginal, and a fixed rate will give you at least the minimum rate of return and benefit, whereas with a variable rate it will be difficult to assess whether the golden rule has been met. We will have to assume certain things about energy use. As the noble Lord, Lord Jenkin, said, some people will use more energy because it is cheaper, for obvious reasons. However, on the basis of equal use and equal interest rates, you can make a reasonable stab at a calculation on the golden rule. If both of those are variable, it is more difficult to say how it applies.
I realise that we have to have flexibility, and therefore Amendment 15 in its absolutist sense is probably not appropriate. The previous amendment, with the clarification on compensation and Consumer Credit Act provisions, is needed. We need to protect consumers from the possibility that the whole structure of repayment is either to their detriment or unclear when they sign up.
Although I will withdraw the amendment at this stage—
Lord Whitty
I will press the Minister for communication with Members of the Committee who have taken an interest in the matter, on both the legal point and on any fee that applies.
Lord Marland
Given that there has been disruption and that not everyone heard what I said, I am happy to communicate with other Members of the Committee to clarify these things and carry on with the dialogue. That is the spirit in which this Committee, including the contributions of all noble Lords, is operating.
Lord Whitty
It would be relatively easy to say what any fee does not cover, which would provide some clarity. I would also welcome any communication from the Minister between now and Report. I would hope that that clarification indicates that fees paid up-front are not included, even if there is need for flexibility about fees paid later. On the understanding that we will be hearing from the Minister, I beg leave to withdraw my amendment.
Lord Davies of Oldham
My Lords, the amendment seeks to clarify some important aspects of the clause and identifies just what the Opposition’s anxieties are. I hope that the Minister will be able to reassure us on this. It is quite clear that necessary consultation will take place between the improver and any potential bill payer. It is important that we appreciate the obvious fact that whoever is saddled with the additional costs that are reflected in energy bills knows exactly what is going on in relation to the property.
The issue does not arise with regard to the householder for obvious reasons, but we are also concerned with kinds of property entirely different from properties inhabited by the owner-occupier or a single tenant. We are concerned with the situation where there are improvements going on across a number of flats, for example, where the improver is the landlord but the individual tenants are going to be the bill payers. We want to make sure that, in any such exercise, everybody is fully informed and knows what is going on.
We also recognise, and I hope that we have included this satisfactorily in the amendment, the enormous danger of the awkward one person putting a veto on desirable improvements right across the range of the property. That would lead to a situation in which proposals were vitiated simply because one had no framework at all to deal with the minority—not that I am against minorities, nor do I think that at any time the individual’s rights should be overridden. However, we have to take the interests of the generality into account in circumstances where someone, for all sorts of reasons that we do not dare to presage, might be awkward.
Of course, there is the obvious fact that, with regard to bill payments, some may consider that they might be in for the shorter term because they might be a little older than other people in other properties and that any costs at this stage—anything at all that puts up a fuel bill—is disadvantageous to them, while at the same time they might not think that there is much in the way of long-term benefits for them because they may not think that their own term is very long. Such difficulties must be overcome.
This is a probing amendment. It merely asks the Minister to identify both the process of consultation and how he thinks the difficulties that may occur from time to time should be addressed. I beg to move.
Lord Marland
My Lords, this clause enables the framework regulations to require that the energy bill payer consents to the adding of the Green Deal charge to their bills. This is important in cases where the Green Deal plan is set up by someone such as a landlord who does not pay the bills for the property. This clause will enable the framework regulations to prevent, for example, landlords from imposing charges on to tenants’ bills without first obtaining their express written consent. The clause also enables the framework regulations to provide for redress in cases where it transpires that the necessary permissions or consents to the improvements have not been obtained—for example, that the improvements have been made without consulting the freeholder.
I am grateful to the noble Lord, Lord Davies of Oldham, and other noble Lords for Amendments 16A and 16B. As I have outlined, there is adequate provision within this clause for the framework regulations to set out more detail on the issue of consent where the improver and bill payer are different people. It is important that such detail is contained within the framework regulations, as the detailed arrangements may be subject to change as the Green Deal develops. These regulations will be subject to the affirmative procedure.
In addition, it is not our intention to force the Green Deal on to any party. It must be allowed to work on a voluntary basis, even where the improver and the bill payer are different people. We are proposing powers under the private rented sector chapter that would ensure that a landlord does not unreasonably withhold consent to a tenant’s request for a Green Deal. However, these powers would be used only if the sector as a whole does not take advantage of the Green Deal and improve properties voluntarily.
I turn now to Amendment 16B. The Bill contains powers to provide for redress in cases where an improver incorrectly confirms that he has obtained all necessary consents to the improvements. We do not consider that it is necessary, as this amendment seeks to do, to provide for redress in respect of matters agreed to by the improver, as the improver will himself confirm consent by signing up to the Green Deal. I hope that this gives the noble Lord reassurance, enabling him to withdraw his probing amendment.
Lord Davies of Oldham
My Lords, I am partially satisfied. I am pleased to note that the noble Lord says that the regulations will be subject to the affirmative procedure, so we recognise that the Government appreciate the importance of this. However, surely the matter of the principle of consultation and the certainty that attends on it is of such importance that it ought really to be on the face of the Bill. I understand that the details ought to be in regulations and I accept entirely his point about changes over time. We all appreciate the obvious fact that you cannot have excessive detail in primary legislation. However, I am not pressing him on the detail at this point; I am pressing him on the principle underpinning the operation of the clause and I am not certain that the clause is clear enough. I hear what the Minister says. As I said, it is a reassurance that the regulations are going to be before Parliament, but we have some anxieties and so might return to this at a later stage. I beg leave to withdraw the amendment.
Lord Grantchester
I am sorry, but we had a few concerns over some of the clauses. We did not want to draft a specific amendment, but we wanted to raise our concerns under the stand part debates. The first concern indeed relates to Clause 7. On our team’s side, having debated this clause, we are a little concerned whether we have identified an inconsistency. I will explain and the Minister can then perhaps satisfy us that we have not misread the situation. Clause 7(3)(a) requires that,
“the improvements installed meet the standard specified in the code of practice”.
The debate on Monday seemed to us to suggest that there was not a standard specified in the code of practice. Nevertheless, we want consistency and a consistent approach. We understood from the debate on Monday that there was not a standard to be specified in the code of practice, so we were concerned to clarify whether we misunderstood or whether there has been an error in drafting on that principle.
Lord Marland
I am grateful to the noble Lord for raising this matter. Perhaps I may take it away and respond to him later. It is a technical matter and, rather than reading the answer now and taking up the time of other noble Lords, I will commit to doing that. I thank the noble Lord for bringing the matter to our attention.
Lord Jenkin of Roding
I was inspired to table my amendment by the proposal of the Delegated Powers Committee. In paragraph 11 of its report, it drew attention to the absence of a limit in the Bill and of the penalty that could be imposed. It took the view that as the affirmative procedure would be required, it would not regard the derogation of the power as inappropriate. However, it suggested that there should be a maximum penalty.
Looking at this provision, and applying my little skill and dubious judgment, I suggested a figure of £500. My amendment was tabled before that of the Official Opposition, and I am intrigued to see that they tabled the same figure for corporate bodies but a much lower figure for individuals. I would like to know what the Minister has in mind as an appropriate level of penalty. Mine is an entirely probing amendment.
Lord Marland
I thank noble Lords for their suggested amendments to Clause 14 to limit the level of financial penalty on individuals and companies for failure to comply with the disclosure and acknowledgement provisions. This clause provides the powers of the Secretary of State to make regulations to ensure that sellers and licensors comply with their disclosure and acknowledgement obligations. The clause allows for the following specific provisions to be made: sanctions for non-compliance, including civil penalties; requiring the Green Deal provider to cancel the liability of a bill payer to pay Green Deal plan instalments; requiring the Green Deal provider to refund any payments already made; and requiring those at fault to pay compensation to the Green Deal providers.
I understand noble Lords’ desire to protect individuals and businesses from excessive penalties. However, the disclosure and acknowledgment requirements are vital to the effective operation of the Green Deal and indeed to protect the customer, so we need robust and transparent sanctions to ensure that they are all complied with. We will work with relevant industry stakeholders to develop options as to how these provisions will apply in practice to minimise instances of non-compliance. I wish to emphasise that we will consult before setting out these arrangements in regulations.
Our aim will be to use existing and well established systems of sanctions and redress where possible. Further consideration is necessary to determine what level of civil penalty would provide sufficient deterrence to ensure compliance, but I trust noble Lords understand that it would be premature to make a decision on an upper limit at this stage. In conclusion, I assure noble Lords that we will seek to ensure that penalties are proportionate. I hope that this assurance will enable the noble Lord to withdraw the amendment.
Lord Davies of Oldham
I do not wish to pre-empt the noble Lord, Lord Jenkin, but my amendment, too, was a probing one and I am satisfied with that reply. I beg to withdraw.
Lord Davies of Oldham
I am grateful for the clarification on the terms of this amendment. The purpose of the amendment is to draw attention to the additional ways in which the Government are intending to disconnect someone’s power. We need to be clear about this. We all know the controversies of the past in relation to disconnection, and we also know that the major energy companies are careful about disconnection issues, particularly with regard to winter disconnections and vulnerable households. However, of course that refers to the big providers; and it is merely a code of practice and therefore not in legislation. We are concerned that here is a cause for potential disconnection and we want to know the circumstances in which disconnection would take place.
We are not quite clear whether we are creating with this legislation something that detracts from the existing protection that so many consumers have, and that would render vulnerable those who are not at the present time, because of the nature of the scheme. We think that this issue is of such importance and that we ought to get this right in primary legislation. All noble Lords will of course fully appreciate the problems for a household if disconnection occurs at any stage. It is of sufficient import for the Minister to give us greater assurances than we have in the Bill on the issue of disconnection. I beg to move.
Lord Marland
My Lords, Clause 16 permits the Secretary of State to modify gas and electricity supply licences to make provisions as to the steps that can be taken by energy suppliers when the customer defaults in making Green Deal payments. We intend that the existing procedures employed by energy suppliers in the event of a non-payment by a customer will also be used to collect Green Deal charges. The clause also enables provision to be made in licences regarding disconnection of a customer who has defaulted on the Green Deal charge. However, we expect that disconnection will, as is currently the case, be very rarely used by energy suppliers and only in the last resort when all other means of collecting payments have been exhausted. Furthermore, licences prohibit energy suppliers from disconnecting households in the winter months where they know, or have reason to believe, the customer is, for example, a pensioner or lives with other pensioners or those under 18. In addition, the larger energy suppliers have developed their own safety net procedure, which is a commitment to never knowingly disconnect a vulnerable consumer at any time of the year.
Clause 16 also allows provision to be made in licences enabling suppliers to require a deposit as security for Green Deal payments in specific circumstances. We intend to exercise this power to ensure that, if a customer is required to provide a deposit in respect of energy supply charges, that deposit can also be used as security for Green Deal payments. We do not intend to allow suppliers to request a deposit solely because a customer has a Green Deal finance arrangement. As is currently the case in the domestic market, a security deposit should only be requested from a domestic customer in specific circumstances. For example, when a customer has a poor credit history and a secure method of payment, like fitting a prepayment meter, is not feasible.
All these provisions are necessary to ensure that the Green Deal charge part of the energy bill can be treated equally with the energy component by suppliers when the customer defaults on payment. This will in turn help to secure low interest rates on Green Deal finance, as debt recovery rates on the Green Deal charge should closely match the high historical recovery rates observed for an energy bill. I therefore invite the noble Lord to withdraw his amendment.
Lord Davies of Oldham
My Lords, I am largely satisfied with that reply. Can the Minister clarify one issue? When he talks about the special deposit, is that specific and unique to this legislation or is he building upon a power that exists elsewhere and applies to deposits where there have been problems with failure of sustaining payments? If this is novel, he has not relaxed my anxieties about this power. If he is saying that in order to protect the Green Deal we are merely buttressing the provision which exists in other circumstances, I have no quibble, but I would like reassurance on that.
Lord Marland
I am grateful to the noble Lord for pressing me on this. There is a practice in place in the non-domestic sector and we are building on that here in the Green Deal. I hope that satisfies the noble Lord; if he wants us to specify how that works, I would be happy to do so during the course of proceedings.
Lord Davies of Oldham
I am grateful to the noble Lord; I would like a note from him on this point, because we have real anxieties.
Lord Marland
Is the noble Lord looking for clarification on the domestic or the nondomestic sector?
Lord Davies of Oldham
This is a power that stretches across the board, so I want reassurance in both instances. The noble Lord has been entirely reasonable, as he always is, but we are anxious that this is originating in primary legislation a concept which is merely practice elsewhere thus far. If it is built on precedent in other Acts to which energy companies or other providers respond, of course I am entirely reassured by his response. I just want a note to clarify that point. As the noble Lord has indicated that he will reassure the Committee on that point, I beg leave to withdraw the amendment.
Lord Jenkin of Roding
I raise a point on this, because it is relevant to a question that I asked on Second Reading. If there is a default on the repayment of a Green Deal loan by a bill payer, which of the parties bears the cost of that default? Is it the energy supplier, whose job it is to collect the repayment as an addition to the energy bill, or is it the provider who put up the money in the first place? I am not sure that I have yet had an answer to that question. I know that it is one that worries suppliers. Many of them are energy companies, which are likely to face considerable strain on their balance sheets due to the huge investment which they will be making in generation and transmission equipment over the next few years. They are anxious that if they find themselves liable to bear the costs of default under the Green Deal scheme, that may affect their balance sheets and the perception of the financial markets.
I do not know whether this is an appropriate point to raise that question, but we are talking about defaults, and that is a question which really needs an answer. My noble friend may well not yet be in a position to answer. I think that I am right in saying that it was not answered on Second Reading, but it is a question which is causing concern and to which, at some stage, there will have to be a full answer.
Lord Marland
We will develop this theme as the Bill goes through. Of course, in the first instance, it is the consumer to whom we would go in the event of default. Then, my noble friend rightly asks, will it be the Green Deal provider or the electricity provider? We are consulting on that issue at the moment. It is a very important thing to consult on, and when the consultation is over, we will bring it in to the Green Deal.
The Deputy Chairman of Committees
Was the noble Lord speaking to the amendment or to the clause?
Lord Whitty
My Lords, I am not sure of the relevance of this argument to the actual clause before us. The issue here is that prepayment meters have a history, whether you are fuel-poor or not, of having significant charges over and above the cost reflectivity and over and above the degree of security which the supplier can assume on other means of payments. In other words, if you are on direct debit, there is a reasonable degree of security, but it is slightly less than on a prepayment meter, which is an almost absolute security of payment, because you do not get any electricity unless the meter is turning.
Historically, the issue has been pretty appalling. Frankly, the regulator denied the problem for many years. I declare my previous interest as former chair of Consumer Focus. Consumer Focus and Energy Watch banged on for years about that before the point about cost reflectivity was finally accepted by Ofgem. It does not matter whether the reason that you have a prepayment meter is because you are fuel poor or because your landlord, in various tenancy situations, insists on you having a prepayment meter. It does not matter whether it is a second home. It does not matter whether you are in a mansion block in Kensington, where many are on prepayment meters—generally speaking, the income of that particular subgroup is somewhat higher than the fuel-poor. The point is that they were being ripped off.
As I understand it, the new clause is proposed by my noble friend because we do not want a similar nontransparent rip-off to occur by clobbering the structure of tariffs on prepayment to hide the fact that, as a result of having a prepayment meter, you have a differentially poor repayment profile under the Green Deal.
The new clause also touches on a substantial point that, had I been present on Second Reading, I would have made: the fact that, at the same time as we are introducing the Green Deal, we are mandating energy supply companies over the next 10 years to install smart meters in every household in the land. The energy companies will have to carry out that provision, over which the landlord, the tenant or the owner-occupier has no real control. Whereas the Green Deal will be a voluntary sign-up, smart meters will not. I happen to be in favour of smart meters for energy efficiency, carbon saving and behaviour change reasons, but we could get those three things muddled up. It may be that the same supplier who is offering you a Green Deal is at almost the same time proposing to put the smart meter in, as they will be required to do, and perhaps negotiating with you the terms of your operation of a prepayment meter.
The point of the new clause, as I understand it, is to separate those different elements so that there is no distortion for the consumer. The wider point is whether the rollout of the Green Deal can in a conscious, planned way relate to the rollout of smart meters. The reality is that, on the one hand, people are going to go into every home in the land under the smart meter installation programme; and, on the other, somebody will be offering a deal under the Green Deal.
A lot of householders will be seriously confused as to which bit they have to accept, and the repayment for that, and which bit they have some option and flexibility about, and they do not have to take the deal at all if they do not want to. I assume that paragraph (a) in the new clause relates to any meter being installed, including the new requirement that smart meters be installed. We have to separate those things in terms of repayment; but in terms of delivery, there may be some benefit in associating them. I would like the Minister to comment on that point, and particularly to endorse the point lying behind my noble friend's amendment: that those three separate issues must be disentangled.
Lord Marland
There are two extremely valuable points here. If I may, I should like to defer the discussion on smart meters because there are a number of later amendments about them. As the noble Lord, Lord Whitty, said, it is important that we focus on this part of the Bill, Which is about the prepayment meter. It is fundamental that we get this bit right, and get smart meters right later. Of course, we need to have in our mind on joined-up thinking, and the two interrelate.
Through the Green Deal, people who pay bills through smart meters first receive information about extra payments that they incur as a result of meters being installed or existing Green Deal plans. We intend that the Green Deal charge can be collected by energy suppliers through all existing payment routes, which include prepayment meters as well as quarterly credit cards, which were mentioned earlier.
A number of licensing conditions are in place to protect customers who receive their energy supply through prepayment meters, including changes to prevent unfair price differentials between payment methods. We will ensure that all relevant protections extend to the Green Deal charge and we are working with Ofgem to make sure that that happens. I hope that that gives enough information for the noble Lord to withdraw the amendment.
Lord Grantchester
I thank the Minister for his reply. I also thank all noble Lords who have spoken for their contributions. They realise the vulnerability of many of our citizens to energy companies using meters. I thank my noble friend Lord Whitty for further clarifying the purpose of the amendment to the Committee on my behalf. His interpretation is entirely correct and I am disappointed if I did not make it clear. We are greatly concerned that the Green Deal should work for the fuel-poor in all households, because they see that not only will they save money but that they will heat and warm themselves far better if they undertake the Green Deal. With that in mind, I would like to think clearly and look at the matter again, especially in relation to amendments that may be tabled and our discussions about smart meters. I beg leave to withdraw the amendment.
Lord Grantchester
My Lords, now we are in stand part discussions again, I draw to noble Lords’ attention some thoughts regarding Clause 28. When we look at the Green Deal and everything that is happening in it, the Minister has said many times that the market will provide. We are most anxious that the Green Deal is taken up and proves to be a great success, and are under debate on Clause 28 pressing the Minister to understand how the Green Deal will work and what he has in mind under delegation and conferring of functions. We are beginning to wonder whether the Green Deal needs a promoter. Lots of people are involved in the Green Deal. We have mentioned the participants, the assessors, the providers, the bill payers and the landlords, as well as situations that occur as properties change hands and the circumstances of bill payers. There does not appear to be a one-stop shop—if I may call it that—unless the Government are going to provide it. Under Clause 28 we may consider whether we need a one-stop shop and who can put out overarching material and promotion to explain and promote the Green Deal. The Minister may be thinking that his department may be that promoter. We have been thinking whether the Energy Savings Trust could be such a valid promoter.
What are the Minister’s thoughts on the need for Clause 28 and what it might pertain to? If it was thought that our financial constraints—which we are forever told about—make it inappropriate, we have in Clause 32 funding for energy efficiency advice. The Minister gives himself powers to spend money; would that allow a promoter to take up this opportunity? What would that delegation be? Does he agree with me that a promoter could help the uptake of the Green Deal? I beg to move.
Lord Marland
The noble Lord asks a very good question, which I will seek to clarify. This clause gives the Secretary of State power to delegate Green Deal functions to one or more public bodies, and to fund the work they do. It is a key clause allowing us to create the most effective oversight framework for the Green Deal.
Where public bodies are tasked with creating codes of practice required to support the Green Deal, the codes must be approved by the Secretary of State before they are issued. Codes of practice will be one of the key mechanisms by which we govern the Green Deal and create consumer confidence in it.
The clause also allows the Secretary of State to delegate administrative functions connected with the licence modification powers contained in Clause 15(3). An example would be where a public body was appointed to administer an administration fee payable to energy suppliers, as in Clause 15(3)(f). This is a key clause in the Bill, allowing us to create the most effective delivery and oversight framework for the Green Deal, and to give Green Deal participants and customers confidence in the deal as a whole. I hope that that answers the excellent question asked by the noble Lord.
Lord Grantchester
I thank the Minister for his reply, and it could well be that I am wide of the mark. He has explained the key purpose of the clause. We will reflect further on the idea that I proposed.
Lord Grantchester
Amendment 19A draws attention to the lack of detail in this clause in respect of appeals. While we acknowledge that it may be appropriate to include some issues in regulations, such as the fee payable, we do not consider that other issues—specifically who has the right to appeal, where they can appeal, the grounds for appeal and the powers of the court or tribunal in making a determination—are suitable matters to be left to further regulations that the Minister may draft. Surely, the class of person who is eligible to appeal under the clause is not likely to change during the course of time and there is no obvious reason why this should be flexible. We are interested to hear what the Minister of Justice and his officials might have advised in this area as it appears to breach fundamental issues of access to justice. It is an equally important point of principle that people should have the protection of primary legislation. We ask the Minister to put down amendments to take these comments on board and to seriously consider amending the Bill in this area on Report. It is an issue that we will be turning our minds to in the next couple of months. I beg to move.
Lord Marland
I thank the noble Lord for his suggested amendment to Clause 31. This clause requires the Government to provide the right of appeal when a sanction has been imposed by the Secretary of State or their delegate. This clause provides a right of appeal against sanctions imposed for any breaches relating to consent, disclosure and acknowledgement, or requirements set by a scheme regulating and authorising Green Deal participants, such as any future schemes for registration and accreditation and their codes of practice. This clause enables an appeal to a court or tribunal. Subsection (3), which noble Lords would omit through their proposed amendment, clarifies that we can address issues such as who can appeal, under what circumstances and to what body, and the powers to suspend the sanctions originally imposed. These are all matters that would need to be dealt with in establishing a fair and workable right of appeal against any sanctions imposed and it is important that the Bill clarifies that these can be included in regulations.
Clause 31(5) enables the Secretary of State to revoke or amend any subordinate legislation governing the jurisdiction, process and powers of any existing tribunal system that may be used to enable this right of appeal. The Government will consult fully and set out details in regulations about who may appeal and under what circumstances. These regulations will be subject to the affirmative procedure.
In conclusion, I assure noble Lords that we will seek to develop a transparent and workable appeals mechanism and I hope that with this assurance the noble Lord will feel able to withdraw his amendment.
Lord Grantchester
I thank the Minister for his reply but, with respect, he has not addressed my point. We do not feel that regulations sufficiently take account of these concerns which should be under primary legislation. We are mindful that consumers must have confidence in the situation facing them and that this is something that should be upfront in the Bill. That is the most appropriate place and it is where these aspects should be dealt with, rather than in regulations. Nor did he take up my point about whether he had consulted the Ministry of Justice over any of these aspects.
Lord Marland
We have consulted the Ministry of Justice. We would not get to this point without having done so.
Lord Grantchester
I thank the Minister for clarifying that. In his answer he referred to subsection (5), which is that regulation may be introduced that,
“may revoke or amend any subordinate legislation”.
Under subsection (6),
“‘subordinate legislation’ has the meaning given in … the Interpretation Act 1978”.
We are concerned about the overuse of regulation in this Bill and ask how far, under subsection (5), it is justified or appropriate that there should be powers to revoke or amend any subordinate legislation. We ask for clarification of the extent of those powers. I understand the Interpretation Act to merely interpret terms and not cover any policy issues. Finally, I should like to ask whether this part of the Bill been commentated on by the Merits Committee.
Lord Marland
There is no greater authority on these things than the Secretary of State. He is responsible for delegating powers. Every intention behind the Green Deal is that we get it right, which is why in matters involving disclosure, breaches relating to consent or any sanctions, the top-down authority will come from the Secretary of State. I hope that that clarifies that point.
As to whether this has been through the correct procedural process, I am not at liberty to answer that question now, but I will respond later rather than put officials through the mill now.
Lord Grantchester
I thank the Minister for his consideration. He no doubt understands that we take this matter extremely seriously and will consider further. In the mean time, I beg leave to withdraw.
Lord Whitty
My Lords, since I packed my bag before we gave up, I will be brief. This group of amendments relates to fees, on which I have expanded at some length already. Some of these simply follow through from those that we have already discussed. Some relate to appeals, and I think that a disincentive to appeals is an area of significant concern. Some relate to other details of the way in which the Green Deal will be delivered. However, they all raise the issue of fees. I think that it would be helpful to the Committee—it would certainly be helpful to me—if, before we come to the next stage, the Minister could arrange for someone to set out why the issue of fees has to apply in these various situations. That can probably be done more logically than going through clause by clause, because some of them obviously hang together. There are only three or four subjects, but there are a lot of points where fees arise. If the Minister would commit to doing that, I would be prepared to withdraw the amendment.
Lord Marland
My Lords, at this point in the proceedings the noble Lord’s views on fees are well known, and he has our assurance that we will look at the issue very carefully. As we have already said, the level of any fee will be set out in secondary legislation. I think that the noble Lord is making the point that he would like us to develop a thinking process before we get to that and that, between us, we can develop it further before we get to that point. I look forward to discussing the matter with him in the near future.