Energy Bill [HL]

Lord O'Neill of Clackmannan Excerpts

Wednesday 22nd December 2010 Lords Chamber

[Lord O'Neill of Clackmannan]

My Lords, this Bill could probably more accurately have been called the energy (miscellaneous provisions) Bill. That is the way the Scottish Office, in pre-devolution days when some of us worked in the Augean stables of Scottish legislation, would lump everything together and put the words “Misc. Provs.” after the subject. The Bill is a bit of a dog’s breakfast. It has some important parts and other bits that have been thrown in because it provides an opportunity to do so, and that is quite a legitimate thing. But the breadth of briefing we have already received tends to suggest that it is only the tip of the proverbial iceberg, because many more interested parties will be coming along when we get down to the fine print.

The Bill covers a new approach to home insulation with a novel payment arrangement and its consequent legislative changes. It also seeks to address the private rented sector, which the noble Earl, Lord Cathcart, just alluded to. I do not think that the sector will be susceptible to a single silver bullet. It will require a fusillade of other forms of armoury to deal with some of the problems. The Bill also seeks to address the question of security of supply, along with issues related to low-carbon generation. These are some of a number of issues, and this afternoon we have had a discussion about last week’s Green Paper on market reform. That will require legislation of its own at a later date, and it will be interesting to see how it can be accommodated.

Before I go further, I declare an interest as the paid chairman of the Nuclear Industry Association. Also, I am the unpaid president of Energy Action Scotland and the vice-president of National Energy Action, its English, Welsh and Northern Irish counterpart, which are fuel poverty charities. I am also doing some consultancy work with the Association of Plumbing and Heating Contractors on matters relating to the low-carbon heating of homes through insulation and the possibility of the kind of work that might come out of the Green Deal.

It is fair to say that the largest single part of the legislation relates to the Green Deal. In many respects it could be called paving legislation in that it prepares the way for this, but the noble Baroness, Lady Noakes—in a speech I was surprised to agree with so much—pointed out that unfortunately there is a fantastic lack of detail here. We are being asked to take on an interesting concept that has a number of downsides, which we may be exaggerating through ignorance. However, until such time as that ignorance is corrected it is quite reasonable for us to ask questions about people who have bad credit records, people in rented accommodation, and individuals on prepayment meters, who already face a number of prepayment charges before they actually start consuming any energy. The addition of another charge on them might well be the straw that breaks the camel’s back. That goes for a sizeable proportion, but not all, of those with prepayment meters, because a number of second-home owners have prepayment meters simply for convenience. However, poor and vulnerable households with prepayment meters, often in the private rented sector, face a number of problems.

The biggest problem is their inability to pay. They address the issue at times of the year like this by self-disconnecting. They stop paying. I am not sure how we can get round the question of having additional charges on top of the pre-payment arrangements that are already in place if we are going to be faced with variability in our climate and extreme changes of temperature, which could well happen over the 15 to 20 years we envisage for this payback.

I do not wish to scaremonger, but we need to know a lot more about the vulnerable groups of poor people who rarely have anything approaching the concept of the economic man or women in their minds. I remember visiting constituents who would, when they could afford it, have an electric oven on, with the door open, in order to try to warm a kitchen that did not have proper central heating or insulation. It was the economics of the madhouse, but it was the only way in which these poor folk could keep themselves and their children warm. Usually this was done with considerable danger to the family because of the open heater. I make this point because at the moment there will be a number of households across the UK who will be trying this make-do-and-mend approach to keeping their house warm.

In many respects the Green Deal is fine for the people who open the Sunday Telegraph or the Saturday Guardian in order to find the best way of spending their money on keeping warm—the folk who will go to Sainsbury’s because that is what people from their socioeconomic group do when they go shopping. However, the people who go to Lidl and the low-cost supermarkets will not be the most capable of, or interested in, dealing with such opportunities. It is unfortunate that Warm Zone and Warm Front are being set aside in the way that they are because there is a case for them.

There is a division in this House between the left and the right because some of us believe in planning and economies of scale; some of us recognise that individuals are not always the best basis for social amelioration or the improvement of our infrastructure. It makes sense to seek out economies of scale and I am concerned about that.

I am also concerned about the electricity company obligations. This is a misnomer because they are consumer obligations paid for by us as consumers. The energy companies merely act as agents and take in money to do a job that we pay for. At the moment, the environmental improvements—which most of us recognise as being necessary—amount to a kind of poll tax to the tune of £80 per household. This and the additional costs of a number of things in the Bill are going to be financed in much the same way and we need far greater reassurance on this.

I know that informally the Minister has indicated that he will do his best but we have to continue putting on the record that it is not enough for us to sign blank cheques in the form of secondary legislation, the definition and specifics of which we know little about at present. The social impact will be much greater on the most vulnerable households in our country than on many of us who can afford to pay the extra charges on our electricity and gas bills in order to do our bit to save the planet or set an example to the rest of the world. I make this point not because I want to see the scheme fail—in a number of areas and districts it will be a most attractive proposition—but because it would be wrong for us to assume that it is the only proposition that should be considered.

We have also in the Bill to consider the issue of security, particularly of gas supplies. In the last debate in which I spoke on this matter, I think I asked the noble Baroness, Lady Wilcox, to respond to this issue but we never got a real response. What I want to know is this. We are talking in terms of providing incentives. We know that we do not have enough by way of gas storage facilities, but it is surely incumbent on the Government to come to a conclusion on what would be a desirable objective for us to incentivise companies towards. We are not in the same position as France and Germany in terms of gas supply. Although we are net importers, we import on a far smaller scale than many other countries and we do not need the 80 or 90 days’ supply that they have. However, it would be useful if the Government could give an indication of what was needed, so that we could say that this level of incentive would be necessary only until we got to that level of gas reservoir and storage facilities. It is incumbent on the Government to give us some indication of that if we are to set in place a system of incentives or subsidies, call them what you will.

As I said, the Bill covers a number of elements and I should like to make one point on behalf of the members of the Nuclear Industry Association. We welcome the Government’s proposals in that section of the Bill. They are modest; in effect, they give legislative effect to the agreements that are arrived at after lengthy consultation with the appropriate parts of the nuclear industry. I put it on the record that the industry is happy with this. Obviously, the fine print will need some scrutiny but, if the agreements that were arrived at can be dealt with in the manner that is anticipated, I do not think that there will be any problem.

This Bill contains a number of innovative and imaginative approaches, but let us not forget that for a lot of people the saving of the planet is only a secondary consideration after keeping their homes and their families warm. We cannot afford to forget that. I want to see the planet saved and I am prepared for us to make sacrifices, but I do not think that the Government’s rather simplistic approach is likely to be either effective or socially just.

--- Later in debate ---

[Lord Marland]

Well, thank you for those very unnecessarily hostile remarks. Obviously, the noble Lord has been deaf to anything that I said at the start of this wind-up. I notice that he was one of the few who has not attended any of the opportunities to have briefings or discussions on this document, and chooses to take up our time on this particular issue, which is not relevant to this Bill. If he wishes to discuss things outside the context of this Bill—as I said earlier, and I shall repeat it, if he would not mind listening—he is entitled to do so, and he is entitled to ask for a debate on it himself. As I said earlier, we are perfectly happy to do that.

If I may, I shall go back to the substantive issues on the Bill. A lot of time has been taken up in this House in the past few days, and I think that people want to get on to other things in their life. To say that I have been unnecessary and not listening is a most unfair remark.

As I think I said, consumer protection is at the heart of this. The OFT will be fundamental to ensuring that best practice carries on, and through the Committee stage we shall enjoy noble Lords’ support. I was grateful to the noble Lord, Lord Best, and others in what they said on the rented sector, and the encouraging words coming from the associations that he mentioned. The noble Lord, Lord Teverson, and the noble Earl, Lord Cathcart, and the noble Baroness, Lady Noakes, also referred to that matter. Clearly, we want to encourage the rented sector to embark on this and embrace it with open arms. The noble Lord, Lord Best, suggests that it will do; clearly, if it does not want to utilise the market practices, we will have to review the provisions in 12 months and then we will have to use powers to ensure that it does. Cracking that is one of the most difficult areas of the Green Deal.

The local authorities issue mentioned by the noble Baroness, Lady Maddock, the noble Lord, Lord Teverson, and others, is largely a matter for the Localism Bill, which involves authorities going back to the local authorities and enhanced authorities. It is to their benefit to do something like that. They have a number of incentives to do this through carbon-reducing programmes that they have to adopt through government best practice. That in itself should be an incentive.

Fuel poverty, one of the biggest issues with which the Government currently have to grapple, was raised by the noble Lords, Lord McFall and Lord Lawson, and others. It is a critical issue. Clearly, there are a number of measures. Fuel poverty has exponentially increased year on year since 2004. We must reverse that trend. The Green Deal is part of the attempt to do so, along with all the other measures that I mentioned in my opening speech and, of course, the warm home discount, which will provide £250 million, rising to £310 million by 2015, to encourage people out of fuel poverty. As your Lordships know, we are going to conduct a review of fuel poverty to get into the detail and solve this terrible trend for those in great difficulty.

Incentives were mentioned by a number of noble Lords. There are incentive schemes. This is a free-market programme so the incentives will come from within the market. The noble Baroness, Lady Parminter, will know that councils have the opportunity to incentivise programmes through 60 schemes. We will be looking forward to them doing so.

The noble Baroness, Lady Parminter, also mentioned a level playing field, as did the noble Lord, Lord Grantchester. Through all our energy and endeavours, we are trying to get competitiveness into the market so that we can establish a level playing field. That is fundamental to this programme.

The noble Lord, Lord Jenkin, raised, among other things, Warm Front and how it interacts with the Green Deal. I am delighted to say that Warm Front has been fully subscribed early in the current year with the money that was made available. In 2011-12 £110 million will be available and a further £100 million in 2012-13. During that time, the Green Deal will have fed in and been excellent in its support of the Warm Front which, as I have said many times, was a good attempt at combating fuel poverty but has not worked in itself. We must grapple and deal with that.

The noble Lords, Lord Cathcart and Lord Teverson, talked about their energy bills and the reverse cost thereof. I undertake to review this during this process because it is an extremely good, fundamental point.

On specific points, the noble Lord, Lord Grantchester, said that there was a cap of £6,500. There is no cap. The golden rule will in itself impose a restriction on the amount that the house can utilise. He also asked a reasonable question about interest rates. We obviously have no control over interest rates, but are developing a model and will, through Committee, have developed a model into which we can build interest rates.

I am afraid that noble Lords would not expect me to have an answer on the timeframes of the second Energy Bill. Getting a timeframe for any Bills at the moment seems quite difficult. I thank noble Lords for their support in getting us to where we are today.

[Lord O'Neill of Clackmannan]

The Minister has gone some way to answering our concerns about the cash limits and the amount of money. Can he confirm that boilers can be part of the Green Deal, or are we talking almost exclusively about insulation measures?

[Lord Marland]

The golden rule is that it generates energy efficiency. It is not intended, as I understand it, that boilers are part of that. Boilers were part of Warm Front, so there has been a lot of activity in that regard.

The noble Lord, Lord Grantchester, refers to deep geothermal, as do, unsurprisingly, the noble Lord, Lord Teverson, and others. We are exploring a licensing scheme as we speak. I hope to return to that subject in Committee. It is a very valuable and useful way forward.

The noble Lord, Lord Teverson, raised the issue of water. We will support the reduction of leaking, provided it can be demonstrated that it reduces the energy cost to the household. He mentioned issues relating to the accreditation framework, as did the noble Lord, Lord Grantchester. I think I dealt with several of those but the devil will be in the detail. With their permission, I hope we will go through that quite extensively in Committee.

The noble Baroness, Lady Finlay of Llandaff, offered the very good suggestion of an alarm system, which I will take away and consider as a valuable issue. I am grateful for her support on that.

My noble friend Lord Jenkin of Roding raised several points. First, who pays for the assessment? This is a market-led endeavour. We would expect a lot of it to fall within the promotional incentive of the people who are going to supply it. The most important thing is that the Government support those who are needy and cannot pay for it themselves. That will be done through an ECO or other function. I am glad my noble friend also mentioned EPCs because I have instigated a review of these. I would like to keep my powder dry until the review is finished. However, by the time we go through the Committee stage, we should have had the full review. I will give further details of that as it goes on. EPCs clearly need a great deal of looking at to make sure that they are fit for purpose. Who bears the cost of a consumer default? A consultation process on that is going on at the moment. It may live with the providers of the Green Deal or the energy companies themselves.

I agree with the noble Lord, Lord O’Neill, that we have not had a big initiative on gas storage due to factors I mentioned previously. To slightly embarrassingly blow my own trumpet, I signed the planning permission for a 15 per cent increase in the nation’s gas storage, which had been sitting around waiting for a new Government. We have taken keen action on that, which we need to increase, although it is not our primary concern because we have the most sophisticated terminals in the country for receiving gas. They are also the most flexible, so we can get gas from various supporting operations. Twenty per cent of our supply still comes from a Norwegian network and we still have a diminishing 50 per cent here in the UK.

The noble Lord, Lord McFall, posed the question of how Rupert Soames would like to be remembered. As he is a friend of mine, I feel he would like to be remembered as the CEO of a business that got into the FTSE 100 and generated great employment not only in Scotland but in England. In fine Churchillian tradition, he has achieved a great deal.

We seek to reform planning, which the noble Lord, Lord Hunt, referred to, by bringing more direct control—and therefore quicker decision-making—over such matters as onshore and offshore wind back into the ministerial department so that they can then be dealt with quickly and efficiently.

The noble Baroness, Lady Maddock, referred to HECA, which came from a Bill that she triumphantly took through the Commons in 1995, although she no doubt worked on it for some time before that. HECA was indeed a very good measure that served a great deal of purpose. However, time has moved on dramatically in this area and there has been much consultation on the subject. The consultation carried out in 2007 indicated that a change was very much on the cards. I am grateful for the support of the noble Baroness and for her advice on consulting various people, including ACE. I understand that ACE feels comfortable that our proposals will be a good follow-on to the great work that she carried out, for which we all owe her a great deal.

The noble Lord, Lord Giddens, fed me some interesting stuff. We all learnt about the Jevons paradox—apart from the noble Lord, Lord Lawson, who explained the point to me while sitting beside me, for which I am very grateful—which my officials tell me we take very seriously. However, as I had not heard of the paradox beforehand, noble Lords will not have expected me to know that. We build in a substantial discount for estimated energy savings from energy efficiency in all our impact assessments to account for increased consumption. Nevertheless, significant net savings still occur even with this conservative assumption.

Job creation, new jobs, net jobs and the renaissance of our manufacturing industry, which the noble Lord, Lord Giddens, and the noble Lord, Lord Hunt of Chesterton, raised, are absolutely fundamental. We believe that 100,000 new jobs will be created through the installation industry. That will appeal to the noble Lord, Lord Giddens, as an economist.