Energy Bill [HL]

Lord Teverson Excerpts

Monday 24th January 2011 Grand Committee

[Baroness Noakes]

My Lords, we are sticking for the time being with Clause 36(5). I have another suggestion to make. The report that is required under this subsection focuses on property characteristics and on landlords, but it does not seem to say anything about tenants. If landlords enter into a Green Deal scheme, it will mean that the energy bills of tenants will increase and thus tenants’ willingness to pay is an important element which should not be ignored. The theory is that the golden rule will not allow a Green Deal to go ahead if the energy savings do not cover the additional cost of energy bills, but it is less than clear that tenants will see the analysis in that way. They will have different time horizons from, say, owner-occupiers, and almost certainly different appetites for risk. While tenants in the private rented sector are clearly not homogenous, I imagine that significant numbers do not have the ability to analyse a Green Deal and its potential impact on their household finances in their rented accommodation, or whether, even if they could analyse it, they would be comfortable with it.

The purpose of the amendment is to ask the Minister to explain what role the Government see for tenants in decisions under this clause. It seems that they have no existence in the context of a scheme, yet they are the ones who will be paying the energy bills. I beg to move.

[Lord Teverson]

My Lords, I welcome this amendment from my noble friend. It is important that tenants are actually mentioned, which is the emphasis here. The broader point is that although tenants are not a homogenous group, because of the differences that arise in the sector, there certainly will be people who cannot and never will be able to afford their own homes as opposed to more transient people who have not bought a property perhaps, because they are seeking to move on. The group will be different in many ways. I therefore support the idea that the review should try to identify the particular hurdles faced by this group in asking their landlords to make the improvements through the providers of the scheme. It is an important area and one it would be useful to understand if and when the report is produced.

[Lord O'Neill of Clackmannan]

Short-term tenants who are in poor-quality houses and move on regularly are not normally the kind of people who will have the time, let alone the inclination, to enter into such an agreement. They may not actually be involved when it comes to the implementation of the scheme, because there is likely to be some time lag. The other side of that is that the kind of landlords who operate in these areas are often unscrupulous and indifferent. Particularly in big cities, we now have substantial numbers of an almost underclass of people who live on the national minimum wage, are in one job that is lowly paid and get moved on to another and, perforce of circumstance, keep moving. There does not seem to be much consciousness on the part of government that such a group of people exist. I am not certain whether they will really be touched by the Green Deal because of the indifference of the landlord, the difficulties facing the tenant, and the persistence of high energy bills due to the inadequacy of the insulation of the houses—that is the simplest form of improvement that such properties could have. No matter how much encouragement we give either to the tenant or to the landlord in these circumstances, I am not sure that much will happen. We might have to fall back on other forms of remedial action, which might not have the market finesse that the Green Deal is supposed to promise.

[Lord Teverson]

My Lords, I am a landlord—very much in the line that the noble Lord, Lord Best, described of one property, but I thought that I should declare that interest in this debate.

[Lord Best]

I shall just add another statistical piece of information. Some 40 per cent of tenants move within a year of the occupation of their home. In principle, the idea of consulting with the residents of a place before you start doing anything to it is entirely right, but we have a big transient population in the private rented sector. My other point is that, although you could consult the first occupier, the debt is taken on and lasts 25 years. In almost no cases will the same person be there for all that period, and you are not able to consult people further down the line about a decision taken by an earlier tenant. Although I sympathise with the sentiment that one should consult with the tenants, this is possibly impractical.

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[Baroness Northover]

I understand what the noble Baroness is saying. These are all areas which the department is looking at. However, I point out that the Bill already ensures that sitting tenants must give their express consent before a Green Deal can be taken out, so if a tenant feels that it is to their detriment, they have the right to refuse. Similarly, landlords must make clear to new tenants if a Green Deal is attached to a rental property before they sign a contract.

Given that these consumer safeguards are already in place, and bearing in mind what the noble Baroness is saying, I hope that at this stage she feels able to withdraw her amendment.

[Lord Teverson]

I ask the Minister what happens when we have a change of tenancy and the golden rule is met by the first tenant whose energy use is quite high, so it works, but the new tenant is a lower energy user. They may be a smaller family or a smaller household or have a different preference as to how they spend their money. The golden rule that was met by the first tenant might not be met by the second and yet, because there is such a competition for rented accommodation, you will possibly get a position where the incoming tenant, although warned, will just say yes anyway.

I wonder if the Minister could remind us—or me—if there is an opportunity for the Green Deal to be renegotiated at that point or does the higher electricity rate stay the same all the way through? This may be important in terms of this change and whether subsequent families could be put into energy poverty.

[Baroness Noakes]

Perhaps I may clarify the aspect of the review that I was probing. While the consent of the individual tenant to a Green Deal may be required, the point of making sure that this is covered in the review is that if there was widespread tenant apathy or unwillingness to get involved because of the issues that I have raised, there would be little point in going ahead with a regulatory approach, which is what Chapter 4 allows the Government to do. I also suggested that the tenant environment should be properly assessed before we go down the regulatory route. That is why I tabled the amendment.

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[Lord Teverson]

I apologise for having asked the Minister a not particularly helpful question earlier. I want only to make a brief point that relates to this issue, and I should declare that I am a member of a local authority. I welcome the fact that local authorities are being brought back into the frame as well as the recognition that there will be implications at a time of financial stringency but, as the noble Baroness has said, local authorities will want to become involved in this area, and it is really important that they are. However, there is a slight irony here in that I am concerned that sometimes local authorities are unable to control building regulations sufficiently to minimise the amount of work that has to be done on these sorts of deals. If buildings are constructed to the specifications set out in the building regulations when they are first built, the problems might not be as great as they are now. The enforcement of building regulations and standards of insulation is a lesson because where in the past money has been saved in these areas, that has not had a good effect in terms of housing and energy performance standards for the future. I make the point, but it is not necessarily completely relevant to this amendment.

[Baroness Northover]

I thank the noble Baroness for her straightforward amendment and acknowledge her concern about the funding of any additional burdens on local authorities. I can assure noble Lords that should we require local authorities to carry out any new duties, we will make a full assessment of the costs of such actions and how they might be appropriately funded. We are already committed to ensuring that new burdens on local authorities are properly funded to avoid pressure on council tax. With this explanation and assurance, I hope that the noble Baroness will be content to withdraw her amendment.

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[Baroness Noakes]

I shall speak also to Amendments 20Y and 21C in this group. These amendments concern the timing of the regulations that will affect the private rented sector. Currently, the review that is required under Clause 36 has to be published by 1 April 2014, and the regulations that will follow the review, as provided for in Clauses 37 and 40, should come into effect no earlier than 1 April 2015. The effect of my amendments would be to slip all of those dates by exactly one year.

As I understand it, the Green Deal regulations themselves are likely to come into force in October 2012. If that is the case, the review under Clause 36(4) cannot start until October 2013. The report must be published by April 2014, which gives a mere six months. Since Ministers have said that a key element will be the impact of the Green Deal, it is difficult to see whether enough data from the early stages of the Green Deal will be available to reach an informed assessment. Indeed, initial take-up may well be low among the private rented sector precisely because Green Deal providers will target the very much easier owner-occupied sector rather than try to reach this diverse group of private sector landlords with different types of tenants.

A key component of the review under Clause 36(5)(a) is a

“comparison of the energy efficiency”,

of private rented sector properties with that of non-private rented sector properties. The British Property Federation has pointed out that the most comprehensive statistics available on housing are to be found in the English Housing Survey, but they take 18 months from collection to be published. So the review that is going to be taking place in the six months from October 2013 to April 2014 will use data that are considerably out of date and will not reflect the impact of the Green Deal. Therefore, the review, based on heaven knows what information, could lead to regulations being enforced from April 2015, only one year later. Those who are involved in the private rented sector believe that more time should be made available before something as heavy-handed as regulation under this chapter is introduced.

A number of bodies have lobbied for the Bill’s provisions on the private rented sector to be modified. However, none of them has suggested a date as early as 2015. They seem to have coalesced around 2016. It is interesting that the Government’s date is 2015 while those who have campaigned most actively for action to be taken in the private rented sector are content with 2016. My amendments challenge the Government to say why the timetables set out in the Bill are fair and practical. I beg to move.

[Lord Teverson]

My Lords, I am very concerned about the amendment. This is one of the risks of the critical path that we have in the Bill. I accept that because of training requirements, the setting up of everything that has to be done, proper consultation, and because the Green Deal has to work effectively, preparation is crucial and we cannot expect it to start until 2012. That is the Government's expectation. Therefore, we have the whole of this year and some part of next year. It is logical to start the review of the private rented sector by 2013. It will not report until 2014 and therefore we could not precipitately take action until 2015.

I like the direct approach on these issues of my noble friend Lord Dixon-Smith. If the policy is not working for tenants and landlords—which is one of the key areas of policy importance—the amendment would mean that we would have to twiddle our thumbs for four years from when the Bill gets Royal Assent. That worries me. There is logic in the current timeframe. It is questionable whether that is the case in the amendment of the noble Baroness.

If the Bill goes through in its current form, it will be obvious within a year—if we are collecting any data—whether it is working in the private rented sector. Whether or not we have sophisticated analysis, we will have enough data-capture to understand whether it is starting to work. I would be fundamentally concerned, and would not believe it to be the case because of the importance of the programme, if the Secretary of State were just to sit in his chair—I know that he would not do this—and say, “I’ve got to wait until 2014 to test this thing out and see whether I need to do anything else”. Surely that will not be the case.

I could perhaps cope with local authorities not being empowered to take action before 2015, although I am very sceptical even about that timeframe. I ask the Minister to imagine what actions the Government might take, apart from the formal process detailed here, to make sure that the tenanted sector gets a move on. This is my problem with the issue. There are very good landlords. I have nothing against the private rented sector, which is crucial in delivering accommodation to families. However, the Bill’s timetable gives a signal that says, “Actually, guys, you don't have to do anything until 2015. That's when we’ll start to get angry, and until then there won't be any pressure”.

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[Lord Jenkin of Roding]

Perhaps I may add a word or two to the debate because I put my name on the amendment. We spent a good part of this afternoon’s proceedings all agreeing that the Government face a major challenge in seeking to extend the Green Deal or apply the Green Deal to the private rented sector; indeed many noble Lords from all parts of the Grand Committee were stressing the problems that are being faced on this. I agree with that.

Although I have a lot of sympathy for those who say we have waited a long time, we must get on with this. If we try to hurry it forward and bring forward the date of the review and curtail the length of time that the review may take, it will go off at half cock. When dealing with the complexities and the challenge, which I described earlier as enormous when citing the federation, we have to be prepared to make sure that the authorities and all the people who take part in this—the property owners, landlords and tenants so far as is possible—are sufficiently aware of what is expected before one tries to rush forward.

My noble friend Lord Teverson says that by 2013 we will know and have enough experience, but with the greatest respect I do not believe that for a moment. This is going to start pretty slow and the immediate reaction will be people coming along and saying “It’s not happening”, and that we have to have compulsion and the full panoply of regulations. That would be very unwise because it might get the process off in the wrong way.

The Minister has been absolutely right. The Government do not want to go down the road of compulsion through regulation, yet if one rushes the review and starts to make decisions on what is bound to be pretty imperfect and incomplete information, my guess is that is that we will be in greater difficulty than we otherwise would have been. I would therefore urge more caution on this.

The date that my noble friend and I have put on this amendment and the other amendments that go with it are perfectly realistic and I would not agree with the noble Lord, Lord Davies of Oldham, that we could bring the thing forward. That would run straight into the dangers which I have been trying, in my own imperfect way, to point out.

Perhaps I can say to my noble friends on the Front Bench that, if the Government are being criticised for anything, it is that on a number of issues they are moving too fast and trying to do too much at the same time. We are dealing here with a problem whose origins go back many decades. Indeed, in some cases it will be centuries. To try to rush forward and deal with it all in a relatively short time is a potential recipe for disaster. I hope that the Government will get the message that this needs a measured approach with enough time being given for people to consider and make sure that they understand the information that is to come out of the review before rushing to make regulations. That comes back to the very first point I made earlier this afternoon. If you go too fast, it will have the effect of drying up the rented sector. People will throw their hands in the air and say, “Blow that. I am not going to let any more”. That would be a very great pity.

[Lord Teverson]

Perhaps I could respond to that because it is exactly not what I am saying. I am surprised that we have a Bill where the Government are constraining themselves with a “best after” date as opposed to a “best before” one. I am not suggesting that things have to move forward at any time, but that we have within the Bill something that Governments normally try absolutely to avoid, which is a restriction on when they can take action if they feel that that action is necessary. We all hope that the action will not be necessary, although I note that a report of the review must be published by 1 April 2014, so there is a longstop. However, while I am the last person to argue that we should not put the quality and success of this scheme first—that is essential and why the 2012 date is right—what I find difficult to understand is not that we are forcing the Government to do this earlier, but that they could not exercise their own power to move forward if they felt it necessary to do so.

I did invite the Minister to suggest, if the scheme was seen not to be moving forward particularly well, other ways of doing it. I am sure that there are ways outside this Bill that the Government would get on with. Indeed, I know that my noble friend would do that, which may be part of making sure that landlords are aware of the benefits of the scheme, that it exists and can be successful. We have also discussed ways of utilising the local authorities, although not through enforcement because I am sure that the Government would find other ways to respond. What I find difficult is that the Government have imposed a constraint on themselves in the Bill about when the process can start.

[Lord Marland]

I am afraid that I cannot agree with my noble friend Lord Jenkin of Roding. I deeply believe that Government have lost themselves in a mire by failing to proceed quickly on things. We have a massive task ahead of us of reforming so many things in order to meet our commitments and face the challenges that lie ahead, so I am afraid I do not agree that we should elasticate time so that some people in the building sector who have been briefing noble Lords do not feel that they are perhaps being rushed into something.

We are now effectively at 1 January 2011 and we are talking about having a review in perhaps two years’ time. Every professional organisation knows about the Green Deal. People understand the possibilities that are available and a number are already making plans to take full advantage of it and put it into the housing sector. It is therefore not right that the Government should not set down tight timelines to see how this progresses.

I will follow up on the remarks of my noble friend Lord Teverson that we need to find out early on if it is working and, if it is not, what action we need to take to make it work. I will amplify what I said earlier. The start of the review will be at the end of 2013. Some people—I am one—are persuaded that it should be done then, while others think that it should be done later. We must start somewhere and get on with it. We cannot allow the land to lie fallow. We have a massive and monumental task. As my noble friend Lord Jenkin of Roding graciously admitted, this has been sitting around unresolved for a long time. The Government must get on and resolve it. Therefore, I am afraid that I do not agree with the amendment. Perhaps we will discuss the issue further. In the mean time, I ask my noble friend Lady Noakes to withdraw the amendment.

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[Lord Grantchester]

I thank the noble Baroness for seeking that extra clarification. In this clause we are assuming that in a situation where a tenant is holding out against the wishes of every other tenant in a block, he would be required to undertake the improvements as part of the Green Deal. The costs arising would not land on the local authority. The tenant that was proving to be the roadblock would be entered under the Green Deal and would make payments under that deal. I think that this provision is set out in Clause 37.

[Lord Teverson]

My Lords, I admit that I do not understand this amendment. I do not understand what it does. I thank the noble Lord, Lord Grantchester, for his explanation, but I do not see how it relates to multiple tenancies. I apologise and will leave it at that.

[Baroness Northover]

My Lords, I am very grateful to noble Lords for their amendments to Clause 39. Amendment 20AAA would give local authorities the power to carry out improvement works if the landlord defaults, and to recover all reasonable costs for undertaking work. We are not convinced that it is appropriate to grant such powers. Local authorities already have the power under the Housing Act 2004 to carry out works and recover costs in cases where there is an immediate and serious threat to health and safety. We are not convinced that any further power is appropriate or proportionate.

I will address the point about a tenant dissenting. Sitting tenants will not be forced to take on a Green Deal, and secondary legislation will set out how this affects landlords' obligations under any PRS regulations. I hope that the noble Lord will be happy to withdraw the amendment.