Energy Efficiency and the Clean Growth Strategy

Steve McCabe Excerpts

Thursday 8th March 2018 Westminster Hall

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Walker. I congratulate the hon. Member for Eddisbury (Antoinette Sandbach) on her efforts to secure the debate. I find myself in agreement with many things that she and the hon. Member for Wells (James Heappey) have said.

We can hardly claim that our country has been a model of consistency in its approach to energy policy and energy efficiency over recent years. Changes from one Government to the next, and even significant changes within Governments, have come thick and fast, all of which has led to a rather unsettling period in our approach to the subject. I recall a series of parliamentary questions that I tabled only to try to ascertain when and how the Government would publish and then respond to the Bonfield review. It was as if I was trying to get blood out of a stone.

The review was finally published in December 2016. While I acknowledge that this Government seem set to embark on a particular course of action on energy efficiency and clean growth, there has been a lot of time lost and it is still not clear to me how the Government will achieve some of their ambitions. To the best of my knowledge, there has not yet been any real opportunity properly to scrutinise the proposals set out in the clean growth strategy. That is one reason today’s debate is so welcome.

The recent report by the independent climate change think tank E3G has highlighted the fact that public investment in energy-efficient homes in England has fallen; I think the figure I saw was that it had fallen by about 58% since 2012. That seems to flow from the coalition Government’s decision to end the Labour Government’s Warm Front scheme, which offered support to poorer households for better insulation and things such as boiler upgrades. Of course, we also experienced what I can safely call the disaster that was the green deal. According to E3G, Wales now spends twice as much as England per person on insulation, Northern Ireland three times as much and Scotland four times as much.

In my own region of the west midlands, fuel poverty is particularly acute. We have the highest level of fuel poverty in England, with about 13.7% of households—roughly 315,000 homes—classified as fuel-poor. The newly appointed Metro Mayor for the West Midlands combined authority has recognised the importance of carbon emission reductions and clean growth in his aims and objectives for the area. I am interested to see what he will do, when he comes forward with his plans, to translate those into tangible results.

My understanding—I am grateful to the Sustainable Housing Action Partnership for a very helpful briefing—is that there are a number of encouraging activities, especially at local authority level, attempting to build on previous initiatives in the west midlands, with the aim of achieving a breakthrough in demand for wholesale investment in high energy-efficient housing stock and other energy improvement and retrofitting schemes. I think the hon. Member for Wells referred to some of the things he had seen in Birmingham on his recent visit. However, SHAP is clear that, for real progress to be made in this area, there needs to be a strong promotion of housing as infrastructure, which is the very point that the hon. Member for Eddisbury made in her fine speech.

Indeed, SHAP actually looks favourably on some of the things that the hon. Member for Wells said he had seen in Scotland that had impressed him. It points out that that is exactly what they do in Scotland: energy efficiency is considered as infrastructure. A long-term commitment to energy efficiency schemes there seems to be leading to improved, high-quality planning, design and delivery schemes. There are things around that we could learn from, but they require some obvious courses of action: clear messages from the Government, access to investment, a long-term commitment and the seeing of these projects as infrastructure projects.

Energy efficiency is obviously a key part of the Government’s wider decarbonisation plans, as well as being one of the better ways to tackle fuel poverty. I hate to think what will happen when fuel bills land after the recent cold snap, and I wonder what we will learn in the coming months about the people who suffered during that period because of their fears over fuel poverty. I was grateful to the Minister for her clarification on the gas scare story, but one thing it exposed is how reliant we in this country have become on gas and how much of a need there is for greater diversity in our energy supply.

Other hon. Members and I are pleased to see the Government reaffirm their support for the EPC band C target for fuel-poor homes, and indeed their proposals to extend that to all rented homes. It is also good to know that the energy company obligation—ECO—will continue until 2028. However, we would all be helped immensely if the Minister put a little more meat on the bones. Is there an implementation plan to ensure that the band C target for all homes by 2035 will actually be achieved? What particular steps will the Minister take to achieve the band C target for social housing and private rented homes? What are her thoughts on phasing out high-carbon heating systems in homes? I would also like to know what is to be done to incentivise able-to-pay homeowners to make the necessary energy efficiency improvements to their homes; other Members have mentioned that issue.

[James Heappey]

I did not talk about the able-to-pay market, but I wonder whether the hon. Gentleman has heard about companies that are starting to look at providing heat as a service? The consumer defines comfort, and the company then delivers that comfort, but the company takes responsibility for delivering energy efficiency into the consumer’s home because that is how it makes its margin when providing heat as a service.

[Steve McCabe]

I have heard about a scheme of that nature, but I have to confess that I do not know very much about it; I would be interested to learn a bit more. We definitely need to think about how we both improve energy efficiency and make it affordable for people who can afford it on paper, but who we know in practice can often find it difficult.

[Antoinette Sandbach]

One of the big problems is that many of those measures need to go in when back-to-the-brick restoration or work is done in the home, because putting in solid wall insulation internally requires re-wiring, re-plastering and many other things. There is therefore a need to incentivise homeowners who are making changes to their home to do so at the right time. I am not certain that I see that being incentivised by the Government at the moment.

[Steve McCabe]

I certainly agree. A lot of the low-hanging fruit has been picked and we are moving to a different level of problem, which I think gives us all the more reason to come up with practical, realistic incentives for that purpose.

As I say, it is good that ECO will continue until 2028. However, it is estimated that, to meet the 2030 fuel poverty target, the scheme requires funding of about £1.2 billion per year, as opposed to the current proposal to keep funding at about £640 million per year. I am curious to know how the Minister thinks she can meet that target with a projected funding shortfall of roughly 50%.

A further concern about ECO is that it is essentially a regressive funding mechanism. It pays for installing efficiency measures in fuel-poor homes by increasing energy bills across the board, which negatively impacts low-income customers who do not themselves benefit from the scheme. It seems analogous to the arguments about the cost of the smart meter programme, in that the cost of that is spread across all bills but without all people gaining the same benefits. That is something I have been looking at with some interest for a while now.

The hon. Member for Wells was looking for a way to vary the funding, and he talked about what might be done with the winter fuel allowance. I agree with the UK Energy Research Centre, whose recent report recommended that the environmental and social levies, including ECO, should be funded through general taxation rather than increased energy bills, which they claim would save the poorest 10% of households £102 per year while the vast majority of people would see no change to the amount they pay for environmental and social levies.

[Claire Perry]

This is a very interesting question, and I intervene to address things that I am not sure I will have time to come to at the end. This point has come up a couple of times, and I say two things to the hon. Gentleman. First, bill payers and taxpayers are generally the same people; we pay out of our pockets for both. Secondly, the problem we all have, as he will know, is that, regardless of which party is in power, it is difficult to hypothecate taxes for particular measures.

Some might argue—I mean no disrespect to our wonderful civil servants—that the Government are not the most efficient deliverer of such schemes. I will talk in closing about the reforms to ECO that we want to bring forward. However, getting energy companies, which know who the customers are, to target that money effectively and to commission and deliver what are often very valuable energy-saving measures for our poorest and most fuel-poor people seems to me a far more efficient way of delivering what we all want, which is people not living in fuel poverty.

[Steve McCabe]

I will certainly not argue with the Minister that the Government might not be the most efficient deliverer of schemes. I obviously concur with her on that.

My point to the Minister is that general taxation is usually graduated to some extent, whereas a figure applied to bills across the board is effectively a flat-rate tax. In that way, it has a regressive impact, which is the point I was making. I am certainly open to other ways of looking at this, and I hope we will hear from the Minister—I hope there will be plenty of time to hear it—that there are other ways that this can be looked at, and that the Government are open to them.

In its response to the clean growth strategy, the UK’s Committee on Climate Change said that an ambitious energy efficiency action plan for able-to-pay households is urgently needed, as well as a robust policy framework including incentives and firm commitments. It also recommend that we need some concrete proposals in place by 2019 if we are going to make real progress. I will be interested to hear the Minister’s response to those points.

I want to mention a couple of other things. The committee also says that action is needed in the private rented sector and that stronger regulations are needed. As the hon. Member for Eddisbury says, we need to find ways to incentivise homeowners to improve the energy efficiency of their homes. Fiscal incentives could include council tax rebates, cutting VAT on energy efficiency measures or a stamp duty rebate. As early as 2005, the Energy Saving Trust published research on the use of fiscal incentives involving council tax and stamp duty, and since then many other organisations have developed thinking on how fiscal incentives for energy efficiency could work, so there is not exactly a shortage of potential levers. I agree with the Minister that the process is not straightforward, but quite a lot of things could be considered and it would be good to hear where the thinking is going.

I would recommend that, alongside the fiscal incentives, the Government start to encourage other schemes. We should look again at the idea of zero or certainly reduced-rate loans, taxpayer-funded grants and mortgage-linked cashback schemes, to which I think the hon. Member for Eddisbury referred.

Something in which I am interested and that requires exploration is equity release schemes. They might be a promising vehicle for energy efficiency, because they would allow homeowners to withdraw some capital from their home for improvements that they would need to pay for only when or if they sold their home. Those schemes are considered suitable in particular for older, equity-rich homeowners—perhaps the kind of people the hon. Lady had in mind when talking about the scale of work that would be done.

Those people own quite a significant proportion of the country’s housing stock. Of course, they do not necessarily have money readily available for improvements, but they do have considerable equity. The Government should build on the work being done in Scotland. I would like to see an attempt at least to pilot an equity release scheme in England, and I would be interested to know whether the Minster is thinking about that.

The private rented sector has some of the worst properties for energy efficiency in the UK. Despite targets being introduced seven years ago to bring all rented properties up to EPC band E by 2020, 6% of private rented homes are estimated still to be in bands F or G. That equates to about 280,000 residences, which are often occupied by the poorest families—people who are forced into choosing between eating and heating. Shockingly, cold homes were found to be a bigger killer across the UK in 2015 than road accidents, alcohol or drugs.

The Department for Business, Energy and Industrial Strategy is introducing new minimum standards—from April, I think—stating that no home can be rented out if it is below EPC band E. However, the regulation includes a “no cost to the landlord” principle, meaning that if the landlord says that they cannot afford to make improvements or that they cannot get access to the energy company obligation scheme, they do not have to do that. I do not understand the rationale for that loophole. I ask the Minister to reconsider the matter, especially in the light of the questions about the availability of the ECO scheme.

As well as setting targets, the Government need to provide effective legislation and regulation, ensure that the financial frameworks are in place to incentivise able-to-pay households and ensure that private landlords are obliged to invest in their properties. It seems to me that there is a degree of agreement across the House on these matters. If we saw some progress on them, we could have much greater confidence that the Government would achieve their ambitions, and the twin aims of decarbonisation and energy efficiency, with the knock-on effect on the fuel-poor, would be things on which we could realistically expect to see significant progress.

--- Later in debate ---

[Drew Hendry]

The hon. Gentleman makes a very salient point. It is important that we encourage these measures, especially for people living in poor households, because they are less likely to take this up off their own backs. A focused programme and looking at how we incentivise this rapid uptake for poor households is very important.

[Steve McCabe]

I agree with the hon. Gentleman and others about the potential of the smart meter programme. Does he concede that at the moment the problem is that it costs households? They do not know how much it is costing them, because the Government will not release those figures, and we do not know how much the Data Communications Company is costing. At the moment, while the potential is there, we have a programme that looks as though it is not on track and could lead to an inflation of energy bills, rather than savings for people.

[Drew Hendry]

That is something to be aware of. I thank the hon. Gentleman for raising that point and look forward to the Minister’s response.

The hon. Gentleman mentioned home insulation, which must be taken forward much more rapidly—I know I am using that word a lot today, but it is important because this is somewhere where we can make a real difference very quickly. In Scotland, as he pointed out, there is four times the progress on insulation. I make that point because it is important to thank the people, in particular in organisations such as Warmer Homes Scotland, who have been on the ground, working with consumers and making the breakthroughs by talking to people and persuading them to take on the new measures. If any hon. Member in the Chamber or anyone else wants to look at that, they will see the fantastic work being done.