Energy and Climate Change Committee
Oral evidence: Home energy efficiency and demand reduction, HC 552
Tuesday 19 January 2016
Ordered by the House of Commons to be published on 8 December 2015
Members present: Angus Brendan MacNeil (Chair), Rushanara Ali, Glyn Davies, James Heappey, Matthew Pennycook, Dr Daniel Poulter, Antoinette Sandbach
Questions 185-269
Witnesses: Lord Bourne of Aberystwyth, Parliamentary Under-Secretary of State for Energy and Climate Change, and Ben Golding, Deputy Director, Head of Strategy and Finance, Home Energy Directorate, Department of Energy and Climate Change, gave evidence.
Q185 Chair: I welcome Lord Bourne of Aberystwyth to his first meeting of the Committee since the election. For the record, will you please introduce the officials accompanying you?
Lord Bourne: Yes; this is Ben Golding from the home energy directorate.
Q186 Chair: Thank you. Lord Bourne, do you have any brief opening remarks before we begin our questioning?
Lord Bourne: As a Department, we have now been through the spending review and we had the reset speech from the Secretary of State in November setting out the Department’s priorities in this Parliament. Having been through the very successful climate change conference, we are moving into calmer waters and setting out priorities for this Parliament. It is in that context that we are able to share with you our thoughts and our vision for the rest of the Parliament.
Q187 Chair: Thank you very much. What are the long-term plans for creating a stable energy efficiency policy framework, and what is your vision? Is there a framework and what does it look like, especially in the light of the Green Deal and zero-carbon homes plan being scrapped? Do you agree that there is a policy vacuum on energy efficiency in the UK at the moment?
Lord Bourne: Obviously, energy efficiency feeds in to all our aims as a Department. We remain wedded to the three aims that the previous Government were also wedded to, of ensuring that we have security of supply, affordability and low carbon footprint—ultimately zero carbon, following Paris. To give some specific statistics for this Parliament, we set out in the manifesto that we aim to have insulated a million additional homes in this Parliament. That is a specific in the manifesto that we are very much wedded to.
There are also measures in the manifesto to ensure that we deal with fuel poverty, which is on a downward trajectory in England, having fallen since the previous year. It remains a challenge in Wales and Scotland, where it is going up, but there are measures to bring that fuel poverty down still further. We have got 2.35 million households in fuel poverty: that is unacceptably high, even though it is on a downward trajectory and even though the fuel poverty gap is narrowing. That, again, is something that energy efficiency will help us with.
Do I accept that there is a policy vacuum? You will not be surprised to hear that I do not. Certainly, we are moving into an area where we are looking at a much more competitive market; for example, we believe that subsidies more broadly are not needed, or not needed in the same way, so we are looking to a competition-driven market. We have far more energy suppliers, for example, than previously: it was six, it is now 24. That is something we should rejoice in. We are hoping that competition will deliver some of the benefits that we all want. However, I accept that it will not be just that: we need regulation, specifically on the zero-carbon homes. That is to give a respite, really, to concentrate on another area of Government activity, which is the need for more building. We may revisit that; we are looking at other measures.
We are looking at regulations on boilers, for example; we have regulations on the private rented sector in relation to energy, which will be helpful, and we certainly do not rule out regulation. So I do not accept that there is a policy vacuum, but there are certainly challenges which we are moving towards, on fuel poverty. We have got a good story to tell, but there is much more that we need to do. Energy efficiency helps us deliver, not just in terms of helping the fuel-poor, but it will obviously help us with the trilemma, as we call it in the Department, of those three objectives.
Q188 Chair: Thank you. You mentioned fuel poverty a number of times; would you say there is a link between fuel poverty and Government subsidies of technologies? Do you agree that the more the Government subsidise technology, the more it adds to fuel poverty?
Lord Bourne: Sorry, what are you thinking about more specifically?
Chair: Do you agree that any subsidies the Government are putting in to technology in the energy area are adding to fuel poverty?
Lord Bourne: I do not see a connection there, to be honest. I think that fuel poverty is linked to poor housing; very often, it is linked to being out of work, whether unemployed or at home with disability or illness. I think there is much more of a causal link there. In this Parliament, we are hoping to link ECO much more specifically to fuel poverty, so that we ultimately have just one measure on ECO, which is a fuel poverty measure, in 2018. I believe that by concentrating resources there, we can help our other aims of low carbon, affordability and security. All those can come together, at the same time helping the fuel-poor. I believe that we are doing that not just through ECO—it will be measures-driven, of course, which in many ways is more desirable—but also through the warm home discount, which, although it does not drive the measures that we need to reduce carbon, will be necessary, because whatever else happens, people will still have heating bills that fuel-poor households might not be able to pay. As I said, the reformed ECO, which we are now concentrating on and developing, will help us tackle fuel poverty.
We aim to tackle the severely fuel-poor first. There are some people in fuel poverty, and obviously some people in severe fuel poverty. We want to prioritise them, because it remains a serious challenge. As I said, we are having some success in bringing that down, but certainly much more needs to be done.
Q189 Chair: Thank you. I am pleased to hear that you do not see a link between subsidising technology and fuel poverty. That is what the Minister of State, Andrea Leadsom, told us in the Chamber last night. In Hansard, c. 1237, she said that the Opposition “need to understand that the more we subsidise technologies, the more we add to fuel poverty.” At the time, I found that a bit baffling.
You recognise in your evidence to this inquiry, Lord Bourne, that energy efficiency can help reduce fuel bills, reduce greenhouse gas emissions, support security of supply and promote health and wellbeing. Do you therefore agree that energy efficiency is a national infrastructure priority?
Lord Bourne: Energy efficiency is certainly a priority for the Government; I am not sure I would necessarily term it infrastructure, but it is certainly a priority. As I have indicated, it was a priority for us going into the election, and it remains a priority now. It informs and helps deliver low-carbon, affordable and secure energy; all those three go together. It is a priority, but I am not sure I would term it infrastructure.
Q190 Chair: It has been made clear to us that cross-departmental collaboration is vital in order for energy efficiency policies to be successful in future. How are you working with other Departments to optimise energy efficiency policies? I am thinking particularly of the Department for Transport.
Lord Bourne: Since becoming a Minister six long months ago, the very first thing that has surprised me is the silo working nature of Whitehall. That is not said in any party political sense; it is just a factor of life, and it is probably a factor with all Governments. There are things that I would have thought were the prime responsibility of the Department of Energy and Climate Change that lie elsewhere. You mentioned transport, Chairman. That is certainly important in terms of low-emissions vehicles, electric vehicles and so on, and we are working with the Department for Transport in those areas. That committee is attended by a Minister from my Department on a fairly regular basis to work through this and look at some of the issues relating to it, most notably the need for batteries and storage if we progress down that route, as we are doing.
Transport is certainly a Department that we must work closely with; we must also work closely with the Department for Communities and Local Government. We mentioned zero-carbon homes, better boilers and so on. Some of those responsibilities lie with that Department, of course.
Q191 Chair: Are you involved in any cross-departmental meetings with those Departments?
Lord Bourne: Yes, indeed. As I said, they are happening on a regular basis with the Department for Transport. They happen with DCLG, both formally and informally, to look at the measures that we need to take to ensure that we comply with our carbon budgets, which apply to heat and transport. That certainly does happen.
Q192 Antoinette Sandbach: I want to come back, Lord Bourne, to a comment that you made in your opening remarks. You said that to provide respite in the home building market, the zero-carbon homes standard has been abandoned. In terms of energy efficiency, how do you see building homes that do not comply with those standards and that may later need to be retrofitted as achieving the low-carbon and fuel-efficient vision for the future, particularly for the fuel-poor? If they move into households that do not comply with those standards, aren’t you just creating a problem for the future?
Lord Bourne: It would be a mistake to think that houses are being built without any requirements at all. There are fairly strict building regulations as we speak, and of course they have to comply with those, so, as it were, it is another tightening of the screw or the ratchet. I don’t think we’re piling up a problem in the way that your question perhaps suggests, but what I would say is that as a Department we are very keen on looking at new possibilities.
I have recently visited in Baglan, which is just outside Port Talbot, a very interesting project called BAPS. I don’t normally like acronyms but this one describes what it does—buildings as power stations. These represent an almost exclusively British supply chain. The cost of the housing is not great, so it fulfils some of our aims in relation to house building. And they are not just zero carbon; they are putting electricity back into the grid.
Q193 Antoinette Sandbach: What are you doing in terms of liaising with the Department of Communities and Local Government around building standards?
Lord Bourne: We are looking at this particular project with DCLG and also with the Welsh Government. It is exciting; I hope we’ll be able to pilot it. I don’t understand the science of it, but it is extremely effective. So, British jobs, and it helps with housing, energy efficiency, fuel poverty and all parts of the agenda. We are working on that, along with DCLG.
Q194 James Heappey: Apologies for bouncing around, Lord Bourne, but I’d like to pick up on Angus’s last question to you about cross-departmental working. When the Secretary of State came to see us last, she implied that there was a cross-departmental group that met and that was focused on the delivery of carbon reduction and on climate change targets, but when we pushed she was reluctant to share with us the composition of that group, its terms of reference, how often it met, etc. Are we to assume from your answers to the Chairman’s questions that actually that interdepartmental working is on a more ad hoc, as-the-need-arises basis?
Lord Bourne: No. I don’t think you should assume that. I have certainly attended a meeting that was not at all ad hoc and that looked at the issues of cars. I think I am right in saying that DCLG meetings also happen on a fairly regular basis.
Ben Golding: The Secretary of State was referring to a group that does meet regularly. It is driven by the carbon budgets process, which, as you know, is set under the Climate Change Act and involves all the Departments that you might expect: DECC, DCLG, the Department for Transport and the Department for Environment, Food and Rural Affairs, as well as the Treasury, the Department for Business, Innovation and Skills and others central to the—
Q195 James Heappey: Does that group have a name?
Ben Golding: It is informally referred to as the interministerial group on carbon, so it isn’t a formal Cabinet sub-committee but it is set up to support cross-departmental working, and that is something that’s done regularly, and particularly when there’s a carbon budget process coming up, because you know we have to set the fifth carbon budget this June.
Q196 James Heappey: That is useful to know and with the Chair’s endorsement, perhaps we might ask that the Department sends us details of the composition of the group and its terms of reference, so that we might know what is happening and might therefore be able to hold it to account in due course.
Ben Golding: We can certainly provide a note on the governance of the carbon budget process.
Q197 James Heappey: Specifically the composition of that group, its terms of reference and how often it meets, please.
Lord Bourne: I don’t see an issue. I am just concerned—it’s above my pay grade—if the Secretary of State says that we can’t. Let me speak to her. I don’t want to cause an internecine war in the Department, but I can’t see a problem. Let me have a word with the Secretary of State and if it’s possible we certainly will.
Q198 Glyn Davies: It is the first chance I have had to speak to you as Lord Bourne, I think.
Chair: Says the future Lord Davies.
Glyn Davies: That’s enough!
I just wanted to ask about the pay-as-you-save principle of the scheme, in particular the Green Deal. I remember speaking to the Minister five years ago, when this was being introduced, and it was going to be bigger than the sale of council houses. It was anticipated that it would completely transform the whole way in which we looked at energy saving. It was a failure, or I’ve been told by many people that it was a failure. Why was it a failure? The Secretary of State has told us she’s got some ideas about how she might reactivate this and take it forward. Can you give us any idea about what that might be?
Lord Bourne: First, it is fair to say that it hasn’t been as great as the sale of council houses and that the take-up of it was minimal; it didn’t represent good value for money. The Green Deal Finance Company, of course, is now not taking on new plans. Green Deal assessments are still happening, so individuals who want a Green Deal assessment can get them. That is still happening, but a lot of that is happening for energy company obligation reasons, not for other reasons. So it is more appropriate to look at that in terms of ECO rather than in terms of Green Deal. Obviously, a major focus—something like £640 million a year—is the actual cost, although it is energy supplier-led, for ECO. That remains a massive part of our armoury in dealing with fuel poverty and energy efficiency. The warm home discount is another £320 million per annum.
Green Deal—we want to look at the able-to-pay side of things, where obviously the costs will be less because the payment will be by the household. We are looking at ways of possibly trying to incentivise that. The Green Deal did not work, but we are studying ways it could be incentivised: possibly some stamp duty abatement, something on council tax or something of that nature. We are looking at that as to what we do. There is a gap there, and we need to do something, but our main thrust at the moment is through ECO and tackling fuel poverty at the same time as tackling energy efficiency. That is really the priority.
Q199 Glyn Davies: The Secretary of State said that this was wrapped up in the spending review, which we are now well past. Can you be a bit more definitive about the Secretary of State’s thinking? We have talked about possible stamp duty or council tax options for a long time. Is there anything specific coming out of the Secretary of State’s thinking since the spending review, which is what we were led to expect?
Lord Bourne: First, on the spending review, the savings on Green Deal were not great. We just did not think it represented value for money. The costs of it were something like £6 million a year—a few million pounds a year. In terms of the overall budget, they were fairly minimal; it just did not make sense to carry on with that. As you rightly say, it is nothing like the sale of council homes.
In terms of looking at the possible future landscape and possible incentives and so on, it is something on which we are surveying opinion to see what is the nudge that is needed, because the Green Deal did not work. What nudge is needed? Is it in terms of an incentive against taxes that are not necessarily terribly popular, like stamp duty or council tax, or is there some other way we could move forward? Whatever we develop will clearly have financial consequences, and therefore there will have to be Treasury buy-in, but it is at a very early stage of thinking at the moment. As I say, the main thinking is how we recast ECO, in particular, and to some extent the warm home discount, and how we alter the priorities there for helping the fuel-poor. That is our No. 1 priority in addressing the energy efficiency side of things.
Q200 Glyn Davies: The former chief executive of the Green Deal Finance Company was talking about the infrastructure that has been built up for the Green Deal, and thought it could be reactivated and used again. Is the Department looking at pursuing that?
Lord Bourne: Fair question. The Green Deal Finance Company is up for sale. There is some interest in it, and we hope to have concluded that certainly in this calendar year, and possibly in this financial year. There are possibilities associated with the sale, and there is some interest in it.
Ben Golding: What Mark Bayley will have been setting out is that the Green Deal framework remains very much in place, so there is nothing at all to stop someone investing further in the Green Deal Finance Company or, indeed, in another company operating in that space. The decision we took back in July was not to invest further public money in the GDFC itself, but the framework is there, and, as the Minister says, it is perfectly possible for it to be reactivated by anyone.
Q201 Glyn Davies: Clearly, everybody, including the Department, is going to be looking at the lessons learned over the last five years from the establishment of the Green Deal and, essentially, its failure. How would you describe the lessons you have learned? It is interesting, because knowing the lessons you have learned means that those lessons are likely not to be repeated in the future. That is the general area we are looking at. What is your take on that?
Lord Bourne: Two things. First of all, we do need to take time to see how we fill that gap for the able-to-pay market. We need to take longer rather than shorter, and probably to move away from some of the wild hyperbole that this is going to be the greatest thing since the sale of council homes, but also to be wise. It can make a difference, but of course independently of this, the able-to-pay market is doing things—insulating its own homes, and so on—without Government intervention. There are things to be done but, in a sense, I am much more concerned, and I think the Department is, to do something about the fuel-poor who can’t pay and who need their conditions improving, which will also help us to meet our goals on carbon targets, affordability and security.
Q202 Chair: Just to put some yardstick on the failure of the Green Deal, was it a failure because it didn’t meet the hype and Government expectations and hyperbole on council home sales, or was it a failure in its own terms, day to day? Given what you have said about other companies looking to continue it or to finance it in some way, it seems that it wasn’t a total failure.
Lord Bourne: I think that is a fair comment. I do not think it is a failure, but expectations were perhaps ramped up. If we let the market do this and move in, they may make a success. You are right that it has to be cast in more modest terms than was perhaps previously the case. I do not think it is transformational in the way that was perhaps suggested.
Q203 Chair: This may be a risky comment, but do you think it could be seen as a political failure, or a political embarrassment perhaps, given the hyperbole that surrounded it earlier?
Lord Bourne: I don’t really see it like that. I am not here for political knockabout, whoever was responsible—you could say it was X or Y. We learn lessons, and not every Government plan goes the way it is meant to go. There are relative successes and relative failures. We did the appropriate thing by pulling back and saying that somebody else can take over the Green Deal Finance Company and move into this space.
Chair: Okay. That is a fair answer.
Q204 Dr Poulter: Pursuing a related line of questioning, and following on from what you have just said about some of the problems with the able-to-pay sector accessing ECO more effectively than low-income households, what is your analysis of why that problem developed?
Lord Bourne: I wasn’t suggesting that the able-to-pay were able to access ECO more easily than low-income households. I am not sure that is the case. ECO, at the moment, has a focus. One of the measures is very much fuel poverty, and the other two are more open and tend to focus on people who are unable to pay. We want a much clearer focus on ECO. My point about the able-to-pay is that, at the moment, post the Green Deal Finance Company, we need to look at a comprehensive programme to help the able-to-pay move into the territory of getting Government help and assistance in saving on their energy bills and paying it back in that way. That is something we are looking at, but our focus at the moment is to help the fuel-poor more specifically than we have previously through ECO.
Q205 Dr Poulter: Thank you for clarifying your position. The Committee has heard that ECO has allowed the able-to-pay sector to access funding that was primarily designed for low-income households. What is your analysis of that evidence?
Lord Bourne: ECO operates, as you know, through the energy supplier. It is an obligation that is placed on the energy suppliers to develop a number of interventions on which a cost is placed in terms of boilers, insulation, cavity walls and so on. Pragmatically, it may make sense if they are doing a street of houses. If British Gas, let’s say, are doing it, it is not necessarily just their own customers—indeed, it might not be their own customers—but it may make sense for them to do the entire street. The vast majority of the street they choose will probably be people in fuel poverty. There may be a couple who are not in fuel poverty, but to leave out those houses would not make sense. That can happen incidentally, and we have to be a bit pragmatic and sensible about that.
We are very much looking at ensuring that the focus of this measure in 2018, when we will have one measure—the reformed ECO goes through a transitional year from 2017 to 2018—is fuel poverty-centric. That measure will probably still allow the sort of situation I describe to happen, because it makes pragmatic sense, but we want to minimise it as much as possible and ensure that those people who really need assistance get it through a measure that helps us to achieve our other goals. The financial assistance is important, and of course it is still necessary, but it doesn’t help us with carbon reduction.
Ben Golding: May I add a little detail to the Minister’s comments? The way ECO is structured at the moment is that it has a couple of different sub-obligations. One of them, affordable warmth, is particularly about the least able to pay and the most vulnerable. Through the various elements of ECO, more than 730,000 low-income and vulnerable homes have received help over the current period.
But there is another element that is more focused around driving carbon reductions, and obviously it is agnostic as to who receives that help. It depends on what we have obligated the companies to do, but as the Minister says, the policy intention now is to refocus the money, increasingly, so that the whole thing is focused around the fuel-poor and the least able to pay.
Q206 Dr Poulter: And are you confident that the new measures and the sub-obligations, which are very often where you get into the detail underneath the high-level objective, will be focused enough in the future, to avoid a dilution of the resource and move away from the resource going just to more vulnerable and fuel-poor households?
Lord Bourne: Often, the fuel-poor households are the ones that will also make the greatest contribution to our other aims, of ensuring that we are able to reduce the amount of energy that is being used, which will help with the carbon footprint, and of security and affordability. For example, insulating cavity walls will make a massive difference to the fuel-poor, but it will also help with our prime objectives. So these are the households we should be helping, not just from the fuel poverty angle but also because of the aims of the Department.
Ben Golding: On the question of whether we are going to get the targeting right, it is inevitably challenging. What we want to build on is what we have done already through the warm home discount. A significant proportion of that money is allocated using Government data and enabling energy companies to match available data, for instance from benefits, to locate people who meet the criteria. We think that there is some very good data in various bits of Government that would help us much more accurately identify people who are fuel-poor, both in terms of low income and high cost, and we would like to look at using that more effectively for ECO.
Q207 Dr Poulter: That is interesting, because we have heard very much the opposite—that obligated companies do not have sufficient data to allow them effectively to target homes in need of support. It goes back to that joined-up Government picture, which I am going to come back to in a second. I struggle, from my own experience in Government, to understand where the data has come from. Where do you get the data that underpins the energy obligations?
Lord Bourne: This is a strange situation, because I understood from speaking to a DWP Minister in the Lords, Lord Freud, that all the data is here. I said, “Can we use it?” and he said, “Well, I think so”. It isn’t as straightforward as that, as you might expect. Some of the data we can use, but with some of the data we need legislative backing to be able to use it in Energy and Climate Change when they hold it in DWP. It seems crazy to me, but that is the legal position. So what we are looking at now is how we can best achieve that, because the Government hold data that will help us to identify fuel-poor households. Some of it we can use; some of it we can’t use without legislative backing.
Q208 Dr Poulter: On that point, my understanding of the situation of using data is that when you have potentially personally identifiable data, you have legal obligations. You have to go through a legal process—a legislative process—to allow the use of that data. But generic population-level data can be shared between Departments, so if you say that data is available I wonder why it has not been shared before now.
Lord Bourne: When I say it is available, it is there—
Dr Poulter: Is there a legal reason why it cannot be shared?
Lord Bourne: There is.
Dr Poulter: No, with respect, there is not. I have also been through this with DWP from a health perspective. Population-level data, and generic data that can be linked in at an area level, can be shared. It is with data that might identify individuals that there is a legal challenge and a legal problem, which is linked to individual people. I just wonder why that population-level data does not seem to have been shared more effectively, to target the schemes.
Lord Bourne: I think that probably that is, in essence, the problem. We are able to use some data, probably as you describe, but some data we cannot, and we do need to be able to identify where the fuel-poor households are. My reaction was exactly like yours, but having sat down with lawyers over some period and having had many discussions on this, I think we do need the legislation to identify the households we need to help.
Ben Golding: We do. That is absolutely right. Population-level data we can and do look at, which is how we know a lot of the characteristics of the fuel-poor, but the challenge comes from needing to be able to work with energy suppliers with data that does potentially identify individual households, so that they can say of their customers or those they target, “Is this particular household likely to be fuel-poor and therefore eligible for measures?” To enable targeting accurately, you need to get right down to that household-level information. For that we need additional legal powers.
Q209 Dr Poulter: I think that is a debatable point, given the evidence we have had. One of the key issues you have just highlighted, and which has been picked up before, is the issue of interdepartmental working. I completely understand the point you made in relation to an earlier question about the challenge of having an informal ministerial working group. By its very nature it needs to be responsive, and putting across an advance agenda is very difficult to do. However, what formal regular meetings—picking up your earlier point about the intrinsic link between fuel poverty, poor housing, illness and people being out of work—have you had thus far with your counterparts in Health and also with DCLG, looking at bringing some of these streams together and sharing some of the data in those Departments?
Lord Bourne: To be honest, discussions have tended to be a bit ad hoc. They have happened. If I can pick up on the Departments separately, in relation to DCLG, I have certainly had ad hoc discussions about the boiler regulation, for example, which will help deliver our objectives. In relation to Health, it is integral to the way in which we are approaching the fuel poverty issue. We already have a scheme that is operational and identifying, I think, £1 million-worth of money that is bid for by local authorities, who are able to refer people who are in fuel poverty. In addition to some of the data mechanisms, we are looking at the ways in which we can have referral from doctors’ practices and possibly other professionals—that is built into it. So that discussion is going on, but there is not a formal body bringing all those people together in one place, because they are different discussions that we have to have with different Departments. It is happening, but it is not in a committee.
Q210 Dr Poulter: Finally on that, because what is clearly absolutely key, from what you have said and some of the frustrations you have outlined about where some of the targeting has not been effective, is more effective interdepartmental working. Do you feel that having some cross-cutting departmental priorities or a more formalised process for driving this agenda and linking with other Departments would be helpful?
Lord Bourne: I am not sure that I do, to be honest. If we look at the DWP issue, DWP are very willing to share what they have got with us. They made that very clear indeed. They approached us on it at one juncture, I think, saying, “Couldn’t we do this?” So I don’t think there are particular problems that would be solved by having another structured committee. They are quite separate issues, where we have bilateral discussions with the Department concerned. I am not saying it would get in the way, but I don’t think it would necessarily help.
Q211 Antoinette Sandbach: A particular group has been identified as missing out, and that is the rural fuel-poor. They miss out on combined electricity and gas pricing because they don’t have access to gas. Very often, the properties that they are living in have solid walls, so they can’t have cavity wall insulation. Is the Department looking at a specific programme to target the rural fuel-poor, many of whom may not be in receipt of benefits? They may be working fuel-poor.
Lord Bourne: That is a very fair question, and as you can imagine, with my background, I have also been concerned to ensure that we have fair treatment for the rural poor, who are very often off gas grid as well, as you rightly say. When you look at the profile of the fuel-poor, it is sometimes quite surprising. It is not necessarily the preconceptions that people would have. They are family-based rather than pensioners, for example. They are often in work rather than out of work and rural rather than urban. They are both. I am not saying that there are no pensioners who are fuel-poor or that there is no urban poverty; of course there is. But we are keen in recasting ECO—this came up in the discussion that we had—to ensure that there is appropriate protection for the rural poor. We have not talked about heat networks, but they are often a way of delivering cheaper energy. I am keen to ensure that we do appropriate things there, and some of the—
Q212 Antoinette Sandbach: But clearly, with heat networks, they are often isolated properties and difficult to connect. Are you looking at a specific ECO scheme that would deal, for example, with solid wall insulation in rural areas, where it is a real issue?
Lord Bourne: We are certainly looking at solid wall insulation, not least because it is low-hanging fruit. A lot of loft insulation has already happened, so cavity wall is going to be a focus, and it is often where the worst fuel poverty is. We are not looking at a particular separate measure for rural communities, but we are looking to ensure that however the system is designed, it is equitable and fair to rural areas. I am keen to do it, and that is true of the other Ministers. We are determined that that should happen, and in early discussions, that has been built into the terms of reference that we are considering for how this is developed.
Q213 Antoinette Sandbach: Given the data issues that you have described, if you are relying on DWP data and you have identified that this group of rural households does not fit the same profile, how will you identify and target those households under ECO?
Lord Bourne: I am not sure I accept the premise. Perhaps there is evidence of this, but I am not sure that I buy it just on the basis of what you have said—the idea that there are more people in rural communities than in urban communities who do not access benefits that they are entitled to. You seem to be suggesting that people entitled to benefits in rural communities are not accessing them. Am I right that that is what you are saying?
Antoinette Sandbach: No, what I am saying is that often they are quite low-waged. The average wage in areas such as north Wales, for example, might be—
Lord Bourne: We should be able to identify that with the data when we have the legislation, through the universal credit system. That should be possible.
Ben Golding: Could I mention both something in the targeting and a couple of things that are already happening? It is worth mentioning that in the current energy company obligation, we introduced a rural sub-obligation to provide a minimum level of delivery to rural areas. As far as we can tell, suppliers are performing well against that. Another thing we have done through the £25 million central heating fund is to introduce a rural uplift when assessing which local authorities should receive it and which projects to support. Again, there has been a deliberate targeting there.
On identifying households, you are right that DWP data isn’t everything. Some of what we are doing is looking at both the low income dimension and the high cost dimension. There is data out there in other parts of Government that will let us get much better proxies for which properties are likely to have high costs. That is about property type, age, number of rooms and whether it is solid wall. Looking at the future and how we might use data and targeting, we are interested in that dimension as well. Again, we are looking at taking the necessary powers to use that dimension of the data.
Lord Bourne: Could I also say in answer to that question that the fact that we are looking at the deepest, most severe fuel poverty first will often help people in rural areas who are off-grid? Some people are off-grid in urban areas, but it is particularly the case in rural areas. That prioritisation, which is built into the system, may also help.
Q214 Chair: Just for information, British Gas has said in a late submission to the Committee that the search cost for an eligible household under the home heating costs reduction obligation element of ECO can be £400 or more. That is just the cost to them of finding people. I want to probe a little further. I have heard in a constituency surgery, and in evidence, that the stop-start nature of ECO mechanisms is causing problems for the supply chain, for jobs and for companies in knowing how to gear up. Is it going to be there? Is it not going to be there? There is a sudden rush; there is a big gap. There seems to be something wrong within the mechanism of delivery. You have a laudable goal, but something is wrong with the mechanism. Do you recognise that there is a problem in the heart of it, between the goal or ambition and the delivery?
Lord Bourne: First of all, I accept the need for certainty and coherence. I would not necessarily say that we have achieved that in all programmes, but with ECO, we have a very clear timeline. The present system is there until 2017; we then have a transitional year, and we are issuing details of how it will operate. Then we have how the system continues from 2018 onwards. I do not think there has been a stop-start nature to this programme. I would say this, wouldn’t I, but in truth the transition has been organised rather well on ECO. I do not think there is a stop-start nature to what we are doing.
Ben Golding: We are totally agreed that a degree of certainty over a greater period is certainly desirable. Having confidence of ECO out to 2022 now, and a warm home discount out to 2021, should certainly help.
Q215 Chair: Before going to Matthew Pennycook, I make a final plea. People in rural areas who are delivering ECO often say that the carbon gains are so great sometimes that the bureaucracy they have to submit prove it is almost a greater burden. They could almost insulate their houses with the amount of paper they have to provide in determining what they have done. I bring that to the attention of your Department and maybe those further down the food chain who are asking for that level of proof, because it is happening regularly. You would imagine that, after a few iterations, that would be learned within the bureaucracy.
Lord Bourne: Fair point. On that, there is an initiative led by Matthew Hancock in the Cabinet Office on regulations, so we are having to scrutinise every element and form that will need to be justified. Some, of course, can be, but that point is well made.
Q216 Matthew Pennycook: May I press you a bit further on the new supplier obligation or, as you have termed it, the reformed or recast ECO? I am picking up on a couple of points made by colleagues, and by Dr Poulter in particular. The deficiencies of ECO, which you have discussed, have been known for some time. Could you give us a sense of why? The average man or woman on the street might ask why that has been allowed to continue, or will be allowed to continue up to 2018. Is it the problems of targeting and the legal issues around data, or is it that the Department knew about these deficiencies for a long time and in theory could have geared up for a change earlier?
Lord Bourne: I don’t want to rewrite your question but I don’t accept that ECO is necessarily like that. I think ECO has been a big success; it is just a question of how we can improve it. ECO has delivered an awful lot of improvements to people’s housing. We have seen that fuel poverty is dropping, and a lot of that must be the influence of ECO.
The incoming Government want a greater focus on fuel poverty than we have had previously. I am not sure what the discussions were prior to this Government taking office but when we have discussed this we have been very clear that we want the focus on ECO to be very much to deal with fuel poverty. That is why it is being recast. I don’t think it would be right to see ECO as a failure. It is a system that has operated successfully. It has flaws, perhaps, that can be improved, but I would not want people to think that ECO has been a failure. I don’t think it has, if you look at the evidence. That is why we are essentially recasting and reforming it rather than throwing it out. It has essentially delivered very well in terms of improvements, but, yes, it could be improved.
Q217 Matthew Pennycook: Could you give us a bit more detail about that recasting and reforming, in the sense of what happens in the months and years ahead? In the spending review we were given a clear commitment that in April 2017 we would get a new supplier obligation. You have fleshed that out this morning by saying that there will be a transitional year and a single fuel poverty measure by 2018. Can I read you something that British Gas submitted as part of the supplementary evidence to the Committee recently? I would like your comments on this: “We plan our delivery of ECO measures up to two years in advance and currently have no clarity over arrangements for the carry-over surplus ECO measures into either a one-year extension or a longer-term measure.”
There may be similar concerns around the clarity of what is coming from the installation industry. Could I give you a chance to flesh out what happens in 2017, and on to 2018?
Lord Bourne: First, the measures we will be looking at will be very much the same as the measures they are taking now in terms of boilers, cavity walls and loft insulation. I don’t think that changes. What changes is the householders who are going to benefit from that. Increasingly, the focus will be on the fuel-poor.
In fairness, they don’t know the details of the scheme, but the great thrust of what we are doing will remain the same. It is just the people who will benefit from it will change—I think I am right in saying that.
Ben Golding: Absolutely. They are quite right that they need as much notice as possible in order to plan delivery, and the details of the scheme matter for that. The carry-over arrangements they refer to are something that have been done in the past between schemes to incentivise them to have a smooth delivery profile. That sort of level of detail is something that we will be looking at. The intention is absolutely to put out a consultation as soon as we can—certainly by spring—to set out where we are going on ECO and to provide that level of certainty and detail.
Q218 Matthew Pennycook: On the new supplier obligation, Lord Bourne, you said that the general thrust of what is coming up is known. As we come to the consultation, were other mechanisms or arrangements examined and discounted in terms of a refinement or a recasting of ECO, or will the consultation include several options or variants of how it might operate?
Lord Bourne: We looked at other possibilities, but against the background that we were clear that we needed and wanted to do something on fuel poverty. It increasingly made sense for that to be the focus. It already is the focus, as we have seen, of one of the strands of ECO, which has been to help the fuel-poor with measures. Perhaps British Gas has misunderstood the nature of what we are looking at and perhaps we need to be a bit clearer with the suppliers as to what we are looking at, but we are not looking at throwing the baby out with the bathwater, as it were. We are looking at reforming ECO and the supplier obligation, but only in terms of the households that will benefit. Previously, as we have seen, the fuel-poor benefited, but they were not the only ones to benefit. We want to make it much more the norm that it is the fuel-poor who will benefit from the reformed supplier obligation.
Q219 Matthew Pennycook: May I press you on the costs from two directions? One is the potential cost reduction for the household bill payer, and the other is the costs of the scheme as announced by the Chancellor. We are told that the new supplier obligation will cost Government £640 million a year through the suppliers. That is a £300 million reduction. Given the aims that you want the new supplier obligation to achieve in terms of a more efficient targeting of the fuel-poor, does the programme have the level of funding it needs? From what you have said this morning, it may need to do more and be smarter about targeting, which may require more resources. Does it have the funding it needs?
Lord Bourne: I don’t think you will see a Government Department that does not want to spend more money on things that are worth doing, but obviously we can only operate within the financial envelope of the spending review. That £640 million a year is still an awful lot of money. As you rightly say, it is the energy companies that are spending that, and that is reflected in the levy control framework. It is a significant sum of money, and it needs focusing on the fuel-poor.
You are right that it is a reduced budget, but it is still coupled with the warm home discount, which costs £320 million a year. It is close to £1 billion a year that we will be spending on fuel poverty programmes just in that narrow instance, and that is without looking at some of the other programmes associated with that and without looking at smart meters, which we have not touched on but which will also help with energy efficiency and reduced bills at the same time. If someone were to offer us more money, I am sure that we would be pleased to receive it, but we can only operate within the financial envelope that we have.
Q220 Matthew Pennycook: I have a final question, because I know other colleagues might want to come in on this section. The figure of £30 has been floated as the potential reduction to the average household bill. That is what has been put out there. In the evidence we have received from stakeholders, there was an incredible amount of scepticism about that figure. Can I just ask what the evidence base is for that figure?
Lord Bourne: This is not specifically related to fuel poverty. You mean across the board, the savings from policy measures—
Q221 Matthew Pennycook: No. My understanding—this is what we were told—is that the new supplier obligation would result in a £30 annual reduction in the average household fuel bill.
Ben Golding: Yes. Inevitably it uses a lot of fairly complex modelling, but it is a £30 reduction relative to the counterfactual. The average household will be paying £30 less on their bills than we estimate they would have been were the current set of policies not there.
Q222 Matthew Pennycook: So it is policies in the round—the Warm Front scheme and the supplier obligation—
Ben Golding: It is the overall net impact.
Q223 Matthew Pennycook: Not just the supplier obligation on its own?
Ben Golding: Yes, I believe that is right.
Lord Bourne: In relation to the amount that fuel-poor households will see their bills reduced by, it will be much more than £30 a year. I think the figure is £300. That is what I seem to remember as being suggested. One other thing is that, by doing all that, we are hoping to achieve people moving up energy certificates. If you have a very poor energy certification—that is E, F or G—you are more likely to be fuel-poor and your heating costs are certainly going to be higher. Everything points to doing what we are doing, and we are in the happy position, as I say, of delivering on our other aims as well, in relation to carbon reduction, affordability and security.
Q224 Matthew Pennycook: Just to get you on the record, are you confident that this package of measures will meet your fuel poverty targets?
Lord Bourne: We are very confident that it will reduce the number of fuel-poor people. That is already happening. As I said, in England we have seen falls in fuel poverty over the past couple of years and the gap narrowing. That is not true in the other home nations, but in England it is falling now and we are confident that this will lead to it falling further.
Q225 Chair: Surely, you would like your policies to meet your targets?
Lord Bourne: That is what I am saying, yes.
Q226 Antoinette Sandbach: You talked about the energy certification from GDFC. Many of the fuel-poor are in rented accommodation. Tenants had the ability to veto any home improvements on energy efficiency under Green Deal. What are you doing to look at rented accommodation and how you can get the landlord sector to improve housing in respect of tenants?
Lord Bourne: You are right, a considerable number of fuel-poor homes are in the private rented sector, though, again somewhat surprisingly, the bulk are owner-occupiers. When you look at the stats there are some surprising things, but in relation to the private rented sector, of course, there is a regulation, which we are looking at, because it requires improvements to be made by landlords, but there is a gap because, at the moment, it is through the Green Deal Finance Company. We are having to look at how we recast that so that there is a continuing obligation on landlords in the rented sector to make these improvements.
Ben Golding: On the point about the tenants’ right to veto, the way the regulation operates, it does not include, in itself, the right for the tenant to veto changes. What it does not do is change the terms of the agreement between a tenant and a landlord. If an existing tenancy agreement says that the tenant can effectively prevent the landlord making changes to the property, the regulation would not alter that, but it does not create a veto in and of itself.
Q227 Chair: I would like to probe a little further on the supplier obligation from the idea of tackling fuel poverty, particularly because the Committee heard from Dr Rosenow of the Centre on Innovation and Energy Demand who said, “ECO has regressive effects and energy suppliers usually target those properties where they can achieve the highest amount of savings for the smallest amount of money. That is not the fuel poverty sector. So I don’t think energy companies are the best actors to deliver on fuel poverty.”
Following that, Calor Gas said, “Because of the way that schemes like ECO have been designed, where the obligated suppliers have been required to deliver measures at the least cost … that inevitably means that the more difficult, hard to treat houses, which you generally find in rural areas have been missed. That is a particular failure…of ECO.” It is such rural areas that Antoinette is often taking about, and, indeed, I have an interest in.
Citizens Advice said, “There are incentives with the supplier obligations to deliver at the lowest cost, which often means not delivering to people who need it the most. There is a question about whether these policies, ostensibly targeting fuel poverty, are getting to the people who most need it.” From that, is there a problem here, and is this the best mechanism?
Lord Bourne: I think it is the best mechanism. It is true to say that, obviously—I suppose this operates in practically any system—what happens is that the measures that are most easy to execute are done first. We have seen that loft insulation has largely been the focus of insulation up to now. There remains loft insulation to be done, but there is now a lot of cavity-wall stuff. As measures are taken, obviously, the remaining measures will be, perhaps by their very nature, more difficult and more expensive. That is true. What we are hoping to do, as I say, by ensuring that the sole criterion, de minimis, after 2018 is fuel poverty, is to ensure that households that can be identified as being in fuel poverty, either through the data which we are hoping by then we will have access to through legislation, or through referrals from doctors of particular cases that they know about in their locality, will then be prioritised by the energy companies. That will be taken up by Ofgem on our behalf, making sure that the households that are identified are taken forward in that way.
Q228 Chair: The UK Green Building Council said the UK is the only country in Europe that uses a supplier obligation to tackle fuel poverty, but suppliers are not in the best position to do that. I see that as at loggerheads with the confidence within DECC. What other mechanisms have you looked at that might tackle fuel poverty, other than the supplier obligations?
Lord Bourne: One other is the warm home discount, which is necessary because ultimately people are going to have bills to pay. We hope they will be reduced bills, but there will still be a financial outlay. The difficulty with focusing money much more on financial assistance rather than doing a measure is that it does not have the lasting effect that the measure will have on the property and on successive years. I would be interested to discuss with the building associations why they do not think it is more appropriate to focus on doing things to the housing, rather than providing direct assistance. We are doing both at the moment. It is about getting the balance right—I accept that—but I do not think we would want to move away from a system that seeks to improve our housing stock at the same time as providing necessary financial assistance with meeting bills.
Q229 Chair: How much does DECC look outwardly across Europe, given the comment we just heard from the UK Green Building Council about the UK being the only country in Europe that uses the supplier obligation? Does the UK look to successes elsewhere? Do you look to successes elsewhere to see what is working elsewhere?
Lord Bourne: We do, and not just to Europe. We certainly look to what is being done in other countries outside the EU in Europe, and also at Canada and the US on particular measures. On this measure, I suspect we have looked fairly closely at what other countries do. I do not accept the thesis that seems to be put forward by some people that ECO has not been a success. I think it has been a massive success. It is about how we improve it and target it more effectively.
Chair: The emphasis on the fuel-poor and the low-hanging fruit was covered earlier.
Q230 Rushanara Ali: Minister, I want to take you back to the question about data. You mentioned that legislation would be required. What steps have you taken to try and make that happen? What is the timeframe for getting the legislative framework in place to enable you to access the appropriate data to help address the fuel poverty issue that is being affected by the lack of data?
Lord Bourne: A very fair question, if I may say so. As soon as we found out about this, we aimed to put it in the next Energy Bill, and there are discussions going on now as to when that can be forthcoming. Subject to normal parliamentary passage, we look to people here to help with that.
Q231 Rushanara Ali: Had you considered trying to do it in this current Bill? Did you have discussions?
Lord Bourne: We did consider it, but, because of consultation and other difficulties, it would have been too difficult. We did consider that. I remember suggesting it at one stage, but I do not think it was feasible.
Q232 Rushanara Ali: What is the timeframe, then?
Lord Bourne: Over to you people, in a sense. We are introducing an Energy Bill, hopefully, that will have to go through Parliament in the normal way.
Ben Golding: I should probably add that we are exploring any legislative route that would be suitable. An Energy Bill is one possible route. There might be other vehicles. The Cabinet Office is currently exploring data sharing mechanisms, so we have a couple of vehicles. I think it will be a case of as fast as the parliamentary timetable will allow.
Lord Bourne: We recognise the urgency and we are very keen, so whatever legislative vehicle we can use, we will gladly use.
Q233 Rushanara Ali: Your cross-departmental group is not a Cabinet sub-committee. Why is that? Is that because the Government do not see it as important enough to make it a Cabinet sub-committee?
Lord Bourne: I have no idea, to be honest. As long as it gets the job done. I am not sure what the pecking order is on these things. Cabinet Ministers go to it. I do not think the nomenclature matters too much.
Q234 Rushanara Ali: Is there an action plan that follows from that that can be made available to this Committee? We have had quite evasive responses so far. We asked the Secretary of State for information on this. I do not know if it was sent to us. We have asked you today, but we have not received anything so far, so I just wondered whether we could have some clarity. Surely it is appropriate for parliamentary scrutiny that we should know more about what this group does, what powers it has, and what it actually can achieve, given it is not a Cabinet sub-committee. Energy and security policy and climate change are a major and serious national issue, and not getting clarity does not seem to make sense.
Lord Bourne: I undertook earlier that I would go back and see if we can release the information you are requesting—at the outset, I think.
Q235 Rushanara Ali: Would you be able to get some information to us about why it is not a Cabinet sub-committee and what the advantages and disadvantages are of its being an interdepartmental group—a more informal group—as opposed to a Cabinet sub-committee? What steps will you and your colleagues take to try to ensure that happens, because you would have more powers and influence across Whitehall in order to get joined-up policy, given the importance of Transport, Communities and Local Government, and other Departments in marshalling energy policy and climate change objectives across Government? That needs to be worked on. That would give you more influence and more power to do so, and I can’t see why Ministers in your Department are not pushing for that.
Lord Bourne: I will certainly and very gladly get a note to the Committee. Is the point you are pushing specifically in relation to the Committee we talked about earlier that deals with transport, heat and these issues?
Q236 Rushanara Ali: Yes. We asked for—
Lord Bourne: I’ll get you a note on that, if I may. I mean, I’m not sure whether its status as a non-Cabinet sub-committee matters, but I’ll get a full note to you if that’s all right.
Q237 Rushanara Ali: I think it does matter, and it would be helpful to understand better. The Committee has been asking the Secretary of State previously for more information on this—
Lord Bourne: I was unaware of that, but I will certainly get a note to you on that issue.
Q238 Rushanara Ali: Great. Thank you very much.
I just want to turn to the point about the fuel poverty target, and it links to some questions I want to ask about local initiatives. Policy Exchange suggested that the Government would need to spend about £1.2 billion a year—you mentioned £1 billion—in order to meet the fuel poverty target. How confident are you that you will meet the full fuel poverty target, given that there’s a shortfall of finance that independent observers are pointing to versus what budget your Department has to meet the fuel poverty target?
Lord Bourne: First, I think I actually said we were spending £1 billion on those two programmes—
Q239 Rushanara Ali: Policy Exchange is suggesting you’d need to suggest about £1.2 billion. Others have said much more—
Lord Bourne: I was going to go on to say that we are spending some more on other programmes. For example, money is being spent on the central heating fund, and there’s money being spent with local authorities and local communities. I’m not quite sure that we fall as far short as perhaps just combining those two budgets would suggest.
However, as I have said, we are putting a focus there. I think we probably are spending overall close to the figure that you mentioned, but it is coming down in England. It is not coming down in Wales, for example, or in Scotland, so we can’t be complacent about this, but it seems that we’re heading in the right direction with the policy mix that we’ve got.
Q240 Rushanara Ali: And you are confident you’ll meet the fuel poverty targets?
Lord Bourne: Yes—quietly confident.
Q241 Rushanara Ali: “Quietly confident”? You can’t say, “Read my lips: we will meet the fuel poverty target set by the Government.”
Lord Bourne: There are extraneous factors that could affect things. I am not noisily confident; I am confident.
Q242 Rushanara Ali: Great. Thank you.
I just want to move to the question about the lowest-hanging fruit and the energy company obligation. As the Chair has said, a number of witnesses with expertise have said or implied in their evidence that the Government are too dependent on the ECO. Could you say more about what specific action you are taking to encourage local approaches? There have been good examples around the country and elsewhere. What specific steps are you taking to encourage better data sharing at a local level so that we can move forward rather than waiting for legislation to happen, because local agencies will have access to more information about their citizens? What support is your Department giving to local authorities and others in order to make that happen?
Lord Bourne: The inference is correct that almost inevitably local delivery is more effective; it’s trusted, it has the local knowledge and it can react more quickly. We are certainly encouraging the energy companies to speak to local authorities and others to ensure that the action they take in a particular locality is appropriate. We give financial assistance to local authorities in terms of some of the objectives. We have mentioned the £1 million that goes to local authorities in relation to some of the heat networks stuff, local delivery of the renewable heat incentive and so on.
Ben Golding: That’s right; there are a number of things. There is also the £85 million green deal communities scheme, and we announced a further £300 million of support for heat networks in the spending review, a lot of which will be in partnership with local authorities.
Q243 Rushanara Ali: Again, you are going back to the energy companies. What are the Government, or the Department, doing to try to make sure there isn’t a conflict of interest between energy companies’ interests and a local authority that will want to address fuel poverty for the most vulnerable, which is a big issue here? I don’t feel confident—I don’t want to speak for my colleagues, but I don’t think anybody on this Committee feels confident—that your Department is really pushing forward in order to address fuel poverty among the most vulnerable. Can you say a bit more about how you are trying to encourage the energy companies to focus on the most vulnerable in their relationship with local areas? That is an area where there is general concern that we are not making as much progress as we should.
Lord Bourne: You say that there is general concern, but I am not sure that I accept that. I could not have been clearer that the focus will be on fuel poverty. This is being recast: it is one element at the moment, and it will be the single element by 2018. We will have the data by then, subject to the passage through Parliament of the necessary legislation, which I am confident about. We will be speaking with the energy companies. They have to prioritise people who are in severe fuel poverty. The detail is not there yet, but that is our aim as a Department. I would have thought that people would support that. It is fairly clear to me that there is general support across the piece for doing that. I am not quite sure that there is a conflict of interest, because often the energy companies are putting these measures in homes for which they are not the supplier. So they have an obligation to focus on what the rules are, within the financial envelope and within the number of properties that they have to deal with. The rules will be that they have to deliver for fuel-poor homes.
Q244 Rushanara Ali: Our Chair quoted some of the expert witnesses who pointed to the fact that energy companies were more likely to go for households where it is not as complex. You can see why that is happening.
Lord Bourne: That is the existing scheme. I am talking specifically about the recast scheme, for which by 2018 the sole principle will be fuel poverty.
Q245 Rushanara Ali: That is quite a long time to wait. I wish you well with that. Perhaps I can move on to the question of the spending review and the pressures on local government finance. Obviously, on the one hand we all know about and have seen evidence of local authorities doing really great work, regardless of what is happening nationally, but they are under huge financial pressure. Some of the funds that you have mentioned will go some way towards this. What do you think the challenges will be if we try? What further support can your Government give to encourage more local initiatives to drive innovation in order to help reduce fuel poverty?
Lord Bourne: At the moment, as Ben has mentioned, there is the Green Deal Communities Fund, which is helping with heat networks. I will gladly get a list for the Committee of the local authorities that have benefited from this, if that would be helpful. Across the range, some are rural and some are urban, and they are mostly in the north and the midlands rather than the south. We in the Department look at schemes to see how innovative they are, and to see that they are making use of what is available to them in terms of capturing heat, for example, and heat networks. In relation to central heating schemes, again we scrutinise what we can do at a local level. A lot of this is done at official level, but it is signed off by the Ministers and we do scrutinise it to make sure that we are trying to get as much bang for our buck as possible.
Q246 Rushanara Ali: Finally, I want to ask you a question about the Scottish Government’s home energy efficiency programme, HEEPS, and what your views are on that. Do you think that there is any merit in looking at an equivalent for England and Wales?
Lord Bourne: It is fair to say that we do look at, and indeed work with, the devolved Administrations, so there are always lessons to be learned. As somebody from a devolved Administration, you won’t hear me rubbishing what is done in devolved areas. I think that all of us, including in the devolved areas, could always benefit from looking at what is done elsewhere. So it is scrutinised. The focus that we have at the moment for the recast scheme is for 2018. That is two years away, which I accept is a period of time, but we have to get it right. In two years’ time it will be coming in. Yes, we do look at what is done in all three home nations and, as I have indicated, elsewhere.
Chair: I am pleased to hear that view of Scotland. We from Scotland are, of course, here to help. If there is any assistance we can give, of course we will give it.
Lord Bourne: I hope that that goes on the record.
Q247 Glyn Davies: I have only the briefest of questions. We learn lessons through the devolved constitution that we have. To say that we are talking to each other and learning lessons from each other is a standard phrase, but is there any formal mechanism by which the Scottish Parliament and the Welsh Government are meeting the Department on a regular, formal basis, with minutes taken and civil servants present, rather than just learning lessons in a vague sort of way?
Lord Bourne: That is a good point, Glyn. The short answer is that I do not think there is. We do meet up, but it tends to be ad hoc, and we speak on the phone at junctures. Last time we met in any formal way was in Paris, I think, where all the devolved Administrations were clearly represented. I met with colleagues then and we discussed issues. But it is a good point. I will take it away, if I may, and think about it.
Ben Golding: As you might expect, down at official level there are rather more detailed working arrangements. For instance, you talked about the Scottish Government’s home energy efficiency programme. That has a programme board that I sit on as an observer member. We have some detailed working-level arrangements, as you might expect, to keep in touch and share lessons.
Q248 Antoinette Sandbach: I am going to move on to driving demand around energy efficiency, both incentivising and communication issues. One of the Green Deal successes was the Green Deal Home Improvement Fund, which was so effective when the funding was made available that it ran out within a few days because there were so many applications. Witnesses have described to us that that kind of incentive is erratic and short term, even though that one was highly successful. What do you say about that, and what have you learnt from it?
Lord Bourne: The success of the Green Deal finance?
Antoinette Sandbach: No, the Green Deal Home Improvement Fund was a very specific part of the scheme. It was highly successful, and the funding ran out within days. It therefore dealt only with a small amount of demand and it was not a long-term programme. So what have you learnt from the success of that, and what can you do to put in place longer term programmes that give that stability, and the ability for people to access them even if they are not in, say, the first 2,000 applications on days one and two?
Lord Bourne: First of all, as I think I indicated, we need to take some time to consider what we will put in place in relation to the able to pay and the type of scheme you are describing, and whether we will have a cap on what is available; I suspect that we will need to, because it cannot be just demand-led. So we have to come up with something that is financially viable and meets the needs of those people who need some sort of incentive. We are looking, as I say, at stamp duty and council tax as possible levers, but it will take some time, and the priority at the moment is to get the fuel-poor and the ECO measure effective and timely.
Q249 Antoinette Sandbach: I am interested to hear what you are saying about stamp duty and council tax. Some of the evidence that we had was that some of the properties that need those figures are outside of stamp duty—they do not hit the stamp duty threshold. Clearly, if you are an owner-occupier, council tax incentives will help. But if you are in rented accommodation, they will not. So how are you addressing that, given the importance of energy efficiency, in terms both of your carbon budgets and of your fuel poverty targets?
Lord Bourne: Those are very fair points. Those particular incentives will not cover everyone and, as you have indicated, they might not cover some of the homes that we need to get to. As I say, those are only two possible levers, and we are looking at other means and at what triggers people to do this. It is not necessarily financial, or that is only one of the factors, so I think it will take some behavioural discussions to see what we need to do to incentivise action in this area. It might not be just the financial incentives I referred to.
Q250 Antoinette Sandbach: I am glad that you picked up on that, Minister, because we have received the following in evidence: “The focus that we had with the Green Deal on the financial proposition ‘you can save lots of money’ is limited. You’re limiting yourself to a very small segment of consumers, so I believe refocusing the engagement process much more towards comfort, quality of life and the value of your property will be much more effective that just focusing on financial gains.” We had very clear evidence around the messaging of these programmes. What steps is the Department taking to ensure that it is not just around value-for-money criteria, as it were, where the pay-back periods can be long?
Lord Bourne: That is very fair. We are on to that, and we certainly recognise as a Department that it is not just about financial incentive. Comfort clearly applies across the board, whatever the nature of the tenure—whether it is owned or rented. An increase in the value of the house won’t help if it’s privately rented, social housing and so on, so we need to look at it in the round. Work is beginning to happen in this area, but it is not the No. 1 priority in the home energy area at the moment; that is getting ECO right and tackling the fuel poverty issue. That doesn’t mean it is not happening, but it is happening more slowly. I don’t want to mislead you by suggesting that we’ve done masses of work on this at the moment.
Q251 Antoinette Sandbach: That sounds like a football being kicked very far into the long grass.
Lord Bourne: That’s exactly what it is.
Q252 Antoinette Sandbach: That is a pity because, given the support there could be for British jobs and supply chains in the UK, and given the need to achieve carbon savings to meet your climate change targets, if you are pushing it out into the long grass, as it sounds like the Department is doing—
Lord Bourne: I don’t want to mislead you by saying that loads of work is going on, but nor do I want to create the impression that nothing is being done on it, because that isn’t the case. We are looking at it, but if I am asked to prioritise, as I have been fairly recently, it will come behind the ECO recasting, but there is work being done on it.
Q253 Antoinette Sandbach: When do you anticipate looking at it?
Lord Bourne: We are looking at it now.
Q254 Antoinette Sandbach: And making decisions about it?
Lord Bourne: We will probably come out with some discussion later this year. Is that realistic?
Ben Golding: Well, that’s a decision to be taken by Ministers. For the able to pay, one of the key drivers is obviously carbon, which we have talked about in other contexts. There is a legal framework, set by the Climate Change Act 2008, which will require us not only to set the fifth carbon budget this year, but, as soon as is reasonably practicable after that, to set out how we intend to meet not only the fifth, but all the carbon budgets up to it. Obviously, at that point we will need to talk in the round about how we are decarbonising the whole economy and a credible set of things that we might do about it.
Lord Bourne: Antoinette, I would have thought that within this calendar year we will come out with a statement of principles, which I hope goes some way to meeting the very valid points that you are making. In terms of the legislation that is needed—statutory instruments and so on—it will fall behind ECO, if it needs statutory instruments and legislation.
Q255 Antoinette Sandbach: Is this an area that needs encouragement and support for members of the public to install these measures, knowing that there are health and environmental benefits?
Lord Bourne: I accept all that. The point is well made. It may not need primary legislation, but it will almost certainly need secondary legislation. The Department and the Government regard it as important. I will ensure that we have some statement of principles within this calendar year with some sort of timeframe. I think that is entirely reasonable.
Q256 Chair: It doesn’t sound like this is awfully important. We will maybe have discussions later this year, and I would think, therefore, that within the calendar year we will come up with a set of proposals. A supply chain has been developed for the Green Deal, but there is a gap while DECC thinks about the new able-to-pay policy. This is the push-pull, which I mentioned earlier, in action. Here we have a Government Department telling us that it thinks that within the calendar year it may come up with a set of proposals, but what about the people whose jobs are dependent on this and are waiting for some action from the Government? We need a bit of urgency here.
Lord Bourne: There is a bit of urgency, but we have got to get it right.
Q257 Chair: Do we need an entire year to come up with a set of proposals and outline principles? With respect, Lord Bourne, it is January. That is a long, long time.
Lord Bourne: I don’t accept that it is too long, because industry, quite rightly, will want to ensure that we come up with something coherent. I hope everybody accepts that a focus on ECO is important. We are realistic, and I don’t think it is unreasonable that as a Government Department we have to have priorities. The priority at the moment is getting the ECO right. That is not to say we are not doing anything on this and that it is not important, but it isn’t as urgent. I will certainly ensure that we have something coherent that we can publish this year, but the priority, as far as the Department is concerned, has to be recasting ECO.
Q258 Chair: Basically, you have a goal, an aspiration. You want to get there, but the time is lost in the conception of the mechanisms to get there. Sometimes these mechanisms, as we have seen, misfire. You are at A and you aim to go to B, but something happens in between A and B that sends you off to D, E, F or whatever. You are not hitting B as you intended at the beginning. It sounds again as if you are looking for mechanisms, whether it be council tax or stamp duty. Antoinette Sandbach raised the problems with that. You know what you want to do, why don’t you just do it? It seems that most of the time the scrabbling around is for a mechanism to enable you to do what you want to do.
Lord Bourne: First, stuff is happening now. It is not as if people who are able to pay are not making improvements. We have to look at this in context. People are able to get Green Deal assessments. If people are able to pay, they are going off organising insulation, new boilers or whatever, as things stand. I am not saying that we ignore the able-to-pay, but in terms of where the priorities should be as a Government, it seems very clear to me that it should be doing what we need to do for the fuel-poor and ensuring, by those measures as well, that they are consistent, as they are, with providing affordable, secure and green energy. I make no apology for that.
Having said that, we will have a look to see what interventions may help the able-to-pay. I come back to the point that often the able-to-pay are doing just that. They are paying and they are making the improvements.
Q259 Chair: Thank you. Can I take you now to the rented sector? In order to meet the new minimum energy efficiency requirements, some landlords rightly will have to make energy efficiency improvements to the properties they rent. Given that both the Green Deal and landlords’ energy saving allowance have been scrapped, how do you expect them to fund these improvements and will they use this as an excuse to wriggle out of any commitments?
Lord Bourne: You are right to identify that there is a legislative commitment there at the moment and that there is a lacuna because of the Green Deal Finance Company no longer being there. We are working on how we can recast this obligation to make sure that there is no slipping back on what is rightly seen as an important obligation, which has served to improve the quality of the private rented sector. That is something that we are looking at.
Q260 Antoinette Sandbach: Obviously, there was a financial mechanism available through the Green Deal to help landlords undertake these measures. Are you looking at some kind of financial mechanism to support that?
Lord Bourne: It is certainly a possibility. We have mentioned previously that we are in the process of selling the Green Deal Finance Company and there is interest in that, so it may be linked with that; so that is one mechanism. I suspect we probably will have to give some measure of assistance in that way.
Q261 Chair: We heard that the Energy Performance Certificates are unreliable and flawed. What is your view on this and how can they be adapted to provide a sounder basis on which to base energy efficiency investments?
Lord Bourne: Whether they are reliable or not?
Chair: Yes.
Lord Bourne: I think they are in general terms. I wouldn’t say they are necessarily 100% reliable—few systems are. I have had no massive postbag or anybody raising this with me since I have been a Minister, to be honest, about serous faults with the system. There may be one or two that don’t measure up.
Ben Golding: Any system is flawed. We are certainly aware of concerns around Energy Performance Certificates. As you would expect, there are variations in how well they are done. We do hear of some extreme cases. You hear about things like drive-by assessments, as they are referred to, where you don’t really have a proper look at all. That is something we are certainly concerned about.
One of the things we are looking at through the Bonfield review around quality and standards is about assessment, advice and how we improve quality across the board.
Chair: Just for context, it was the Country Land and Business Association that said: “EPCs are widely recognised as being fundamentally flawed and unsuitable for the uses for which they are now being applied… An EPC does not provide a sound basis on which to base energy efficiency investment as is now being required through the PRS energy efficiency regulations”. On that basis, you can see that there are reservations out there about the Energy Performance Certificates and I think it is necessary that DECC are aware of the problems there and thinking about how to meet those gaps.
Lord Bourne: As Ben indicated, we have the Bonfield review, which was set up by the Secretary of State. Dr Bonfield will be reporting in the spring—probably in April—so we will have an opportunity to look at that if he thinks that there is a serious issue. He is looking at standards across the piece, so that would certainly be within his purview.
Q262 Chair: Thank you. That was a very useful answer. What analysis have the Government carried out on the impact on the house building industry of your decision to scrap zero-carbon homes? Last week in the EU Commission in Brussels they were talking about zero-energy homes, but here they were called zero-carbon homes. That aim has been scrapped—what was the analysis?
Lord Bourne: Any analysis would probably be done by DCLG. I am not aware of any analysis that has been undertaken, but if it has been, we can endeavour to share it with you. It would probably be early days to indicate how that has helped to increase house building, which is the aim.
Ben Golding: What I would say is that the estimate of the overall cost on the house building industry of zero-carbon homes would have been around £300 million, so it is not immaterial, but, as Lord Bourne says, it is early days to see the exact impact of the change.
Q263 Chair: It can be argued that today’s costs are tomorrow’s savings. With that in mind, would you be willing to write to the Committee with any analysis and impact assessment that the Government carried out on the scrapping of zero-carbon homes?
Lord Bourne: I will certainly get a note to you on the precise thinking behind that, plus any projected figures, if there are any. You should bear in mind that I do not think they would be in our Department—they would be within DCLG—but I will get a note to you on the position on that.
Q264 Chair: Thank you. I appreciate that. The EU’s energy performance of buildings directive requires all new buildings to be nearly zero-energy by the end of 2020. Now that the Government have scrapped the zero-carbon homes policy, how confident are you that you will meet the directive?
Lord Bourne: We remain confident, as we do in relation to all legal obligations, European and otherwise. It is obviously a legal requirement that we adhere to them and, periodically, we sit down and consider them specifically. I have not looked at that one specifically, but I am pretty confident—I don’t think it is totally zero-carbon, is it? There are de minimis provisions. I don’t think we have any particular legal issues, do we?
Ben Golding: No. The standard is near zero-energy. As the Minister said earlier, the intention on zero-carbon homes was to provide breathing space for the industry, rather than to stop improvements altogether. There were improvements in building standards for new builds of around 30% over the previous Parliament, so we are heading in the right direction and will have the opportunity to come back to that.
Q265 Chair: What was the balance between costs today and costs tomorrow? Or was it for political expediency—today versus any other considerations tomorrow?
Lord Bourne: I suppose there are different policy objectives. There is clearly an issue with house building. I think we would all accept that in this country we need to build more houses. There is also a policy constraint related to meeting our carbon budgets and ensuring that we are carbon-neutral, both for its own good and because of our obligations internationally as well as domestically. But in this instance, to give breathing space to help with the housing programme, that particular argument won out.
Q266 Antoinette Sandbach: I want to come back to the funding of the minimum energy efficiency standards, particularly in the private rented sector. The Committee has received a lot of evidence saying that without the Green Deal, such standards will not be financed. I am sure your civil servants, Minister, will be able to identify that evidence. If the Green Deal mechanism is not going to be there, are you trying to discuss with the Treasury the landlord energy saving allowance? It was abolished in April 2015, but did permit landlords to offset the costs of certain energy improvements to properties. Are you looking at mechanisms like that to incentivise the market again, given that Green Deal financing was the way to fund minimum efficiency standards?
Lord Bourne: As I have indicated, I think we have to look at how we ensure that that obligation remains effective and how it is abided by, which would include—well, nothing is off the table really. We need to ensure that landlords have the means of delivering on that particular obligation. That is very much the departmental aim, so I certainly would not rule that out.
Q267 Chair: I want to raise a couple of final points, Lord Bourne. You said earlier that you do not think that energy efficiency should be a national infrastructure priority and I would like to press you a little further on this, if we can go back to your opening. We have been told that benefits from improving home energy efficiency include reduced levels of fuel poverty, reduced carbon emissions, increased energy security, and improved health outcomes and economic growth. With all those benefits in mind, why is it that you think that energy efficiency does not constitute a national infrastructure priority? Is it not exactly the sort of thing that the National Infrastructure Commission should be looking at, given those four or five huge benefits?
Lord Bourne: I think probably we are looking at terminology. To me, perhaps subject to my age, “infrastructure” tends to mean hard infrastructure. When someone says “infrastructure” to me, I tend to think of HS2, the Channel tunnel or something like that, rather than soft infrastructure, but I am far from saying that it is not vital. If the question is, “Is this vital?”, then yes. It is just that, in my own mind, subject to my own educational background, I suppose, it does not automatically look like infrastructure. But I accept that it is vital, if that is the point being made.
Q268 Chair: Okay. I appreciate the reflectivity there, because one of the things mentioned in a recent visit to the European Commission was that sometimes home energy efficiency can be seen as the fifth, or another, generating area, over and above what we see—it is the unseen generation, if you like, or almost abstract infrastructure. I think it is worth rethinking.
I have a final issue to raise. On the cross-departmental ministerial group, I should point out that the Secretary of State has sent us a note, but that it does not provide answers to all the questions asked by Members today. As such, we will follow it up in writing again—we agreed that privately earlier—but in the meantime, Lord Bourne, I would be grateful if you talked to your colleagues at DECC about how keen we are to hear more details about this group. As you saw and heard, a number of people raised it. In particular, Rushanara made a very good point about the powers that such a group could have, depending on how it is constituted. From that point of view, I would appreciate your raising it among your colleagues.
Lord Bourne: I certainly will. I accept that it is a very important area of questioning. To reassure you that work is going on across Government Departments, I will get you a note on the status of that discussion and try to give as full an answer to the points raised as possible.
Q269 Chair: Before I bring the sitting to a close, is there anything else that you would like to add to this morning’s proceedings? Or are you happy at this stage? “Happy” might be a strange word in this context, but you know what I mean.
Lord Bourne: I should just like to mention—I did mention it briefly—that we should not ignore the impact of smart meters on helping all consumers, businesses as well as families and single-person households, with their energy bills. When this is rolled out, as it will be, they will no longer have estimated bills. All the evidence so far, from the vast majority of households who have smart meters already—2 million have been deployed to businesses and households—is that bills are coming down. That is good news on fuel poverty and across the piece really, including on carbon footprint. We have to realise that that is an important part of the mix as well.
Chair: Thank you for that. Thank you both, Lord Bourne of Aberystwyth and Ben Golding, for your time this morning and for coming to the Committee.
Oral evidence: Home energy efficiency and demand reduction, HC 552 26