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Energy Efficiency

Volume 403: debated on Monday 7 April 2003

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To ask the Chancellor of the Exchequer (1) what fiscal measures or instruments he plans to use to encourage (a) registered social landlords, (b) private landlords, (c) local authorities and (d) other public bodies acting as landlords to install the most efficient heating systems in their properties; [106791] (2)what plans he has to use

(a) enhanced capital allowances and (b) other fiscal measures to assist energy services providers to contribute to the UK's environmental objectives; [106790]

(3) what fiscal measures and instruments he plans to use to encourage the installation of the most efficient heating systems in domestic properties. [106812]

The Government have already introduced a range of measures to promote energy efficiency in the home. Budget 2000 reduced the rate of VAT to 5 per cent. on the grant-funded installation of new central heating systems and heating appliances. Budget 2002 extended the reduced rate of VAT to the grant-funded installation of factory-insulated hot water tanks, micro combined heat and power systems, and renewable energy heating systems in the homes of the less well-off.Budget 2001 introduced 100 per cent. first-year enhanced capital allowances (ECAs) for designated energy-saving plant and machinery.The ECA scheme enables businesses to write-off the whole cost of their investment in designated energy-saving equipment against the taxable profits of the period during which the investment is made. In the commercial sector, energy service companies can claim ECAs on their spending on qualifying equipment. Special rules enable them to claim allowances where, as part of a comprehensive energy services agreement, they provide equipment that becomes a fixture on another person's land in which they have no interest.The Government's Affordable Warmth Programme supports the installation of modern energy efficient central heating systems in low-income homes, including registered social landlord homes. The equipment is leased to the landlord and where the equipment is designated energy-saving equipment. Special rules enable the lessor to claim the enhanced capital allowances. The benefit can be passed on in the form of lower rental charges.The Government consulted on economic instruments to improve household energy efficiency during 2002 and a summary of responses has been published on the Treasury website. In his pre-Budget report in November 2002 the Chancellor announced that the Government will consult further on specific measures to promote greater energy efficiency by households, once the responses to the initial consultation have been fully considered.The Government have also introduced other measures to improve energy efficiency and tackle fuel poverty in the domestic sector, including the Energy Efficiency Commitment (EEC) and Warm Front. This commitment requires gas and electricity suppliers to encourage and assist their domestic customers to reduce energy consumption and to meet targets for quantified energy savings. At least 50 per cent. of the benefits from the EEC currently go to households on income and disability related benefits.Since its launch in June 2000, the Warm Front Scheme, which provides packages of insulation and heating measures worth up to £2,500 to private sector households in receipt of certain benefits, has assisted over half a million households, helping improve the comfort levels and living conditions of some of the most vulnerable members of society.