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Domestic Energy Efficiency

Volume 586: debated on Tuesday 21 October 2014

I believe this is the first time I have served under your chairmanship, Mr Streeter, in what I hope will be a constructive debate. I want to focus on the effect of the Government’s changes to the energy companies obligation on domestic energy efficiency and the local schemes to improve efficiency in my area. I welcome the opportunity to discuss those things with the Minister.

When the ECO was devised, the architects of the scheme aimed to improve the energy efficiency of dwellings exactly like those in Haslingden and Hyndburn. However, since the last time I spoke in the House on the subject, the help provided for home energy efficiency has been significantly reduced. In terms of energy efficiency, Hyndburn has some of the poorest-quality housing stock in the country, with 45.1% of all dwellings built before 1919, which is well above the English average of 23.6%. Terraced properties of that age tend to have hard-to-treat cavities. It is estimated that 90% of such stock has a cavity of some sort that can be insulated, but doing so is costly and requires a subsidy. Because of the age of the stock in Hyndburn, 50.2% of category 1 hazard properties are so designated because of excess cold, and for category 2 hazard properties the figure is a staggering 78.5%. The housing health and safety rating system states:

“If the score produces a Category 1 hazard, for example if there is a high risk of serious health implications”—

such as damp—

“from exposure to cold then the Authority have a duty to take action. If there is a Category 2 hazard, for example there is risk that exposure to cold may have an adverse affect on health, the Authority may take action.”

Hyndburn borough council therefore has a duty to take action on properties where excess cold is a category 1 hazard, but such is the scale of the problem that that legal duty cannot simply be a matter for a small district council.

My constituents face having to live in homes that were designed a century ago, with no thought for thermal efficiency. Hyndburn borough council undertook a comprehensive housing condition survey in 2009, which noted that the rate of thermal comfort failures was 24.5%, compared with an English average of 18.3%. My constituents, therefore, are the very people to whom the ECO can offer most, but Hyndburn borough council’s warm homes energy company obligation scheme has come under threat before it has even begun in earnest. Moreover, the businesses in the green economy in my constituency that were innovating and creating jobs as a result of the ECO are now concerned about their futures. Indeed, 49 of the 149 schemes nationally have been cancelled.

As I have said, nine out of 10 stone terraced properties of the sort that are prevalent in Hyndburn have hard-to-treat cavities that would benefit from the ECO. For that reason, the ECO presented a particularly welcome opportunity to my constituents and to local councils across east Lancashire to tackle insulation, fuel poverty and the UK’s climate change obligations. The most recent Government statistics state that 5,088 households in my constituency are living in fuel poverty, which equates to some 13.1% of homes. On the alternative measure, which is based on the number of households forced to spend more than 10% of their household income on energy, there are 6,712 such households. The fact that 17.3% of households struggle to heat their homes is a tragedy, and it comes as no surprise that the poor live in the older terraced stock. There is a direct link between the age and condition of the housing stock and the high levels of fuel poverty in my constituency.

I raised that issue in the Energy Bill Committee in June 2011, and the then Minister, the right hon. Member for Bexhill and Battle (Gregory Barker), told me that the ECO would

“play a huge part with regard to harder-to-treat properties.”––[Official Report, Energy Public Bill Committee, 14 June 2011; c. 199.]

My question to the new Minister is simply this: what has happened to that aspiration? Is it still an aspiration, or was it only ever an aspiration? My constituents would be right to feel let down by the Government’s domestic energy efficiency policies.

As I have indicated, my constituency has an incredibly high number of hard-to-treat properties. Plenty are in the private rented sector, where there are excessive problems, and many are owner occupied. Thanks to the roll-back of the ECO, my constituents who are in most need will miss out. When that is coupled with the Government’s record on place-based housing regeneration, the outlook is depressing.

Even more galling is that despite the Prime Minister’s claim that cutting levies would save consumers £50 on their energy bills, four of the big six energy companies refused to pass on the full £50 reduction to customers on fixed-price deals. Not only did those customers not receive insulation, but they did not receive that discount, lamentable though it is in comparison with the savings that would result from energy efficiency measures. In January this year, the former Minister, the right hon. Member for Bexhill and Battle, said that for the energy companies not to pass on the full savings to consumers “would not be acceptable”. However, no action has been taken to ensure that the 3.8 million people on fixed-price deals do not miss out on that saving.

In response to the consultation on the future of the ECO, the Government openly stated that energy companies were

“likely now to be in a position to make greater savings than they had originally projected in December”.

When the Government make no effort to recoup those savings for consumers, the result is more money for the energy companies. In attempting to kick the long-term problems of the cost of energy, market failure and domestic energy efficiency into the long grass, the Government have effectively cut the energy companies some slack, with no noticeable reduction in prices for millions of people and at the cost of thousands of much-needed domestic energy efficiency projects, such as those in my constituency.

I apologise for missing the first two minutes of the hon. Gentleman’s argument, and I congratulate him on securing this important debate during energy week. Although great progress is being made, I accept that there are gaps that the Government need to address. The hon. Gentleman is talking about cavity wall insulation, but surely his constituents would be entitled to and eligible for boiler replacement under the affordable warmth element of the ECO.

Yes, they would, but the terraced properties in my constituency seep heat. We need to look at energy conservation; it is not enough simply to lag the loft. There is no point in having a new boiler without also implementing a range of measures to capture the heat that it generates. If we continue to allow heat to flow out of stone terraced properties with semi-solid walls, we do a disservice to those properties. They will remain energy-inefficient. I accept that there are some modest improvements that can be made, but the main beneficiaries of insulation and energy efficiency improvements will be householders who live in properties with hard-to-treat cavities.

Another point that has seemingly been absent from the debate on the changes is that the energy companies’ revenue streams are protected by inefficient, uninsulated houses. Rather than reducing the use of gas through greater energy efficiency, the energy companies have a perverse disincentive to support energy efficiency because they are making profits from selling so much gas to my constituents.

There is concern in the cavity wall insulation industry about the effects of the changes. Isothane, a company in my constituency that produces cavity wall insulation, stated to me recently that the cavity wall industry is effectively “at a standstill” due to the changes. That was after the company had prepared itself for increased demand under the ECO. The carpet was pulled from under the company after it had been encouraged to be part of the green revolution. Job losses across the industry, which has a strong base in the north-west, make for sad reading.

Twelve jobs have been lost at Isothane Ltd in Accrington in my constituency, which I have been told may have a further impact, with job losses in Dukinfield in Manchester. There have been job cuts at Viscount Insulation in Blackburn and Castleford. There have been 85 job losses at Home Insulation Services in Preston, and 600 jobs went this summer at Domestic & General Insulation as a direct result of the Government’s policy changes. Many smaller companies have also laid off workers whom they had previously hired after the Government talked up the demand that would be created by the ECO and green deal schemes. I am afraid those job losses will not be the last. The majority of people in the UK would rather know that the levies are supporting a growing green economy and creating long-term financial and environmental savings, rather than simply being handed back to the energy companies without cast-iron guarantees that they will be passed on fully and without exception.

Before the hon. Gentleman concludes his speech, I will give him a slightly contrary view. In my constituency in Northumberland, which has similar properties—old stone buildings—the expansion of the energy sector is something that I welcome and applaud. Organisations such as the Centre for Green Energy and the multitude of biomass and other green and diversification suppliers are showing that there is a future for that type of energy.

I am grateful for the hon. Gentleman’s comment, but he cannot deny that job losses have occurred due to the changes. Changes bring uncertainty, and I am sure we all agree that there should be less change and more consistency, because that will lead to more jobs in the sector. If we chop and change our energy efficiency policy, we will find that companies are reticent about entering the market because they are unsure about the future. Certainty is the bedrock of business, as I am sure he would agree.

I will conclude by asking the Minister a number of questions. Does she recognise the job losses that have directly resulted from rolling back the ECO? How many jobs does she estimate have been lost nationally? What does she see for the future of this important industry? The Government predicted that there would be 35,000 people working in the sector by 2015-16. Does she still seriously expect that to happen? What future plans does she have for areas with a prevalence of hard-to-treat walls and cavities, such as mine in Haslingden and Hyndburn, and clearly those in Hexham, which will no longer be economical under the changes to the ECO scheme? It seems obvious to many people that hard-to-treat, cold and damp properties are in most need. Why has that not been reflected and prioritised in Government policy?

Finally, has the Minister investigated where the remaining ECO money is being spent? The green deal home improvement fund opened in June and shut five or six weeks later in mid-July. Where has that money been spent? My constituents did not get an opportunity to apply for that money, and it included measures such as solid wall insulation. What happened to that money, and where was it spent? What proportion of that fund, the ECO and other schemes was spent on properties that are most in need?

It is a great pleasure to serve under your chairmanship, Mr Streeter.

This debate comes at the start of big energy saving week, a joint campaign between the Department of Energy and Climate Change, Citizens Advice and the Energy Saving Trust that will highlight the support available to help people keep warm this winter. It was good to see so many parliamentary colleagues at yesterday’s launch. During the last big energy saving week, 300,000 consumers received help and advice through events, by phone or online. This year we and our partners want to make big energy saving week even bigger than last year.

The independent review of fuel poverty enabled us more fully to understand the problem and to measure fuel poverty effectively. That has helped us to put in place policies that can target assistance at those most in need, which the hon. Member for Hyndburn (Graham Jones) spoke about earlier. We already have strong policies working on the ground, such as the ECO, the warm home discount scheme and the big energy saving network, but we recognise that the most vulnerable may still need extra help.

To highlight the Government’s commitment to making a real and lasting difference on fuel poverty, we have tabled draft regulations to create a new fuel poverty target in law. We want to ensure that as many fuel-poor homes as reasonably practicable achieve a minimum energy efficiency standard of band C by 2030. We have also consulted to help us to prepare for a new fuel poverty strategy.

I welcome the Minister’s comments, but I asked a fundamental question. How does she anticipate that constituencies such as mine in Hyndburn, which have a considerable mass of such fuel-poor people and hard-to-treat and uninsulated properties, will be addressed in the next five and a half years?

I appreciate that the hon. Gentleman wants me to get straight to the point and address his key questions. I have a few minutes, and I would like an opportunity to set out what the Government are doing.

We recognise that improving domestic energy efficiency helps consumers to control energy bills, thereby reducing fuel poverty. Of course, it also contributes to our challenging carbon reduction target, which is, by 2050, to reduce greenhouse gas emissions to at least 80% below 1990 levels. To drive up domestic energy efficiency, we have put in place a long-term programme that reflects fundamental underlying challenges. Much of the easy energy-efficiency work has been done. Nearly all homes have at least some loft insulation, although many could benefit from a top-up, and most of the easiest cavity walls have been filled. We need to move away from a culture of unsustainable grant dependency to a different, market-based approach. Our long-term aim is for consumers to be motivated to improve their homes and to be ready to meet some of the costs, with real, effective help for the most vulnerable. That is good for all bill payers, as subsidy will go where it can have the most effect; and it is good for our economy, as innovative businesses will enter the market and develop better, cheaper products.

In private meetings and in meetings with my constituents, I have spoken to the Minister about oil companies having a 500-litre minimum limit for delivering to people who are off-grid. If the Department were to change that minimum delivery to a lower figure, it would have a massive impact on people who are particularly fuel-poor and off-grid. Could she please look at that and get back to me?

I thank my hon. Friend for that comment. He has raised the matter with me previously, and I will get back to him.

I do not want to try the patience of the hon. Member for Hyndburn, so let us move on to the ECO, which is the particular element of support that he has asked me to address. We have made changes to the ECO, and the vast majority of customers pay for the ECO as part of their energy bills. With bills rising, it was right to review the impact of the policies on household costs and to ensure that the benefit of the ECO is directed where it can make most impact. This much is clear: we have not reduced the element of the ECO aimed at helping low-income and vulnerable households. Approximately two thirds of the ECO that is currently collected goes to the fuel-poor, which, overall, is the same amount as was previously set, despite the reductions. The hon. Gentleman talks about the Government cutting the energy companies some slack, but we have felt obliged to cut taxpayers some slack. At the same time, we have ensured that the people who are most in fuel poverty, the vulnerable, are still being given the assistance that was pledged. Dedicated fuel poverty activity within the ECO stays at the original level of investment of £540 million a year reaching 230,000 households, and we have extended activity on the same scale to 2017.

We are also making the ECO easier and cheaper to deliver, and we have extended the carbon saving community part of the ECO to cover the bottom 25% of areas on the index of multiple deprivation, extending it to more households in low-income areas. That will not only help more hard-pressed families; crucially, for the first time, extending the obligation to the end of 2017 will give industry and other partners maximum certainty. The hon. Gentleman discussed business’s need for certainty. We have delivered that by extending the obligation to 2017.

I appreciate that the Minister is giving way on her time. I generously admit that the carbon savings target for individual households was reduced, rendering the scheme worthless in that it could not actually be used, but how will the community target have an impact on district councils such as mine? It was essentially designed around local authorities, but small district councils such as mine are cash-strapped, and the shire does nothing. How can local district councils such as mine help community schemes meet the community target? It is not happening.

I urge the hon. Gentleman’s council to consider what it can do within the current ECO arrangements, which as I said have been extended for the next two years.

Turning to the green deal home improvement fund, which I also urge his council to consider, he is absolutely right. The green deal home improvement fund opened in June and was closed at the end of July, such was the take-up. It was more popular than any of us had expected. We had always said that the pot of money available was limited and that once it was gone, it was gone, but we did not anticipate that demand would be so strong, and we have acknowledged that that was not ideal for householders, industry or local authorities such as the hon. Gentleman’s, which might have promoted the scheme to residents.

However, the good news is that we have sourced additional funds and will reopen the green deal home improvement fund next month. We are working closely with industry, local authority and other partners to get their views on how the first phase worked and their ideas on how we can improve the scheme.

Can the Minister ensure that authorities such as mine that are deprived according to the index of multiple deprivation—our district council has challenges in trying to bid for the money quickly; they will inevitably be slow out of the blocks, because they do not have scale and size—are prioritised and given first dibs on the fund? That would be helpful in meeting some of the concerns that I have outlined.

I thank the hon. Gentleman for that suggestion. We are keen to get the green deal home improvement fund absolutely right. I will take his suggestion back to my officials. We are getting a lot of contributions on how to ensure that the new green deal home improvement fund is correctly launched in order to get the maximum benefit for communities, particularly the most vulnerable communities, who have been suffering.

I hope that we can reassure the hon. Gentleman that the green deal home improvement fund will be an additional source that his council can access to help the people who need help, particularly with solid wall insulation, as he said. I recommend that his council contact my Department to find out more about a previous fund called the green deal communities fund. His council might be interested in finding out about its best practice. It had particular success in going street by street, door to door and working with community leaders to build trust among householders so they could use the fund.

I wanted to take a few minutes to comment on the private rented sector; I am not sure whether the hon. Gentleman has a particular interest in that area.

That is good. We want to support and encourage landlords to make improvements to their properties and empower tenants to request them. That is why, on 22 July 2014, we launched our consultation on energy efficiency regulations for the private rented sector. As a result of our proposals, from April 2016, private tenants will have a right to request consent for energy efficiency measures, which may not be unreasonably refused by the landlord. From April 2018, private rented properties will need to achieve a minimum energy efficiency standard before being let to tenants, except where certain exemptions apply.

I am grateful to the Minister; she is being very helpful. I point out to her for the record—she may or may not wish to comment—that I sat on the Energy Bill Committee in 2011 when that proposal was introduced. I voted against it, because I thought that the dates should be brought forward to 2011 from 2018. For seven years, people in the private rented sector have had to suffer. The Government are not doing this today; it was in the 2011 Energy Bill. I wanted that to be a matter of public record.

I think I can accept that as cautious support for the proposals, although they are less timely than the hon. Gentleman would like. He may rest assured that my Department is committed to delivering them, and we will use our best endeavours to do so.

I point out that although the hon. Gentleman’s constituents may be able to access the green deal home improvement fund, green deal finance is also available and is now picking up. It is also an important element for the private rented sector, where the electricity bill payer is normally the tenant, who contributes towards the cost of improvements through savings on their electricity bill. Tenants will benefit from a warm, healthier home while landlords will gain improvements to their property. The ECO and incentives announced as part of the autumn statement 2013 provide additional funding support for landlords to make improvements. Landlords took advantage of both the green deal cash back and home improvement funds, and nearly 115,000 households in the private rented sector have benefited from the ECO measures so far.

I point out to the hon. Gentleman that with the arrival of smart meters, which are now being rolled out, constituents will hopefully be able to control their use of energy and heating more effectively and efficiently. We are also making good progress on encouraging the take-up of local renewables. The number of installations, mainly of solar photovoltaic panels under the feed-in tariffs, now totals more than 590,000. The domestic renewable heat incentive was launched in March this year, and 10,000 homes are already being rewarded for switching to biomass, ground or air source heat pumps and solar thermal technologies.

I hope that the hon. Gentleman will appreciate and agree that although he has certain frustrations that the ECO is not reaching some in his community, this Department is leading many other initiatives to assist everybody, including his constituents, to have warmer homes for less. It is an ambitious long-term programme. We are making progress and learning what works best. The scale of the funds that we have made available shows our determination to improve homes, reduce bills and fuel poverty and meet our carbon reduction commitments.