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Green Deal

Volume 591: debated on Thursday 22 January 2015

[Relevant documents: Third Report from the Energy and Climate Change Committee Session 2014-15: The Green Deal: Watching Brief (part 2), HC 348, and the Government response thereto, HC 882.]

Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Wallace.)

I welcome you to the Chair, Mr Gray. It is a great pleasure to speak under your chairmanship, and I will endeavour to stay within order. I also welcome my hon. Friend the Member for Wyre and Preston North (Mr Wallace), who will reply to the debate. I have had an apology from the Under-Secretary of State for Energy and Climate Change, my hon. Friend the Member for Hastings and Rye (Amber Rudd), who is out of London today, but I know that my hon. Friend the Member for Wyre and Preston North will be a more than adequate substitute.

My Committee is delighted to have secured this debate. The green deal links directly to the last Westminster Hall debate that we had on one of our reports, just before Christmas, in which we discussed the latest findings of the Intergovernmental Panel on Climate Change. Promoting energy efficiency through schemes such as the green deal is a good way to respond to the challenge of climate change.

I much regret that two of the hon. Members who serve on my Committee and who took part in that debate are not present today, although I am sure they have good reasons for not being here. During that debate, they both questioned the scientific conclusions of the Intergovernmental Panel on Climate Change about the extent to which climate change is taking place. In the context of this debate on the green deal, I would have welcomed their comments on last Friday’s joint announcement from NASA and the US National Oceanic and Atmospheric Administration, which confirmed that 2014 was the warmest year on record, and that 14 of the 15 warmest years on record have occurred since the turn of the century. Only the most determined flat earther could now continue to claim that there is a pause in the trend towards higher temperatures.

The conclusion of the NASA director, Gavin Schmidt, was unequivocal:

“This is the latest in a series of warm years, in a series of warm decades. While the ranking of individual years can be affected by chaotic weather patterns, the long-term trends are attributable to drivers of climate change that right now are dominated by human emissions of greenhouse gases.”

One cannot be much plainer than that, though doubtless my right hon. Friend Lord Lawson, and some other members of the upper House, particularly his henchmen in the Global Warming Policy Foundation, will dismiss NASA as yet another part of the global conspiracy, which apparently exists, of grant-seeking academics and left-leaning politicians who have invented the evidence that climate change is a clear and immediate threat to the conditions of climate stability, which have made it possible for the human species to enjoy phenomenal and possibly unprecedented success—very recently in the context of a planet with a 4-billion year history on which humans have been present for less than 0.001% of the time.

I want to assure my hon. Friend the Member for Wyre and Preston North that the Committee’s comments on the green deal are intended in an entirely constructive manner. The green deal was an ambitious policy, vaulting in its aims. It had and still has my full support and that of my Committee. Increasing the energy efficiency of UK households addresses all three aims of energy policy. It improves security, cuts energy bills and reduces greenhouse gas emissions. It particularly helps the fuel-poor to make their homes warmer and more comfortable, and it improves public health as well. So, energy efficiency is the true “no regrets” policy. The Committee fully supports the Government’s efforts to call quits on cold homes and to stop wasting heat through buildings that are inadequately insulated and inefficiently constructed.

Although we acknowledge that putting a completely new framework in place can take time, the green deal and the energy companies obligation are far from achieving the level of activity seen under previous energy efficiency schemes, so we have to ask: how can the green deal be made to work better? That was why the Committee started a watching brief when the green deal was launched two years ago.

The idea of the green deal is admirably simple. It is intended to help people to make energy efficiency improvements at no up-front cost. The installation costs are attached to the property’s electricity meter and are repaid in instalments through the electricity bill. Who could argue with the golden rule that says that nobody will repay more than they are saving?

My Committee published its first report on this subject in May 2013, and it highlighted areas for concern, particularly about public awareness, access to the green deal, and value for money. Even by the time we published the second report, which is the subject of our debate this afternoon, only 4,000 green deals were in progress. The Committee understands that the green deal plans are only the means to an end, but, in advance, hopes for the green deal were very high. It was promoted as a revolutionary finance mechanism that would empower consumers to make the changes that they needed to their homes.

Of course, we are delighted to see the faster rate of take-up of green deal plans in recent months, but, even as of Christmas, there were less than 9,000 green deal plans in progress nationwide. That makes it impossible to avoid the conclusion that this is a very disappointing outcome in relation to the original hopes—and expectations —for the scope of the green deal.

Our report concluded that the green deal could be improved. We identified three types of barriers that needed to be addressed. First, there are financial barriers. For example, the cost of the interest rate charged is too high. Households that can pass the standard credit checks can obtain cheaper loans elsewhere. Secondly, there are communications barriers. Regrettably, there has been quite widespread mistrust of the scheme. That is partly due to a lack of good communication, and it has been exacerbated by some instances of mis-selling by rogue traders. It has not been helped by a lack of clarity in some of the Government’s statements, and it certainly has not been helped by a shortage in some parts of the country of green deal providers.

Thirdly, we identified behavioural barriers. The attachment of the green deal loan to the property is a difficult concept for many people. They see it as a potential burden—an obstacle—if at some future date they want to sell their home. In light of these identified difficulties, my Committee has suggested three ways in which the green deal could be made more attractive. Above all, we want to see the take-up rate of the green deal substantially increased.

First, we urged the Department of Energy and Climate Change to make the finance package more appealing. We recognise that a subsidised interest rate is not appropriate, but we suggest that the way in which the golden rule is calculated could be reviewed. Perhaps the assumptions in those calculations are too cautious. We also suggested that other incentives should be explored. I have long advocated more radical incentives to kick-start the process of investment in energy efficiency in our built environment. As we all know, in the UK we have a high proportion of older properties.

Interesting evidence was produced by the Committee on Climate Change about changes in the habits of new car buyers. In response to quite modest incentives and differentials in the road tax or vehicle excise duty charged on different types of vehicle, there was a surprisingly large shift towards the purchase of low-consumption vehicles. Even though the cost of running a car might be £2,000 or £3,000 a year, or even £4,000 or £5,000 a year, buyers who think that they can save £200 or £300 a year on the vehicle excise duty are surprisingly influenced by the extent of that saving.

That, to me, suggests a psychology of people liking the idea of putting one over on the taxman—they think they will get a break and they want to get the biggest advantage possible out of it. Therefore, perhaps for a limited period, we should offer incentives that would allow people to get a discount on their council tax or, on commercial premises, a discount on the business rate, if they invest in a way that improves the energy efficiency rating of the property concerned by a certain amount. That might strike a chord with many people and we could see much more investment going into energy efficiency.

Furthermore, the moment at which people move into a new home is the most likely time when they will make improvements and are willing to spend some money on making changes and renovating a property. That is another opportunity. If we were to offer buyers or occupiers some rebate on stamp duty—notwithstanding the considerable improvements that have just been made to it—and they improved the energy rating of their property by a certain amount, perhaps in the first year of occupation, we might again find that that would strike a chord with people.

We need to get people talking about energy efficiency. Most people pay far more attention to advice from a friend, neighbour or family member than they do to anything said in Westminster Hall. If people realised the extent to which they can save money and make their homes warmer and more comfortable through energy efficiency investment, the word will start to spread on the ground. To get the process started, in addition to tweaking the green deal arrangements, I urge the Government—we are probably talking about the new Government after May—to look carefully at the enormous potential of introducing more radical incentives.

The second set of improvements that my Committee urged DECC to make was to streamline the green deal process and to make it quicker—“Green Deal in a day”. At the moment people are deterred by the complexity and length of time involved. We suggested that a centralised go-to website for all energy efficiency measures would be helpful, so that people do not have to search around for different sources of information about what they can do. The third set of improvements that we urged on DECC was to improve access to the green deal, to be more proactive in identifying those households that are most in need and, alongside that, to continue expanding the network of green deal providers. In our view, all such measures would help to achieve a clearer, more consistent and more credible policy.

In conclusion, the Committee supports the Government’s vision for a green deal brand. We agree that a choice of initiatives is needed, which is why we have recommended prioritising communication and restoring trust. We acknowledge the positive changes already made by DECC and the efforts made to engage consumers more effectively. The green deal is truly a “no regrets” policy that can make homes warmer and more comfortable, while also saving money, cutting consumer bills and, crucially, cutting greenhouse gas emissions, but we believe that the Government should be even bolder. They should continue to promote the green deal through long-term planning. Quick fixes will not make much difference.

I look forward to my hon. Friend’s comments when he responds to the debate.

It is, as ever, a pleasure to serve under your chairmanship, Mr Gray. Usually the debate on these issues is longer than this has been, but I suspect the timing has made a difference.

I commend the work of the Energy and Climate Change Committee and agree with many of the comments made by its Chair, the hon. Member for South Suffolk (Mr Yeo). The report is an important one, given how disappointing the green deal has been.

The Committee hit the nail on the head in its first recommendation, stating that, 18 months in,

“the Green Deal has so far been a failure.”

Unsurprisingly, in their response to the report the Government disagree with that assessment, but I think it is fair to say that success of the green deal has been underwhelming.

The green deal was heralded by the Government as the biggest home improvement scheme since the second world war, but, frankly, DECC’s latest figures show unacceptable results, with only 4,721 completed green deals. The green deal is simply not a good deal. The interest rate is not competitive or attractive, and often the deal does not fund the measures that people want and need. The green deal is not the tool we need to correct large-scale market failure. Consumers and installers have been let down, and that is without even mentioning the debacle of the green deal home improvement fund.

We in the Labour party believe that we have solutions to the problems of the green deal, which I will take about briefly towards the end of my remarks, but I first want to highlight some of the Select Committee’s other recommendations, to which the Government should pay real attention. The report pulls no punches. Recommendation 1 described the green deal as a failure and urged the Government to deal with the barriers that prevent even adequate take-up. The Committee’s opinions are shared by the shadow Ministers. The most disappointing element of the Government response was the complete unwillingness to accept what the Committee and many others are saying.

Recommendation 5 is of great significance, and I will be interested to hear what the Minister has to say. The green deal and the energy companies obligation should dovetail and be complementary, but we have seen the complete opposite and I do not think that the Government know how to rectify that. Again, I was disappointed by the Government response, which was to claim that the green deal home improvement fund was part of the solution to the problem. I hope that the Minister can clarify how that judgment was reached, given the farce that followed the sudden closure of the first round in July and the numerous complaints that have followed. The fund is simply not a long-term solution, but is instead the Government throwing money at the problem.

The attractiveness of the green deal is also criticised in the report, with a key point made in recommendation 7:

“Unless the package is made more attractive to a wider group of consumers, Green Deal finance is likely to remain unappealing to many.”

Again rather disappointingly, the Government response points to the green deal home improvement fund as an answer. I fail to see how a short-term measure will provide a solution. I would prefer some long-term thinking by the Government, which has been sorely lacking so far. The green deal home improvement fund is not and never will be a long-term sustainable policy.

Finally, of all the excellent recommendations in the report, I will touch on recommendation 11: better targeting of energy efficiency measures on those who need help the most, primarily the fuel-poor. I share the Committee’s view that the Government should be doing more, and I was heartened to see tacit agreement in the Government response. However, their actions towards the fuel-poor do not match up. The affordable warmth element, which is explicitly aimed at those most in need, was scandalously cut by the Government in 2013 for political reasons, despite its having done a lot of good work. It cannot be stressed enough to the Minister that the best way to get household bills down and, crucially, keep them down is to prioritise energy efficiency and insulate people’s homes. The Government sought to do the opposite, which is quite frankly unforgiveable.

I am aware that it is all too easy to criticise the green deal, and the Government have only themselves to blame for that, but we in the shadow energy team have put our money where our mouth is, and in November last year launched our energy efficiency green paper, setting out proposals that we believe would solve the issues that the green deal and energy efficiency in general have been struggling with on this Government’s watch. Our policy has five key points relevant to the discussion today.

First, we would provide half a million personalised home energy reports a year, which would detail how households could save money on their energy bills through insulation and energy efficiency. I think many would agree that levels of public knowledge about energy efficiency and the products available, such as heating controls, are very low, but we can easily give the public that information and it will help.

Secondly, we would administer free energy efficiency improvements for 200,000 households in or at risk of fuel poverty every year, with an ambition to upgrade all such homes and end the scandal of cold homes within 15 years. This chimes with the report’s recommendation that more should be done to target those most in need. It should save the average household around £270 a year and provide a much needed boost given the failings of the ECO, especially following the disastrous changes to it in the 2013 autumn statement.

Thirdly, for those able to pay, we would replace the flop that is the green deal with a much less bureaucratic system. Most important, during the next Parliament we would offer up to 1 million interest-free loans to cover the costs of energy efficiency improvements—something that, as the report highlights, DECC is unwilling even to consider. For the private rented sector, which was singled out in the report, there would be a new target to upgrade properties to a minimum of EPC band C by 2027, which is far more ambitious than anything the Government have committed to.

We have also promised that energy efficiency will be designated as a national infrastructure priority under Labour’s proposed national infrastructure commission, giving energy efficiency the importance it has lacked under this Government. Finally, we would put in place a long-term, streamlined strategy to support investment in energy efficiency in the non-domestic sector.

The Committee’s report delivers some stinging criticism of the green deal—all of it warranted. I sincerely hope the Minister will take on board many of the points raised today. The report’s conclusions accurately sum up where DECC has failed on both the green deal and energy efficiency as a whole. It is clear to me that the only hope for a pay-as-you-save model and for energy efficiency as a whole is a Labour Government after the election.

I am delighted to serve under your chairmanship today, Mr Gray, and to be given a run-out as energy Whip on the subject of the green deal. The subject is close to my heart, as I represent a seat up in north Lancashire, where it is often cold. I am used to the cold, but that means that heating houses efficiently and ensuring the best value for money are important to me.

I thank the Energy and Climate Change Committee for giving the Government the opportunity to respond to the report and some of its criticisms and suggestions. I also thank its Chair, my hon. Friend the Member for South Suffolk (Mr Yeo), for presenting those to us today. I read the current and previous reports on the subject, as well as the Government responses to them, and a few things stuck out for me that I would like to address.

The first thing to strike me about the report was that it did not feel as though the Committee disagreed with the concept of the green deal—the idea that Government should try to use incentives and grants to induce millions of people across the country to be more efficient in using energy to heat their homes. The overall policy aim of the green deal has been welcomed so far; a lot of the criticism has been based on the delivery rather than the concept.

I am sure that the Committee understands that the green deal is not just about finance, but I thought one mistake it made in the report was putting front and centre the idea that the green deal is a finance delivery mechanism. The Committee needs to recognise that the individual nature of people’s homes means that there is no silver bullet for or instant way of fixing the problems. Many of the issues identified in the report would affect dozens of Government schemes across the whole policy spectrum and the whole of Whitehall, because of the gap between the theory of a policy and its actual roll-out. No plan of any Government—if Labour is successful at the election and the hon. Member for Sunderland Central (Julie Elliott) is in government next year, she will recognise this—survives delivery in all circumstances. Governments have to adapt to what they see on the ground. The Government have recognised that fact, and in annex A of our response to the Committee’s report we list many of the changes we have made to the green deal as it has developed.

It is also important to realise that in this sector there is always a natural rivalry of priorities between fuel poverty and carbon reduction. That idea came out both in the Committee’s inquiry and as we have rolled our the green deal. However, I am concerned that the Committee focused too much on the green deal as a finance scheme rather than on our overall ambition to reduce carbon emissions and cut energy waste. Paragraph 8 on page 6 of the report opens:

“The Green Deal is a financing mechanism”.

That is perhaps where we disagree most with the observations in the report. The finance is a means to an end. It is about us trying to deliver schemes and mechanisms to make sure that we improve energy efficiency.

We should not forget that private sector finance is a highly mature and competitive work place and area for products. Our scheme will not always be able to provide the best financial offer every day, as doing so depends on circumstances not under our control, such as energy prices and other demands. Over the long term, we are confident that green deal financing will provide the best option, but at certain stages that will not always prove to be the case. We are getting there, though. During the Committee’s inquiry and subsequently, the Green Deal Finance Company has taken quite strong steps to streamline the process, cutting out some additional parts of the application that people felt—and the Committee agreed—had caused delays. That will make a significant difference.

Leaving aside the issues about the finance mechanism, the Committee raised some valid points that the Government need to keep on top of, including communication, behavioural challenges and the complexity of the process. On communication, it is a challenge for all Government schemes to make sure that they match the message to what people are thinking all the time. The good step we took of making sure we put more focus on working alongside local authorities has been a real success, and we have seen an increase in uptake. Councils such as Leeds and Nottinghamshire have started to make a real difference to the roll-out by getting across a strong message that it is in people’s own interests to cut energy bills, use less carbon and heat their houses efficiently.

It is not that easy to get people to change their behaviour. It does not happen overnight; it takes time—indeed, it takes a long time for Governments to change many things. My only message to the Opposition Front-Bench team is that we all go through the manifesto process and make brave statements, but changing the public’s behaviour will always be easier said than done. I am sure that if, this time next year, I am sitting in opposition to the hon. Member for Sunderland Central and asking, “Where is the first roll-out for 75,000-odd homes?” she will quote me back to myself on that point. Things are changing, though, and we are getting to a better place. The more expensive things are now being done. The low-hanging fruit is, to some extent, on track now and we have to get on to dealing with some of the more difficult areas.

We need to look at uptake, which has improved significantly in the past few months and hopefully will go from strength to strength. The demand for green deal plans has more than doubled since the start of 2014, and at the end of October we had a record-breaking week in which 570 plan applications, worth £2.2 million, were made. In comparison, there was an average of 190 applications per week in the first part of 2014. Raising consumers’ awareness of how they can improve their homes is an important foundation of our approach. By December 2014, some 445,800 green deal assessments had been carried out and a large number of people are now aware of what they need to do to improve their home’s energy efficiency. The next challenge is to get them into a plan.

The energy company obligation has been effective and has delivered the majority of the homes improved. We made important changes to the ECO to reduce consumers’ energy bills. We announced a further £540 million to be spent on energy efficiency over three years, and we announced an increase in that figure by £100 million last October. That investment enabled us to establish the successful green deal home improvement fund to incentivise households to install energy efficiency measures through cashback offers. Our green deal communities programme is working with 96 local authorities to get a better understanding of how to deliver efficiency measures on a street-by-street basis and how to integrate home energy efficiency improvements with other aspects of local authority activity.

Stakeholders and the Committee’s reports inform us that we are on the way to seeing better traction for the green deal. I am convinced that the figures prove that we are increasing our roll-out. People get what the green deal is and are able to access the finance they want, so I am confident that, as we go from strength to strength, the green deal will be accepted across the board.

The Committee report contains valuable steers, and I will tell the Under-Secretary of State for Energy and Climate Change, my hon. Friend the Member for Hastings and Rye (Amber Rudd), to take them on board. Those important and valid points were meant in the spirit of constructive criticism, as the Chair of the Committee said, and our response accepts that. We will work to improve our communications and ease of access to enable the green deal to change people’s behaviour across the board.

I do not need to be reminded that there is an election coming up shortly. Energy efficiency is bound to be a high priority for the incoming Government, whatever their political persuasion, because it is the most effective way to reduce carbon emissions and manage our energy demand. It is also good for societies not to waste resources. Whatever the carbon emission challenges are, we must be efficient. The Government have delivered a significant number of improvements to homes, and the innovative ideas to make Government support go further that we have implemented have attracted interest from other countries.

It would be tempting to ask the Labour party to tell the electorate what it is offering, but this debate is about the Committee’s report. However, the electorate must understand that those things will have to be paid for. The Government cannot intervene and encourage people for free, and offering 1 million interest-free loans will cost a lot.

May I advise the Select Committee that our proposals will not cost a penny more than what the Government are already spending in this area?

We will have to take the hon. Lady’s statement at face value, but given the previous Government’s track record on managing the economy and their books, I ask only that the electorate look closely at the figures that are produced.

The Opposition should reflect on the difference between roll-out and theory. I remember sometime in 2009 receiving 32 light bulbs at random from my energy supplier, because that was the way it was meeting the rather fudged, bizarre obligations placed on them by the previous Government. I think I still have them—the Labour party can have them back if it wants; it was probably the only contribution it made. We are confident that the green deal will go from strength to strength. The graphs, charts and the uptake show that we are moving in the right direction.

I thank my hon. Friend for his reply and for his close study of the two reports that my Committee produced on this subject in the past couple of years. He is absolutely right that the Committee continues strongly to support, without reservation, the concept of the green deal. I assure him that our concerns about its progress are motivated by our wish to see it succeed.

We share the aim of eliminating energy waste. It is a scandal that millions of buildings in this country are still so energy inefficient that a large amount of energy is wasted. A consistent thread running through all our reports is our concern to ensure that the UK achieves the challenging targets we have set for cutting greenhouse gas emissions. Energy efficiency has an enormous part to play in achieving those targets. Our criticisms derive from our disappointment and frustration about the relatively slow progress of the green deal so far. Even the most ardent defender of the coalition’s policy—as my hon. Friend the Minister knows, there are few more ardent defenders of the coalition than me—would not claim that the high hopes about the green deal have yet been fulfilled.

As my hon. Friend the Minister said, progress is much better than it was this time last year. There has been an encouraging acceleration, from a relatively low base, of the take-up of green deal plans and enquiries. I cannot predict what my Committee will do in the next Parliament, because I will not be a member of it, but I would be very surprised indeed if it did not want to continue the watching brief that it adopted towards the green deal in this Parliament. In conclusion, I hope that this time next year another debate will take place on this subject, and that the Minister will be able to report on further substantial progress.

We come to the next debate. I ask those who took part in the previous debate, including my hon. Friend the Member for South Suffolk (Mr Yeo)—I was his special adviser many years ago when he was a Minister in the Department for the Environment; he has served with distinction for many years—to leave the Chamber quickly and quietly.