I thank colleagues for being here today. There are some terrible weather conditions across the country, which I think will suppress attendance at this debate. Some colleagues had to get back to their constituencies before they got cut off, or the rail links got cut off. I call Antoinette Sandbach to move the motion.
I beg to move,
That this House has considered energy efficiency and the clean growth strategy.
It is a pleasure to serve under your chairmanship, Mr Walker. I am grateful to the many of my colleagues from both sides of the House who helped me to secure this debate, not least to the hon. Member for Birmingham, Selly Oak (Steve McCabe).
This is an important debate, and I hope that it will spur Members to action, not just today but in the future. This is the first debate of its kind in several years, and it is important to ensure that we keep energy efficiency at the top of the political agenda. This week the energy price cap Bill, the Domestic Gas and Electricity (Tariff Cap) Bill, received its Second Reading. The Bill is a vital step to protect consumers while we reform the market in the short to medium term.
I want to propose a long-term solution for energy efficiency improvements and suggest how to make best use of the time we will have bought with the energy price cap Bill to address energy efficiency. In my remarks, I will outline how far we have come and discuss the challenges we face, before proposing a couple of solutions to return us to a better low-carbon path. I plan to talk generally about the state of energy efficiency, but where I am more specific I shall be addressing domestic energy efficiency. Other Members, I am sure, will focus on other areas, but I shall leave that contribution to them.
It is important to outline how far we have come in building a low-carbon economy and in improving energy efficiency over the long term. That is testament to the commitment of successive Governments, and I am proud to say that we are now a world leader in the green economy. Since 1990 we have cut emissions by 42%, faster than any other G7 nation. We have outperformed the first carbon budget, of 2008 to 2012, by 1%, and we are on course to outperform the second and third carbon budgets by 5% and 4%, respectively.
All that achievement has not come at the cost of economic growth. Emissions dropped by 42%, but the economy grew by 67%. In 2016, 47% of electricity came from low-carbon sources, which was twice the rate of 2010. Household energy consumption has fallen by 17% since 1990, despite a rise in the number of home appliances. More than 430,000 people work in low-carbon businesses and the supply chain. All that work has resulted in bills being roughly £490 lower than they would have been without the energy efficiency improvements made since 2004.
Clearly, significant progress has been made over the past three decades. I applaud Ministers and Members of all parties for their commitment to tackling climate. What is more, we have taken those steps without damaging our economy, the idea of which was originally dismissed by some as simply not possible.
Despite such progress, there is still more to do. Progress on energy efficiency has slowed. Between 2012 and 2015 the annual investment in energy efficiency fell by 53%; and in the same period there was an 80% reduction in improvement measures, with the Committee on Climate Change warning us that that will decline even further by 2020. Fuel poverty remains a stubborn problem that we must continue to address. It is all very well giving assistance with bills, but a long-term solution—insulating houses—is surely the way forward.
As of 2014, 2.3 million households in England were in fuel poverty and 41% of the households in the lowest income decile were fuel poor; 56% of fuel-poor households lived in properties built before 1944. To my mind, those issues make it an urgent requirement of the Government to do a housing survey in England: 60% of fuel-poor households lived in inefficient properties with an E, F or G energy performance certificate rating, and 14% of households in rural areas were in fuel poverty, which is higher than the national average. Those rural households cannot access the efficiencies of dual fuel billing, and that is important, because many are off grid. Many cannot access the warm home scheme measures, which often involve whole streets. The low-hanging fruit has been picked, but the more challenging households, in particular in rural communities, have not been addressed.
The clean growth strategy is a welcome addition to the debate. I support its proposals to combat fuel poverty and to promote energy efficiency, but I hope that the Minister can be more specific about the Government’s plans today than they were six months ago. The Committee on Climate Change assessment of the clean growth strategy found that three actions were expected to deliver, six actions had delivery risks, or were rated amber and seven proposals were without firm plans, or rated red.
It has never been more important to tackle climate change and to decarbonise the economy. However, the potential rewards have never been so great. A building energy performance programme could save households £270 a year on bills. Over the long term that would save even more than the current proposed cap on energy bills, and it would also make a large contribution to hitting our climate change goals. Bringing every household up to an EPC band C by 2035 would save 25% of the energy used by the UK, which is the equivalent of six nuclear power stations the size of Hinkley Point C. The net economic benefit of such a programme would be between £7.5 billion and £8.7 billion, according to macro- economic analysis by the UK Energy Research Centre, and that figure does not include the wider secondary benefits in growth, jobs or health. With cold homes in England costing the NHS an estimated £1.36 billion, such a programme would have a considerable impact on health budgets, as well as on the wider economy.
The economic and social case for increased energy efficiency measures seems unarguable. We must focus on how to deliver them. Throughout recent history, we have seen that the fight against climate change is most effective when Government and private industry work together. The Government can lead the charge, but we need to harness the innovation and energy of the private sector to truly succeed. That is why I want to suggest one way in which the private sector can step up. It is one way for the Government to make a change that can expedite energy efficiency improvements. Mortgage providers should give people more incentives to purchase energy efficient homes.
In essence, if people make savings on their energy bills they will have more money to service a larger mortgage, and that should be taken into consideration when banks make their lending decisions. We know that in 2014 51% of fuel-poor households were owner-occupiers, with only 33% in the private rented sector. Were the EPC rating of a house to be included in a lender’s affordability calculation, people could borrow up to £4,000 more in many cases. Under such a system, an EPC A rating would allow people to borrow £11,500 more than an EPC G-rated house. I recommend to hon. Members who are interested in this proposal a report by the Lenders group, which said that energy bills were a sizeable part of borrowers’ essential expenditure, and were therefore a component of the affordability calculation that warranted being made more sophisticated.
My hon. Friend is making such a good point about how we can challenge mortgage lenders to revisit affordability, based on how much it costs to live in a house. Crucially, it demonstrates to developers who have pushed back against higher energy efficiency building standards on the basis of affordability that lenders understand that reduced operation costs are a good thing, because borrowers can borrow more to pay more for a house that costs less to live in. It slays the developers’ argument against more stringent building regulations.
I completely agree, and those houses would be more easily resold, too. The energy efficiency measures that had been introduced in a property would have a market value, and that would be taken into account in the ability to resell—particularly the increased borrowing capability. Furthermore, it would give real value when looking at the EPC rating for the future. It is a simple step that could be taken with relatively little Government interference—a simple statutory instrument so that energy efficiency could be considered as part of the mortgage affordability criteria would be very persuasive, particularly for those companies specialising in green finance.
Despite that, I also agree with my hon. Friend that we have to look at the criteria that we impose on house builders. It is simply not acceptable that in this day and age we are building houses that are likely to need retrofitting in future. By increasing the build standard, people would learn how an energy efficient home can have an impact on their life. I sat and shivered in my own home in London during the freeze last week; I found myself sitting in my sitting room in my coat because the house was so cold and inefficient. I now realise that I have a relatively fuel efficient home where I live in Cheshire, which makes a difference mentally, to comfort levels and to bills. Merely including the energy efficiency measures in affordability calculations would be enough to drive people towards more energy-efficient homes even if buyers do not borrow extra money, because they would be attracted by the perception of value implied by the higher borrowing limits.
My second suggestion is one that the Minister may be able to assist with more directly. When Members talk about infrastructure spending, one is put in mind of boys with their toys: big trains, roads, railways and power stations. However, I suggest that the Minister designate energy efficiency measures as infrastructure spending, bringing it under the purview of the National Infrastructure Commission. The rationale for that is simple: energy efficiency spending is a one-off cost, so it is closer to capital than revenue expenditure. By reducing energy consumption, those investments free up energy sector capacity. That reduces, or at least delays, the need for new capacity to come online. That new capacity—in the form of generation plants, networks and energy storage—would be considered infrastructure spending by the Government, and potentially would involve a large amount of Government expenditure.
Why invest in the big plant if we can roll out energy efficiency measures across the country, as part of an infrastructure project? Energy efficiency measures provide a public service: they insulate consumers—literally—against the volatility of energy markets. Likewise, they provide health and wellbeing benefits, by enabling consumers to heat buildings more effectively, and they have the knock-on consequences of reducing our carbon emissions and contributing towards our overall aim of clean, green growth.
Research by Frontier Economics found that a building energy performance programme would meet the Treasury’s criteria for determining the top 40 infrastructure priorities. The National Infrastructure Commission has said that it will consider
“an ambitious programme of energy efficiency improvements”
and that it
“is examining ways to make the UK’s building stock fit for the future.”
I hope that Ministers will pave the way by committing £1.1 billion to a programme of energy efficiency improvements, under the auspices of the National Infrastructure Commission. It is estimated that that would leverage £3.9 billion of private investment by 2035. That additional capital spending, alongside the £0.6 billion already spent, would dramatically improve energy efficiency, bringing all the benefits I have outlined.
With the £1.3 billion of savings that have been highlighted in the health budget, these measures would effectively fund themselves out of savings to other parts of the Government’s expenditure. The starting step is to recognise that this is capital spending on infrastructure—not revenue spending. Members might like to look at the Energy Efficiency Infrastructure Group report, “Affordable Warmth, Clean Growth”, where they will see a detailed plan to take forward this suggestion.
I look forward to hearing suggestions from other hon. Members of how to renew our energy efficiency drive. The case for pushing forward seems indisputable: it would make significant inroads into fuel poverty and carbon emissions, as well as creating jobs and securing clean, green growth for the future. Mine are just two suggestions of how to approach that, but I hope that the Minister and her Department will take them on board. I am also keen to hear the suggestions that the Minister has brought with her; there is a lot of potential in the clean growth strategy, and I know that she is as keen as I am to see that potential realised.
It is a pleasure, as always, to serve under your chairmanship, Mr Walker. I commend my hon. Friend the Member for Eddisbury (Antoinette Sandbach)—I call her my friend because we serve on the same Committee and I have the utmost respect for her and her work. She gave a very impressive speech and I thank her for introducing today’s debate.
I want to focus my comments on the clean growth strategy—I am sure that other colleagues will do a far better job than me in talking about energy efficiency. I welcome the clean growth strategy; it sets out strong commitments to cut our carbon emissions in the UK and to improve energy efficiency. I thank the Minister for her recent visit to Teesside and I am grateful that she recognises the opportunities that we have there as one of the most energy-intensive areas in the country, as well as the huge potential to do something quite transformative.
The Committee on Climate Change has cautioned that there are policy areas where the Government need to flesh out the detail of how they will deliver on those aims of cutting our carbon emissions. We all know that there is no path to meeting our carbon emission target that does not involve the decarbonisation of industry. I want to focus on that in particular.
In 2016, industrial emissions fell, but largely due to the closure of the SSI steelworks in Redcar. Actually, energy prices played a huge role in the 2015 steel crisis. In the UK, our steel companies were paying 80% above the EU median cost for energy—that is a huge factor in one of the challenges that our steel industry faces—but we know that we cannot meet our emissions targets without looking at industry. No one wishes to see a repeat of the 2015 closure of the SSI steelworks in Redcar, which ended 175 years of a major industry that built the world by providing the steel that forged everything from the Sydney harbour bridge to the new Wembley stadium. The loss of 3,000 jobs had a devastating impact on an area with a proud heritage and a proud history of driving the industrial revolution through steel production and its many other energy-intensive industries. We do not want to reduce our emissions through that kind of crisis. Industrial decarbonisation, done in a properly sustained, managed and strategic way, is the way forward, and it is a clear priority in the Government’s strategy.
We already have good energy efficiency action plans for several sectors, including cement, ceramics, oil and chemicals. That is a really positive start, but we need to go much further to meet the challenge. One of the easiest and most cost-effective solutions is carbon capture and storage. As the Minister knows, Teesside is hugely ambitious about becoming one of Europe’s first clean industrial zones and using CCS to drive that. The Teesside Collective in my constituency is ready and waiting to start decarbonising UK industry.
Teesside is home to nearly 60% of the UK’s major energy users in the process and chemicals sectors. To keep those industries thriving and to retain jobs, investment and growth in our area in a low-carbon world, we need to be serious about cleaning up their emissions. The internationally renowned North East Process Industry Cluster represents chemicals-based industries across the region, but it is concentrated in Teesside. The sector generates £26 billion of sales and £12 billion of exports annually, and is the north-east’s largest industrial sector.
The chemicals sector is up against strong international competition. NEPIC estimates that CCS could create and safeguard almost 250,000 jobs in the next 30 to 40 years. The Committee on Climate Change has shown that CCS could virtually halve the cost to the UK of meeting emissions targets. The UK is especially well placed to be a leader in the industry, not least because of the storage space in depleted oilfields just off our coast. The Library estimates that CCS could sustain up to 60,000 jobs and deliver a £160 billion economic boost by 2050 if it were delivered along the east coast.
The Government have promised a CCS demonstration project, which I really welcome. Of course, I sincerely hope that it will be in Teesside, but wherever in the UK it is based, the most important thing is that it comes to fruition. We cannot lose another opportunity. The new £100 million commitment is a significant downgrade from the £1 billion of funding that the Government pulled from CCS in 2015. It is a cautious investment in a crucial technology, but I welcome it as an important step forward.
On Teesside, we are taking a couple of other approaches to improving energy efficiency and decarbonising. District heating has huge potential. I welcome the Government’s recognition of the role that it can play in reducing bills for both homes and businesses, and we are keen to deliver it on Teesside. We want to use our vast renewable energy resources, which the wind turbines off our coast make very visible, to support our energy intensive industries, and we want to continue to innovate, as we have done for more than 200 years. We want to use the carbon dioxide that is produced for useful projects, such as replacing oil with bio-resource. We have a huge number of plans afoot in Teesside. We are looking to work positively and constructively with the Government, and we welcome all the positive signals we have had from them so far.
The former SSI site in my constituency will be the focus of much of that work. Ben Houchen, the Tees Valley Mayor, issued a press release this week previewing an upcoming Government energy announcement about the site. We do not know any more than the details that appeared in the media, but they sound positive, and I welcome and support this. As the Minister knows, the former SSI site has huge potential for that kind of investment to help to fulfil our ambition of being a world leading clean industrial zone, and I do not hesitate to back it.
However, I am slightly concerned that we are racing ahead to make an announcement without necessarily having the means to follow it through. I would welcome more detail about that from the Minister. As she knows, the former SSI site is still in the hands of the Thai banks, and I am concerned that a premature announcement on what will happen on the site might push up its value and make it harder for us to negotiate with the banks and get the site out of their hands to enable us to carry out all our wonderful plans and projects. Any further information from the Minister would be gratefully received.
Finally, let me say something about our potential. Energy efficiency and clean growth are not only priorities for tackling climate change and poverty, but offer huge economic potential in jobs and investment in the UK. In areas such as mine, which lost 3,000 jobs overnight, every job is critical. We desperately need investment and growth. The UK energy efficiency sector already turns over £20.3 billion, employs 144,000 people and sells exports worth more than £1 billion. We are in a prime position, particularly in Teesside, further to increase the market and to export our skills and technology to the world. This is a chance to future-proof our industries, protect our jobs and create new ones, and ensure that areas such as Teesside can play as big a role in the industry of this country and the world in the future as they did in the past.
It is a pleasure to serve under your chairmanship, Mr Walker. I congratulate my hon. Friend the Member for Eddisbury (Antoinette Sandbach), who has become the leading champion in this place for energy efficiency. She is at risk of being overtaken by the Minister, who is celebrated in all quarters of the energy industry. That is very welcome indeed.
This is a very important debate. I chuckled to myself at my hon. Friend’s reference to infrastructure projects being like boys with their toys. It is tempting when talking about energy policy to start with the wind turbines the size of the Eiffel tower in the North sea, the big nuclear power plants we are building or the transmission system. It is much less glamorous but no less important to talk about the other end of the system, where we can make huge differences in the amount of energy we use.
I happen to believe that six networks drive productivity in this country: road, rail, air, broadband, mobile and the energy system. The first five are discussed all the time in this place, but the energy system is talked about very rarely indeed. Energy got a rare outing this week, but in a consumer-focused debate about capping bills rather than in a debate about the wider energy system and potential productivity advantages.
A more energy-efficient system is important to our energy security. It was grimly predictable that, when National Grid released its warning about a squeeze on the gas supply last week, the headlines would scream stuff like, “Blackout Britain!”, and that the proposed solution would be more thermal generation from coal and gas. I argue that the solution is actually a more efficient energy system that allows demand to be shifted when those sorts of times come.
Let me clarify for the record what happened last week. I was extremely concerned that consumers might be alarmed and worry about whether to cook their tea or turn their heating on. What happened was an entirely normal signalling: “Can anyone who is consuming lots of gas sell it back? We’ve got a spike, because we’ve got the coldest weather for a decade.” That system worked. Sufficient gas was provided. That is a tribute to our very flexible energy system.
At no point was domestic supply under threat. I have worked closely with National Grid to ensure that, should that ever happen again, those messages are put out much more quickly, because I do not want people to be worried about making those choices in their homes.
My right hon. Friend is absolutely right, and she knows that she has my full, enthusiastic support on that point. The answer to what happened last week is not that we need more gas: actually, the system worked and demonstrated that there is flexibility. That more efficient, more flexible system brings with it energy security, and we should make that point robustly.
We should also be clear that a more efficient energy system brings with it reduced costs for consumers. Transmission and distribution costs are a not insignificant part of energy bills, so designing a more efficient system should be a priority. I will come back to that point shortly. It is not just price capping that can bring down bills for consumers: we could also find pretty significant savings in the costs of operating the energy system.
The other reason why we need a more efficient system is that, over the next 15 years or so, we will increase by an order of magnitude the demand we place on our electricity system. As we decarbonise heat and electricity, we will find ourselves significantly increasing the load, and the answer to that increased load cannot exclusively be more generation. We must seize the opportunity to create a more efficient energy system to meet that increased demand. For that, we must recognise that all of the clean tech coming along that allows for decentralised generation allows us to generate locally and use locally.
Rather than conceiving the national energy system as we see it at the National Grid control room in Wokingham, with its big map of the UK and it is worrying about getting power from Hinkley Point to someone’s toaster, we should start to see it in terms of: what the net energy use is in someone’s home and whether they are putting energy back into the system or drawing down; and whether a community can service its energy needs and whether it is drawing from or exporting to the system.
The system would constantly balance upwards and, crucially, the distribution network operators would become distribution system operators, balancing the flows within their region. The national grid—if we need one in the future—would be left simply to balance the net flows of energy between the regions. If energy is generated and consumed locally, that must bring a significant reduction in distribution and transmission costs.
Of course, I recognise there will always be a requirement to socialise among all consumers the underpinning energy security that comes from a system that backs up when local systems fail. Such a system would bring huge reductions in bills and huge reductions in carbon—and frankly it would be an embracing of progress, given that all of this clean technology is coming down the tracks.
There is another area in which we could make the energy system more efficient: we should recognise that we waste a huge amount of energy in the form of heat. Remarkably few organisations that produce huge amounts of heat as a waste by-product yet understand their ability to monetise that heat. There are some brilliant pilot schemes that should inspire. London Underground has huge amounts of heat moving around its tunnel system underneath our capital city, and there are examples of it trying to get that heat out of the system and into heat networks on the surface. That is great, but such examples are relatively few and far between.
There are examples from heavy industry, where waste heat is being put into a heat network. Also, and this is a shameless plug: the shadow Minister and I—I will also demonstrate the non-partisan nature of the debate by referring to him as my hon. Friend—are both vice-presidents of the Association for Decentralised Energy, which told me the other week about a sugar factory in East Anglia, where waste heat and carbon is taken from the factory to greenhouses, where a prodigious amount of tomatoes are grown. That understanding of the value of the waste product and making energy usage more efficient should be an inspiration to companies all over the place.
There is also the electricity system itself. I understand from some of the distribution networks that the waste heat from the transformers when energy comes from the national grid into a distribution system is huge, and at the moment it goes out into the ether. Surely there is an opportunity to look at how that could be connected into heat systems.
At the Conservative party conference in Birmingham last year, a number of us were invited to go down to a combined heat and power plant beneath the library in Birmingham city centre. What is amazing in Birmingham is there is a network of CHPs—one underneath the library, one under New Street station and a couple of others in the city centre—that generate heat that is sold commercially to the hotels concentrated around the city centre at a cheaper rate than the hotels could get for themselves. The hotels therefore get a good deal and Birmingham business gets a good deal. However, Birmingham City Council, which put the network in place, also gets to sell cheap heat into the social housing immediately beyond the city centre. What I love is that the system is not just more efficient and therefore bringing down costs for business, but allowing for social justice by delivering far cheaper heating into the homes of those who can least afford to heat themselves.
That brings me to the domestic energy efficiency market, and first to those who are fuel-poor and unable to pay. Clearly, when it comes to our intervention, we must look at two types of energy efficiency to support those who are fuel-poor: barrier technology to avoid waste, putting stuff into windows, walls and roofs so that less electricity is required; and putting clean tech into homes, so that they have more efficient boilers and smart appliances, which also use less power. This is a completely non-partisan debate, but I adore the scheme in Scotland—and not just because it is called HEEPS, which was my school nickname. All power to the Scottish Government, who have one of the world’s leading domestic energy efficiency mechanisms in place. I hope we can be inspired by learning about what has been done north of the border.
There are opportunities to intervene. Yes, we can make the point that it is socially just to do so, but I hope the Treasury realises that it is financially sound, too. In the eight weeks of 2018 thus far, the Treasury has shelled out £56,282,500—roughly—in cold weather payments to those who live in fuel poverty. If we were to intervene aggressively to make those in fuel poverty live in better insulated, more energy-efficient homes, arguably that 56 million quid could have been reduced significantly. As my hon. Friend the Member for Eddisbury said, there are huge savings to be passed across to the NHS system and adult social care by ensuring that those who are fuel-poor, those most vulnerable and those living on the lowest incomes are in homes that are comfortable.
There are productivity gains to be had, too. If people live somewhere they can heat and they do not have to choose between heating and eating, they will be much more able to go out and get work, be motivated to be productive and get promotion, which will stop them being in a position where they are fuel-poor.
I have three more suggestions. The first is about the winter fuel allowance. I am aware that it is probably a bad idea to talk in the House of Commons about a universal benefit to pensioners, especially when as a result of this suggestion there is a chance that some will not get a payment any more. However, we might start to look at whether to set aside those who we class as being fuel-poor—those who have qualified for cold weather payments in the past couple of weeks, for example—and make sure they still get a winter fuel payment.
For the remainder, however, instead of giving cash to be used against an energy bill, could we start to give vouchers for that value with which they can improve their homes with energy efficiency measures? They would get the same amount, and I would argue passionately that over time they would be delivered a saving from their energy bills far in excess of what they currently get with the extra cash of the winter fuel allowance. More importantly still, whereas that allowance is given, spent and gone, with vouchers we would upgrade the housing stock of all the houses currently lived in by pensioners that, at some point in the future, will be lived in by people who are not pensioners. We would make an intervention using the existing universal benefit in an ever-so-slightly different way, which would stimulate economic activity—all these people would move into the supply chain to deliver those energy efficiency measures—and upgrade our housing stock permanently. We should consider that.
We also need to look at how we do EPCs and the standards we set for new homes. In hindsight, I think we on the Government side made a mistake in reducing the carbon standards for new built homes. However, even if we leave the standards as they are for the moment, please let us ensure that developers are building houses at the EPC level they say they are. There is too much discussion in this place of charities worrying about energy efficiency—they say that developers can say, “Everything we build that is ‘The James’ is an EPC band C. Therefore, wherever we build it, it is an EPC band C, even if we cannot guarantee those properties were built to the exact same standards as the type tested.”
We need to ensure that all of the hundreds of thousands of homes that the Government are commendably committed to building are built to the very highest standards—at the very least, to the standard it says they are built to in the brochure the developer provides at the point of sale.
Instead of EPCs simply being a mechanism for judging how efficient a property is in terms of its barrier technologies, or how well insulated the walls, windows, doors and roofs are, I wonder whether the Government might also consider how we might start to value the clean tech that might also have been put into the home. Clearly, some clean tech is removable; smart appliances may well be moved with the owner when they move house. But we have asked the energy companies to commit to having offered every consumer in the UK a smart meter by the early part of next decade, and by 2025, I think, we want all properties to be at band C. I wonder whether a requirement for reaching band C by 2025 should be that a band C house has a smart meter within it. That would catalyse the uptake of smart meters quite quickly.
My hon. Friend the Member for Eddisbury has already mentioned the importance of getting energy efficiency, and therefore operation costs, factored into the affordability studies done by mortgage companies. Nothing will bring the value of energy efficiency to the attention of homeowners more. I declare an interest here, insomuch as I am on the phone to my mortgage broker quite often at the moment and spend a lot of time scouring Rightmove, but nothing motivates homeowners more than when they are going through the affordability study and the mortgage company or broker is asking about the bills.
There is a hugely frustrating moment when the mortgage broker asks, “And what do you spend on your household utilities at the moment?” and the homeowner says, “Probably about £200 a month, but within the house I am building there are solar panels on the roof, or solar PV on the roof, or I want to put those things onto the roof or to put in a heat pump,” and the mortgage broker just moves on to the next question and shows no interest whatever in what they have just been told.
I have been converted, having installed an air source heat pump in a very old property in north Wales, with 75 mm of internal insulation. I can virtually heat the house on a candle—it is not quite that efficient, but it is close. What is more, I get money back in renewable heat incentive payments, which means that my total energy cost has gone from approximately £1,200 a year to about £600 a year. It is extraordinary. It is comfortable to live in; I know that if I walk through the door, it will be warm. It is incredibly efficient. There is a gas boiler that gives hot water on demand with no wastage and no heating up water unnecessarily. It makes a huge difference.
My hon. Friend is absolutely right. I suspect that we need collectively to convince our colleagues in the Ministry of Housing, Communities and Local Government that we can value energy efficiency and clean tech within buildings in a much better way. We must shift them away from an analysis that says that the affordability of a property is exclusively about what that property costs to own or rent. It is not; it is what that property costs to own, rent and then live in in the month that follows. With energy efficiency measures, we can significantly bring down what it costs to live in a house, and therefore make it more affordable, by more than the smaller savings we might have got from cutting a few corners with energy efficiency when the place was constructed in the first place.
I have now unloaded all my bright ideas into Hansard. I believe that we must embrace this agenda and see that the renewal of our energy system is about not just building big zero-carbon generation, but making an energy system that is more efficient, that sees the value in waste heat and looks at how we use that more efficiently, and that is re-geared so that it is localised and decentralised and we are balancing upward rather than downward.
We must see domestic energy efficiency as an opportunity to save consumers money in a far more meaningful, lasting and organic way than the price cap intervention, which we necessarily had to make this week, but which must only be short term. If we do all those things, we create economic activity and save money for both the Exchequer and, crucially, bill payers too.
It is a pleasure to serve under your chairmanship, Mr Walker. I congratulate the hon. Member for Eddisbury (Antoinette Sandbach) on her efforts to secure the debate. I find myself in agreement with many things that she and the hon. Member for Wells (James Heappey) have said.
We can hardly claim that our country has been a model of consistency in its approach to energy policy and energy efficiency over recent years. Changes from one Government to the next, and even significant changes within Governments, have come thick and fast, all of which has led to a rather unsettling period in our approach to the subject. I recall a series of parliamentary questions that I tabled only to try to ascertain when and how the Government would publish and then respond to the Bonfield review. It was as if I was trying to get blood out of a stone.
The review was finally published in December 2016. While I acknowledge that this Government seem set to embark on a particular course of action on energy efficiency and clean growth, there has been a lot of time lost and it is still not clear to me how the Government will achieve some of their ambitions. To the best of my knowledge, there has not yet been any real opportunity properly to scrutinise the proposals set out in the clean growth strategy. That is one reason today’s debate is so welcome.
The recent report by the independent climate change think tank E3G has highlighted the fact that public investment in energy-efficient homes in England has fallen; I think the figure I saw was that it had fallen by about 58% since 2012. That seems to flow from the coalition Government’s decision to end the Labour Government’s Warm Front scheme, which offered support to poorer households for better insulation and things such as boiler upgrades. Of course, we also experienced what I can safely call the disaster that was the Green Deal. According to E3G, Wales now spends twice as much as England per person on insulation, Northern Ireland three times as much and Scotland four times as much.
In my own region of the west midlands, fuel poverty is particularly acute. We have the highest level of fuel poverty in England, with about 13.7% of households—roughly 315,000 homes—classified as fuel poor. The newly appointed Metro Mayor for the West Midlands combined authority has recognised the importance of carbon emission reductions and clean growth in his aims and objectives for the area. I am interested to see what he will do, when he comes forward with his plans, to translate those into tangible results.
My understanding—I am grateful to the Sustainable Housing Action Partnership for a very helpful briefing—is that there are a number of encouraging activities, especially at local authority level, attempting to build on previous initiatives in the west midlands, with the aim of achieving a breakthrough in demand for wholesale investment in a highly energy-efficient housing stock and other energy improvement and retrofitting schemes. I think the hon. Member for Wells referred to some of the things he had seen in Birmingham on his recent visit. However, SHAP is clear that, for real progress to be made in this area, there needs to be a strong promotion of housing as infrastructure, which is the very point that the hon. Member for Eddisbury made in her fine speech.
Indeed, SHAP actually looks favourably on some of the things that the hon. Member for Wells said he had seen in Scotland that had impressed him. It points out that that is exactly what they do in Scotland: energy efficiency is considered as infrastructure. A long-term commitment to energy efficiency schemes there seems to be leading to improved, high-quality planning, design and delivery schemes. There are things around that we could learn from, but they require some obvious courses of action: clear messages from the Government, access to investment, a long-term commitment and the seeing of these projects as infrastructure projects.
Energy efficiency is obviously a key part of the Government’s wider decarbonisation plans, as well as being one of the better ways to tackle fuel poverty. I hate to think what will happen when fuel bills land after the recent cold snap, and I wonder what we will learn in the coming months about the people who suffered during that period because of their fears over fuel poverty. I was grateful to the Minister for her clarification on the gas scare story, but one thing it exposed is how reliant we in this country have become on gas and how much of a need there is for greater diversity in our energy supply.
Other hon. Members and I are pleased to see the Government reaffirm their support for the EPC band C target for fuel-poor homes, and indeed their proposals to extend that to all rented homes. It is also good to know that the energy company obligation—ECO—will continue until 2028. However, we would all be helped immensely if the Minister put a little more meat on the bones. Is there an implementation plan to ensure that the band C target for all homes by 2035 will actually be achieved? What particular steps will the Minister take to achieve the band C target for social housing and private rented homes? What are her thoughts on phasing out high-carbon heating systems in homes? I would also like to know what is to be done to incentivise able-to-pay homeowners to make the necessary energy efficiency improvements to their homes; other Members have mentioned that issue.
I did not talk about the able-to-pay market, but I wonder whether the hon. Gentleman has heard about companies that are starting to look at providing heat as a service? The consumer defines comfort, and the company then delivers that comfort, but the company takes responsibility for delivering energy efficiency into the consumer’s home because that is how it makes its margin when providing heat as a service.
I have heard about a scheme of that nature, but I have to confess that I do not know very much about it; I would be interested to learn a bit more. We definitely need to think about how we both improve energy efficiency but also make it affordable for people who can afford it on paper, but who we know in practice can often find it difficult.
One of the big problems is that many of those measures need to go in when back-to-the-brick restoration or work is done in the home, because putting in solid wall insulation internally requires re-wiring, re-plastering and many other things. There is therefore a need to incentivise homeowners making changes to their home to do so at the right time. I am not certain that I see that being incentivised by the Government at the moment.
I certainly agree. A lot of the low-hanging fruit has been picked and we are moving to a different level of problem, which I think gives us all the more reason to come up with practical, realistic incentives for that purpose.
As I say, it is good that ECO will continue until 2028. However, it is estimated that, to meet the 2030 fuel poverty target, the scheme requires funding of around £1.2 billion per year, as opposed to the current proposal to keep funding at about £640 million per year. I am curious to know how the Minister thinks she can meet that target with a projected funding shortfall of roughly 50%.
A further concern about ECO is that it is essentially a regressive funding mechanism. It pays for installing efficiency measures in fuel-poor homes by increasing energy bills across the board, which negatively impacts low-income customers who do not themselves benefit from the scheme. It seems analogous to the arguments about the cost of the smart meter programme, in that the cost of that is spread across all bills but without all people gaining the same benefits. That is something I have been looking at with some interest for a while now.
The hon. Member for Wells was looking for a way to vary the funding, and he talked about what might be done with the winter fuel allowance. I agree with the UK Energy Research Centre, whose recent report recommended that the environmental and social levies, including ECO, should be funded through general taxation rather than increased energy bills, which they claim would save the poorest 10% of households £102 per year while the vast majority of people would see no change to the amount they pay for environmental and social levies.
This is a very interesting question, and I intervene to address things that I am not sure I will have time to come to at the end. This point has come up a couple of times, and I say two things to the hon. Gentleman. First, bill payers and taxpayers are generally the same people; we pay out of our pockets for both. Secondly, the problem we all have, as he will know, is that, regardless of which party is in power, it is difficult to hypothecate taxes for particular measures.
Some might argue—I mean no disrespect to our wonderful civil servants—that the Government are not the most efficient deliverer of such schemes. I will talk in closing about the reforms to ECO that we want to bring forward. However, getting energy companies, which know who the customers are, to target that money effectively and to commission and deliver what are often very valuable energy-saving measures for our poorest and most fuel-poor people seems to me a far more efficient way of delivering what we all want, which is people not living in fuel poverty.
I will certainly not argue with the Minister that the Government might not be the most efficient deliverer of schemes. I obviously concur with her on that.
My point to her is that general taxation is usually graduated to some extent, whereas a figure applied to bills across the board is effectively a flat-rate tax. In that way, it has a regressive impact, which is the point I was making. I am certainly open to other ways of looking at this, and I hope we will hear from the Minister—I hope there will be plenty of time to hear it—that there are other ways that this can be looked at, and that the Government are open to them.
In its response to the clean growth strategy, the UK’s Committee on Climate Change said that an ambitious energy efficiency action plan for able-to-pay households is urgently needed, as well as a robust policy framework including incentives and firm commitments. It also recommend that we need some concrete proposals in place by 2019 if we are going to make real progress. I will be interested to hear the Minister’s response to those points.
I want to mention a couple of other things. The committee also says that action is needed in the private rented sector and that stronger regulations are needed. As the hon. Member for Eddisbury says, we need to find ways to incentivise homeowners to improve the energy efficiency of their homes. Fiscal incentives could include council tax rebates, cutting VAT on energy efficiency measures or a stamp duty rebate. As early as 2005, the Energy Saving Trust published research on the use of fiscal incentives involving council tax and stamp duty, and since then many other organisations have developed thinking on how fiscal incentives for energy efficiency could work, so there is not exactly a shortage of potential levers. I agree with the Minister that the process is not straightforward, but quite a lot of things could be considered and it would be good to hear where the thinking is going.
I would recommend that, alongside the fiscal incentives, the Government start to encourage other schemes. We should look again at the idea of zero or certainly reduced-rate loans, taxpayer-funded grants and mortgage-linked cashback schemes, to which I think the hon. Member for Eddisbury referred.
Something in which I am interested and that requires exploration is equity release schemes. They might be a promising vehicle for energy efficiency, because they would allow homeowners to withdraw some capital from their home for improvements that they would need to pay for only when or if they sold their home. Those schemes are considered suitable in particular for older, equity-rich homeowners—perhaps the kind of people the hon. Lady had in mind when talking about the scale of work that would be done.
Those people own quite a significant proportion of the country’s housing stock. Of course, they do not necessarily have money readily available for improvements, but they do have considerable equity. The Government should build on the work being done in Scotland. I would like to see an attempt at least to pilot an equity release scheme in England, and I would be interested to know whether the Minster is thinking about that.
The private rented sector has some of the worst properties for energy efficiency in the UK. Despite targets being introduced seven years ago to bring all rented properties up to EPC band E by 2020, 6% of private rented homes are estimated still to be in bands F or G. That equates to about 280,000 residences, which are often occupied by the poorest families—people who are forced into choosing between eating and heating. Shockingly, cold homes were found to be a bigger killer across the UK in 2015 than road accidents, alcohol or drugs.
The Department for Business, Energy and Industrial Strategy is introducing new minimum standards—from April, I think—stating that no home can be rented out if it is below EPC band E. However, the regulation includes a “no cost to the landlord” principle, meaning that if the landlord says that they cannot afford to make improvements or that they cannot get access to the energy company obligation scheme, they do not have to do that. I do not understand the rationale for that loophole. I ask the Minister to reconsider the matter, especially in the light of the questions about the availability of the ECO scheme.
As well as setting targets, the Government need to provide effective legislation and regulation, ensure that the financial frameworks are in place to incentivise able-to-pay households and ensure that private landlords are obliged to invest in their properties. It seems to me that there is a degree of agreement across the House on these matters. If we saw some progress on them, we could have much greater confidence that the Government would achieve their ambitions, and the twin aims of decarbonisation and energy efficiency, with the knock-on effect on the fuel poor, would be things on which we could realistically expect to see significant progress.
It is a pleasure to speak under your chairmanship, Mr Walker. I, too, commend my hon. Friend the Member for Eddisbury (Antoinette Sandbach) for securing the debate. Many contributions have focused on domestic energy efficiency, and I will touch on that, but I also want to broaden the debate and talk about energy efficiency in the commercial and industrial market, which is crucial if we are to meet our emissions targets.
The clean growth strategy was introduced last year by the Department for Business, Energy and Industrial Strategy with the express intention of accelerating the pace of clean growth, allowing the UK to meet its greenhouse gas emissions targets while ensuring that we maintain the strong economic growth that has been a key success of the Conservative Government during the past eight years. It is worth noting that the clean growth strategy has been introduced not to address an issue, but to improve, accelerate and maximise an already successful set of Government policies.
Since 1990, the UK’s GDP has increased by 67%, while emissions have gone down by 42%. In comparison, the G7’s GDP has increased by 61%, but its emissions have gone down by only 3%. That shows that the UK has led the way in growing the economy without jeopardising the environment. To put that another way, protecting our environment need not undermine our economy.
The argument that environmental protection is incompatible with a thriving economy holds little water. Our success in creating more jobs while reducing emissions shows that we need not choose between economic growth and environmental measures. The UK is therefore clearly right to seek to maximise the economic benefits of our transition to a low-carbon economy.
With regard to Scotland, energy efficiency was of course devolved in 2016, but energy policy is still a reserved matter. Particularly important for Scotland is the recognition of the importance of carbon capture and storage to decarbonising UK heat, industry and power. That has been mentioned by Opposition Members. For Scotland, CCS is a vital tool to reduce emissions, and the Minister should be commended for putting it firmly back on the Government’s agenda.
In the UK, we have world-leading oil and gas skills and infrastructure—predominantly based in the north-east of Scotland—which could be perfectly suited to CCS. However, the opportunity to repurpose many of those assets before decommissioning is diminishing. That is why putting the clean growth strategy into action now is vital for the UK as a whole. The economic benefits of CCS to Scotland and the east coast of England combined have recently been estimated at more than £163 billion during the next 60 years, making it imperative that we maximise this opportunity.
It is therefore worth considering the Caledonia Clean Energy Project, which could be well placed to kick-start the UK CCS industry. The Caledonia Clean Energy Project would see the development in Scotland of crucial low-carbon infrastructure that not only provided clean, reliable power to up to 1.3 million homes, but facilitated the decarbonisation of Scotland’s major industrial hub, Grangemouth. If that were not enough, the project could also produce enough clean hydrogen every day to power about 500 hydrogen-fuelled buses.
There is not a strict definition of energy efficiency at industrial level, but surely a helpful one would be the sort of energy efficiency that not only helped the UK to lower its emissions and meet emissions targets, but put the UK at the forefront of economic innovation in the energy market.
It is clear that Scotland specifically has the exciting potential to be a major part of the clean growth strategy, but if there is one criticism that can be levelled at the strategy, it is that it does not provide the sufficiently clear policy signal that investors in CCS need to justify what could be multiple billions of pounds of inward investment in the UK and Scotland. It is important to remember that although energy efficiency is devolved—we have heard here today examples of best practice in England and in Scotland—energy policy is still a reserved matter. That is why having a joined-up strategy that goes across the UK is so important—to ensure that we can pool our resources.
Where we have large energy assets such as nuclear, wind—we have world-leading wind farms in the North sea—and oil and gas, we can pool our resources, but we can also leverage some of the research and innovation that the UK is so famous for to promote micro energy efficiency and energy generation schemes and decentralised projects across the UK. The clean growth strategy seeks to promote that and it is a UK-wide strategy, which I very much welcome.
I would like the Minister to comment on how the clean growth strategy could deliver commercial-scale carbon capture to Scotland and other parts of the UK, before the oil and gas infrastructure is decommissioned and our best offshore engineers move abroad to work in other markets. Will she meet me and other Scottish Conservative colleagues to discuss the matter further?
As was mentioned by my hon. Friend the Member for Wells (James Heappey), we should be looking at a number of different energy measures. As a strategy, it is right that we look at both the top level and the micro level. I will not repeat some of the points so articulately put by my hon. Friend when talking about decentralised energy schemes and micro energy schemes, but I will just add some of the geothermal schemes. Certainly in my constituency, in Clackmannanshire, we have been looking at former mines and whether it is possible to use them as sources of geothermal heat.
As a matter of principle, it would be a pleasure to meet with anybody. As everyone knows, my door is open. Secondly, the hon. Member for Southampton, Test (Dr Whitehead) and I had that conversation only this week. I suspect that many people know about this whole geothermal mine water thing. I am really interested in this technology. If there are groups out there that are interested in promoting this and suggesting what can be done in a cost-effective way, bring it on. Let us look at what we have actually done—we have already dug the holes—and see whether we can get some more benefit for those communities.
I thank the Minister for her intervention. Fortuitously, Clackmannanshire is up for a city deal, so there would never be a better time for her to come and get involved in these energy projects. I will definitely be following up with her on that as soon as we leave Westminster Hall.
As we are all getting on this afternoon, I should to invite the hon. Gentleman to come and see me in Southampton, to look at its geothermal energy scheme, which has been going since 1984. Unfortunately, it is still the only one in the country, but I trust that, with the Minister’s good offices, the geothermal schemes that the hon. Gentleman has mentioned could shortly get under way to join Southampton in its geothermal pioneering position. I really do commend what he is thinking about for geothermal. I think a lot of development is possible in terms of both mines and aquifers. I hope he will continue on his path of supporting that.
I thank the hon. Gentleman for his intervention and will gladly take up his invitation.
Given the new Thornton campus in Cheshire, which is specialising in geothermal, may I suggest that on the way to Southampton from Scotland my hon. Friend call in to see some of the leading research that is being done at the University of Chester on the opportunities for geothermal and how we can roll that out much further across the country?
Mr Graham is now going to make some progress.
I thank my hon. Friend for her kind intervention and, again, invitation. I would certainly be keen to visit both places, as my constituency arrangements allow.
Scotland has been at the forefront of every major industrial development in the UK, from the industrial revolution in the 18th and 19th centuries, to oil and gas in the 20th and 21st, so it has undoubtedly contributed to the UK’s emissions over the years, but it has fantastic potential, through infrastructure and existing expertise, to be the leader on the clean growth strategy in the UK, and to drive the UK as a global leader in economic growth through emissions reductions. I urge the Minister to put the entire UK at the centre of the Government’s clean growth strategy in the months and years ahead.
It is a pleasure to serve under your chairmanship, Mr Walker. We should all be friends in this room today. I warmly welcome the fact that the hon. Member for Eddisbury (Antoinette Sandbach) has initiated this important and overdue debate. It is something of a scandal that the subject has not been debated for so many years. In this warm debate, I will give the Minister only a couple of bits of heat, which have actually been generated by the contributions of others, while I try to go through the constructive discussion we have had.
First, the hon. Member for Eddisbury rightly raised the issue of fuel poverty. She talked about the fact that this is an issue for many people, particularly in rural areas where lower incomes are more common and costs are higher. The weather is often less favourable and less warm. That is especially true for off-grid customers. In the highlands and islands, distribution charges mean 4p per unit more for customers than other parts of the UK, which is a particular additional problem. I call on the UK Government, as we have called on Ofgem and energy companies, to end this inequality without—importantly—increasing the cost for others: it can and should be done.
The hon. Member also mentioned energy efficiency and the massive strides that need to be taken towards climate change goals. I was interested in her proposition about mortgage providers providing an incentive. That merits investigation, but I would insert a word of caution there. The measures used would have to be carefully thought out, because we do not want to see the unintended consequence that people who are trying to get on the housing ladder and get their first home are effectively priced out of the market by measures that may not be appropriate for their area and its housing stock. It is worth investigating, but I urge some caution.
The hon. Member was quite right in saying that the onus should be on new developments to provide more efficient properties. Developers should take that up. I was caught by her comment that she was shivering in her home in London. I think it is quite unusual for people in London to find themselves shivering in their houses. When I was down in my flat last week, although we benefit from a district heating scheme, the insulation is so bad that it was actually very cold in the flat, because the heat was flying out of the windows. That is a good example of what happens. Is it not also the case, however, that that gives us an insight into what people in fuel poverty have to put up with throughout pretty much the whole of the winter? It is a good lesson for us to take away: we should be aware of the genuine suffering that people face through cold.
The hon. Member, in her very good speech, said that energy efficiency measures should be thought of as infrastructure. I think that is a good idea, which is overdue for consideration. The Minister that should take that into account, particularly in light of the great heat challenge that we will have in the coming decades. It is an important suggestion, which should be taken forward. Of course, investment in energy efficiency creates jobs. That is a great thing to do not only socially and morally but for the economy. I think that is an important point to make.
The hon. Member for Redcar (Anna Turley) talked about not being able to meet emissions targets without taking on the industrial effects, and she was absolutely correct. Industrial decarbonisation has to be accelerated. The whole strategy needs to be given a lot more—if you will pardon the pun—energy, and the attention that it needs.
The hon. Lady quite rightly talked about carbon capture and storage, and about the Teesside Collective and the investment that is required. She should be commended for fighting for her constituency in that way, particularly given the issues over steel. Happily, in Scotland we were able to save the steel industry, with the Scottish Government working with Liberty Steel to take over the plants in Lanarkshire. It dramatically affects the wellbeing of industrial neighbourhoods if they lose that significant number of jobs, and they should be prioritised for reinvestment. However, we should be wary—this is one of the points of contention with the Minister—of promises of investment in carbon capture, because in Peterhead the Chancellor said that we would invest £1 billion in carbon capture and storage, but the rug was pulled away from underneath that project and it was left without that funding. It will be interesting to see the Minister not only make those commitments but follow through on commitments for the different projects. I will return to that point when I respond to the comments made by the hon. Member for Ochil and South Perthshire (Luke Graham) in a moment.
The hon. Member for Redcar talked about district heating, which has to come through far more importantly and strongly to support communities. There are great benefits to district heating schemes if they are got right. She and the hon. Member for Wells (James Heappey) also talked about renewable energy, which is very important in both industrial and domestic energy in taking the challenge forward.
Another bone of contention that I have with the Minister —perhaps she will tell us what she will do about it—is the shabby treatment of the solar industry. Energy efficiency in commercial and industrial properties could have been greatly enhanced by supporting the solar industry, yet Government policy has withdrawn that support. Investments in new solar projects have dramatically declined—they have fallen off the scale—so I hope that the Minister will have an answer on how it can be supported.
Heeps—sorry, the hon. Member for Wells—said that big infrastructure was “toys for boys”. On International Women’s Day, it is worth pausing to reflect on that and say to the Minister, as I and others have before, that we need to encourage more girls and young women into the energy industry so that, large, small or however the infrastructure is designed, it is no longer “toys for boys” but “toys for boys and girls”. It is important we continue to challenge the language that we use, although I know that was meant in the best possible way.
The hon. Gentleman also discussed whether the domestic supply was near to crisis. I know the Minister answered that point; but I will pose the slight warning that, owing to capacity, people in off-grid areas came perilously close to running out. Some in my constituency of Inverness, Nairn, Badenoch and Strathspey actually did run out of liquefied petroleum gas during that period. It was not job done. I appreciate what the Minister said, but there needs to be more focus on off-grid gas customers to ensure that we support them. I would welcome a comment on that either now or later.
The hon. Gentleman and I, and I suspect others in the room, share exactly the same off-grid problem. It is a problem of effective supply. At the moment, heating oil is relatively cheap, but a couple of years ago the price was going through the roof, so we end up with unmanageable spikes in demand, although we have many collective buying schemes. He knows that one of the ambitions of the clean growth strategy is to phase out fossil fuel heating for new build in off-grid areas—it is simply ridiculous that we continue to put oil boilers in—and to look at how we create a cost-effective technological pathway. My hon. Friend the Member for Eddisbury (Antoinette Sandbach) has installed a heat pump, which, as she mentioned, can require a lot of reworking of a home, which may not be cost-effective. We are all collectively determined to solve this problem. To me, the answer lies in investment, innovation and creating some good routes to market.
I thank the Minister for that intervention. I understand that she wants to create solutions, but the proof will be in the pudding. I look forward to seeing what tangible measures come forward.
The hon. Member for Wells also talked about comfortable homes improving productivity. It is absolutely true. Studies have shown that in cold homes, children’s educational attainment is held back. He is right to point out that people are more productive when they have reasonable places to live in, and we give our children the best possible start in life when we give them warm homes to live in and have their education in.
The hon. Gentleman made very salient points, which I was delighted to hear. The voucher scheme for fuel-poor households is a really good thing to follow up—it is another idea that has merit and deserves further investigation. If something could be produced on that level, it could help a number of people and, as he said, improve housing stock. A measure that could improve things right away is the rapid acceleration of the programme to put the latest generation of smart meters into homes. A lot more needs to be put in to ensure that that happens much more quickly.
The key to getting smart meters into people’s homes is not only that the technology will allow all sorts of smart solutions that will bring down energy bills for people who are using less, but that the new tariffs being brought forward by the insurgent energy companies and based around half hourly settlement will allow people to access cheaper bills because they will be in a better market. The more that we can all, on both sides of the House, encourage smart meter deployment, the better job we will be doing for our constituents.
The hon. Gentleman makes a very salient point. It is important that we encourage these measures, especially for people living in poor households, because they are less likely to take this up off their own backs. A focused programme and looking at how we incentivise this rapid uptake for poor households is very important.
I agree with the hon. Gentleman and others about the potential of the smart meter programme. Does he concede that at the moment the problem is that it costs households? They do not know how much it is costing them, because the Government will not release those figures, and we do not know how much the Data Communications Company is costing. At the moment, while the potential is there, we have a programme that looks as though it is not on track and could lead to an inflation of energy bills, rather than savings for people.
That is something to be aware of. I thank the hon. Gentleman for raising that point and look forward to the Minister’s response.
The hon. Gentleman mentioned home insulation, which must be taken forward much more rapidly—I know I am using that word a lot today, but it is important because this is somewhere where we can make a real difference very quickly. In Scotland, as he pointed out, there is four times the progress on insulation. I make that point because it is important to thank the people, in particular in organisations such as Warmer Homes Scotland, who have been on the ground, working with consumers and making the breakthroughs by talking to people and persuading them to take on the new measures. If any hon. Member in the Chamber or anyone else wants to look at that, they will see the fantastic work being done.
The Warmer Homes scheme was a fantastic initiative. I know that some of the terms changed in 2017 because a number of constituency cases were brought to me, with people sometimes being disadvantaged. Will the hon. Gentleman join me in working on addressing some of those issues to ensure we are still reaching as many people as we can?
I will come to what the Scottish Government are doing in a moment or two.
The hon. Member for Birmingham, Selly Oak (Steve McCabe) talked about energy efficiency schemes, and in Scotland some of those are changing the housing landscape. I want to point out one of the commercial companies, a private developer from the north of Scotland: Springfield Properties. It is not only looking at more energy efficiency measures in its buildings, but in Perthshire, where it has a new development of thousands of homes, it is putting in electric vehicle charging points for every single house. That is a very innovative thing for a private developer to be doing, adding to the fact that Scotland is leading the way in electric charging for vehicles.
The hon. Gentleman is making another important point. At the moment, when new houses are built in England, I think they are being built with 2 kV or 3 kV fuse boards, but an EV requires an 11 kV fuse board. I do not understand why we are building hundreds of thousands of houses with electrical connectivity that is insufficient to charge at full flow cars that are very likely to dominate the market in future. I hope that our friends at the Ministry of Housing, Communities and Local Government will amend that part of housing policy quickly.
The hon. Gentleman makes a good point, and I share his hope that people are listening to the need to adjust those things. To achieve the outcome of improving homes, making them ready for the future through energy efficiency and tackling the clean growth challenge, it is important to take a holistic view.
I agree with the hon. Member for Birmingham, Selly Oak about introducing grants, loans and measures to help people to gain energy efficiency but, again, it is always good to look at those kinds of ideas with real caution. His talk about an equity release scheme should give us pause for thought about its unintended consequences. It is a good idea that merits investigation, but we need to reflect on whether it is a position that only people with assets could access and whether we would be forcing people to release those assets, instead of promoting it as a core policy across the board.
I hoped that I would not have any heat from the hon. Member for Ochil and South Perthshire, as is usual in exchanges between near-neighbours in Scotland, but he bravely brought up the carbon capture and storage challenge. I will not repeat my words to the Minister earlier, but in a positive sense, I ask her whether she will support the Scottish Government’s commitment to developing carbon capture in St Fergus. What will she do to put real weight behind that Acorn project?
My cheeky word of caution, which is in fact not cheeky but factual, is that in the vast majority of city deals in Scotland, the UK Government have failed to match the Scottish Government’s funding. If a city deal comes forward, I hope the hon. Gentleman’s constituency gets its fair share, unlike Aberdeen and Inverness.
The hon. Gentleman and I debate Acorn and St Fergus frequently. I will double check the numbers, but my understanding is that the UK Government have put in £1.6 million and the Scottish Government have committed a welcome £100,000. We are absolutely keen to support those projects and we continue to be a major investor in all sorts of levels of carbon capture and storage; I will address CCS and its future in my closing remarks. I will double check those numbers and write to him, but I am confident that we have already committed several multiples of what the Scottish Government have to that project—and quite rightly.
We are all looking forward to the Minister’s closing remarks.
I have not even got to the bulk of my speech, but I will try to speed up. I was getting to the end of my responses to hon. Members’ comments, which I was certain we had time for.
I will finish on a positive remark about the hon. Member for Ochil and South Perthshire’s comments. I am pleased to say that geothermal investigation has been embraced around the Chamber. I am sure that he will support the delivery of the Scottish Government’s ambition for accelerated clean growth in Scotland.
To aid the debate, I will cast aside some of my notes. As we have heard in this debate, much more needs to be done on energy efficiency. In my meetings with energy companies and climate change activists, they all agree on one principle: not enough is done for energy efficiency in our homes and businesses across the nations of the UK. Old housing stock is part of that huge challenge.
On new housing stock, I was struck by the comments in an intervention about new heating systems and new ways of looking after buildings that can reduce costs for people. When I was the leader of the Highland Council, I was pleased to be involved in a Highland housing fair, which adopted a housing development model from Finland. Some houses on that scheme were so innovative that it was reckoned that they would have average energy costs of about £2 per year, so it can be done with the right will. They have been sold now, so someone who wanted to see them would probably have to knock on the householder’s door. It was a good project, and the Minister might want to consider more innovation like that.
I will skip a page of my notes. We welcome the industrial energy efficiency accelerator, but we look for more detail from the Minister. We want to see how that will move forward.
My conclusion will not be too lengthy, but I will touch on some things that are happening in Scotland. Energy efficiency has been mentioned several times; it is fundamental to Scotland’s meeting its ambitious climate change targets. The Scottish energy efficiency programme route map—I am sorry to tell the hon. Member for Wells that its name is now SEEP rather than HEEPS—will be published in May 2018.
Last December, the Scottish Government published their energy strategy, which will strengthen the development of local energy projects, empower customers and support Scotland’s climate change ambitions, while tackling poor energy provision. Our ambition to improve the energy efficiency of Scotland’s buildings is central to our efforts to tackle fuel poverty.
On 28 February, the Scottish Government’s Cabinet Secretary for the Environment, Climate Change and Land Reform published the “Climate Change Plan, Third Report on Proposals and Policies 2018-2032”, which details how the Scottish Government will meet their emissions target of 80% by 2032. With the Climate Change Bill, Scotland is sending a message that it is the place to do low-carbon business, which seems to be endorsed around the Chamber.
Energy efficiency is fundamental to Scotland. Heating and cooling Scotland’s homes and businesses costs £2.6 billion a year, and accounts for just under half the country’s greenhouse gas emissions. In June 2015, the Scottish Government announced that they would take long-term action to reduce the energy demand of residential services and industrial sectors by designating energy efficiency as a national infrastructure priority. Again, something that has been called for in the debate has already been done in Scotland. That was subsequently confirmed in the Scottish Government’s “Infrastructure Investment Plan 2015”.
Would you believe, Mr Walker, that I am going to cut my remarks considerably short? I wanted to go into a lot more detail about what is happening in Scotland, but given the response in the Chamber today, there is plenty of incentive for the Minister to look at that in detail.
As the Member for Inverness, Nairn, Badenoch and Strathspey, it would be remiss of me not to mention a wonderful development: the Scottish Government’s dualling of the A9 between Perth and Inverness. The A9 is set to become the world’s—well, Scotland’s—electric highway because of the Scottish Government’s investment in ensuring that it has rapid charging points all the way along. It will be a real boon for the electric vehicle proposition in Scotland, and it is just the start of much more work that will be done there.
The debate has been very constructive, and I thank the hon. Member for Eddisbury for introducing it. There is still an awful lot of work to be done, but hopefully the debate has given the Minister a bag full of ideas to take forward and develop in future.
We have had an excellent debate. I congratulate the hon. Member for Eddisbury (Antoinette Sandbach) on securing it and on her excellent contribution, which was a superb setting-out of the imperatives of securing energy efficiency in homes and what flows from that.
What happens to fuel poverty, if we systematically insulate our homes to an acceptable standard? What happens to bills in the future, and what happens, as the hon. Member for Eddisbury pointed out, to the amount of fuel that we are consuming in our homes? She estimated that a 25% or so reduction in gas as a result of insulating our homes to an acceptable standard has all sorts of knock-on effects for the wider climate change debate. As she also said, that is reflected in the clean growth strategy ambition and targets that ideally we should be aiming for as far as insulation in all homes is concerned, and in the earlier target of insulation up to band C for homes in fuel poverty.
I very much commend the target in the clean growth plan, but how do we get to that target? That was also a part of the hon. Lady’s and other hon. Members’ contributions this afternoon. We ought to dwell on that as something that we can all sign up to and aspire to. There is a long gap between that aspiration, where we are now and what has happened in recent times with energy efficiency and what we now have to do to close that gap. Among other things, we must make sure that we fulfil our climate budget obligations and make sure that what comes into those climate budgets from the energy efficiency contribution is as good as it can be.
Having congratulated the hon. Member for Eddisbury on her contribution, I want to add a slight note of sadness. Perhaps we should have all sat on one side of the Chamber this afternoon and addressed our comments to all the rest out there who did not turn up to the debate and who quite often do not engage with this issue. We might have collectively addressed the importance of energy efficiency not only in domestic buildings but commercial and industrial buildings. It is important to work together to address climate change, fuel poverty and all those other targets to make sure we sort them out. Today’s debate has reflected the collective and consensual activity that we ought to organise between all of us, provided all those other people along the road support the Minister in what she is doing for energy efficiency. The Opposition party must have the very best policies so that when our turn comes to govern, we have a clear understanding of where we need to get to, what we have to do and how we support and fund it. That is a job of work for all of us in this Chamber to get ourselves involved in.
The elision of energy efficiency and the clean growth plan in this debate highlights one of the central issues that will make or break our approach to making sure that our obligations under the fourth and fifth carbon budget can be met. I have said on various occasions that the really good news about the clean growth strategy is that it encompasses all of those things. The bad news is that the clean growth plan itself does not get us to where we need to go in terms of our obligations under the fifth carbon budget. I think the Minister accepts and understands that and has, I hope, substantial plans to add to the measures in the clean growth plan to get us to the fifth carbon budget target. However, I do not think we need to come up with a lot of brand new ideas to do that. We need to make sure that what is in the clean growth plan is funded and sorted out at the earliest possible stage and on the widest possible canvas so that when we come to put the sums together we will see that they add up as we go down the line.
I cannot emphasise strongly enough, along with other hon. Members this afternoon, what we need to do to meet the target for energy efficiency in homes. The hon. Members for Eddisbury and for Wells (James Heappey) and my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) all emphasised the components of the action that we need to undertake with regard to energy efficiency. The hon. Member for Eddisbury emphasised how clear-eyed we need to be about what it will cost us and how it will be financed, but, once that cost has been met, there will be benefits in the end. We need to understand that that is a pretty good cost-benefit analysis over the long term.
My hon. Friend the Member for Birmingham, Selly Oak reminded us not only about how the cost will be borne, but by what parts of Government it will be borne. He drew attention to how matters stand under the clean growth plan of action. I believe that there is shortly to be a Government publication on the plan for the next phase of ECO and how that will have its impact on energy efficiency. We have to be clear that even if ECO is extended out to 2028, at its present level of funding that will nowhere near get us to the numbers that we need to be energy efficient. There are still 7 million homes out there—the non-cavity wall and hard-to-treat homes—that have a far higher unit cost of treatment than what we might call the lower-hanging fruit of loft and wall insulations, a lot of which have already been done around the country.
Since some of the measures taken by the previous Labour Government on area-based schemes, including the enveloping of some hard-to-treat homes, there has been a 58% drop in treatments related to energy efficiency. I do not blame the present Minister for that drop. I know that she is committed to turning that around and getting a far greater number of treatments undertaken, but we have to face the fact that that is what has happened in recent years. We are starting our road back towards energy efficiency from a fairly low and, in some senses, rather dispiriting base.
My hon. Friend the Member for Birmingham, Selly Oak reminded us that when it comes to funding the changes it is extremely unlikely that we will be able to do it by heaping obligation on obligation in customers’ energy bills. I want to go further and remind hon. Members that we are assuming at the moment that action will be taken in a range of areas by means of obligations on companies, which will be passed on to customers in their bills. As my hon. Friend mentioned, we assume that the cost of the smart meter roll-out will go on customers’ bills, because the obligation on energy companies to fund them will be passed on. The capacity market for procuring standby energy supply and new forms of conventional energy supply is, effectively, an obligation that is passed on to customers in their bills. The contracts for difference that we have already are also based on such an obligation—the renewables obligation—and the additional £557 million that is in the budget for further offshore wind. The warm home discount is in the same boat. If, as I understand the present plan is, the energy company obligation is extended to 2028, that will also be based on a continuing obligation—it is in the name—that will go on to customers’ bills. Recently what was effectively a grant from Government to energy-intensive industries was converted to an exemption, which is to be funded by a levy on customer bills. There is a raft of such levies, and the number is increasing.
The hon. Member for Eddisbury set out some recent figures from, I think, Frontier Economics, and said that they were the likely real annual cost of getting us to an acceptable level, close to the target in the clean growth strategy. Her figure was £1.1 billion. From recollection, although I do not have the Frontier Economics report before me, that figure is a net one, arrived at after taking into account other contributions, including local authority and, as other hon. Members have mentioned, landlord contributions. The hon. Member for Wells—perhaps in future we can refer to him as the hon. Member for HEEPS—mentioned, and my hon. Friend the Member for Birmingham, Selly Oak emphasised, the fact that landlords may make a contribution, but if they say they cannot afford it or get into ECO they will effectively be given a free pass.
There should be a minimum merchantable standard for property for rent. Although it is true in theory that at the moment the landlord should not be able to let property below that standard, which would be band E in this instance, the remedy is enforcement at local authority level. We know what the situation is as to enforcement at the moment, given local authority resources.
Landlords do not necessarily have to stick at band E if they have spent, I think, £2,500. If they cannot get on ECO they get a free pass. I do not think that that should be regarded as acceptable in the next 10 to 20 years. The landlord contribution should be doubled—and, indeed, the Frontier Economics report suggests a landlord contribution of £5,000 being factored in to the figures mentioned by the hon. Member for Eddisbury.
However, the issue is not only about that. If someone said, “I am letting out this hotel room, which has no glass in the windows, has cockroaches all over the place and has no sheets on the bed, but is quite cheap,” trading standards and various other people would be all over it. We need to get into the idea that a house being let in the rented sector with poor energy efficiency is a non-merchantable product and should be seen as such. A key part of a drive to make firm progress on energy efficiency is making sure that rentals in that sector are made on the basis of merchantable properties with good energy efficiency.
The figure that the hon. Member for Eddisbury mentioned can be upped a little in view of all the contributions. It comes to a round total of, I think, £1.8 billion. That is certainly what our party would commit to as the sort of expenditure needed to get to the level in question. I cannot see that that can be found by increasing obligations on bill payers over the next period. It must come from central taxation.
The hon. Gentleman is a sensible, intelligent man, but what he is saying presupposes that the prices never change. However, the reason why we no longer have to invest so much of the £557 million in offshore wind is that prices tumbled precipitously, giving us more bang for our buck and enabling us perhaps to buy technologies that are further in the market.
Part of the clean growth strategy is trying to take that investment spend—the innovation spend that the Government are setting out—so that we can drop the prices of technologies significantly, and so that they no longer require a burden on the bill payer or the taxpayer, because they are sufficiently cheap. The benefits in reduced energy costs that my hon. Friends described mean they pay for themselves. Please would the hon. Gentleman get out of the world of equating the amount of money that the Government spend with the result that we need? It is actually a matter of how we deliver the most homes, well insulated and cheap to run, most affordably.
The Minister is right, in that, obviously, area-based efficiency measures that uprate an entire area lead to economies of scale. Far more houses can be treated in that way than by cherry-picking individual houses in different places and dealing with them one by one.
That is true, but surely the hon. Gentleman agrees that other people’s money will be better used if the underlying price per installation has fallen because of a completely different approach to cavity wall insulation or investment in solar-reflective paint, which is a technology being rolled out in other parts of the world—in other words, if we are looking at more cost-effective and innovative ways of doing things, so that the same amount of money buys far more installations on a per-unit basis?
I surely do. On the basis of what the Committee on Climate Change says, the current ECO commitment falls way short of the levels of treatment we need if we are to get anywhere near our 2035 targets. Even the £1.8 billion figure that has been cited will not cover a complete series of treatments for houses in the UK. I suggest that making our treatments much more efficient—by doing them on an area basis, for example—would allow us to get much closer to our target for the same money. We can probably agree that £1.8 billion will be the sort of money that will get us there, but an efficient approach could get us so much further, which I would completely support.
As the hon. Members for Eddisbury and for Wells and my hon. Friend the Member for Birmingham, Selly Oak emphasised, enveloping energy-efficient homes area by area needs to be funded from the infrastructure budget. It may not look like big boys’ toys, but it is absolutely an infrastructure project and ought to be treated as such by the Government. That would have a number of advantages for costs of capital, borrowing and all the rest of it; as the Minister says, we could make even more houses efficient for the same investment.
I appreciate that I have gone on rather longer than I intended, but let me briefly say a few words about the speeches of my hon. Friend the Member for Redcar (Anna Turley) and the hon. Member for Ochil and South Perthshire (Luke Graham). They both drew attention to the role that CCS can play, as did the hon. Member for Wells—or rather for HEEPS. I thoroughly endorse that line of thinking on CCS, but I must point out that as far as the clean growth strategy is concerned, £100 million will not get us anywhere near our CCS target, just as our ECO commitment will not get us anywhere near our energy efficiency target.
I congratulate Teesside on its comprehensive approach, in which my hon. Friend the Member for Redcar has been centrally involved. Teesside could be an absolute exemplar for the rest of the country in its combination of intensive industry with CCS and its by-products. That is very important for realisation of the clean growth strategy and we need to incorporate it in all our future clean growth plans.
I congratulate all hon. Members on their contributions to the debate. They all faced in exactly the same direction, acknowledging the importance of energy efficiency in homes, for a variety of reasons including climate change and fuel poverty, and the prominence that we need to give it in our policy debates. If this afternoon’s debate has hastened that process, we will have done a very good job between us.
I have let speeches go on longer than is conventional because we have had plenty of time. We have had two mammoth speeches from the SNP and Labour Front Benches. I know the Minister could speak for 55 minutes if she wanted to, but if she felt that she could just match them at 25 minutes, I am sure we would all appreciate it.
It is a pleasure to serve under your chairmanship, Mr Walker. You tempt me, but I will say what I had planned to about this excellent debate.
May I wish everyone a happy International Women’s Day? [Hon. Members: “Hear, hear!”] I am so proud to represent my constituents on this marvellous day—a great day for discussing boys’ and girls’ infrastructure investment preferences. It is a bit like blue and pink jobs, but we all need better roads, railways and power generation as well as warm and well-insulated homes. That is certainly my focus.
I congratulate my hon. Friend the Member for Eddisbury (Antoinette Sandbach) on securing this fantastically important debate and on her characteristically thoughtful, knowledgeable, well-balanced and well-researched speech. She is an extremely important member of the Business, Energy and Industrial Strategy Committee, which has done such good work on the matter. It is striking that this is our second debate this week—after the Second Reading of the Domestic Gas and Electricity (Tariff Cap) Bill on Monday—in which there has been an outbreak of consensus. Long may it last.
Hon. Members across parties understand the vital need for action and the potential difficulties. A lot of sensible suggestions have been made about prioritisation, but ultimately we all share the ambition to secure clean growth for the UK at the right level and the right cost; maximise productivity under our clean growth strategy and our industrial strategy; and create a secure, diverse energy supply at low cost for our consumers. This has been a really thoughtful debate and many good ideas have been suggested.
Let me recap where we are. Based on 2017 data, the last time emissions in the UK were this low was in the year the Forth bridge was opened and “The Picture of Dorian Gray” was published, which was the year before penalties were introduced in football. I hope hon. Members from north of the border will already have got it, but in case not, it was the year 1890. When we consider the scale of the challenge, we should take a moment to think about just how far we have come: in a couple of decades, we have dropped our emissions to a level last seen in Victorian times. That has been achieved through cross-Government support for the Climate Change Act 2008, impressive work done by successive Governments on decarbonising parts of the economy, sustained investment and getting the costs of intervention to a market level, as we have seen so recently in offshore wind.
To be slightly partisan for a moment, I am very struck that it was Margaret Thatcher who made the first speech to the United Nations on the impact of human activity on the climate. She referred to sulphur emissions and acid rain, but since then we have realised the impact of chlorofluorocarbons, started talking about carbon and methane, and become far more informed. Only two countries in the world are considered to be doing enough to meet a 2° target: China and the United Kingdom. I would be the first to acknowledge the scale of the challenge ahead, but we should feel reasonably good about getting there and about speaking to colleagues and constituents about what we have done.
Before I plunge into my attempt to answer the many questions asked in the debate, let me refer to a couple of speeches. My hon. Friend the Member for Eddisbury opened the debate and the next speech was made by the hon. Member for Redcar (Anna Turley). It has always been a pleasure to work with her and it is so wonderful to see her back in her place, standing up very ably for the concerns of her constituents. The opportunity to create a new industrial cluster on the SSI site that sequesters rather than emits carbon is incredibly exciting. Unfortunately, the hon. Lady was not there when I visited, but I was pleased to go up to see the site, work with some of her colleagues and celebrate a really good interaction between national Government and local government—having a Mayor for the combined authority is making a huge difference—and some incredibly effective cross-party working. That is a really important model for how we should be going forward.
Let me briefly address carbon capture, utilisation and storage, which is not the topic of this debate but is important none the less. We have a triple test for spending taxpayers’ money on technology. First, can we get the carbon down? Secondly, can we get the cost down? Thirdly, can we create a competitive innovation that we can then export around the world to improve productivity? I was not in my current post when the decision was taken on the council. I can say that the money that was not spent was recycled into the research and development budget, which has allowed us to have £2.6 billion to spend on energy innovation that is bearing fruit all over the place.
By the way, there are only 21 at-scale CCS plants working in the world today, 16 of which rely on capturing the carbon and using it for enhanced oil recovery. This is not a cost-effective technology that other countries are embracing with gusto. Even our friends in Norway, who are a little further along than us in building up the infrastructure, are struggling with precisely this point, which is, how much do we burden taxpayers or consumers to fund these projects? That is a real challenge. However, we are not going to bow down before it; we are going to embrace it.
That is why I have set up the carbon capture, usage and storage council—literally the best minds on this problem in the UK, and indeed around the world—to consider how we build strategically the case to carry out CCS in a more cost-effective way. We have also set up the CCUS cost reduction taskforce, emulating what was done in offshore wind, to drive prices down, not only in terms of the technology, but in terms of the financing, risk analysis and risk-sharing, which was one of the problems we had in the last project structure.
As the hon. Member for Redcar mentioned, I have set aside £100 million for CCUS innovation. That is not a subsidy and it is not putting money into a contract for difference; it is trying to create the innovation that we need. There are enormous opportunities to work with the hydrogen economy and with heating systems, to try to bring this work together. I accept that that news was a disappointment, but I would like colleagues to be reassured that we understand completely the need to decarbonise these industrial pools and to decarbonise further our heating system. Without CCS and CCUS, I do not believe that we can do that, which is why they are such vital technologies.
My hon. Friend the Member for Wells (James Heappey) displayed his characteristic vision and knowledge of this sector. He said that we have been too focused on inputs, not outputs, when we talk about energy and efficiency. He also talked about the distributed energy future, which is absolutely what is happening both in our minds and the minds of the commercial world.
Of course, we already have solar. We do not often see a lot of solar generation on the very helpful national grid app, because it tends to sit behind the distributors and make its contribution there. However, we also know that we need to keep investing in this industry, which is why the smart systems plan has tried to set out the framework for doing that.
My hon. Friend also alluded to Birmingham combined heat and power, demonstrating that there are some fantastic examples out there, whereby not-for-profit or community-owned entities have already been set up. Robin Hood Energy in Nottingham also comes to mind, as does the White Rose Energy project. In those projects, there is real innovation and local leadership, which we welcome. We have been supporting those things. I have just put another £7 million into working with UK100 to try to build capacity at a local level.
For me, most of this activity works when it is delivered in a particular place. It is very easy to sit in Whitehall and push out suggestions, but if they can be pulled through by a local authority, a local council or a local company, we can start to think about transport. How does transport plug in? And how do we deal with heat? That was an excellent set of suggestions.
The hon. Member for Birmingham, Selly Oak (Steve McCabe) also spoke. I will try to reassure him that these things are not just warm words; they are actions. I think we are all apprised of the need to deliver and to continue to maintain the UK’s leadership position in this area, which is genuine. Now, when we go around the world and talk to other countries about what we are doing, people listen. There were 70 people at the event on this issue in Germany yesterday, according to my officials, who said people are really hungry to learn. That is because the strategy is not just a piece of lovely paper; it is trying to set out a cross-Government set of actions that we have to take. They are not optional, if we want to meet our targets, which we must do by 2032 and beyond to decarbonise.
The hon. Gentleman and I share the aspiration around energy company obligation and fuel poverty. As the hon. Member for Southampton, Test (Dr Whitehead) mentioned, shortly I will publish some of the ECO consultation and consider how we pivot ECO to focus on fuel poverty, while also making it a conduit for more innovation, so that we can reduce the costs and target it better. That is because I get invitations to join ECO through my front door. Why? Because I live off the gas grid, so I clearly fall into some category that says there will be some fruitful mining out there. I do not want to respond to those invitations; I want ECO to be targeted at the people who need it most. They may not be the ones who are currently in the frame; they may not be known. We know that local authorities know where they are, so we want to target the ECO system much more at those who need it. I will return to mortgages when I wind up.
My hon. Friend the Member for Ochil and South Perthshire (Luke Graham) again made a powerful case for CCS and its importance. I think he also referred to the “win-win” of clean growth. We are not looking forward, as some campaigners might want to look forward, to a kind of deep green “lights off” future, because we all know that recessions are the greatest thing for cutting carbon emissions. We want the economy to grow. As he said, we already have 400,000 people working in this sector, which is delivering jobs from Aberdeen to Aberystwyth to Cornwall, and to many places in between. People have only to go to the Humber area to see what is happening with the support and the manufacturing of the offshore wind turbines for the wind industry, which is hugely transformational.
Of course, I also enjoyed receiving my hon. Friend’s invitation to all; we have had many invitations. Perhaps a Select Committee would like to produce a report on this subject, because its members could then travel around and take advantage of all these great opportunities.
The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry)—I normally never get a chance to say the full name of his constituency—gave a typically well-informed speech. We exchanged views on off-gas grid. I think that in both his constituency and in mine, 15% of households live off the centralised grid, and we have to find cost-effective ways to provide them with more heating solutions in particular. Of course, all those people will benefit from the Domestic Gas and Electricity (Tariff Cap) Bill. Again, we exchanged views on CCS.
The hon. Gentleman also made a strong point about the Scottish Government’s plan. We should all be willing to learn from each other. There are so many good people out there who are coming up with good ideas, whether that is at a local level or a national level, and we will be stronger if we pool all those ideas. Then we would not replicate what we are trying to do and spend.
The hon. Member for Southampton, Test again talked about clean growth being a strategy, which is important. It is not a plan; it is a longer-term strategy, deliberately for that reason. He also emphasised that there is strong cross-party support for these measures and, frankly, we will need that support. If we are asking for this issue to be a spending priority or a national priority, we will need as many voices as possible from all parties to make these points on behalf of our constituents.
Have I covered everyone? I think I have.
I now turn briefly, Mr Walker, to some of the plans that we have to implement this agenda. I was very interested—indeed, excited—to hear the conversation about whether this issue should be a national infrastructure priority. I know that the National Infrastructure Commission will report shortly. I will follow that closely and I undertake to meet the commission, because the case that was made for demand-side as well as supply-side infrastructure investments is powerful. However, I caution colleagues that that does not automatically turn on a new funding tap. There is no packet of money under the Chancellor’s desk marked “Infrastructure”, so this all has to be put through a similar hopper.
Nevertheless, the point about energy efficiency is excellent; energy efficiency is not only a strategic imperative, but an economic imperative. If we improve energy efficiency, we reduce people’s bills, create value, and create opportunities and investment for new forms of technology. We lead the world in many of these spaces, but we have never provided a really good route to market. I am interested, for example, in the Government’s commitment to new home building, which is absolutely vital. We should try to make those homes as affordable to run as they are to buy, using that as a route to market for so much of this technology.
I have talked a bit about what we have done, and of course we have seen household energy consumption fall by 17% since 1990 and the energy efficiency of non-domestic buildings has also improved substantially. Actually, the Government’s minimum energy standards, which we have put in place for appliances and for boilers, have had a measurable effect.
I would like to reassure right hon. and hon. Members in the Chamber on one point. People have asked, “Does coming out of EU mean any weakening of these efficiency targets?” Absolutely not. Of course these targets have a meaningful impact on energy efficiency and they reduce bills. As a result of more energy-efficient products being used, the average annual bill for dual fuel households in 2020 will be £100 lower than it might otherwise have been, and the Domestic Gas and Electricity (Tariff Cap) Bill, which we introduced this week—I was pleased that it received cross-party support—will also help to cut bills, as will the record low capacity cost of the energy that we are now buying in the market, as indeed will Ofgem’s announcement yesterday of further investigations into network company returns. We have to find a way to reduce the cost of energy right across the board.
This work does not just stop in the home or in the business environment. In the public sector, enormous efforts have been made, using the Salix programme, which has been highly successful in lending money for these energy efficiency measures. We anticipate a saving of about £1.5 billion for us all—for taxpayers—between 2018 and 2020.
So, we are moving in the right direction, but we have to go a lot further and faster. I completely accept that, which is why I set out the band C objective for 2035. That is the first time we have done that, saying, “That’s what we think ‘good’ looks like in housing stock.
There will always be homes that are cost-inefficient to treat. There will also be homeowners who do not want that and will deny access. We cannot forcibly upgrade someone’s home if they do not want it.
Can I tempt the Minister to have a look at a particular private Member’s Bill that is going through the House at the moment introduced by one of her colleagues, the hon. Member for Basildon and Billericay (Mr Baron)? The Bill suggests that the 2025 aspiration should be made a statutory target. Does she have any thoughts on that?
Indeed. I have met my hon. Friend the Member for Basildon and Billericay (Mr Baron) and some of those who support the Bill. I think it is an extremely interesting suggestion. I was able to reassure my hon. Friend that, given the work we are doing on ECO—I will come to that—and other measures, we will get there without legislation. That is always the preferred route, although having the overarching legislation of the Climate Change Act 2008 has meant that we have to deliver on these promises right across the economy.
I started to have the conversation with my hon. Friend the Member for Ochil and South Perthshire about it ultimately being a win-win to upgrade people’s homes or buildings because it saves money. Someone upgrades their home and they save money on their bill. There is a commercial proposition there. I served on the Energy Bill Committee—the Bill provided for the green deal—and I had great hopes for it, but it did not deliver. There is an economic value to doing those upgrades, however. Some of it may flow straight to the homeowner. Some may flow to a landlord, in which case there is the opportunity to rent the flat at a higher rate or to have a different sort of tenant who has a bit more money. There are opportunities there.
We talked a little about the co-benefits of better health for the country from warmer homes. We do not cost those things, and we cannot necessarily capture the money in the silo of BEIS, but we all know that they intrinsically make sense. As well as supporting what is already happening through spending, which I will talk about, we are focused on trying to build a better market for long-term delivery of much better solutions. That is absolutely where we want to go.
I know that my right hon. Friend the Minister will certainly not make such a commitment immediately today, but may I check whether she will take away the suggestion I made about smart meters becoming a requirement for band C and above EPC ratings? Perhaps she and I and colleagues might discuss that as an option at a later date.
It was an excellent suggestion, and I have already clocked it as one to take away. Indeed, I will be attempting to turbocharge the smart meters roll-out later this year, because we have done some excellent work that needs to be continued.
I reassure colleagues that the money we are spending on ECO, where we aim to improve more than 1 million homes going forward, the money we are spending on the warm home discount and the money that we are already putting into the problem of fuel poverty will be spent in a way that tries to drive more effective solutions. One of the things I want to do with the ECO project is targeted at fuel poverty, which is a hugely important aspiration for all of us. I also want to try to have much more of it targeted at research and development and innovation. Technologies qualify in a very formulaic way, and I think we could do a lot more on that.
To reassure colleagues who have said the clean growth strategy is just warm words—I know they have far better things to do—on page 132 and 133 of the document I have clearly set out the next series of things that we will do. People say that just bringing consultation forward is not action. I want to make decisions that stick over the long term because they have been widely thought through and bottomed out analytically. On pages 132 and 133 is a long list of things we have already done, are doing or are planning to do this year—so I am not getting away with a long target—to drive forward the ambitions on the band C rating.
We are also working hard with business and industry. While we have a real challenge in our homes, the biggest pool of emissions in the UK come from—it fluctuates a little bit between them—industry and transport. We have always found it difficult to decarbonise businesses. Part of that is process decarbonisation—as the hon. Member for Redcar knows, that is difficult to do without fundamentally changing the feedstock or heat source for a particular manufacturing sector—but a lot is just business premises. All the same issues we have in the homes sector absolutely apply to business premises.
If energy efficiency measures have been rolled out in the home, surely common sense dictates that those people who have experienced them go into work and see how similar measures could affect their work environment. Does my right hon. Friend the Minister agree that tackling the home energy efficiency market would inevitably assist with the business market?
My hon. Friend is absolutely on the money, but I would like to do both. I do not want it to be sequential. I cannot remember which of my hon. Friends talked about energy as a service. I thought it was my hon. Friend the Member for Ochil and South Perthshire, but as I say that, I think it might have been HEEPS—my hon. Friend the Member for Wells. He is never going to live that down.
If someone running a small business is trying to do payroll and deal with potential changes in the regulatory structure for export, are they really going to sit down and think about energy efficiency? They might—I agree with my hon. Friend the Member for Eddisbury that if someone has installed an energy efficiency measure in their home and has seen a material change, they might do that—but they might not. What incentives can we create and what market structures are already there that can help those businesses to focus on their energy efficiency? Many of the challenges in the rented sector that apply in the homes market also apply in an even greater way in the energy market. It is a real challenge that many firms occupy premises where energy is just part of the service bundle they receive, so it is not within their control to install such measures.
We are consulting later this year on a package of measures to help businesses improve how productively they use energy. We are focused on trying to do things that work, and that work locally.
Many Members referenced green mortgages and finding a way to finance such initiatives going forward. There has been some excellent work, such as the “Levering economics for new drivers to energy reduction and sustainability” project. My hon. Friend the Member for Wells talked about being asked about utility bills. Actually, the way the market works now is that, whether someone is in a home rated A or G, they input the same number, which is crazy.
Work is already under way on mortgage lenders who might pick up on the fact that someone could save £700 on their energy bills by having a better energy performance certificate. The green finance taskforce that I set up with the Treasury last year will be reporting shortly. One of its strands of work is how we get green mortgages to be a proper retail offering. Some lenders have taken steps to support energy efficiency improvements. Last November, Barclays launched the first green bond from a UK bank, on the back of the work that the taskforce was doing. That is being used to fund domestic assets, which it plans to use to refinance mortgages for the most energy-efficient properties. That is a testament to the data available and the bank’s desire. It is common sense to reward that sort of behaviour.
I have talked a little about the savings and what we are doing. Now I will mention briefly the most vulnerable households, which have come up often, especially given the recent cold snap. As my hon. Friend the Member for Eddisbury said, it was really cold in many homes. Turning up the heating was an option for many of us, but we might not have realised that others who do so feel extremely worried about what their bills will look like.
I want to reassure colleagues that the warm home discount programme—£140 a household—continues to operate. Winter fuel payments are being paid, and the cold weather payment was triggered by the cold snap. It is absolutely right for the Government to continue to support the most vulnerable and to help them make improvements to their homes. Such people do not necessarily have financial choice. I was therefore pleased that we committed £3.6 billion to ECO. Going forward, that will upgrade more than 1 million homes. We will extend that out to 2028 with funding at least at current ECO levels.
I take the point about the landlord challenge. The problem, frankly, is that 95% of landlords have four properties or fewer—they are us. We asked them to sign up to something that at the time we had underpinned with a green finance offer, but now they are potentially required to raise capital to do it. We have to do things that are fair and proportionate if we want the country to come with us. The measure is still incredibly important. We do not want people living in the least fuel-efficient homes and we are determined to do something about that. In fact, compared with 2010, there are 835,000 fewer homes rated E, F or G in the UK, so we are making progress at the least efficient end of the market.
I hope that I am not trying your patience, Mr Walker, but I have two more quick points to make. The first is on smart meters. I think we are on the cusp of something really exciting with smart meters. We are absolutely in the world’s vanguard by offering every household a smart meter by 2020. I accept the concerns about technology. People say, “Why would I install one of these when I’m going to get a better one?” The point is that if someone installs one now, they get all the benefits immediately of understanding what their energy consumption looks like, and can work out ways to cut their bills. Furthermore, they will automatically be upgraded through the technology that we are putting in place to the next generation, so when they switch suppliers they will not lose any of that functionality. That is a vital step forward.
More needs to be done to work on the consumer proposition. I am desperate to put in a smart meter, but not to take a morning off work to do so. It is really difficult to find the time, which is a problem that many people face. We will be working with industry and the organisation rolling the meters out to see how we can make them more consumer flexible, and how we provide incentives, because plenty of money is being spent on advertising them. We are on the cusp of something very exciting.
I also wanted to mention fundamentally changing the way in which we build and think about homes in the construction process. It is astonishing that the way in which we build homes has not changed much since the 1890s: we build the foundations, and then get the trades in. We can build really high-quality modular homes—homes that are built off-site and installed—in a far more effective, and far more resource-efficient way. We are working closely with the construction sector to see what we can do to turbocharge that.
We can also do retrofits in a modular way. Nottingham City Council and Melius Homes are taking a prefabricated approach to retrofit homes to 2050 standards, and improve their energy performance. A lot of innovation is happening in this area that I am extremely keen to support. That is how we create a new market for what needs to happen, while rightly focusing on building regulations. All colleagues will be aware of the challenge in the post-Grenfell world of ensuring that there are no unintended consequences to what we do with building regulations. We are working very closely with our colleagues in the relevant Department, and have reconstituted the inter-ministerial clean growth group, because so many of these challenges span across Government.
There is a huge amount more to do. We have heard lots of sensible ideas today, many of which are extremely attractive and that we want to take away. All of us want to get the costs and consumption of energy down, reduce carbon emissions, make our homes warmer, and make the transition to low-carbon energy less risky. This is not an either/or question; in order to meet our carbon targets, and to create a housing stock that is fit for the future, we absolutely need to do this. That is why the clean growth strategy is so important, and why the industrial strategy has clean growth as one of its four major pillars: things that we know that we can lead the world in, and that have to be done.
It has been a pleasure in today’s debate, as in so many others in this area, to work with colleagues across the House who are so committed to this agenda, and have so much knowledge and interest in it. It will really help us to accelerate the work going forward, so I thank hon. Members for the opportunity to respond this afternoon.
I think colleagues were almost heading for the door, but we have up to two minutes for the proposer of this great debate to wind up.
I thank colleagues from across the House for participating in the debate. We have now had three Front-Bench speeches that have referred to colleagues’ contributions, so I will not go over them again. I reiterate that there has been agreement across the Chamber: if the Government invest in this area now, that will lead to huge savings—£1.3 billion in the health sector alone, as well as productivity gains. In addition, it would generate a huge amount of jobs, and save consumers £290 on their bills every year.
I urge my right hon. Friend the Minister to go to the National Infrastructure Commission, as she has promised. It is due to make its decision in April, which is why I asked for this afternoon’s debate to take place today. Given the cross-party consensus, I suspect that there may well be a cross-party letter winging its way elsewhere to Government, encouraging them to take up the infrastructure challenge and the opportunities that innovation in this area offers the UK economy. I thank again all hon. Members who have contributed today.
Question put and agreed to.
That this House has considered energy efficiency and the clean growth strategy.
Thursday 8 March 2018
[Mr Charles Walker in the Chair]
Energy Efficiency and the Clean Growth Strategy