That the draft order laid before the House on 2 July be approved.

Relevant documents: 20th report from the Joint Committee on Statutory Instruments and 24th report from the Merits Committee.

My Lords, these two orders implement an important part of the home energy saving programme announced by the Prime Minister in September last year. They are aimed at helping households permanently to cut their energy bills and contributing to permanent CO₂ reductions. Both orders have been developed closely with stakeholders and were warmly received and supported through formal public consultation.

I shall speak to the CERT order first. CERT is a programme that, alongside its predecessor—the energy efficiency commitment—has already demonstrated its effectiveness. Over 6 million households have been helped with energy-saving measures such as insulation since 2002, with around 1 million households assisted in the past year alone. However, we need to keep increasing our efforts if we are to help the most vulnerable in society and to meet our security of supply and climate change goals. As part of this, we consulted earlier on a proposal to increase the CERT obligation on energy suppliers.

This consultation received substantial support for an increase, and the order gives effect to this by increasing the suppliers’ target by 20 per cent—from 154 million lifetime tonnes of CO₂ to 185 million tonnes—which will mean making annual savings of more than 5.6 million tonnes of CO₂ by 2011. This makes it the biggest household carbon-saving programme by some distance. The effect of this will be that an extra £600 million is likely to be invested by energy suppliers in helping households to install energy-efficiency measures, bringing total support under the programme between 2008 and 2011 to an estimated £3.2 billion. Of this, we estimate that around £1.9 billion will be directed at vulnerable households in the priority group of customers who are 70 years and over, and those on qualifying benefits.

Alongside the increased target, we consulted on a number of specific changes to the design of the scheme. We consulted on the principle of including behavioural measures, namely home energy advice and real-time displays, as eligible measures within the scheme. This will help people better to understand their energy use and, we hope, empower consumers to take informed decisions on reducing their energy use.

We received many responses on this point—not all of the same view—but on balance we have decided to include these measures within CERT. We have recognised the risks raised by some stakeholders that, as real-time displays are novel, long-term studies of the carbon-saving effects are not yet available. However, we believe that we should use behavioural measures and that they will reinforce the take-up of traditional measures. Given that they are new measures, suppliers will be able only to promote behavioural measures of up to 2 per cent of their carbon-saving target.

We proposed in the consultation to curtail the number of compact fluorescent lamps directly mailed to households, in recognition of the high number of high-efficiency lights distributed early in CERT. Many households have been able to save energy with CFLs, and while we recognise the risks of non-use from continuing such high levels of distribution, we are, therefore, working with Ofgem to ensure that a broad range of bulbs are promoted by suppliers, whereby consumer choice is respected as far as possible in terms of the light fitting, lamp design and wattage output promoted. We have also decided that, as from 1 January 2010, only those schemes which result in a direct purchase of a CFL through a retail outlet will be eligible under CERT—thus excluding direct mail and other “give away” schemes.

My Lords, the measures contained in these orders, whatever their merits—I certainly would not wish to assert that they have no merits—will add substantially to the costs of electricity users. If I follow the report of the Statutory Instruments Committee correctly, the 20 per cent CERT increase will cost £1.1 billion, which, as it happens, is about the same amount as electricity consumers pay today on an annual basis for the ROC subsidy to wind-farm operators. According to paragraph 4 of the committee’s report, the CERT £1.1 billion is accounted for by a £363 million cost to householders to part-pay for measures—presumably capital costs—and £582 million to energy suppliers who will, of course, as they are explicitly permitted to do, pass it on to consumers and a £160 million cost to local authorities and social landlords. How much of these costs will be recurring, how much are one-off costs and over how long a period will they be spread? To ward off criticism, the Government in their impact assessment have introduced an enormous figure which they simply assert will be the financial long-term benefit of the measure over its lifetime. In this case they have picked the figure of £3,523,000,000.

The Government hope that the improvement in the standards of energy efficiency, which the CESP order seeks to promote, will bring a reduction in the number of households classified as being in fuel poverty. It seems to me highly probable that that could be more than offset by the number pushed into fuel poverty by the increase in their bills due to companies passing on their costs. That possibility is mentioned also by the Statutory Instruments Committee.

In recent years, the number of households classified as being in fuel poverty has been increasing. The Government have been moving away from, not towards, their fuel poverty targets. The community energy saving programme is directed at the lowest-income households in an attempt to deal with the fuel poverty problem. That will only add to the costs which the companies will have to recover from all other consumers and, as the Statutory Instruments Committee report points out, there will be very few beneficiaries in rural areas, only payers. Therefore, issues of fairness arise, as the committee points out, as well as affordability.

Of course, not all increases in electricity bills are necessarily attributable to climate change legislation such as this. In my submission, the consumer should be informed of the contribution that he is making towards meeting the Government’s climate change targets. The Government are always singing the virtues of transparency in other contexts, so why do they not oblige electricity suppliers to inform their customers, private and business, on their bills of how much is attributable to each relevant piece of climate change legislation? Would that not be in the interests of transparency? Would it not also give consumers the moral satisfaction and, to some extent, the kudos of knowing how substantial their contribution was to meeting what the noble Lord, Lord Hunt, only this afternoon called the moral challenge of our time, or are the Government afraid that if consumers knew what they were paying, that would spell the end of any chance of the Government meeting their fanciful renewable energy targets?

My Lords, I agree with absolutely everything that my noble friend has just said. I wish to make two points on the community energy saving programme and two points on the carbon emissions reduction order. Today has been a big day for energy news and doubtless there will be much commentary on what has been said—my noble friend has just alluded to some of it. It is reasonable to relate these orders to a couple of the bigger issues and the broader picture before I go on to my four points.

A certain amount in the orders relates to wind. Sadly, by the end of July, we shall have no major domestic wind systems manufacturer in this country as the Vestas plant is being shut down on the Isle of Wight and on the mainland in Southampton, with the loss of 600 jobs. I am very concerned about capacity. I shall not labour the point because doubtless it was dealt with this afternoon on the Statement.

I am also concerned about the consumer, as my noble friend was in his formidable exposé. Yesterday and today, the First Secretary has been very busy recalibrating, to use a delicate phrase, the Government’s approach to cuts in spending, in effect saying that the Government should be much more straightforward about the problems that they would face if they continue in government. It is important that the Minister lets the House know whether all additional costs on consumers which may come from these two orders are built into the figure of the average cost laid on consumers across the country of £90 or £92 given by the Secretary of State in another place. Have those costs been rolled in? I happen to think—I do not know what my noble friend thinks—that the suggestion that it is a mere £90 is rather strange and that the actual burden will be much closer to £250, as experts have been saying during the course of the day.

In a spirit of inquiry, I would love to know the answers to those questions. It has always been enjoyable inquiring of the Minister, as he and I used to debate in the council chamber of the City of Oxford. He has always been lucid and straightforward in what he has said. At the time, the town clerk in his wig passed a comment on the pair of us saying that we showed some promise if only we concentrated a bit more. Look where we ended up.

Turning to the orders, on the community energy- saving programme order, I am concerned about the geography of the areas that will benefit from the quite interesting experiments which will be carried out and monitored between now and 2012. Unfortunately, a lot of deserving communities in low-income areas will not benefit. A walk over a few hundred yards from the City of London, where I work during the day, into the East End means crossing a gross-domestic-product-per-head fault line. It is like falling off a cliff of higher incomes to lower incomes. I do not think that the people in that area will benefit, although I am happy to be corrected on that. Will the Minister undertake that he and his officials will consider the fairness of the geography of the scheme when evaluating it up to 2012?

Is the Minister really convinced that the community energy saving programme order can be delivered by energy suppliers and electricity generators for as little as £350 million? I think that is an underestimate. Are not these estimates often overoptimistic—just as is, it seems to me, the estimate given by the Secretary of State in another place today on the costs likely to be laid on consumers following the package that he has announced? Consumers have every reason to be worried, as my noble friend Lord Reay pointed out.

I turn to the two points that I wish to make about the carbon emissions reduction order, which is trying to help with the 20 per cent increase in the carbon emissions reduction target. There has been a lot of consultation about that and some sensible responses to the consultation by the Government, notably in reaction to providing carbon-saving uplifts to both do-it-yourself and professionally installed loft insulation. I welcome the Government’s positive response to representations made. There have also been a few daftnesses—if that is a word; doubtless Hansard will correct me if it is not—in past policies, such as allowing direct-mailed high-efficiency light bulbs to be qualifying measures. I never thought that that was sensible. Why do we have to wait until the beginning of 2010 to stop that direct-mailing practice, with HECA- tudes of bulbs piling up in some peoples homes where they are not used? Why can it not be stopped immediately, or at least as soon as the beginning of the fourth quarter of 2009?

My second point is again on what may be termed gimmicky ideas. I appreciate that trying to introduce some of the things that the noble Lord has spoken about—taking up real-time displays, for example, and smart metering—require not just money but considerable changes in what doubtless professionals in the trade call consumer behaviour. That means, so we are told in the order, that there will be an awful lot of home energy advice. Home energy advice is not adequately costed. It is referred to more than once. Is any of the so-called home energy advice to persuade consumers to change their behaviour, take up real-time displays, to indulge in smart metering, and all the rest of it, to be a public cost, in whole or in part? Putting it in shorthand, is there an advertising budget for that with which HMG are concerned?

Following the First Secretary’s rightful remarks over the past two days that the Government should really come out and say what they are spending and what they are cutting, it is best to be open about those costs. I rely on the Minister to do just that.

My Lords, I will not detain the House long on the orders; I will attempt to damn them with faint praise. First, they are fairly complex instruments and fairly difficult to understand. I am not sure that, for the size of the task, they are the right tool. To put this into context, about 27 per cent of carbon emissions come from the household sector. There are about 22 million houses out there, just a handful of which are at the standards we would want to build them to in 2016, and 14 million of those are already well below standard. Where does this get us in terms of that stock, 80 per cent of which will still be around in 2050?

These two measures, although commendable to a certain degree, are fairly small in their effect on the overall picture. In fact, I believe that CESP is expected to affect 90,000 households, which is about 0.5 per cent of the total housing stock, yet we require something like a 29 per cent cut in carbon emissions in the sector, as we heard earlier.

One thing that I find fundamentally flawed about this—I am slightly off piste in terms of my party on this point—is whether the energy companies are really the right people to deliver the programme. I was interested in the evidence base in paragraph 3, which stated that household energy suppliers are well placed to deliver carbon dioxide savings from their customers. It states that they are well placed to inform them of the potential measures to save money—to save energy. The key thing for an energy company is to produce efficient energy and to sell it to its consumers. To get them to concentrate in this area is a bit like putting the editor of the News of the World in charge of phone-tapping policy.

If we sat on the board of one of those energy companies—perhaps some people here do, I do not know—I cannot imagine that high up on the agenda of their key performance indicators is carbon emissions and energy saving targets. Clearly, they will be making sure that they comply with government targets, and the orders increase them, but I think that it is an area of delivery that is bound to fail.

I want to ask the Minister two questions. Normally, when we go through these orders, we all ask about 10 questions. Usually, the Official Opposition get about half of them answered; the Lib Dems about 25 per cent. I shall stick to two questions. We talked earlier this afternoon, in the debate about the White Paper on moving to a low-carbon economy, about the North Sea gas transition programme, which is the big game, the big opportunity. I know that the orders are included in the White Paper as part of that overall reduction, but, for me, that is key: the street-by-street conversion policy that goes through UK plc. It may be very difficult to do, but that is the big game. To me, this seems like a sideshow. How do those two come together?

At the other end of the scale, do the orders really tackle the issue of the poor consumer in fuel poverty in the north-east of England—an example I was asked to give by one of my colleagues—who is elderly, a tenant and whose landlord is not interested in any of this, but just collecting a rent, who is on a prepayment meter, which are still being installed throughout the country? Do the orders help that citizen to get out of their fuel poverty and get their landlord to put in proper energy-saving measures that ensure that they can live securely and warmly in their environment?

My Lords, I was going to thank the Minister for explaining this so well, but I am not so sure now, having listened to everyone else. Maybe I have missed a few things here. I know for sure that the question of the noble Lord, Lord Reay, about the cost to the consumer, particularly the disadvantaged consumer—a point taken up by the noble Lord, Lord Teverson—is valid. We know that the Government are a little slow on getting round to tackling fuel poverty. They have been very slow, and they are not getting any faster.

The noble Lord, Lord Teverson, asked one or two questions that I had written down, which I shall not repeat because he has already asked them. Perhaps I may just whistle through one or two. We support the carbon emissions reduction target and the sentiment behind the community energy-saving programme, but we are concerned about the implementation, aware that the Government recently spent, as we heard, £16 million on the Warm Front scheme, distributing energy-saving light bulbs to every household. I am delighted to hear that the Government have realised that that was a complete waste of time and that they will not do it again.

The community energy-saving programme includes home energy advice as a measure that can be offered where experts will visit householders and audit current energy, allowing households to take simple, easy steps to reduce energy consumption and cut their fuel bills. I, too, find that difficult to visualise happening in some houses. Given that there are already many energy assessors out of work, I ask whether they will be fulfilling the role of the home energy advisers.

The Government have estimated that 60 pert cent of the total funding available under the community energy-saving programme will go to low-income and elderly householders, who will receive free or substantially discounted energy-saving improvements such as insulation. Will the Minister clarify whether this will be in addition to the support already available to those vulnerable households?

I have listened, as we all have, to some of the Government’s good ideas on CESP and CERT, so the Minister might like to listen to a good idea from this side and see whether he agrees with it. One of our policies is to grant an entitlement to householders to approved home energy-efficiency works up to the value of £6,500. The cost would then be recovered automatically through the household energy bill over a period of up to 25 years, but with a payback period, in terms of reduced fuel consumption, that is substantially shorter. This will be in addition to CERT. Does the Minister think that that is a good idea and would he like to add it to the list of measures that he thinks will tackle these two problems?

My Lords, this has been an extremely interesting debate, particularly as it follows our discussion on the White Paper today. I preferred the noble Baroness’s initial assessment of the orders to her later revision. I shall come on to light bulbs in a moment in answer to the noble Lord, Lord Patten, whom it is delightful to see here, recalling our days a few years ago in Oxford City Council chambers.

The noble Baroness referred at the end of her speech to her party’s proposed loan guarantee of £6,500 per household. I am slightly puzzled by it, because, by my reckoning, the implication of its being a loan guarantee is that a Conservative Government would be guaranteeing what could be up to £200 billion of loan. I am confused because I had understood that the Conservative Party was concerned about both personal debt and national debt. I am not quite sure how the two mix together. It is clear, as was pointed out earlier today, that we have many households where energy-saving provisions will be expensive, which is why we announced in the White Paper proposals to try out schemes which recognise that, in order for householders to be willing to pay or to take out loans, there has to be a realistic possibility of there being a payback provision over a reasonable time. That is the key to unlocking the door of many of those homes where the cost of the various energy-saving devices that can be taken is very high. As I said earlier today, it is one of the biggest issues that we need to crack.

The noble Lord, Lord Teverson, was of course right to raise the more general and fundamental issue of energy-saving. In a sense, I have just answered that point. I have no doubt that what we are proposing in CESP and CERT is part of a cohesive approach. Although the noble Lord may be disappointed by the numbers covered, it is none the less an important contribution. However, I also accept, as I have already said, that there are many homes where the costs will be considerably higher than could be covered under these programmes, and it is vital that we tackle that. The transition to a low-carbon Britain will not be able to be successful unless we can really tackle the requirement for energy-saving in homes.

My Lords, I am extremely grateful to the noble Lord for his very careful explanation. Reverting to the figure of £92 by 2020, the extra burden from these measures laid on the average household is 10 years away. The figure of £92 is very precise. Does the noble Lord really have complete confidence in the forecasting ability of any Government, whether Labour, Liberal or Conservative, to say that in 10 or 11 years the sum is going to be exactly £92? I think that it will be in the area of £200 to £250, but that is another argument, and that is a broad-brush approach. Are the Government really wise to suggest that it will be £92, not a penny more, not a penny less?

My Lords, of course I have confidence in the work that is undertaken to give noble Lords and Members in another place as clear an indication as we can as to the likely cost. No doubt this House will finally have been reformed by 2020, but if we are still here then we might be able to debate the question of whether I got that figure right or not. It is the best estimate that we have, and we expect that, for the next four or five years, the increase will be minimal. The cost will rise in the latter part of the next decade. I know that there is a disagreement about these costs, and I suspect that the costs to which the noble Lord refers probably do not take account of the potential impact of energy-saving measures. It could be that that is the reason for that discrepancy. I will be happy to discuss this with him to see if we can at least reach agreement on the methodology, as this is a very important matter.

I fully understand the point that the noble Lord, Lord Reay, makes about energy bills showing what households are paying towards energy efficiency schemes. He may recall that we debated this very fully last autumn, although I forget whether we were debating the Energy Bill or the Climate Change Bill. We continue to explore with suppliers the best way to strengthen consumers’ awareness of these issues. I have no disagreement with him in terms of the principle. The Government have made it quite explicit today that there will be a cost issue for consumers, and although noble Lords disagree about the figure, I hope they will agree that it is very good to have this in the public domain. I agree with the noble Lord that it is very important that this is understood. It is why, incidentally, we are very keen about home energy advice. I noted the concerns and questions that the noble Lord, Lord Patten, and the noble Baroness, Lady Wilcox, raised. We see this as one of a range of energy efficiency measures that suppliers can promote. Suppliers have discretion about how they market, and costs will fall to suppliers, although we have already accepted that this can be passed on in customers’ bills. It is the same point about transparency. The more information we can give the consumer, the better. That is why it is important that we have introduced behavioural measures through the scheme.

This is also a very good introduction to smart meters. A number of noble Lords are passionate about the impact that smart meters can have. I accept that advice standards need to be of a high quality. My understanding is that only qualified personnel will be allowed to give advice, that Ofgem will require that all advisers have had a CRB check and character references, that suppliers must also provide advice on a specific set of behavioural issues, and these behaviours will obviously come within the kind of framework of regulation which I have suggested. I accept that there must be integrity in this process.

I refer to the question of rurality. In the consultation we received many conflicting views about how the programme should be targeted. We consulted on the basis that CESP should use the lower income domain of the indices of multiple deprivation to target activity. These areas are in the lowest 10 per cent of income deprivation in England, and the lowest 15 per cent in Scotland and Wales. This will cover more than 2.5 million households in around 4,500 defined areas. The majority of responders agreed that the indices represented transparent objectives and a simple approach. There were some concerns that this would limit the number of rural areas, but no alternative methodology was proposed that was not excessively complicated. However, if CESP is to have its maximum value, it is important that it should foster a reasonable spread of different types of project in different types of location. The Government therefore expect obligated companies seriously to consider targeting action at a variety of areas around the country, including rural areas. We will facilitate contacts where this would be helpful. We will monitor and evaluate all schemes to ensure that any lessons relevant to rural delivery are considered in future policy development.

I say to the noble Lord, Lord Teverson, that I thought my strike rate in answering his questions was rather better than that, and I am rather concerned.

My Lords, I was not questioning the quality, just the quantity on this occasion.

Even that was a bit double-edged, my Lords. The noble Lord expressed concern about whether the energy supply companies were the best people to do this. I understand his concerns but, on the other hand, the companies are there and have current experience. It is our job as a Government to make sure that it is done effectively. The revision that we are making in relation to the CESP order is surely an indication that we do look at how this is working and have made changes where we do not think that it is working effectively.

I now come to light bulbs. Before the reshuffle four weeks ago, I also had responsibility in Defra, where I was Minister for light bulbs. I understand the reasons why noble Lords are concerned. I, too, heard stories about millions of light bulbs being given out that were not used. I understand the point that the noble Lord made about direct mail. That is why we have made the changes. However, I defend the previous policy. It is a no-brainer that energy-efficient light bulbs are a good thing to have. Lots of customers have taken them and now use them, but we have learnt from experience and have come up with what is probably the right way forward.

I am grateful to noble Lords for their comments on these orders, which I think take us down the right pathway. None the less, important matters have been raised tonight and I will make sure that my department is mindful of them.