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Home Energy Efficiency Scheme (England) (Amendment) Regulations 2010

Volume 721: debated on Tuesday 26 October 2010

Motion to Take Note

Moved by

That this House takes note of the Home Energy Efficiency Scheme (England) (Amendment) Regulations 2010.

Relevant Documents: 7th Report from the Merits Committee.

My Lords, I beg leave to move the Motion standing in my name on the Order Paper. I do so following the publication of the statutory instrument and the seventh report of the Merits Committee on Statutory Instruments. I am grateful to the Merits Committee for determining that the special attention of the House should be drawn to this measure. The committee made that determination not because the instrument in itself is necessarily controversial, but because the House can give proper consideration to the statutory instrument only with the benefit of the comprehensive spending review Statement. As we have now had that Statement and a brief time to digest its implications, I welcome the opportunity to raise some questions with the Minister.

It may assist your Lordships' House if I briefly outline the background to the Warm Front scheme, including both the benefits and the difficulties that arose. The Warm Front scheme provides assistance with the installation of heating and insulation to improve energy efficiency in a household and to reduce fuel poverty. Fuel poverty is generally understood to be where a household has to spend 10 per cent or more of its net income on fuel. A household must satisfy certain criteria in order to qualify for the scheme. An owner-occupier or private rented household is eligible where the household has someone over 60 in receipt of certain benefits, a child under 16 in receipt of certain benefits or other households that are deemed vulnerable to fuel poverty because of income or disability. Those who are eligible are entitled to improvements to the value most recently of £3,500 or, where oil, low carbon or renewable technologies are more suitable, £6,000. It is government-funded and managed by Eaga.

More than 2 million households have been assisted with energy efficiency measures in their homes and provided with a package of insulation and/or heating improvements. That is more than 2 million households now living healthier lives in warmer homes because of our changes. That benefits the individual through personal savings on energy bills—on average, about £250 a year—and, no doubt, ultimately, the Government through preventable NHS bills and by helping to meet our climate change commitments.

In terms of both environmental impact and cash savings to the household, the scheme has had a major impact. That is why we were willing to commit funding. In the financial year 2010-11, the budget for the Warm Front scheme is £345 million. The Government have now announced that it will be reduced to £110 million next year and £100 million in the following year. The scheme will then be disbanded and replaced by Green Deal and the Renewable Heat Incentive programme, details of which are, I understand, yet to be announced.

The Warm Front scheme was examined by the House of Commons Public Accounts Committee and the National Audit Office. Both made criticisms but saw the value of the scheme. The Public Accounts Committee was the most critical. Among its findings were that some of the measures on their own were unlikely to lift the householder out of fuel poverty, that it did not prioritise the least energy-efficient homes and that some of the poorest households may have withdrawn from the scheme because they were unable to afford their contribution. The committee was concerned that those in rural areas were harder to reach with this support. It also criticised the management of the scheme and considered that the maximum amount of grant should have been increased earlier. However, overall, it recognised that most customers were satisfied with the work and the Public Accounts Committee report makes a powerful case for doing more, not less, to reach those in the greatest need and for stimulating greater efficiency. The National Audit Office report of February 2009, as published on the DECC website last week, stated that the delivery of the scheme was largely effective and has provided value for money with some 86 per cent of households satisfied and 5 to 6 per cent dissatisfied.

Demand for the scheme has been high and the previous Government increased the funds that were initially made available. As a result of these reports, the department made a number of changes and has continued to assess the scheme. This is a process of continuous improvement. The SI before us today clarifies the circumstances in which an application must be refused to ensure that the Warm Front scheme operates within budget. In the Explanatory Memorandum, the Government admit that the possibility of refusing applicants will impact on vulnerable customers. Given that the scale of the reduction in the budget is no longer a possibility but a reality, it will most certainly impact on those in fuel poverty at a time when fuel prices are increasing rapidly.

The scale of the budget cuts to Warm Front in the next two years and its abolition after that give rise to real concern. I therefore have a number of questions for the Minister that I hope he will be able to address. I was able to give him advance notice of most of them. There are a couple I have thought of since and I will be happy to receive something in writing if he cannot answer tonight. However, I am sure he will have no trouble in answering. I shall speak slowly, which may be helpful in allowing enlightenment to arrive.

What percentage of the 2010-11 budget has been allocated to date? How many further applications have been received, and what is their total value? When does the Minister consider that the 2010-11 funding will have been fully allocated? I understand that previously once the budget for a financial year had been allocated, applications were assessed on the understanding that they would be carried over to the next financial year. Is that still the case or will applicants have to reapply if their application is rejected on the grounds that the funds for that financial year have already been allocated? What demand is anticipated for the years 2011-12 and 2012-13? Is the Minister planning any changes to the criteria for those years?

The Explanatory Memorandum to the statutory instrument confirms that this will impact on the vulnerable and that it will be closely monitored. Can the Minister tell me how the monitoring will be undertaken and by whom? I assume that the purpose of the monitoring is so that action can be taken if it is found that the measure is having a detrimental impact on those who are vulnerable. Can the Minister advise what action will be taken to address that, if it is the case, and will there be some method for reporting back to this House on the monitoring? The Explanatory Memorandum also states that all publicity materials will contain advice about other potential options. Can the Minister supply any further information on those options, their cost and who would bear it? Given that there will be no consultation on the statutory instrument, I put it to the Minister that, given that the policy outlined here is impacted on significantly by the budget cuts outlined in the CSR, a consultation on how best to manage it would be helpful.

We have already seen a number of studies about the impact on different vulnerable groups of the proposed welfare cuts. Given that this scheme is targeted at vulnerable households, can the Minister reassure me that an equality impact assessment will now be undertaken? Finally, if the Minister is able to say anything today about the Green Deal and the Renewable Heat Incentive programme that, in effect, replace the Warm Front scheme, it may go some way to reassure those who are concerned about the effects of this measure. I beg to move.

My Lords, I congratulate the Government on their prescience in bringing forward this statutory instrument just in time for the comprehensive spending review. As my noble friend Lady Smith has pointed out, the CSR included a significant reduction in funding for Warm Zone and for other schemes funded by a variety of agencies, including local authorities, the health service and other government departments. In the case of Warm Zone, a 60 per cent reduction for each of the next two years will be followed by the new scheme to which my noble friend has referred.

I come from Newcastle. I come not bearing coals to this energy-related debate but because two schemes are based in Newcastle. The first is a voluntary sector scheme devised by Neighbourhood Energy Action, which is now a national organisation and delivers the Warm Front programme. Warm Front has operated primarily in the private rented sector, as opposed to the owner-occupier sector, with which Warm Zone deals. It, too, is critically dependent on public funding and it remains to be seen what impact the comprehensive spending review and its consequences will have on its programmes.

As my noble friend has said, Warm Zone is managed by Eaga, which is also based in Newcastle. Eaga was assisted by the Newcastle City Council under the then leadership of the noble Lord, Lord Shipley, who is not present at the moment. The council purchased a £23 million building from the late lamented Northern Rock Building Society, or bank as it subsequently became, on the basis that it would house this thriving concern and pay a rent to the council. Of course, the prospects of that company are now significantly diminished. In the past year, its share price has reduced by two-thirds and just in the past few days it has dropped by around 10 per cent. So its future is certainly now open to question and, with it, the many homes that it would have assisted in terms of insulation works.

Apart from the works that both these organisations and others like them carry out, which are clearly prejudiced by the present situation and no doubt sooner rather than later presumably will fall within the scope of the statutory instrument, there are other aspects to what the organisations do. In addition to carrying out such works, they both work to assist people with the problems of fuel poverty. Both organisations have worked in the ward that I represent in Newcastle and throughout the city and elsewhere. They help with benefits checks across the range of welfare benefits to which people are entitled. If they are unable to proceed with their insulation programmes their significant contribution to the take-up of such welfare benefits will go as well.

Given the financial circumstances we now face as a result of the comprehensive spending review, while clearly there is a necessity for this statutory instrument, the implications go wider even than just the energy-related aspects. I hope that it will be possible in due course to restore the activities of both organisations and others like them to the level they have experienced in the past few years, so that they can carry out not only energy conservation programmes, which are environmentally beneficial to combating fuel poverty, but also help to combat other aspects of poverty and reduce the inequalities which disfigure so many parts of this country.

My Lords, the thing that interested me most when I read this rather obscure amending regulation was that it insisted that the Government pay the agency that had to do the work. I could not understand how it had worked in the past if there was no obligation on the Government to pay the agency that delivered this programme. However, the Minister may wish to come back on that.

Last week I had to leave the House to go to a conference before the comprehensive spending review was completed. I watched part of it at Heathrow as I waited to go to a conference in Japan where we discussed matters such as energy and climate change. I was struck by how good DECC—the Minister and his colleagues—had been in its tussle with the Treasury and my honourable friend Danny Alexander to achieve a good settlement for the environment and for energy in the review. Carbon capture and storage, the renewable heat initiative and feed-in tariffs, which many of us had feared would be significantly cut back, are still going ahead. It is good to see that the emphasis given to climate change and energy within the coalition agreement is being delivered in that way.

As the noble Baroness, Lady Morris, stated, the situation could change and the Warm Front scheme might have to come to an end during a budgetary year because of the funds running out. I regret that, theoretically, that could happen and that it is slightly more likely now. I realise that it will be the case in some areas because of the problems that we have with the national budget at the moment and the changes that we will have to bring forward in order to make the accounts balance sufficiently in the future. If that situation ever comes into being, cutting off a fund at a particular point would be an unfair way of rationing allocations. What plans do the Government have to ensure that any rationing will produce best value in terms of energy saved for those households that need the investment most?

My Lords, in answering these comprehensive questions I shall lump them together.

First, I welcome the noble Baroness, Lady Morris, who has changed her name since I had tea with her this afternoon—for the record, I thought she was called Baroness Smith—who made an excellent first speech as the shadow DECC Minister. It was a factual speech which represented the situation fairly, adequately and comprehensively and I thank her for that. I also thank her for the pre-advice she gave me on some of the questions I need to answer. I am not sure that I have all of them but I shall do my best. I thank the noble Lord, Lord Beecham, and my noble friend and colleague Lord Teverson, who is always so excellent on these matters. He is missed when he goes to Japan but we know that he is doing valuable work out there on behalf of this subject.

I shall go through the questions as asked by the noble Baroness and pick up on them. What percentage of the 2010-11 budget has been allocated to date? As at the week ending 16 October, £310 million has been allocated; of this about £180 million has been spent. As at 16 October approximately 81,000 customers had made applications that are currently being actioned. This number takes account of customers who have dropped out of the process. We expect these applications and other costs to lead to further expenditure of about £130 million.

When does the Minister consider that the 2010-11 funding will have been fully allocated? The Warm Front budget for 2010-11 remains unchanged at £345 million—I underline the fact that it remains unchanged—and the measures will continue to be delivered throughout the year. The scheme remains open to new applicants this year while the resources are available to meet the commitments—that is what we have promised—and, at the current rate of applications, we expect the funding to be fully utilised by mid-December. I should point out that, despite the comments made by the noble Lord, Lord Beecham, and the spending review, the commitment has remained. There has been no going back on it and it has been honoured. Applicants contacting Warm Front after the funding has been fully allocated will be advised to reapply once the scheme reopens.

What demand is anticipated for the years 2011-12 and 2012-13 and are we planning any changes to the criteria for those years? We expect the demand to be lower in 2011-12 and 2012-13 because of changes to the scheme. Based on the available budget, we expect, as a maximum, to be able to help 60,000 households in year one and 54,000 in year two of the spending period. We will work to improve the cost-effectiveness of the Warm Front scheme by ensuring that it will be better targeted to help the most vulnerable. We will be consulting to make sure that the eligibility criteria reflect this.

Another question concerned monitoring. The scheme is monitored on a weekly basis to review the flow of applications and expenditure commitments. This is underpinned through the contractual reporting arrangements and will continue throughout the lifetime of the scheme. An equality impact assessment will be undertaken in advance of temporary closure to new applicants and we will also conduct an equality impact assessment on any proposed changes to the eligibility criteria.

Warm Front will continue until the Green Deal is launched. The Green Deal is a key element of our policy to improve household energy efficiency. It will help to protect people against price rises through greater energy saving, with special support for the most vulnerable. The new energy company obligations, starting in late 2012, will run in parallel with the Green Deal programme. It is intended to focus particularly on households that cannot achieve financial savings without additional support, including the poorest and most vulnerable and those in hard-to-treat homes. This includes offering a wide range of measures to improve energy performance, such as heating systems. As announced on 20 October, as part of our spending review, the renewable heat incentive will go ahead in 2011. We expect to be in a position to announce details of the scheme at the year end and to be open for business in 2011.

I hope that that deals with most of the noble Baroness’s questions. If she has more, I am always delighted to hear them. I hope that what I have said also picks up the comments of the noble Lord, Lord Beecham. I shall now respond to his comment about Eaga, about which he is obviously very knowledgeable.

Eaga has been contracted by the Government to deliver Warm Front since 2005. The contract provides for fees to be paid to Eaga, based on its delivery. We intend that the scheme should provide for the vulnerable; that was Eaga’s main task when it was set up. Given the statistics, the Government think that the scheme has not fully targeted the vulnerable. Fuel poverty has increased from 4 million to 4.6 million, which indicates that one of the things that the scheme was introduced to do has not been achieved to the desired end. However, that does not mean to say that Warm Front is wrong; we have been lucky to have it as an experiment. When something is not working completely, it is the job of government to recognise that and adjust it. That is why we have learnt from the mistakes made and developed two new policies. The social price support will generate £250 million of support, rising to £310 million by 2014-15, while the Green Deal will continue to offer practical support to households and will focus on the vulnerable.

Before the new schemes are introduced, we are consulting on how Warm Front should best operate and who are the most needy and vulnerable. We will then target those people for the delivery of these measures, which we hope to do by November. I hope that that explanation satisfactorily answers the questions that have been asked.

My Lords, I thank the Minister for the care that he has taken in addressing the questions that have been raised today. I thank also the noble Lords, Lord Beecham and Lord Teverson. Tempted as I am to get the latter’s name wrong, I promise not to do so.

I humbly apologise. I think that that is the first time that I have ever got anybody’s name wrong in this House. I shall not do it again. From the Liberal Democrat Benches of the coalition, I welcome the noble Baroness to her Front-Bench position.

That is very generous of the noble Lord. I am grateful. No offence was intended and none was taken.

While I would not accept the Minister’s categorisation of Warm Front as an experiment, I do not think that any of us here is wedded to a particular method. Our objective is to reduce fuel poverty and to help those who are in fuel poverty. If Warm Front can be improved, with a greater number of people enjoying better outcomes, I am sure that it will receive the support of the entire House. I am grateful to the Minister for looking at the scheme, but we will want to see how the measures that he has outlined progress—I am grateful for his comments on monitoring. The current scheme will run out of money by mid-December, so there is a need for progress. I look forward to seeing the consultation on the new criteria for targeting Warm Front. We will welcome further information. As I said, I am grateful for the Minister’s answers today. We will monitor the new measures as they go through to ensure that we reach those people who genuinely need help from government.

Motion agreed.

House adjourned at 7.37 pm.