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Energy Performance of Buildings (England and Wales) (Amendment) (No. 2) Regulations 2015

Volume 767: debated on Wednesday 16 December 2015

Motion to Regret

Moved by

That this House regrets that, notwithstanding the reasoned opinion from the European Commission, the Energy Performance of Buildings (England and Wales) (Amendment) (No. 2) Regulations 2015 have been introduced without proper consultation and without the additional resources necessary being made available; and calls upon the Government to address the concerns raised by the Chartered Trading Standards Institute and the Association of Chief Trading Standards Officers, particularly concerning the capacity and resources available to local weights and measures authorities to fulfil the additional duties imposed on them under the Regulations (SI 2015/1681).

Relevant document: 11th Report from the Secondary Legislation Scrutiny Committee

My Lords, this Motion to Regret is about the introduction of regulations without proper consultation and without taking account of their practical and financial consequences.

The regulations are concerned with the energy performance of buildings and amend the principal regulations, which call for the production of energy performance certificates when buildings are constructed, sold or rented out, and for the display of such certificates in large public buildings. They implement an EU directive which seeks to establish common measures across EU member states to increase the energy efficiency of buildings, reduce their carbon emissions and lessen their impact on climate change. Enforcement of these regulations is the duty of local weights and measures authorities—I shall refer to them as trading standards—which are service departments of local authorities.

The further measures required under these amending regulations are argued by the Government to flow from the Article 258 reasoned opinion from the European Commission and are necessary, it is said, to ensure that the enforcement of the principal regulations is effective and robust. They require enforcement arrangements to be put in place in another area when a local authority is itself under a duty—for example, to display a certificate—and to notify the Secretary of State that it has done so; the collection by trading standards of information covering buildings for which it has enforcement responsibilities, to enable effective enforcement to be planned; and the recording of all enforcement activity, with an annual report to the Secretary of State.

Let me be clear that we are thoroughly supportive of efforts to increase the energy efficiency of buildings, to reduce their carbon emissions and to lessen the impact on climate change. The issue here is the manner in which amending regulations have been introduced, which has denied those working in trading standards the opportunity to point out, in consultation, the ramifications of what is proposed. Indeed, the inadequacy of the consultation is a matter that your Lordships’ Secondary Legislation Scrutiny Committee determined should be brought to the special attention of the House.

It is also about recognising that if these additional responsibilities are imposed on trading standards without additional funding, the inevitable consequence will be to draw effort away from other enforcement activity.

We are grateful to the Chartered Trading Standards Institute and the Association of Chief Trading Standards Officers for their briefing, which I believe has been generally circulated to noble Lords. This sets out matters that they should have had the opportunity to explore in a consultation before these regulations came into being. Fundamentally, the institute and the chief officers reject the notion that this is a minor change to the current situation and explain why it could significantly shift the focus of their efforts, to the detriment of consumers. To understand why this might be the case, one should just reflect on the range of areas for which trading standards has responsibility. The list includes consumer safety, counterfeit goods, product labelling, weights and measures, underage sales, animal welfare and more. They cannot all have the same priority.

This must be seen also in the context of the resources available to trading standards. The institute describes it as a small and financially stretched service which has seen average budget reductions of some 40%, and staff numbers have halved in the last five years. Unless the Minister can tell us otherwise, the DCLG appears to be denying the service extra resources, notwithstanding that these amending regulations, with their reporting requirements, are an extra burden.

As our briefing points out, to date, EPC rates have not been a priority for trading standards, given the assessment that there is a relatively low level of consumer detriment associated with non-compliance. The focus has been on tackling the supply of dangerous counterfeit products or protecting vulnerable residents from scam mail—both of which activities are often linked to higher-level organised crime. So the concern is that, without further resources, the additional requirements to record and report activity under these EPC regulations will inevitably cause activity to switch away from enforcement activity that addresses greater consumer detriment. This cannot be an outcome that the Government should be happy with.

The Minister will also be aware of the BIS-led review into trading standards, which is exploring whether trading standards is the most appropriate mechanism for delivering some of its enforcement responsibilities and how its enforcement burden might be lightened. It seems a little odd, therefore, that these regulations take us in the opposite direction. The institute asserts that the enforcement of EPC regulations anyway has little relevance to the rest of the trading standards remit—a view supported by the LGA.

Noble Lords will be aware that the Secondary Legislation Scrutiny Committee was unconvinced that the EU processes, involving a letter of formal notice of infringement in July 2014 and the reasoned opinion in June 2015 with a two-month deadline, precluded some consultation, particularly with those who will be most affected by the new regulations.

Perhaps I can finish with a question to the Minister. Does she accept that, without further resources, these regulations will divert some of trading standards’ efforts away from vital consumer protection, in particular its combating of the proliferation of scams that prey on the most vulnerable in our society? I beg to move.

My Lords, I cannot get overexcited about this issue. Indeed, as the noble Lord, Lord McKenzie, said, this is an important regulation that has come from Europe, which is about making sure that houses are properly managed in terms of their energy efficiency, which I suspect we all believe is good. Clearly, there should be consultation, if that is possible. My experience of consultation in a lot of these areas is that the Government take little notice of it, but we should have it.

However, I disagree quite strongly that somehow the management of energy performance is less important and has less detriment to people than many of the other areas that trading standards looks at. I remind the House that there are some 20,000 excess winter deaths. This will not solve that, but it is a part of the process of making sure that we do not take the energy efficiency of houses and being able to heat them properly at a reasonable cost for granted. We forget that there is a continuing process of making sure that people understand the costs of energy when they purchase houses or public buildings.

Fuel poverty is one of the major issues in this country that all Governments have failed pretty badly to solve. The numbers have come down slightly recently, but they tend to correlate directly to energy prices.

Perhaps the noble Lord can explain the relevance of this set of regulations to fuel poverty. I understand that the regulations refer to public buildings rather than to homes.

The SI certainly relates to public buildings. I will come on to explain why it is important to the trading standards side. But I welcome the noble Lord’s intervention. The regulations are partly about public buildings but I had also felt that they were partly to do with private buildings as well. I am happy to be corrected if I am wrong. This is an area of great importance and one that we need to keep on the agenda. I understand the resourcing issue entirely, but this is an area where trading standards generally needs to be involved and should be happy to be involved, subject to that funding.

What I find shameful is that, when the Government are trying to move forward in areas such as climate change, energy efficiency and other areas, DCLG has moved in the other direction. The vandalism of taking out the zero-carbon homes and the commercial buildings targets for 2019 was one of the most regrettable actions of this Government to date in this area. While I understand that there are issues around this particular statutory instrument, which I do not think are so important, the department has been woeful in its actions in this area since this Government came into power. After the great agreement that we have had in Paris, I very much hope that the department will start to get in line with the rest of the Government’s aspirations and repair some of these areas. I thank the noble Lord for his contribution.

My Lords, I support the objections to these regulations so ably raised by my noble friend Lord McKenzie of Luton this evening. I also ask the Minister why no proper consultation was considered necessary.

As president of the Chartered Trading Standards Institute, I know at first hand how this wonderful profession of trading standards officers is now stretched to the limit. They have experienced, as my noble friend has said, an average of 40% cuts in funding over the last five years and up to 80% in some trading standards services up and down the country. In this time of austere cutbacks their duties have not decreased. As well as all their other responsibilities to which my noble friend referred—consumer protection, e-crime, doorstep crime, food standards, animal health and welfare, age-restricted sales, and weights and measures—they are also, as we know, at this time of year especially, Santa’s little helpers when it comes to product safety. For example, trading standards revealed recently that of the 17,000 hoverboards imported from beyond the European Union for Christmas that they have inspected, 15,000 have failed basic safety tests. That is 88%. This is not a service with time on its hands.

DCLG may well say that the new requirements under the EPC regulations will not change the nature of trading standards duties in this area, but if it says that, I will have to disagree. The requirement to produce an annual report, as my noble friend has said, on all activity undertaken in this area, combined with the requirement that local authorities must enforce the regulations on behalf of another authority, means that the enforcement requirements have significantly increased and will force many services to reprioritise their work away from areas of high consumer detriment, often linked to higher levels of organised crime, to focus on these issues.

Traditionally, EPC regulations have not been a priority for trading standards, despite what the noble Lord, Lord Teverson, has said, because of the low level of consumer detriment associated with non-compliance, compared to areas such as the supply of dangerous counterfeit products or protecting vulnerable residents from scam mail. The profession is extremely worried that the additional “record and report” activity under these regulations will draw attention away from these other crucial areas of enforcement in overstretched local authorities. As we know, the present list of statutory duties placed on trading standards involves more than 250 separate pieces of legislation. I am sure that the Government do not want to see, as a result of the implementation of these regulations, enforcement activity addressing other levels of consumer detriment being reduced. This may well happen as scarce resource is redirected towards the new EPC regulations to ensure that local authorities do not fail to fulfil their duty to report.

The Minister will no doubt tell us that DCLG has provided £3 million in funding towards these duties; however, that money has not been ring-fenced and we all know what happens when funding is not ring-fenced. Will the Government look again at the serious issue of increasing funding if they are insistent that these EPC enforcement duties remain with trading standards? This raises the whole question, raised by my noble friend, of whether the duties under the EPC regulations should remain with trading standards at all, as they appear to be outwith the rest of the trading standards remit.

The LGA’s recent publication, Remodelling Public Protection, comments that the EPC regulations are not “actively enforced” by local authorities and,

“detract from the core purpose of public protection”.

The report goes on to say:

“In the context of substantial funding cuts, all local authority services are under pressure. However, there are additional challenges specific to public protection services, which have a huge range of statutory responsibilities, a relatively low profile, and have not been prioritised or protected”.

In the case of trading standards, that huge range goes at present from dealing with estate agents to dealing with anthrax.

In conclusion, let me make it clear that none of these objections means that we are opposed to implementing the DCLG’s strategy to help tackle climate change. How could we be opposed in the week that has brought us such a positive outcome to the Paris climate change talks, where almost 200 countries have all come together to commit to the single goal of net zero carbon emissions by the end of the century? In that context, of course we understand the importance of the EU directive on the energy performance of buildings, which means improving the energy efficiency of our homes and public buildings, and from which these regulations come. Our argument is not with the principle of the regulations, but is one of resource and capacity within trading standards, and one that I trust that the Government will not simply ignore.

My Lords, I start by declaring my interest as chair of the National Trading Standards Board. None of the projects that it funds is directly engaged in the work involved here. It is important that I put that on the record. Perhaps I sounded critical to the noble Lord, Lord Teverson, but one of my concerns about these regulations is the extent to which they take us anywhere significantly close to the direction of the issues that he highlighted in terms of climate change and energy efficiency. As I understand them, these regulations place an obligation on local authorities to check that public buildings, not private buildings, display a notice that states how energy efficient they are. While I appreciate that that can concentrate minds and makes those running the buildings at least think about what is on the notices, I do not believe that they actually make an enormous amount of difference. But I understand that the Government have these requirements.

I have to say that to a casual observer, you cannot but be impressed by the zeal and enthusiasm with which the party opposite embraces any regulation that emerges from Brussels. On this one in particular, it has gone out of its way to say that it is critically important. Indeed, I am in awe of the enthusiasm with which they are pursuing it because of its connection with climate change. The noble Lord, Lord Lawson, is not in his place, but I know how united the Conservative Party is behind issues that address climate change. But, as I say, the zeal with which it has brought forward these regulations, in such a rushed fashion that there was no opportunity to talk to the people expected to enforce them, seems to be what many people would call absolutely admirable. It must demonstrate the commitment of Her Majesty’s Government, first, to implementing all EU regulations as rapidly as possible, and secondly, to taking this important—albeit infinitesimal—step in the direction of protecting us from climate change.

Let us be clear: nothing is more important for a busy trading standards department than making sure that every public building, not in its area but in a neighbouring area, is displaying the right piece of paper within the public gaze that states how much energy that building is using. I agree that it is an incredibly important thing that local trading standards departments should be doing. If they had the resources to take this on board easily, I might not be concerned, but the reality is that it is not like that. The effect of the regulations is that they are saying to extremely busy, and in many instances very small, trading standards departments that they have to prioritise this requirement on them above all others. As my noble friend Lady Crawley has said, over the past 10, 20, 30, 40 or 50 years, there have been 250 or more pieces of government legislation that are supposed to be enforced by local trading standards.

Local authority trading standards have been cut in budgetary terms by 40%. We do not yet know what the implications will be in the statement to be made tomorrow about local authority finance. We have seen staffing levels reduced by 50%. Yet there are 250 obligations which they are expected to enforce. I was tempted to read them to your Lordships, even at this late hour. There are 29 pages of regulations. If the noble Lord wishes me to do that, I will. It makes exciting reading. But within all this, this is yet another requirement and it has been given particular priority by these regulations. This is virtually the only one of those 250 legal obligations where there is a requirement placed on the local authority to produce an annual report on how it has fulfilled its obligations in respect of that area of activity. It is vital to check that public buildings are displaying these notices. But why is this requirement the one on which a local authority must produce an annual report on the progress it is making as regards implementation?

My first question to the Minister is: what resources are being made available? My noble friend talked about £3 million. How do we know that that £3 million is there, even if that is the figure? If a local authority budget has been cut by 10% or 20%, how do you know that that little bit of money is there? What is there to make sure that the local authority says, “Oh yes, above all else we must prioritise checking that public buildings display a notice because that is far more important than anything else we do”? If the Minister cannot say where this money is coming from, could she tell us which of the other 250 obligations placed on trading standards the Government expect the local trading standards departments not to follow? No doubt her brief will tell us that this is a matter for local decision—that local authorities are autonomous and that they make up their own minds. The reality is that central government, month upon month and year upon year, with these regulations—there are other examples—are placing additional obligations on local authorities to implement them without the resources to do it. So what should they stop doing?

How many civil servants will be employed to scrutinise these annual reports from trading standards authorities? Who will look at them? If the answer is that no one will look at them, what is the point of a regulation which requires that an annual report is produced? If, however, there is going to be a special unit created in the Department for Communities and Local Government to check these reports, what will they do if a local authority, having thought about its budget and all its other priorities—my noble friend Lady Crawley has talked about them—says, “Well, we have done nothing in the previous year and we don’t intend to do anything next year in respect of enforcing this duty”? What will happen to that local authority? If nothing is going to happen, again, what is the point of these regulations?

My noble friend referred to hoverboards. In fact, her data were a week out of date. The flood of unsafe hoverboards into this country is rising. It is not 17,000 that have been checked by trading standards; it is 38,000. Of those, where the tests are back, 32,000 are dangerous or non-compliant. In some cases they are so dangerous that they can cause house fires. That seems to me to be a priority for local trading standards—to try to protect people who plug them in to charge overnight on Christmas Eve with the result that their homes burn down. I want the noble Baroness to tell us why, above all other trading standards duties, this one is picked out and must have an annual report, what the Government will do if it is not implemented and what they expect local authorities to give up if they are to follow the letter of the regulations.

My Lords, I thank all noble Lords who have spoken in the debate on these regulations, and the Secondary Legislation Scrutiny Committee for its report, which has helped to inform it. I understand that the regulations apply to both domestic and public buildings. I thought that I might clear that up at the start.

I will start by addressing the concerns expressed by the Secondary Legislation Scrutiny Committee that the policy-making process relating to these regulations may have been weakened by the lack of consultation. I regret that in the limited time available to take action, my officials did not have the opportunity to carry out more extensive consultation on the regulations. However, they made use of the responses to the previous Government’s consultation on the future of the display energy certificate, or DEC, regime, which sought views on this enforcement regime. They then tested these regulatory proposals in discussion with a number of local weights and measures authorities and officers, based on their experience of implementing the existing duty.

Local weights and measures authorities have been responsible for the enforcement of energy performance of buildings regulations in England and Wales since 2008. These regulatory changes do not change the nature of the existing enforcement responsibility or set central targets for activity, as enforcement priorities are a matter for local determination. They create a new reporting duty and require local measures to resolve a potential conflict-of-interest issue. From their discussions with local enforcement officers, my officials were assured that the additional burdens imposed by this reporting of existing duties would be minimal, as all enforcement activity should already be appropriately recorded locally. They discussed these measures with local trading standards officers and confirmed that this was not a significant burden. They confirmed that enforcement action is already recorded, so one annual report is no burden. It is for local enforcement bodies to determine—

Yes, but this is the only one for which there is a requirement to present an annual report to the department. Why?

My Lords, the DCLG will collate and publish a national report. The data will not be challenged in order to provide transparency and national evidence on activity. I am guessing that it is being done because it is an important matter.

It is for local enforcement bodies to determine the nature and extent of the enforcement activity, responding to local priorities and needs. Local weights and measures authorities have the power and discretion to issue penalty notices if necessary, as well as being able to take action to inform, advise and educate. We have ensured that the new reporting requirements are as light-touch as possible to fulfil the purposes of these regulations and provide the transparency that I talked about.

We did not simply spontaneously decide to impose requirements on these authorities, however. As set out in the appendix to the 11th report of the Secondary Legislation Scrutiny Committee, the department received a letter of formal notice in July 2014 from the European Commission relating to UK regulations. The focus of the letter was broader than the scope of these regulatory amendments as it was considering the issue and display of energy certificates in public buildings, although it raised a range of concerns on the adequacy of our enforcement regime. We responded to all the issues raised by the European Commission. We explained the measures we have put in place to allow scrutiny of compliance with the requirements of the Energy Performance of Buildings (England and Wales) Regulations 2012. This included the accessibility of registers on which all of our data are lodged and the amount of information that we put into the public domain.

In various exchanges with the Commission between July 2014 and June 2015, we made it clear that our enforcement regime did not need significant change. Views were sought regarding barriers to enforcement and information in the last Government’s consultation on the future of the display energy regime in early 2015. Local weights and measures authorities have, for the last seven years, had a duty to carry out this work, and appropriate funding has been included in the local government settlement since 2008, when regulations first placed responsibility for enforcement on local weights and measures bodies.

The noble Baroness, Lady Crawley, talked about ring-fencing funding. The settlement provides unring-fenced funding and individual councils can decide what resources they will allocate to each service, depending on the local priorities and needs. We received a range of suggestions on alternative approaches, along with a suggestion that we should ring-fence the funding for this work if it remains a local government responsibility. However, ring-fencing would run directly counter to the long-standing government policy to allow local authorities to determine for themselves how best to use the total pool of resources allocated to them, and cannot be justified in these circumstances.

I believe that these regulations set out the minimum measures necessary to satisfy the UK’s obligations under the directive and to protect England and Wales, and our local authorities, from the possibility of further action. However, that is not to say that they are set in stone.

I regret that we were unable to consult more widely regarding these regulations. However, despite the impression that we have had over a year to address any weaknesses, it was not until we received the Commission’s reasoned opinion in June 2015 that it was clear that further steps were necessary, in particular to address a potential conflict of interest that may arise when a local weights and measures authority is required to enforce against its own parent authority and to put more information into the public domain on enforcement activities.

Once we received the reasoned opinion, we had to act quickly to address any shortcomings. Our focus was to ensure that any further measures we introduced were fit for purpose but as light-touch as possible, and to this end we concentrated on engaging with enforcement officers directly in order to reality-check our thinking. Were we to fail to satisfactorily fulfil the obligations of the directive within the time allocated to us, the likely outcome would be a referral to the European Court of Justice and ultimately the imposition of a multimillion pound fine. Any such fine could potentially fall on local as well as central government.

Going forward, my department will continue to be open to considering the views or proposals of authorities and others based on their experience of implementation. I am also aware of the ongoing review of the functions of local trading standards authorities being led by the Department for Business, Innovation and Skills, and we will consider any relevant recommendations that arise from that.

With that, I hope that the House is assured that we take seriously the representations made to us regarding this enforcement regime. In acting to regulate, we have needed to respond—

I can let the noble Baroness know that in writing because I do not know when that will be.

In acting to regulate, we have needed to respond to a tight deadline, but at the same time we have made every effort to avoid placing unnecessary burdens. This House has been greatly assisted by everything that has been said during this debate. I hope that the noble Lord, Lord McKenzie, will feel able not to press the Motion.

My Lords, I thank all noble Lords who have contributed to this short but very well-informed debate. On the proposition that there was limited time to consult, the letter of 2014 would at least have given some fairly clear indication to the Government that something was going to have to be addressed. Even taking June 2015 as the date when that opinion came through, we believe that there was time to consult and it would have been to the Government’s advantage to have done so.

As for who these things apply to, my understanding is that it is necessary to produce energy performance certificates when all buildings are constructed, sold, or rented out, but that displaying such certificates is necessary for large public buildings. It seems to be at odds with the professionals’ view that these regulations will force them to change their priorities. Is the Minister entirely dismissive of that view? This is a profession that received praise from my noble friend Lady Crawley. It has been doing this thing for a long time; it is extremely knowledgeable. Why would it advance the proposition that this will change its priorities and what it will do if that were not the truth? Does the Minister think that they are misguided or misled? Why is that proposition rejected?

My Lords, I would not accuse the profession in any way of being misguided. As I say, we are open to taking further representations as time goes on.

That is a very helpful reply. I think that the representations were to the effect that, if the profession is going to do this without extra resources, it will switch priorities. If the Minister says that its existing priorities will be preserved—if that is what it thinks is right with extra resources—then I think there will have been real purpose, or additional purpose, to this debate.

My noble friend Lord Harris spoke with passion and great knowledge on this issue and had some very relevant questions. He pointed to the 250 areas where trading standards have responsibility at the moment, asking what they should stop doing, in the Minister’s view, if they are to take on these extra responsibilities. I refer the Minister to some of the debates that we have had on welfare reform and the issue that what gets counted, measured and reported is what has the focus of the Government, and local government, which is absolutely right. That feature will mean that there is going to be a change of emphasis. My noble friend Lady Crawley said that the focus on product safety, particularly at present, is absolutely right—a point supported by my noble friend Lord Harris. We know that the LGA does not support the current structure of EPCs being dealt with through trading standards.

The noble Lord, Lord Teverson, could not get overexcited about all these things, although my noble friend Lord Harris tried to encourage him to become so. This is not about denying the need to make sure that our buildings are energy efficient; we do all that we can to make sure that that happens. Again, as my noble friend said, what the regulations propose in terms of contributing to that is pretty small but, even with that, we are not denying the opportunity for them to be properly enforced. We are saying that, if they are to be properly enforced without skewing the other priorities of trading standards, resourcing is needed to achieve that.

We have had a good run through this. The clock is ticking but I am minded to test the view of the House on this.

House adjourned at 9.55 pm.