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Energy Company Obligation Schemes

Volume 735: debated on Tuesday 27 June 2023

[Ian Paisleyin the Chair]

I beg to move,

That this House has considered the implementation of ECO4 and ECO+.

It is a pleasure to serve under your chairmanship. Mr Paisley. I am grateful for the opportunity to discuss the importance of energy efficiency schemes for domestic properties in general, and more specifically the implementation of the energy company obligation 4 and energy company obligation plus schemes.

As everybody will be aware, households have had to endure wave after wave of challenges to budgets in recent months, with each adding to the financial burden on families and eroding living standards. Although we have recently received welcome news that falling wholesale energy prices will begin to feed through to households, it is unlikely that energy bills will return to pre-crisis levels any time soon.

A frequently cited statistic that bears repeating, lest we allow current prices to be normalised, is that in April 2022 the Welsh Government estimated that energy bills of £1,971 would push 45% of Welsh households into fuel poverty. Next month, when Ofgem’s price cap kicks back in, it will still be marginally higher, at £2,074. The New Economics Foundation suggests that that pressure will continue into next year, with energy bills in April 2024 estimated to be as high as 70% above pre-crisis of 2021 levels. To put it simply, for too many households energy prices will continue to be a significant pressure on their budgets for some time to come. Households will also be more vulnerable this coming winter, after being forced to use savings or take out debt to make it through last winter.

Citizen Advice Cymru has seen an increase in the number of people seeking debt advice, and reports that more people are falling into arrears on essential household bills. The number of people seeking advice on debt relating to energy bills, for example, has more than doubled between May 2021 and May of this year. Although that is not the purpose of today’s debate, it demonstrates why short-term relief with energy bills is still required, including another round of the alternative fuel payment for off-grid households next winter.

In the long term, the energy crisis has thrown into very sharp relief the urgent need to implement measures to bring down energy bills permanently for households and businesses. One solution is to transition to renewable energy sources, another—the focus of today’s debate—is to introduce comprehensive policies to enhance the energy efficiency of the UK’s housing stock.

That issue is particularly acute in Wales, given that we have some of the oldest and least efficient housing stock in western Europe. Data from the Department for Levelling Up, Housing and Communities shows the percentage of dwellings within each local authority with energy performance certificates rated level C or above. The data shows that five out of the 15 local authorities with the smallest percentage of dwellings with EPCs rated level C or above are in Wales, with Gwynedd third from bottom at 23% and my constituency of Ceredigion only slightly better at 25%.

It is perhaps not surprising that Ceredigion does so badly, when we consider that 35% of our homes were constructed in the 19th century. It is sobering to reflect on the fact that the vast majority of the county’s 2050 housing stock has already been built, more than a third of it in the Victorian age. The case for action is, therefore, quite clear and simple. We need to upgrade the energy efficiency of our housing to reduce people’s exposure to increased energy costs. Almost a quarter of tenants in the private rented sector live in fuel poverty, with those living in the least efficient homes spending as much as £950 more per year on their energy bills, compared with homes rated EPC level C.

The UK Government have made the case that it is unsustainable to maintain support indefinitely for households with energy bills. By retrofitting, we can mitigate the need for ongoing and future support packages. Indeed, the New Economics Foundation estimated that had all homes in England and Wales been upgraded to EPC level C by October last year, the energy price guarantee would have cost £3.5 billion less over its first six months and households would have saved an average of £530 over the year.

Of course, retrofitting would also have significant beneficial outcomes for health. We know that living in a cold home can worsen asthma and other respiratory illnesses, and increases the risk of heart disease and cardiac events. It can also worsen musculoskeletal conditions such as arthritis, as well as having a detrimental impact on mental health. Wales’s Future Generations Commissioner estimated that a comprehensive home retrofitting programme could save the Welsh NHS as much as £4.4 billion by 2040 by tackling some of those health issues.

Finally, reducing household energy demand is of course vital for us to improve energy security, reduce our reliance on fossil fuels and, of course, realise our climate targets. A coalition of charities, including Fuel Poverty Action and Green Alliance, have warned that without action on housing and buildings, there is no plausible path to achieving the fifth carbon budget or meeting the 2030 statutory fuel poverty target.

It is clear that home retrofitting is vital and that action taken now will place the UK in a good position in the future. The UK Government’s flagship fuel poverty reduction scheme, the energy company obligation or ECO, has a key role to play in upgrading our homes to permanently reduce the cost of heating for households and to address fuel poverty. ECO has operated since 2013 in several iterations and up to March of this year it had delivered a total of 3.6 million energy efficiency measures in Great Britain. The energy performance improvements that have been delivered have saved low-income customers as much as £17.5 billion in lifetime energy bills and saved the average home some £290.

ECO4 is, of course, the fourth iteration of the scheme. It began in April last year and is planned to run until March 2026. In the past year, however, installations have dropped quite significantly. All versions of ECO have experienced difficulties in some form or other, but ECO4 has undoubtedly been delivering at a slower rate than previous iterations. Energy suppliers and installers are now warning that structural issues are preventing the scheme from fulfilling its potential and I want to dwell on those issues today.

Between April last year, when ECO4 commenced, and March this year, approximately 45,000 households had received support under the scheme. Given that that is around 10% of the 450,000 households that the scheme is supposed to support over its four-year lifetime, there is concern about the pace of the roll-out so far. One reason might be that the number of measures installed per property during the roll-out of ECO4 to date has been much higher than expected, with an average of nearly 3.5 measures per property since April 2022 compared with the average of 1.8 measures expected in the scheme’s final impact assessment. In the first quarter of 2023, the figure increased to an average of 4.93 measures per household.

E.ON Energy estimates that, as result, industry could achieve its overall national bill saving target by delivering ECO4 to only 215,000 properties of the 450,000 targeted. Of course, it is not a bad thing that energy efficiency is being significantly improved for those households supported by ECO4, but it raises a question about the adequacy of the funding in place if ECO4 is to achieve its target of supporting 450,000 households, as I am sure that Members will agree.

I agree entirely with my hon. Friend, as I am sure that many would, that this is primarily a question of funding. We should take a step back and realise that Shell has directed £5 billion in windfall profits towards its shareholders in the first quarter of this year, so there is surely a good case to be made for an emergency windfall tax to enable additional work for the other households that would benefit so much from it.

I am very grateful to my right hon. Friend for that important intervention and you will be unsurprised, Mr Paisley, to hear that I agree with her that there is an important opportunity to introduce emergency measures. At the end of the day, energy companies are making eye-watering amounts of profit at a time when households across the country are struggling. I think it is very appropriate for us to consider ways of recouping some of that potential income to put against this important measure.

Adjustments are required to get the scheme back on track so it can achieve its full potential. The first adjustment requires the UK Government to look again at ECO4’s cost assumptions. They were finalised in April 2022 and do not reflect current market conditions, including the escalation in costs caused by labour shortages and manufacturing prices. More recent cost assumptions, such as those included in the Great British insulation scheme’s impact assessment, reflect those price increases.

For example, the fixed assumed costs of installing external solid wall insulation, which comprises 12% of measures installed under ECO4 to date, increased from £4,200 in 2021 to about £5,000 in 2022—by almost 20%. Meanwhile, the UK Government estimate that the cost of installing cavity wall insulation for bungalows, as well as detached, semi-detached and end-of-terrace houses, has increased by 50% to 63%. That is all without factoring in the inflationary pressures we have seen in 2023 so far. At the start of 2023, insulation and associated material prices increased significantly, many by close to 10% and some by as much as 35%, compounding similar increases seen last year.

Another aspect of the scheme that requires attention is the minimum requirements threshold, which means that a household’s energy performance certificate must be improved to a particular level. For example, if band D and E homes are to be eligible for the scheme, they have to be upgraded to at least band C, and band F and G homes must be upgraded to at least band D. We should welcome the intent of that requirement. Providing support to the poorest households in the least efficient homes by bringing them up to a significantly higher energy performance rating is an important objective. Nevertheless, the requirement is proving to be a limiting factor on the scheme’s delivery. I have spoken to installers and energy suppliers who say that the minimum requirements are too inflexible compared with previous schemes.

It is suggested that the requirements are making it difficult to find eligible properties, and installers are reporting difficulties in proving how properties in higher EPC bands, such as those in band D, as well as on-gas properties, can meet the requirements. E.ON Energy estimates that around 90% of qualifying fuel-poor households cannot have works delivered to their properties, as either they fail to meet the minimum requirements threshold or it would be economically unviable to upgrade them to the levels required to meet it.

The hon. Gentleman is giving one of the best speeches I have heard in Westminster Hall in a long time, and he has some good evidence to back up his comments. I congratulate him on securing the debate. My constituency, like his, has a high number of rural homes. Many are reliant on oil-fired central heating and also struggle to fit into the qualifying criteria for the type of scheme that he has outlined. What advice does he have for the Government on how we can improve the flexibility of the schemes to ensure that oil-fired homes can qualify?

The reality is that a very high proportion, if not the majority, of homes in rural constituencies find it difficult to access the scheme because they are not on the mains gas network. In my constituency, some 72% of properties are not connected to mains gas and they are struggling uphill to get on to the scheme. The Government would do well to look again at whether we can change the ECO Flex pathways to allow local authorities greater flexibility to support off-grid properties in particular. That might be a way forward. We certainly need to address the issue. If we do not, I worry that rural areas, which often have an older, less efficient housing stock, will be left behind. I am grateful to the hon. Gentleman for making that important point.

As greater investment is required per property to meet the minimum improvement threshold requirements, the current iteration of the scheme appears to be more exposed, and therefore more vulnerable, to the inflationary pressures that I mentioned earlier, so we need to look again at how it is funded. I ask the UK Government to look at that very carefully.

Another aspect of ECO4 that is welcome in principle, but which is putting pressure on those delivering the scheme, is the Flex pathway. The pathway is important, because it enables local councils to identify low-income households that are in need of support, but that are unlikely to be eligible under the scheme’s standard approach. It also provides an opportunity for local councils to better tailor energy efficiency schemes to their respective areas, and I refer back to the remark from the hon. Member for Central Suffolk and North Ipswich (Dr Poulter) about rural properties. The issue, however, is that local councils feel that the Flex pathway is too onerous and that the information required of them for each application takes up significant staff time and resources. Indeed, I am told that the level of detail required can make the Flex pathway inflexible when considering different local factors.

One of those factors is the nature of the housing stock in an area, and I have already mentioned that Wales has some of the oldest and least efficient housing stock in western Europe. I spoke to representatives of Gwynedd Council, who expressed concerns that the products available via ECO do not always work well with the design of older houses.

On that point, I would like to mention Meilyr Tomos at Gwynedd Council, who supplied me and others with advice on this debate. In relation to the ECO Flex programme, another issue in Gwynedd is second homes. Younger people are now priced out of staying in their own homes, and more non-dependant children are remaining with their parents—between 2011 and the 2021 census, in Gwynedd the figure increased by 6.8%. Given that non-dependant children artificially inflate household incomes, that has a knock-on effect on ECO Flex. The Government would be wise to give due attention to such rural issues.

I agree with my right hon. Friend. The Flex pathway offers a real opportunity to allow the policy to be tailored to the specific needs of local areas, so as to accelerate the delivery without impacting on the broader scheme that the Government have implemented.

The consequence of rising costs and a perceived inflexibility in the structure of the scheme has been that supply chains are starting to stutter, and I am told that many installers are leaving the market. The Installation Assurance Authority warns that there are now fewer than 10,000 people involved in the industry and public-funded schemes, whereas there were 54,000 in 2012. Those who have moved away from ECO4 are reluctant to return. If installers continue to leave the market at this rate, it will make it very difficult not just to deliver ECO4, but to achieve the level of home retrofitting required to meet our future climate and fuel poverty targets.

If those issues are not addressed, thousands of eligible households will miss out on crucial energy-saving measures, meaning that they will face higher energy bills this winter and beyond. I believe that the Department for Energy Security and Net Zero is consulting on the deliverability of elements of ECO4. If it intends to do so, I ask that they publish the consultation before the summer recess in order to allow sufficient time ahead of April 2024 for industry to adjust accordingly. A failure to do so may mean that even more installers drop out of delivering the scheme due to continued uncertainty.

It is not too late to get ECO4 back on track, and I would argue that a consultation could play a key part in doing so, but I would appreciate it if the Minister could explain what consideration has been or will be given in a consultation to the following points. Could ECO4’s cost assumptions be revised in line with current supply costs to reflect current market conditions? Could the eligibility of homes be widened to ensure that more people can benefit from the scheme? That could include increasing the number of fuel-poor households eligible in the private and social rental sector, or it could mean enabling the Flex channel to be more responsive to local needs in order to be able to capture more fuel-poor households, such as those in receipt of means-tested benefits or with health conditions.

Another suggestion is that we investigate the possibility of extending the buy-out mechanism, so that others besides energy suppliers can take on obligations, and enable local councils to deliver ECO. Other suggestions are: making long-term funding available for training, so that we can boost the supply chain, and considering measures to boost recruitment and careers in the retrofitting energy efficiency industry; ensuring continuous and open engagement with installers, energy suppliers and other industry and fuel poverty experts, to guarantee that the scheme remains on the right track and to ensure that the UK Government can respond effectively to any future issues that arise; and finally, exploring the possibility of expanding the range of technologies that will be considered in scope in future iterations of ECO4 to, for example, water control technologies, which can help bring down the cost of energy used to heat water.

I will briefly touch on ECO+ or, as it is now known, the Great British insulation scheme. I of course welcome the scheme, which is designed to support households in installing single energy efficiency measures in their homes, but again possible adjustments could vastly improve delivery. Can the Minister say what consideration has been given to refining the scheme’s targeting, so that it better helps fuel-poor households? For the majority of the scheme, households are expected to make a financial contribution to the cost of the measures. That will effectively make a large proportion of the scheme inaccessible to the lowest-income households, which cannot afford to make those contributions. In a cost of living crisis, when disposable income is diminishing across the UK, surely the requirement for contributions should be taken out of the scheme, or the percentage of participants who are expected to make contributions should to be lowered.

It would be remiss of me not to mention that I have heard from constituents who were unfortunately let down by contractors delivering measures under the ECO4 scheme. Of course, any measures installed are now covered by the UK Government-endorsed quality scheme, TrustMark. I appreciate that incidents of poor delivery may be isolated examples, but in those worst-case scenarios where delivery goes horribly wrong, the protection and security for households is still inadequate.

I would be grateful if the Minister addressed the issue of providers who place solar panels on agricultural land, but do not guarantee against damage caused by animals. Obviously, placing panels on agricultural land is very convenient, and it makes access cheaper, although attention is not always paid to planning requirements. However, the convenience may be outweighed by the risk for the householder of damage caused by animals that is not covered by a guarantee. I very much wish the Government to address that rural issue.

I thank my right hon. Friend for raising another important point. It perhaps illustrates the need to strengthen the accountability of the scheme. In Ceredigion, households have had measures installed that were of substandard quality, and they find it almost impossible to get information about redress and holding the installers to account for the sub-par work. Her concerns would be captured by a broader effort to improve the scrutiny and accountability of the scheme. Will the UK Government consider ways of improving oversight of installations? We need a stronger mechanism by which installers can be held to account.

Before closing, I will touch on the need to incentivise those who are ineligible for the ECO scheme to invest in retrofitting—those who might have the means to do so. A few measures come to mind. First, could we look again at removing VAT from insulation products, and not just from the installation of these products, as well as from storage batteries? I appreciate that that might be a Treasury matter. What work might the Government undertake on providing interest-free loans to those who wish to install energy efficiency and low-carbon heating measures? Providing access to such support will be even more important in the face of steep interest rate hikes.

Finally, I come to another area that deserves a brief mention in a discussion on how we can help households to bring down energy bills and expand our renewable capacity: incentivising households to invest in smaller-scale renewables. I have been contacted by several constituents who are concerned that the reduction in support from the feed-in tariffs—and now their replacement, the smart export guarantee—has vastly reduced the incentive to invest. I urge the Government to consider increasing the tariffs that the energy suppliers are required to offer to homeowners who generate renewable energy. I draw my remarks to a close, and very much look forward to the comments of my colleagues.

I thank hon. Members for bobbing. If anyone else wishes to bob, feel free. I intend to call the Front Benchers at approximately half-past the hour.

It is a pleasure to serve under your chairmanship, Mr Paisley. I congratulate the hon. Member for Ceredigion (Ben Lake) on bringing this important debate to this place.

We are in the middle of a cost of living crisis. Bills are soaring, wages are not keeping pace with inflation, and people are struggling to make ends meet. We must not forget how harsh last winter was. The energy price cap rose by 54% and many people were trapped in cold, leaky homes. We cannot allow that to happen again.

Households in poorly insulated homes will pay an estimated £13 billion a year more in energy bills. That is because the Government have failed to bring those homes up to at least band C of the energy performance certificate rating. Some 43,000 homes in Bath have a poor efficiency rating, and the Government’s inaction has meant that some of my constituents are more than £1,300 poorer each year.

We are also in the middle of a climate emergency. The UK has some of the leakiest homes in Europe. Insulating our homes would push down energy demand and cut our country’s greenhouse gas emissions. For the past decade, the energy company obligation schemes have delivered warmer homes, cheaper bills and greener buildings for millions of vulnerable households. The ECO4 scheme is the latest iteration. It provides grants to fund energy-efficient upgrades to homes, and pays for loft or cavity wall insulation, new heating systems such as boilers, and other measures designed to increase energy efficiency, as we have already heard.

However, ECO4 installations are not keeping up with the target to improve 450,000 homes by March 2026. The Energy Efficiency Infrastructure Group has shown that, by March 2023, only 15,000 homes had been treated. That is just 3% of the overall delivery target. That is very poor, and an example of the Government’s inaction on delivering what has been promised.

The cost assumptions made in the ECO4 assessment are outdated and unrealistic. The modelling used to set ECO4 targets was based on estimated costs in 2021 prices, with an allowance for general inflation over time. Since that assessment was made, inflation has soared. December 2022 saw inflation having risen by 9.2% in the previous 12 months. That is more than three times what Ofgem projected it to be.

The costs of delivery far exceed what Ofgem has accounted for. Loft insulation is, on average, 430% more expensive, cavity wall insulation is 372% more expensive, and external wall insulation is 147% more expensive. The Government should ensure that those costs are taken into account and must match the cost of measures in ECO4 with inflation. That is the main point that I wanted to make; the 2021 estimates do not take into account the soaring inflation that we have seen over the past year.

The ECO4 criteria restrict the number of homes that can be improved. The eligibility requirements set out that the homes must be improved by at least two EPC bands, which makes it hard to find suitable homes. Energy Efficiency Infrastructure Group members estimate that 90% of qualifying homes miss out because they are unable to meet the minimum requirements of the scheme. To illustrate my point, E.ON attempted to deliver energy-efficiency measures to a three-bed mid-terrace property in Dagenham. The owners of the property qualified for ECO4 as their home was rated EPC band E and they were living in fuel poverty. The package of measures that E.ON proposed would have saved the family about £600 a year on their energy bill, but the installation was rejected because the measures would not improve the house enough to make it jump two EPC bands.

When it comes to tackling the climate and cost of living crises, every little helps, so why is the ECO4 scheme making perfection the enemy of the good? The Government should relax the minimum requirements when all reasonable measures have been installed in an eligible household. That would ensure that vulnerable households could still receive much-needed support. To tackle the cost of living and climate crises, we must improve the energy efficiency of our homes. We must do all that we can to ensure that the ECO scheme benefits as many people as possible, as soon as possible.

The hon. Lady is making some excellent points. I am sure that in her constituency, as in mine, there are many older properties that are very difficult to convert. Does she agree that more needs to be done to ensure that those households can access the scheme, because it is harder for them to convert their house?

Absolutely; I could not agree more. In Bath, we have a lot of old, leaky homes. They are very beautiful, but they are not particularly energy efficient. People really want to do something, but ECO4 does not work for a very large number of households. If we really want to help vulnerable people and tackle the climate emergency, we must look at how the scheme has been designed and make some improvements to it. The two-jump requirement is particularly difficult in old properties.

The Government must take urgent action and improve ECO4, in order to protect the most vulnerable from cold winters and tackle the climate emergency as soon and as effectively as possible.

It is a pleasure to speak in this debate and serve under your chairmanship, Mr Paisley; I have done so in the past, and hopefully I will do so again in the future. I congratulate the hon. Member for Ceredigion (Ben Lake) on his passion for this issue. His dulcet Welsh tones seem to flow, unlike my Ulster Scots accent, which does not come anywhere near his. Like him, I have a number of park homes in my constituency that have lacked support during this great energy crisis. He has spoken about this issue in the Chamber, including in an Adjournment debate; he has been very much at the forefront of raising it, and I thank him for that.

I read with interest that Ofgem stated at the end of March that the Great British insulation scheme, which was previously referred to and consulted on by the Department for Energy Security and Net Zero under the name ECO+, will allow early delivery from 30 March 2023, and will run until 31 March 2026. On 5 April, Ofgem published a consultation, through which it sought stakeholder views on its proposed administration of the policies set out by the Department for Energy Security and Net Zero and included in the Electricity and Gas (Energy Company Obligation) Order 2023. The consultation covered areas where Ofgem exercised its discretion in administering the new legislative provisions for ECO4, and proposed further improvements to current policies.

That is where we are. That is why the hon. Gentleman raised this issue, and why it is important that we understand it better. We look to the Minister for a positive response, and I look forward to the contributions from the two shadow spokespeople. The hon. Member for Bristol East (Kerry McCarthy) has a deep understanding of these issues and brings her knowledge and interest to the debate.

We have seen the havoc wreaked by protesters, who have destroyed pieces of art, and caused disruption on motorways, to the extent that ambulances have been stuck, and people have missed operations and work. The discussion about insulation and necessary improvements has been lost in the wanton disruption caused by people who have a sound message—that is not in doubt—but whose methods do not encourage debate. Instead, they encourage righteous indignation and, in some cases, anger. That is why I am grateful to the hon. Member for Ceredigion for bringing the discussion back to where it needs to be—in this House, in Westminster Hall. Here, we can do our jobs and advocate for the change that the protesters want, but in the right way. I commend the hon. Member for that.

I read the hon. Member’s piece in Politico last year. His words are worth repeating, so I will quote them. I am not trying to embarrass him, but his words were very salient:

“We know that households in the least efficient properties have energy bills that are twice the cost of the most efficient homes. There is a statutory target to upgrade the energy efficiency of all fuel-poor households to EPC C by 2030 and all households to EPC C by 2035. Government needs to ensure that it follows through with its existing commitments. Ensuring the ECO 4 legislation is prioritised in Parliament to maintain installation rates, making swift decisions on minimum energy efficiency standards in the rented sectors and meeting its manifesto commitment to spend £2.5 billion on the Home Upgrade Grant this Parliament.”

Those words are even more relevant today, and I commend him for that. Each of us fully supports him. It also shows that we read the magazine—some people wonder whether we do. I look through it to see whether I know any of the authors, and I always catch up on it.

I support the hon. Member’s efforts to hold the Government to account on this issue, to the betterment of all. I always like to give an example from back home. My parliamentary aide bought a property that had been lying vacant for years. It had no heating and needed a total refurb, which was reflected in the price. When she looked into insulating that property, she could not afford to do it as well as all the other work—the new flooring, new kitchen, and new bathroom, and the work on the heating, the garden, and the front. There was lots of work to do. She is a clever girl—she writes all my speeches and interventions, so people must know that she is exceptionally clever and busy. She knows that in the long run the insulation will save money, but given the demands on the joint wages of her and her husband, and given that she is raising two children, with only child benefit to help, I understand why she made that choice. It would have been better to do the insulation, but people’s money does not stretch that far. That is why this debate is so important. The scheme gives a wee bit of a helping hand, and nudges and assists people.

We need to help more people like my parliamentary aide to do the right thing—people who get little or no help from the system as a rule, and who work extremely hard. We are talking about people who are environmentally conscious; she washes out her yoghurt pots at 11 pm at night after writing a speech for me. People want to do the right thing by the environment. I support them. We must do the same. I look to the Government and the Minister here; they can start by fulfilling their obligations, and can move on from there.

I know that the Minister is listening. I hope that we can have a positive answer, and that she will reinforce the fact that I do not need to throw orange powder around the streets, or over the Minister or my colleagues, to make my point. Orange is a good colour, Mr Paisley—you know that—but I still would not do that. My point is that insulation makes sense. We all agree that those who highlight the issues may use different methods—in this House, we use dialogue and communication—but they are trying to make change. Let us get buy-in from the average person, who his making sacrifices, and prove that we are in it with them. I am here on behalf of my constituents. The hon. Member for Ceredigion, and everyone who has spoken and will speak, is here to do the same thing. We can do it, but we need the Minister’s help to get over the line.

It is a pleasure to serve under your chairmanship, Mr Paisley. I congratulate the hon. Member for Ceredigion (Ben Lake) on securing the debate and making an excellent and detailed opening speech. I also pay tribute to the other contributors, who have spoken well on a really important subject. I am indebted to Cumbria Action for Sustainability for its work in helping to bring homes up to an adequate standard to ensure energy efficiency and lower heating prices, as well as to tackle the climate emergency.

It is estimated that our homes—the ones that we live in—contribute something like 19% of the greenhouse gases emitted by the United Kingdom. In the last two years especially, there have been crushing increases in fuel poverty. Families who may have considered themselves comfortable a couple of years ago now find themselves in dire straits. Mortgage payments and rents are rising, as is the cost of living in general, but the huge increase in fuel and energy costs in the last couple of years has rendered many in a situation where they cannot see where to turn.

The need for a scheme that delivers warmer, greener and cheaper-to-run homes has never been greater, yet the number of UK energy efficiency installations peaked at 2.3 million in 2012. In the decade that followed, we got down to a miserable 100,000 a year. The Government’s much-vaunted green homes grant, which was meant to deliver energy efficiency for 1 million homes, in the end did so for only 60,000. ECO4 can and must do much better.

In Cumbria, we face specific problems that make our challenge much greater. We have a much larger proportion of solid-wall properties, of off-grid homes and of homes that are listed or in conservation areas. There are lots of positive things to say about ECO4, including, fundamentally, about its ambition of raising energy performance certificate points and its fabric-first policy—the aim to ensure that insulation happens before the installation of new and hopefully better heat sources. Those things are positive in principle, but in practice they are not entirely being followed. Households in Cumbria—especially those that can least afford it—are suffering because the detail is not being got right.

The funds provided to those installing insulation do not meet the costs, especially for single-wall properties. As we have heard, on average there has been a 77% increase in the cost of materials. Insulation is not happening because companies simply cannot afford to do it, and it is much more expensive to do the work on single-wall properties, which need it most. Insulating a single-wall property entails the further risk that moisture will build up between the wall and the insulating layer. That can lead to the build-up of mould and have a huge impact on human health and building quality in the months and years that follow.

I am told by the people who advise me on such matters that there are answers to that. Cork board or timber fibreboard can be used, as can insulating lime render, which is especially suitable for Lakeland properties in terms of its aesthetics as well as its efficacy. Frustratingly, however, none of those materials are available through the ECO4 scheme, which goes to explain why a relatively small number of people will take advantage of it.

ECO4 is a more complex scheme, as the hon. Member for Ceredigion rightly pointed out. There are many good reasons why, but one of the consequences is that the energy companies and local authorities have been reluctant to engage as providers. That means that the only people providing work through ECO4 will be independent and private providers, some of whom will be very good but some of whom will not. Private householders, almost certainly including the likes of me, are not always the best judge of which is which. That will have an impact on the quality of the work, and on whether taxpayers’ money is spent wisely. For that reason, while Cumbrian contractors have been used to deliver some of the work, Cumbria Action for Sustainability tells us that there have been no Cumbria-based companies offering ECO4 measures.

I mentioned listed properties and those in conservation areas. Residents of Westmorland living in such properties tell us that, when they explain that their home is listed or in a conservation area, suppliers almost instantly—and very politely, I hope—tell them that they are not interested, because there is no way they can make it add up and make the scheme pay.

Fuel poverty among residents of private rented properties, as has already been mentioned, is the worst of all in a community like mine. The average income in my constituency is about one twelfth of the average house price. We have a council house waiting list of 5,000 or 6,000. We have an inadequate quantity of affordable housing. The only way there is any workforce of a working age available in my constituency is because of the private rented sector, and let us say that there is a mix in its quality. Cumbria Action for Sustainability is unaware of a single private landlord in Cumbria who has pursued ECO4, as things stand.

Insulation, and the warmth and energy efficiency of any property, stands and falls on the property’s windows. Of course, ECO4 allows for funds to replace single glazing, but it will not allow funds to replace double glazing, even if it is 50 years old, past its use-by date, cracked and faulty. That appears to be a blind spot, which I hope we will act on quickly.

We have heard that ECO4 does not cover the real costs of insulation, especially in single-wall properties. That is especially so for floor insulation above garages, where there are rightly fire safety requirements, making the work more expensive. Where the scheme does not cover costs, measures are not taken, and the people who suffer are those who are left with a home that is too expensive to heat.

Cumbria Action for Sustainability and providers point out that a major reason that the green homes grant failed was the lack of skilled workers to carry out, in particular, the work needed for solid-wall housing. The situation is no better now. Retrofitting, for example, still does not feature in most relevant training schemes.

ECO4 is, in principle, better than its predecessors but, if it does not work in practice, people in Cumbria and elsewhere in our country will suffer. I will argue that ours is the most beautiful bit of the country, though it is often the coldest and the wettest, too. There are extremes of wealth and poverty, and it is hard for many of my constituents to cope with the financial costs and deprivations that go with that. More than a third of our housing stock is single-wall properties. Cumbria needs the Government to get ECO4 right. I hope they will hear the practical and constructive suggestions made by colleagues on all sides in this debate, and act accordingly.

It is nice to see you in the Chair, Mr Paisley. I commend the hon. Member for Ceredigion (Ben Lake) for securing and leading the debate.

There are two issues that require immediate attention and decisive action: the soaring cost of living crisis and the importance of energy efficiency support. In the light of that, it is deeply concerning that, while we face those crises, the Government choose to cut taxes on bankers. Such a decision is abhorrent, especially when it is ordinary citizens who bear the brunt of an escalating cost of living crisis, much of that due to rising energy costs.

Inflation continues to hit those on the lowest incomes most severely, exacerbating their ongoing struggle to make ends meet. The Prime Minister pledged to cut inflation by half. However, it is evident that the Government are struggling to meet that pledge, and now aim to reduce public sector pay to compensate. We learned today that the leader of the Labour party, the right hon. and learned Member for Holborn and St Pancras (Keir Starmer), also refused to back public sector pay rises. That is a misguided approach, in our opinion, that will only further burden those who are already struggling.

Research by the Joseph Rowntree Foundation paints a distressing picture, revealing that 7 million households have gone without essentials, such as food, heating or basic toiletries, due to the cost of living crisis. It is our responsibility to provide support and relief to those individuals and families who are enduring such hardships. Considering all those other parts that play into the crisis, it is vital that we do not withdraw or cancel energy efficiency support for those in need.

Energy efficiency measures such as ECO4 and ECO+ play a crucial role in achieving our net zero targets and combating climate change. In 2019, a report from the Business, Energy and Industrial Strategy Committee praised the Scottish Government for being leagues ahead of the UK Government on energy efficiency, and we continue to deliver on that front. Our planet is facing unprecedented challenges, with soaring sea temperatures, and action is urgent. It was disheartening that a previous BEIS Secretary and disgraced former Prime Minister Boris Johnson blocked plans for a public information campaign on energy efficiency. How much could consumers have saved if they had received the necessary information and support? Many of our constituents do not know that help and support is out there in the form of these schemes.

The Scottish Government have taken proactive steps towards energy efficiency and are committed to investing at least £1.8 billion in heat and energy efficiency over the course of this Scottish Parliament. Through existing programmes, we have already supported over 150,000 households in or at risk of fuel poverty, including those in rural and island communities. Our Home Energy Scotland grant and loan scheme offers grant funding of up to £7,500 for heat pumps, with an additional £7,500 made available as an optional interest-free loan. Moreover, we have provided an uplift of £1,500 to both the heat pump and energy efficiency grants for rural and island homes, recognising the specific challenges faced by those communities.

Beyond immediate measures, we must recognise the urgent need to change the way we use our energy. As oil and gas production naturally declines, there is a tremendous opportunity for growth in low-carbon energy production. It is projected that low-carbon energy jobs could increase to 77,000 by 2050, delivering an increase of 7,000 jobs across the energy production sector. The Scottish Government’s draft energy strategy and just transition plan outlines the actions necessary for the UK Government to collaborate with us to achieve Scotland’s full energy potential. To facilitate that transition, the Scottish Government, led by the SNP, are already investing in the sector’s net zero transformation.

Our expanded £75 million energy transition fund and £100 million green jobs fund, alongside the £500 million just transition fund, will support regions such as the north-east and Moray in becoming centres of excellence for a just transition to a net zero economy. That stands in stark contrast to other parties, which have historically bled the north-east of Scotland dry and left the region on the proverbial scrap heap.

Renewable energy presents a significant economic opportunity for Scotland. The just energy transition will deliver a net gain in jobs across the energy production sector. The Scottish Government have taken decisive action, but we are constrained by the limitations imposed by Westminster’s grip on the purse strings. It is time for the UK Government to recognise that and the importance of energy efficiency, collaborate with us and our colleagues in the Scottish Government, and provide the necessary support to achieve our shared goals.

It is a pleasure, as always, to see you in the Chair, Mr Paisley. I congratulate the hon. Member for Ceredigion (Ben Lake) on securing the debate.

We have heard from all Members who have spoken how important it is for the Government to look at the complexities of this issue. I represent a predominately urban constituency and, by and large, the other Members we have heard from represent rural constituencies. Each area will have different problems depending on its housing stock, the availability of skills and so on, but it is the Government’s job to try to iron those problems out. That is why it is important that we are having this debate so that people can put on the record some of the issues they have found.

Let me start with the broadbrush issues with retrofitting. Members have set out well that the crisis of rising energy bills has brought home to people how much energy they lose through having poorly insulated homes—energy is literally going through the roof—and how we could reduce not only bills, but our emissions if we had homes that met the EPC C standard.

I would say that this is about retrofitting existing homes, but the Government had a pledge to introduce zero-carbon new homes and then dropped it. Estimates suggest that well over a million homes have been built since then that do not meet the EPC C standard. Given that we face such a massive task in retrofitting existing housing stock, it seems ludicrous that we do not insist that new builds meet a certain standard, because we will need to retrofit them not too far down the line.

I have just come from the Energy Bill Committee, where we were talking about how we ensure that we have the skills for a just transition. This work tends to be carried out by small and medium-sized enterprises and sole traders—it is not as though there is one big company that will deliver it—and they need certainty that this is a line of work in which there will be jobs for the foreseeable future. With schemes stopping and starting as they have in the past—there was lack of consumer confidence because of the way some earlier schemes floundered—people will not move into those jobs, particularly given the shortages of construction workers, plumbers and electricians. It can be difficult to get people to do even the traditional jobs, let alone move into this area. We must address that to create stability.

The need for consumer advice was mentioned, and I just mentioned consumer confidence. Previous experience shows us that that is really important. This is about going into people’s homes, uprooting their domestic lives and putting them at risk of having to pay a lot of money. Under earlier schemes, cowboy operators did not do work to the expected standard and people were suddenly told that they needed extra—

It seems evident to me that, since many of the people who will qualify for support through these schemes will be vulnerable, unless protections are built in for them, they may not be able to deal with it when work is not done to the expected standard, which is what we will hear about as MPs. I would have expected the Government to build that into the schemes in the first instance because of the nature of the people they are trying to support.

That is very much the case. I have been in this place for 18 years. Earlier in my career, I saw in my casework people who had been ripped off really struggling to deal with the bureaucracy of whether they would be able to get public funding and whether they had to pay the people who were literally on their doorstep asking for money.

Turning to where we are now, the ECO scheme was well intentioned and welcome, but it is not working. At the moment, the UK has the least energy-efficient housing in Europe and home insulation rates have plummeted. Many statistics have been bandied around. My numbers are slightly different and relate to a different time period. In 2013, the coalition cut energy efficiency programmes; in the same year, insulation rates fell by 92%. That is what I go back to—the period when the market crashed, setting us back about a decade to where we are now. Last year, only 159,699 ECO measures were installed in low-income and fuel-poor homes, a reduction of 59% from the 393,706 in 2021.

There is a substantial gap between Government insulation targets and delivery where ECO4 is concerned. Analysis from E.ON Energy suggests that, as of December 2022, the industry had completed around 11% of the obligation, compared with an expected 19%. We estimate that at the same point during the ECO3 scheme, the industry had completed 29%. That delay will have consequences. A report from the World Wide Fund for Nature and ScottishPower warns that the Government are on track to insulate just one sixth of the homes needed to meet their target of reducing energy consumption by 15% by 2030.

I have spoken to people from various businesses in the retrofit industry, and they fear that the same mistakes are being made. Nigel Donohue, chief executive of the Installation Assurance Authority, said the transition to ECO4 was

“really poorly managed…despite conversations with the Government about not allowing this to happen to the industry again”.

There is no getting away from the fact that the scheme is really struggling.

There are two major issues delaying delivery. The first is limitations on scoring. Aeon estimates that up to 90% of the properties eligible for ECO4 will not receive the support they desperately need because those homes do not meet the minimum improvement requirements. The goalposts that must be cleared for properties to meet the SAP score are being moved, so vulnerable, fuel-poor households have been ruled ineligible and are missing out.

The second issue is costs. Funding assumptions under ECO4 are significantly lower than actual installation costs, and rising inflation has led to costs in the supply chain escalating even further. With current inflation rates and the skill shortages, those costs are likely to be increasing incrementally, almost by the week. I am not convinced that the Government have taken that into account. Delivering loft insulation, for example, is currently 430% more expensive than the Government estimate, while cavity wall insulation is 372% more expensive. These are clearly not small discrepancies, and they have to be recognised in the ECO4 scheme.

The Department for Energy Security and Net Zero acknowledged the increased costs when consulting on the ECO+ scheme back in December, but ECO4 has not been aligned. There is also the problem I mentioned of the gaps between schemes causing confusion and a drop in uptake. There was a four-month gap before ECO4, and I think at one point prior to that there was an 18-month gap between schemes, which I am told had a major impact on the skills front. We cannot allow the same to happen with ECO+. Continuity is needed.

I have also spoken to a housing association boss who says that he thinks the schemes are working okay generally, but that timescales and bureaucracy are a big problem. Low levels of contribution to band D homes means that installers and energy companies are less likely to take them on. He would like a focus on ensuring that installers are compliant with publicly available specifications, PAS, in the long term, so that people trust retrofitting more, but at the moment the process is very bureaucratic. He cites a case where a 115-page form was needed to fit loft insulation that took only an hour to install. I do not know how long it takes to fill out a 115-page form, but I would imagine that it was considerably longer than one hour. He also said that with schemes such as the home upgrade grant, the focus on specific measures, rather than letting retrofitting co-ordinators decide what is best, sometimes means that they cannot offer support for some houses.

It would be remiss of me not to mention how well Bristol is doing at retrofitting homes through its City Leap programme. The 3Ci website has a really good account of what we are doing. One of our ambitions, for example, is to get all social housing up to EPC C by 2030, which involves an innovative arrangement with private sector finance. Under our green prosperity plan, Labour is committed to spending £6 billion a year to retrofit 19 million homes to EPC C within a decade, saving families an average of £1,000 a year on their energy bills, creating over 206,000 new full-time equivalent jobs, and cutting national gas imports by up to 15%. I hope that we will be ready to start work on that in just over a year’s time, or whenever the election is called, but it would be good if the current Government addressed some of the underlying issues, particularly the skills gap, ensured continuity of supply, and listened to what Members have said today, so that we are ready to hit the ground running. Even if we do not win the next election, I am sure the Minister would hope to get things in a better place so that we can steam ahead with this programme.

It is a great pleasure to be serve under your chairmanship, Mr Paisley. I congratulate the hon. Member for Ceredigion (Ben Lake) on securing this incredibly important debate and thank all those who have contributed. As you may know, Mr Paisley, this issue is not in my portfolio; however, I am here to represent the Government and to take away any questions that I am unable to answer today.

I welcome all Members’ contributions; they really have been incredibly helpful. I thank everyone, particularly the hon. Member for Ceredigion, for the suggestions they made throughout the debate. One of the things that we really need to apply within all of this activity is common sense, and a lot of the suggestions that I have heard today have been based on common sense.

Although they are not relevant to this debate, I will also talk about the energy costs that really play on my mind as the Minister with responsibility for consumers and affordability. Clearly, there are many schemes that I could go into, although, as I say, they are not relevant. I will just say what many hon. Members have already said, which is that we must encourage all consumers to make sure that they get all of their benefits. I thank the hon. Gentleman for raising that issue; as Members of Parliament, we should always encourage people to do that.

The energy company obligation is the Government’s most successful domestic energy efficiency scheme in Great Britain. It obliges larger energy suppliers to deliver bill savings for households by installing energy efficiency measures. Since it began in 2013, it has delivered 3.6 million measures in more than 2.4 million properties, which means that over 9% of British households have had an ECO measure installed. Low-income and vulnerable households will save over £19 billion on their bills over the lifetime of the measures that have been installed. As the hon. Gentleman may know, over 17% of households in his constituency have received ECO measures over the last decade.

ECO4 was introduced last year and runs until March 2026. It has continued to support low-income and vulnerable households while also increasing the focus on the least energy-efficient properties and on fuel poverty. To be eligible for it, households either have to be in receipt of means-tested benefits, live in social housing or be referred by their local authority or energy supplier. For the first time, part of the overall target has been met by upgrading the equivalent of 150,000 of the worst-performing homes, with those living in homes with energy performance certificate ratings of E, F or G the most likely to be in the deepest fuel poverty. Also for the first time, we set a minimum requirement for energy efficiency improvements, depending on a home’s energy efficiency rating. This means that more of the households receiving help will be brought out of fuel poverty permanently. We estimate that at current energy prices, households benefiting from ECO4 will reduce their annual energy bills by over £600 on average.

Delivery under ECO4 commenced last April, with around 130,000 measures delivered to over 43,000 low-income households. The scheme data shows a gradual increase in delivery, and recent reporting from the supply chain indicates that delivery has continued to increase through May and June.

I am sure that the hon. Member for Ceredigion will be delighted to hear that Ceredigion continues to benefit disproportionately from ECO4; over 1% of all measures installed under ECO4 have been in his constituency. This success is partly due to the explicit incentive within the scheme to treat off-grid rural homes in Wales and Scotland, and it is also thanks to the ECO Flex provision, which allows up to 50% of the overall obligation to be met by treating homes that have been referred by a local authority or a devolved Administration. Ceredigion is one of the leaders in that part of the scheme.

Nevertheless, I assure the House that we are not complacent. We continue to monitor delivery closely, working with local authorities, energy suppliers and devolved Administrations to share best practice about ECO Flex and to remove administrative barriers where possible. Ofgem has recently republished guidance that should make the ECO Flex process easier, and, as has been mentioned, we are considering how the whole scheme can be amended. We recognise that costs have increased since we developed ECO4 and that, as the hon. Gentleman explained, meeting the minimum improvement requirement in certain homes is challenging. We are considering whether changes to the policy are desirable and analysing the potential impact of such changes. For example, we will need to examine the consequences of relaxing the minimum requirement for our fuel poverty targets, given the imperative of proofing homes to band C. Making changes to ECO4 will require a public consultation and amendments to affirmative regulations, so any changes we decide to make will be well informed by external stakeholders.

On the hon. Gentleman’s point about expanding the list of technologies, the primary legislation that enables ECO4 and GBIS limits technologies to those that reduce space heating costs. While we are open to expanding the eligible technologies in the future, that would require a change in primary powers. Beyond ECO4, and in response to persistently high energy prices, we have extended the help available through a new eco energy efficiency scheme: the Great British insulation scheme, which many Members mentioned. Previously consulted on as ECO+, it will boost support for those on the lowest incomes and the most vulnerable, and extend help to a wider pool of households who are also challenged by high energy bills.

ECO4 and the Great British insulation scheme are a major expansion of the Government’s action on energy efficiency. The predecessor ECO3 scheme was worth £640 million annually, and total ECO funding has now reached £1.3 billion per year to March 2026. We estimate that by April 2026, the GB insulation scheme will have delivered about 376,000 measures to about 300,000 households, helping households to cut heating bills by an average of £300 to £400 per year.

These schemes also create continuity for the supply chain. To further facilitate supply chain growth, the Government have increased funding for training schemes, as many Members mentioned. The Department’s £9.2 million home decarbonisation skills training competition, launched in September 2022, has awarded grant funding to 19 training providers in England to deliver subsidised training in the energy efficiency, building retrofit and low-carbon heating sectors. That training will deliver an estimated 9,000 training opportunities to the building retrofit, energy efficiency and heat pump sectors through to summer 2023. That includes accredited training to qualify standard installers and retrofit co-ordinators.

Alongside the energy efficiency upgrades we are making through the Great British insulation scheme and ECO4, the Government are investing £6.6 billion over this Parliament in clean heat and energy efficiency, reducing our reliance on fossil fuel heating. In addition, £6 billion of new Government funding will be made available from 2025 to 2028. We have heard it said that consumers are at the heart of everything we do, and I give my assurance that one of the things we are doing is reaching out to stakeholders. Hon. Members have also mentioned places such as citizens advice bureaux. Clearly it is important that we talk to people about the cost of living but also what we are doing in our ongoing support.

The Government investment I have listed, as well as specific investment in building a market for green finance, means that a range of green financing options are already available from high street lenders to owner-occupiers and private landlords. They include things such as green mortgages and additional borrowing facilities, or cashback offers to homeowners undertaking energy retrofit. Some energy suppliers also offer 0% finance for certain energy efficiency products. Improving the energy efficiency of our homes is the best long-term solution to reducing energy bills and tackling fuel poverty. ECO4 and the GB insulation scheme will support that, while also helping to protect our nation’s energy and support our net zero target.

A comparative assessment of cost assumptions for the ECO4 scheme and those set out in the Great British insulation scheme consultation has also been talked about. We are monitoring ECO4 delivery against the current cost assumptions, and we will consider changes if necessary. Changing the cost assumptions may require a change to the overall energy bill reduction target, to the estimated funding, to policy details of the scheme, or a combination of all three. Such changes will require public consultation and regulatory change.

There are many more areas that I could discuss, but I will end by thanking the hon. Member for Ceredigion again for securing this important debate. I look forward to continuing to engage with him and all ECO stakeholders to ensure that the schemes continue to help fuel-poor households, support jobs and deliver value for consumers.

I thank all those who have contributed to the debate; it has been very detailed and useful. As well as some of the practical concerns and challenges, we have discussed some of the broader and deeper tensions within various aspects of the policy, and how changes to one aspect might have a detrimental or unintended impact on another.

I am grateful to all colleagues. I thank the hon. Members for Bath (Wera Hobhouse), for Strangford (Jim Shannon) and for Westmorland and Lonsdale (Tim Farron), who made speeches. I also thank the hon. Member for Coatbridge, Chryston and Bellshill (Steven Bonnar), the hon. Member for Bristol East (Kerry McCarthy) and the Minister, as well as those who made interventions. It has been a good debate with a consensus that this objective is very important, and the policy will deliver a great deal of good for households as they face ever-increasing pressures on their finances.

I have the last word, as it were. I will use it to say that I am pleased that the Government are monitoring the situation, particularly the cost assumptions. That will be broadly welcomed by those who are responsible for installing some of these measures.

Question put and agreed to.


That this House has considered the implementation of ECO4 and ECO+.

Sitting suspended.