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Energy Performance of Buildings (England and Wales) (Amendment) Regulations 2021

Volume 811: debated on Thursday 18 March 2021

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Energy Performance of Buildings (England and Wales) (Amendment) Regulations 2021.

My Lords, these regulations were laid before the House on 22 February 2021 under paragraph 12(1) of Schedule 7 to the European Union (Withdrawal) Act 2018. They were debated and moved in the Commons Delegated Legislation Committee on Monday 8 March and considered by the Secondary Legislation Scrutiny Committee on Tuesday 9 March. Mirroring legislation is being prepared for data registered against properties in Northern Ireland, which will be presented in plenary on Monday 22 March. Scotland operates its own energy performance of buildings register and is not covered by these regulations.

This is a straightforward instrument. It relates to the statutory fees that are charged when data is registered for energy performance certificates, display energy certificates and air conditioning inspection reports for properties in England and Wales. Fees are applied to two classes of data registration, covering domestic and non-domestic properties. The regulations propose to reduce fees from £1.86 to £1.64 when data is lodged for domestic properties, and from £9.84 to £1.89 for non-domestic properties. Noble Lords may recall that fees charged for data registrations in England and Wales were last adjusted three years ago, and that they have been amended by statutory instruments on six occasions between 2012 and 2018.

The Committee will recall that the United Kingdom has set a target in law to bring its greenhouse gas emissions to net zero by 2050, to help tackle climate change. Heating and powering buildings currently accounts for 40% of the UK’s total energy usage, and we must ensure that buildings are constructed to high standards of energy efficiency. The energy performance of buildings registers are a key tool in promoting energy efficiency by providing valuable information about the energy performance of buildings and encouraging home- owners and commercial building owners and occupiers to improve the energy efficiency of their buildings. An energy performance certificate is needed whenever a property is built, sold or let, and must be ordered before a property is marketed for sale or rent. At a glance, a consumer searching for a new home or commercial premises can determine how efficient a property might be, while an owner can consider recommendations on how they might improve the energy efficiency of their property.

Historically, the Energy Performance of Buildings (England and Wales) Regulations 2012 implemented the energy performance of buildings directive. We retained those regulations after we left the European Union, as they contribute to our target of achieving net zero greenhouse gas emissions by 2050. They set out the Secretary of State’s obligation to maintain registers of data so that energy performance certificates, display energy certificates and air conditioning inspection reports can be recorded in a readily accessible format and made available to everyone. Regulation 28 sets out a power to levy fees to maintain the registers. Officials in my department calculate the appropriate level of fees each year on the basis of proposed costs of service divided by the forecast number of data lodgements expected.

A reduction in fees is possible now because the Government have invested in a new cloud-based digital platform and moved away from the fixed hardware model that had been in place since 2008. This will ensure the energy performance of buildings register service is user-centred and fit for the future. The new fee rates set out in this instrument will allow the costs of operating the energy performance of buildings register service to continue to be met without profiteering, but nor do we expect lodgement fees to subsidise a loss. Costs of the service have been calculated in line with government policy and tested with Treasury colleagues and stakeholders in the property energy profession.

Domestic and non-domestic data lodgements are now made to a unified platform built on cloud-based infrastructure. There are some technical differences between lodging data for a domestic and non-domestic certificate, which give rise to additional costs for making a non-domestic data registration and hence a differentiation in fees between the two classes, although this is now greatly reduced compared to previous years.

To conclude, these regulations serve a very specific purpose: to reduce the statutory fees charged when data is registered for domestic and non-domestic energy performance certificates, display energy certificates and air conditioning inspection reports. Colleagues in Northern Ireland are proposing to introduce their own mirroring legislation to ensure coherence between different parts of the United Kingdom that make use of the same register infrastructure. This will ensure that fees charged for Northern Ireland data lodgements are in line with those for England and Wales. I hope that colleagues will join me in supporting the draft regulations. I commend them to the Grand Committee.

My Lords, on the face of it, the regulations before the Committee are as simple as they come. However, my noble friend the Minister will recall from his previous encounter, over business rates relief for sport and charities, with me and the noble Lord, Lord Addington, who will of course be opening the bowling for the Liberal Democrats, that what appears to be the simplest of balls can lead to a Minister being nutmegged at the crease. While we hope that that will not happen today, I intend to press the Minister on a few key issues relating to these fees. I thank the Energy Saving Trust and all those who have offered advice on this issue.

I also draw on my experience as a resident in Ayrshire, Scotland. For while, as my noble friend the Minister has said, Scotland operates its own energy performance of buildings register and is not covered by the draft regulations, I believe there are important read-across policy implications which are pursued in Scotland and which the Committee may reflect on in the context of these regulations.

As the Minister has said, this is a straightforward SI relating to the statutory fees charged when data is registered for energy performance certificates—EPCs—display energy certificates and air conditioning inspection reports for England and Wales. Fees, as he confirmed, are applied to the two classes of data registration, covering domestic and non-domestic properties. There are significant benefits in having the energy performance certificate register and the service it provides, including readily available access to information and data. I strongly support any initiative that provides easy-to-access information and data on the land and built environment at cost.

However, there are likely to be considerable changes to building regulations. It is important that these changes are provided as far in advance as possible, so that contracts can also be amended as far in advance of any proposed changes. This would improve the lodgement process and minimise the requirement for the Minister to return to this Committee in future years over fees. Would it also be possible for government to consider sending registered EPCs by email rather than having to log into a labyrinthine database to retrieve them, as this can be inadequate and time-consuming? If so, this would provide value for the money spent. We need constantly to review and improve the system to which these fees apply.

Policies could be implemented in England that have made a real difference in Scotland and, indeed, Wales, such as the existence of a focused, directly funded scheme for installing energy efficiency measures and efficient heating for fuel-poor homeowners and private renters. I remain convinced, as I have previously proposed in the House, that this policy would be more efficiently delivered centrally. That said, in the context of these regulations the question as to how frequently charges will be reviewed and revised is important, which brings me to certainty. This is important because it bears on the frequency of registering for EPCs for properties in England and Wales. Governments can offer two very important things for energy efficiency measures to work: money, of course, but also certainty.

To develop the supply chain and to unlock investment from the private sector, a defined and adhered to long-term policy framework is needed. The biggest issue when talking to the supply chain is always the chopping and changing of energy efficiency schemes. While the nature and detail of schemes matter, that they should not be changed frequently is almost as important as what those actual details are. The supply chain can adapt to and thrive on most variants of energy efficiency schemes; what it cannot deal with is uncertainty and discontinuity.

Scotland and, to a lesser extent, Wales have long-term energy efficiency policies and programmes. In this vein, one of the key components of a stable policy environment is to make energy efficiency, particularly domestic energy efficiency, an infrastructure priority. The Scottish Government have done this and reaped the benefits.

Although individual energy efficiency installations are obviously relatively small in scale, the energy efficiency of buildings is a key parameter in the overall efficiency and productivity of the economy, and the aggregate costs and benefits are of major infrastructure scale. Raising domestic energy efficiency to EPC rating C would generate 150,000 jobs, have a budget of the same magnitude as HS2 and would save the energy equivalent of six Hinkley Points. It thus makes sense for energy efficiency to be an infrastructure priority, and once it is, this drives investment and policy certainty and sends key signals to the supply chain.

While I accept that a modest reduction in fees is now possible, I question whether the reduction is not exceeded by the duplication, time input, form changing and system adjustment for such a small change for domestic properties simply because the Government have invested in new cloud-based digital platforms and moved away from the fixed hardware model that has been in place, as my noble friend the Minister said, for the past 13 years.

A recent report by the Public Accounts Committee said that the Government have no plans to meet climate change targets, two years after setting them in law. That is what is stated in the report. The UK’s stock of 27 million houses includes some of the worst insulated and least energy-efficient homes in Europe. I share the views of Members of another place that I hope the Government will take the example of what is proposed in this related SI to move further with the agenda and deliver a big improvement in work to meet our climate change targets by making homes in the UK warm, dry and affordable to heat.

Should there not be some consideration of linking the fees to improvements in the future homes standards to be introduced in 2025, so that sellers can make a marketing point that there might be no charge where homes are at least 75% more carbon-efficient than when they were purchased? Correspondingly, would these charges not be an opportunity to charge more for those homeowners and businesses who fail to meet targets? They could effectively become a financial penalty and reward scheme. It would provide an opportunity for everyone concerned to have skin in the game, rather than the less efficient mechanism of being urged to take action by government. This would add further impetus to the sector.

With these suggestions now tabled, I hope my noble friend will present a defensive straight bat in response to what I appreciate may have been six difficult balls to defend. We know that he can do no more than play a defensive shot today—wild attempted sweeps to six would be a fatal error—since the last thing the noble Lord, Lord Addington, and I want to do is to take the wicket of such an impressive and erudite Minister.

My Lords, it is a genuine pleasure to follow my noble friend Lord Moynihan, who has made lots of good points. Some of them relate directly to points that I was hoping to make, so I will not repeat them, but the importance of the building sector in achieving our net zero carbon objectives should not be underestimated. The second largest source of emissions is from buildings.

It is easy for us to focus far too much on the commendable achievements in building net zero carbon homes, but by my calculation, we simply have to recognise that, by 2050, something like two-thirds of the homes we live in will already have been built, so retrofitting and securing energy efficiency in our existing housing stock is absolutely critical. There are government schemes for this purpose, such as the Whole House Retrofit plan related to social housing, and so on.

The scope of these regulations is modest, and I welcome that. I know that we are all grateful to the Minister for explaining the regulations at the outset, but I shall unashamedly take the opportunity to talk about not the price of EPCs but the uses to which they should be put. Far too infrequently are EPCs seen as the spur to energy efficiency improvements that they should be, which is what we are looking for.

On this occasion I will not be drawn into the private rented sector. I know that the Government undertook a consultation in the latter part of last year. I am probably slightly disappointed that, in the event, they were not a bit more ambitious, because the cost-benefit ratio they ended up with suggested that the benefits did not outweigh the costs, but that of course was at the carbon price assumed between now and 2050.

Again, I will not go down this rabbit hole for too long because it is too important and too deep, but we ought to ensure that our carbon pricing is set at a level that forces change. If it is set at that level, it is also one that is likely to deliver substantial benefits in relation to the energy efficiency of buildings and the costs that renters and landlords have to meet.

I come back to the use of the EPC. Two-thirds of the existing housing stock has a rating of D or worse, so we need to effect change. There are government schemes: my noble friend Lord Moynihan is quite right; it is not that there are not schemes. The Government have put money and resources behind grant schemes, but the supply chain and the people influenced by it need these things to be sustained over a considerable period and we need the response to be substantial and positive. I am afraid it is not.

At the moment, even in the last few weeks, we are sitting here saying, “Why are people not taking up the green homes grant?” I think it would be far too easy to blame it on Covid and say, “They do not want people in their homes, understandably, so they are not taking up the grant.” However, it was true beforehand. We have had this with other insulation schemes. It is sometimes as brutally simple as people living in a house not wanting to empty their loft to let somebody up there to put the right insulation in place. They do not want the disruption.

I will put just one point to my noble friend in the hope he will convey it into the right ears across government. Like we do in the private rented sector, focusing on when there is a new tenancy, in the owner-occupied sector we must focus on the moment of sale—when the EPC is given to a potential new owner and they have a period ahead of them when they might reap the benefits of investment in energy efficiency. At that moment, they also are likely to empty the house. They may empty the loft and sometimes they can engineer a short window of opportunity for energy efficiency improvements to take place.

I suggest that, at that moment, rather than a grant scheme which comes and goes and depends on the vagaries of spending reviews, there could be a permanent allowance against stamp duty for energy efficiency improvements up to, say, the value of £5,000 that they undertake—if recommended as a result of an energy performance certificate. Such a scheme could be confined to houses with an EPC of D or worse or, to start off with, those rated F and G, to see how it goes.

I prefer tax incentives to government grant schemes. I prefer tax relief to expenditure. I prefer incentives people can permanently rely on and where they feel they are getting some of their own money back or not having to give their money to the Government. As the tax is targeted on that moment, the incentive can be deployed in that moment as well. I commend that thought to my noble friend.

I know government departments not only hesitate, but will not enter the territory of tax, because it is all the Treasury’s business. But if they have an objective—and there is an objective here—and they think it can best be achieved by working with the Treasury through a tax incentive, I ask that they go down that path.

My Lords, follow that. The noble Lord, Lord Moynihan, started with what we might call a tricky spin and then we had straight bowling at the wicket from the noble Lord, Lord Lansley.

Anybody who has been around this issue will have heard variations of these points before; they are the obvious points. If you have a scheme that people are not accessing, you might as well not have it.

One of the points I wanted to make was this. With varying savings of 22p and £7.95, it might seem churlish to complain, but are those savings at the cost of guiding people through the benefits? I am thinking of somebody wanting to pick up the phone to be told how to do it properly, especially if this is something that they do not do very often and they are not that confident.

This is a useful tool in the battle against climate change, because it gives people information about how to go on from here. But are we going to make sure that the housing stock changes? To my knowledge, there has been agreement for over 30 years that we have very badly insulated housing in this country. This is no surprise to anybody who has been around this issue; even if you had wanted to avoid knowing it, it would have been very difficult not to have found it out. How are we going to get through that?

A small reduction is lovely—everybody likes that—but are we even going to notice a 22p change and a seven quid change on the fees? What is the cost here? Have we made sure that there will be somebody at the end of a phone line, to chat through the process and make sure people know what they are getting, how it is being used and the benefit? What if you get something wrong online and there is nobody to help you? On such occasions my use of expletives goes through the roof. If you are not used to using the system online or have limited access, things may not happen as they should. How are we going to talk people through it?

I totally endorse the points made about the fact there should be a long-term, reliable strategy to address the long-term problem—that has been here long before any of us were—of badly insulated housing, and that people are wasting money and we are messing up the environment. I thank the Government for what they have been doing and the greater incentive they have brought forward. But there is a long way to go and this is an old problem. I look forward to the answers that the noble Lord gives.

My Lords, I reassure the Minister that I will be speaking for a considerably shorter time in this debate than I did in an earlier debate this afternoon on the levelling-up fund. I am also afraid to say that I have a complete absence of cricketing metaphors in my vocabulary, but I am looking forward to Wales winning the grand slam on Saturday.

The instrument before the Committee simply reduces statutory fees in relation to energy data. It has the support of this side of the Committee, but I would appreciate clarification from the Minister in a few areas.

First, considering the application of these regulations to both England and Wales, can the Minister confirm the role of the Welsh Government in the drafting process? Secondly, can the Minister detail how the Government decided on a fee of £1.64 when data is lodged for domestic properties and £1.89 for non-domestic properties? Finally, can the Minister confirm whether his department has estimated the impact of these regulations on compliance with energy performance certificates?

I also briefly raise the Government’s broader green homes agenda, of which this is a part. Earlier this month, the Public Accounts Committee said that the Government have no plans to meet climate change targets. Can the Minister confirm whether this is true? If not, how will the Government urgently support homeowners as part of a green transition to tackle the climate crisis?

My Lords, I thank everybody for this short debate in Grand Committee considering the draft regulations and for the many cricketing metaphors, as well as the reference to the important rugby match taking place at the weekend. I am sure we can all agree that this is one of the shorter and easier instruments that we have been asked to debate.

The proposed statutory instrument will reduce the fees that are chargeable when statutory data is lodged to the energy performance of buildings register. The reduction is possible because the Government have invested in modernising the register by using new information technology and the latest software development techniques. The register service is now hosted on a cloud-based digital platform that is managed in-house, with lower running costs, the benefit of which can be passed on to fee-payers.

The noble Baroness, Lady Wilcox, asked how the fees were calculated. Noble Lords will be reassured that we aim for a cost-neutral service over time. As I said in my opening speech, there is no desire to profit from this. The fee modelling indicates that the data lodgement fees can be reduced, and the cost of the service has been calculated in line with government policy as set out in Managing Public Money from Her Majesty’s Treasury. The registered service costs from April 2021 to March 2022 have been modelled at £2.25 million, and our forecast fee income over the same period will deliver approximately the same amount from a projection of approximately 1.36 million data lodgements.

In response to the noble Lord, Lord Addington, I say that there are very clear benefits from these EPCs. They provide policy-makers and markets with information about the energy efficiency of the building stock as well as supporting and encouraging individuals to make informed choices about how to improve the energy efficiency of their building. Increasingly, government policies such as minimum energy efficiency standards in the private rented sector, the renewable heat incentive, which supports installation of renewable energy production, and the Green Deal, which supported installation of energy efficiency measures, have relied on buildings having a current EPC and being linked to achieving a specific EPC rating. The most recent green homes grant, which helps with installing energy-efficient and low-carbon heating improvements to homes, also makes use of the recommendations set out in the EPC where one is available for the property concerned. I assure the noble Lord, Lord Addington, that the Government are delivering an action plan to explore better ways to identify non-compliance and review penalties, provide better consumer information and improve the quality assurance of EPCs, including better oversight, accountability and formal error reporting.

I am surprised that both my noble friends in energy efficiency—the noble Lord, Lord Addington, and my noble friend Lord Moynihan—talked about the difficulty of accessing the data. My understanding is that there is open public access to the register and on the website you can access records by address search or EPC reference numbers, so it should not be too difficult to access the information.

I thank my noble friend Lord Lansley for his policy ideas. One can see that he has tremendous experience of heading up policy thinking, and indeed implementing it as a very distinguished Cabinet Minister. Retrofit is important, but that policy area is very much led on by BEIS, and it would certainly require some thinking about how to operate that. Of course, as he pointed out, any changes to the way we collect the stamp duty land tax would require support from the Treasury. It is an important point that we consider ways in which we can drive the agenda of getting homes to be more energy efficient, and obviously, as he outlines, the existing stock requires retrofitting. However, I will take forward his policy ideas with some enthusiasm. I completely agree with the broad point that very often tax incentives are a better way of achieving policy objectives than direct grant funding.

In response to my noble friend Lord Moynihan, I take the opportunity to highlight that the Government have a plan around this. We set the future homes standard, which is very clear about the need to produce at least 75% lower CO2 emissions than current standards. That is for our homes but, equally, the future building standards consultation, which was launched in January 2021 and which will close on 13 April, will set a future buildings standard. By having these standards and then having a suite of measures, including the energy performance certificate, I am sure that we will be in a position where we can deliver on the Government’s promise of a zero-carbon economy.

I have certainly done my measured best to deal with the variety of questions that have been thrown at me from my colleagues. If I have not done so, I am happy to follow up with them in writing if necessary. I hope that noble Lords have found the debate informative and will join me in supporting these regulations.

My Lords, despite my having a wealth of cricketing metaphors, the umpire will put the Question. The Question is that this Motion be agreed to.

Motion agreed.

The Grand Committee stands adjourned until 4.30 pm. I remind Members to sanitise their desks and chairs before leaving the Room.

Sitting suspended.