Seventh Standing Committee on Delegated Legislation
Thursday 10 April 2003
[Mr. James Cran in the Chair]
Draft Electricity and Gas (Energy Efficiency Obligations) (Amendment) Order 2003
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Mr. Elliot Morley): I beg to move,
That the Committee has considered the draft Electricity and Gas (Energy Efficiency Obligations) (Amendment) Order 2003.
May I say how nice it is to see you in the Chair, Mr. Cran? I look forward to your guidance and the good order of the Committee.
The order will amend the Energy Efficiency Obligations Order 2001, which places an obligation on electricity and gas suppliers to achieve targets for the promotion of improvements in domestic energy efficiency. They do that by encouraging customers to take up energy efficiency measures, such as cavity wall insulation, condensing boilers and energy efficient appliances and light bulbs. The energy efficiency obligation is commonly known as the energy efficiency commitment. The current programme started in April 2002, and it will run until March 2005.
In the first year, suppliers have significantly increased their levels of activity and accelerated the take-up of energy efficiency measures. The amendment to the 2001 order is to a list of income and disability benefits and tax credits on which a priority group of low-income consumers under the energy efficiency commitment is based. It reflects changes to the tax credit system, which came into force on 5 April, and the introduction of the pension credit in October 2003.
I shall give some background. The energy efficiency commitment has three important benefits. First, it will cut greenhouse gas emissions by an estimated 0.4 million tonnes of carbon a year. That will make a sizeable contribution to the United Kingdom's legally binding Kyoto target to cut greenhouse gas emissions by 12.5 per cent. below 1990 levels by 2008–12, and to its domestic goal to cut emissions of carbon dioxide by 20 per cent. below 1990 levels by 2010. We may consider some recent figures that demonstrate that there has been good progress on the industrial front in reducing carbon dioxide.
Secondly, the energy efficiency commitment is intended to help electricity and gas consumers to save energy: it helps to reduce their fuel bills, or they may choose to enjoy greater comfort by living in better heated homes without increased costs. Thirdly, the commitment gives particular help to low-income consumers who may spend a larger proportion of their income on energy than others. That contributes to the eradication of fuel poverty.
The order is concerned with that third aspect of the energy efficiency commitment. The 2001 order requires
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each electricity and gas supplier to direct at least 50 per cent. of energy savings to those in receipt of at least one of the benefits or tax credits listed at schedule 2 to the order. That list includes the former working families tax credit and disabled person's tax credit. On 6 April, two new tax credits were introduced—the child tax credit, and the working tax credit—to replace the working families tax credit, disabled person's tax credit and children's tax credit. In October, we will introduce the pension credit, which will replace the minimum income guarantee. The draft order gives effect to those changes by adding child tax credit, working tax credit and pension credit to the list of benefits in the 2001 order.
In the case of child tax credit and working tax credit, there will be an income cut-off of £14,200 for the energy efficiency commitment. Families in receipt of those credits who earn less than that amount will be included in the priority group of low-income consumers. We are taking that step because the new tax credits are structured differently from those in the current system. Families with children with an income of up to £58,000 a year—£66,000 if a family is responsible for one or more children under the age of one—can continue to receive some support through the child tax credit. It is obvious that to include families in that income range within the energy efficiency commitment priority group would be at odds with the commitment's purpose, which is to focus on low-income consumers. We have chosen an income of £14,200 because it is an uprating of the low-income cut-off currently used for tax credits of around £11,470. That level is generally recognised as an indicator of low income.
In response to our consultations on the proposals, some concern was expressed about how suppliers would be able to ascertain consumers' income levels. Since we consulted, however, the Government have issued a tax credits award notice that states clearly on its front page the level of child tax credit and working tax credit, and the level of annual income. The notice also states that the award of tax credit may confer eligibility for other financial help or benefits. I hope that the existence of that award notice will, to a large degree, allay those concerns. We propose a similar notice for the pension credit.
The draft order will have the effect of increasing the size of the energy efficiency commitment priority group, since it will bring in more people on low incomes. We consider it important that those people are included and should have the opportunity to benefit from the energy-saving measures that focus on low-income consumers.
In conclusion, the order reflects recent changes to the tax credit system and the introduction of pension credit. We have sought to do that in a way that will maintain the focus of the energy efficiency commitment priority group on low-income consumers. It is a fairly small change in the original order and relates to benefits. I welcome the fact that it brings in additional groups to enjoy the benefits. With that in mind, I hope that the Committee will approve this necessary order.
Mr. Graham Allen (Nottingham, North): Agreed!
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The Chairman: You are a little previous, Mr. Allen.
Mr. James Gray (North Wiltshire): Welcome, Mr. Cran, to the task before you. I remember serving under you when you were our assistant Chief Whip and I was a junior Whip. Tough but fair is the right way to describe your approach then, and I am sure that it will be the same this afternoon.
The Conservatives entirely support both the original order of 2001 and the principle lying behind today's order, which amends it. It was interesting to find in Hansard the record of the original debate, in this very Room, in 2001, and to follow word for word from that the speech just given by the Minister, which was, in 2001, given by the Minister for the Environment. I almost intervened in order to tell him what he would say next, but I am glad to say that, having outlined the three great benefits of the order, he missed out a catchy little final sentence from his right hon. Friend, who said:
''It is a win-win-win situation.''—[Official Report, First Standing Committee on Delegated Legislation, 5 December 2001; c. 3.]
Equally, last Friday, Baroness Farrington of Ribbleton can be found in the House of Lords Hansard making remarks somewhat similar to those that the Minister has just made, which pay tribute to the excellence of the words processors at the Department for Environment, Food and Rural Affairs.
We support the principles behind the amendment to the order. None the less, hon. Members, such as my near neighbour the hon. Member for South Swindon (Ms Drown), will not be surprised that we have one or two questions to ask. Of course it is worth while to encourage energy efficiency and to find ways to end fuel poverty and make people's houses warmer. It is right for industry to contribute towards doing that, and it is important that the criteria for judging who should obtain benefits should be updated alongside changes in the benefits system.
I am sure that the Minister would agree, however, that there is precious little purpose in amending the order if people do not take up the opportunity provided. As I listened yesterday to the Chancellor of the Exchequer talking about such matters on the Floor of the House, and as I read the debate in the House of Lords on the order and listened to the Minister a moment ago, I hoped that I was not alone in the United Kingdom in finding the Byzantine collection of tax credits outlined completely unfathomable. It is extraordinarily difficult to work out what on earth they are all about. When constituents come to my surgery—many of whom are deserving cases—I try to explain the differences between working families tax credit and all the rest, but I find it extraordinarily difficult.
That is proved by the lack of take-up under the order. I find it worrying that worthy organisations such as Help the Aged, Age Concern and the Child Poverty Action Group have all expressed grave concerns about how complex the instruments are. Only 17 per cent. of those eligible are taking up the baby tax credit, 64 per cent. have taken up working
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families tax credit, and that is just 51 per cent. of those who are eligible. The new tax credit system seems even more complicated. A 12-page application form comes with a 47-page instruction book. Does it need 47 pages of instructions to show someone how to fill out a 12-page form in order to apply for credits? Some of the people who apply are among the most disadvantaged in society, and a 47-page instruction book and a 12-page application form are, for them, a shade daunting, to say the least.
Mr. Allen rose—
Mr. Gray: I thought earlier that the hon. Gentleman was keen to get off, but if he wants to extend the debate, I shall be happy to give way to him.
Mr. Allen: I have a brief question. Is the hon. Gentleman suggesting that there should not be proper checks on the use of public money?
Mr. Gray: Indeed not. The hon. Gentleman's question shows more about new Labour than it does about us. He believes that proper checks on the use of public money should be ever-more complicated, and that books of instructions on how to fill out forms should be so complicated that many disadvantaged people cannot fill them out. He seems to think that that is good; I think that it is a bad idea, and that those who most deserve the benefits are often the very people who would not be able to fill out those forms.
I had an example of that just last year with one of the forms to do with the pension credit, which, among other things, asked the important question of whether the pensioner was pregnant. That is a very important matter, of course, but it need not necessarily take up an entire section of a form. The hon. Member for Nottingham, North (Mr. Allen) is keen to ensure that public money is not misspent, but he should realise that 6,700 eligible pensioners are not claiming the tax credit. Some £820 million a year is being saved by the Chancellor thanks to people who fail to collect the means-tested benefits that are due to them. That is a shame, but given that the order is intended to ensure that worthwhile energy savings grants are targeted at the right people, and given that half the right people do not have the ability even to claim the benefits to which they are entitled, we must presume that half the people entitled will not claim these excellent grants.
The thrust of what the Government are doing is fine. A perfectly good principle lies behind the changes. Does the Minister agree, however, that the complex nature of the tax credit system is such that a remarkably small number of people will take the opportunity offered to them?