Examination of Witnesses (Questions 100
- 108)
WEDNESDAY 4 FEBRUARY 2004
MR ANDREW
WARREN AND
MR RON
BAILEY
Q100 Mrs Clark: What about the role
of energy advice centres? What support are they getting, if any?
We have one in my constituency of Peterborough, which is very
effective When I say "effective", they have all the
right ideas, they have an eco-house, they are brilliant, but I
just wonder whether you are getting any feedback from them nationwide
that they are not getting the steer they need.
Mr Bailey: Less so with them,
because they are being given money to give advice and the advice
is very effective. Certainly for that very reason they were very
demoralised over the lack of steer in the Pre-Budget Report, because
they did respond to these consultations. I think 47 of our 51
responded, so the demoralisation has started to set in with them
much more recently.
Mr Warren: Probably your later
witnesses, particularly the Energy Saving Trust, who do provide
a substantial amount of funds for that, will be able to respond
more directly to you on that. Certainly we believe that the advice
centres do carry out a very important role indeed and I know they
would like to be able to expand that role, but obviously they
are limited in their resources, as I am sure you are aware.
Q101 Mrs Clark: What do you think
about the 28-day rule, the 28 days' notice to switch suppliers?
How important is it that we make progress here in achieving wider
objectives we may all agree with?
Mr Warren: It is a very important
move in the right direction. It is an experiment ostensibly with
one million homes likely to be involved, so it is quite an experiment.
Yes, it is valuable. Whether by itself it will turn the corner
for energy services remains to be seen.
Q102 Mrs Clark: Indeed it is a pilot
project and we talked about the hiatus between DTI and Defra.
Is it not just absolutely significant that the allocation of responsibilities
on this pilot fall to DTI rather than Defra?
Mr Warren: There is a continuing
difficulty with this demarcation line and my colleague has already
alluded to the fact that there is a genuine problem there. With
the best will in the world, while one continues to have to deal
with a whole set of government departments, that demarcation line
causes unnecessary problems.
Q103 Mrs Clark: Likely impact on
your members of the five key measures you are advocating.
Mr Warren: The answer is that
seeing these in place will begin to give them confidence to be
able to invest, to be able to provide first of all the manufactured
products and then do the training which is going to be necessary
to ensure that these are installed. This is all about confidence
in the fact that we are not just dealing with words, we are dealing
with firm commitments. I alluded to the position even 10 or 12
years ago in terms of fine words and we have been receiving those
find words for the ensuing period. Those of my member companies
who had believed those fine words have on the whole suffered financially.
Q104 Mrs Clark: Is not the point
anyway, regardless of our ideals, that the UK housing stock is,
one could say, almost a disgrace; it is very, very poor quality?
Surely this is going to impede the objectives and surely it is
significant that there is not the political will behind housing.
Okay, we do have the Housing Bill going through, but it was many,
many years before we had a Housing Minister in the Cabinet.
Mr Bailey: May I come in as regards
the likely impact on some of the worst housing stock, which is
private accommodation? All the government's fuel policy documents
say it is the hardest sector to deal with. I referred earlier
to the National Federation of Residential Landlords and I pay
tribute to Richard Price the General Secretary who went round
all his county associations enthusing them about these fiscal
measures and they all passed resolutions and they were then enthusing
their members. At long last we had private landlords enthused
about energy efficiency, only to be deflated about the fact that
there was no response in the Pre-Budget Report. That is one effect
on one of my members, the National Federation of Residential Landlords.
The National Housing Federation, which represents social landlords,
were very disappointed at the lack of initiative on enhanced capital
allowances to install proper heating systems in one million or
so social housing units. They are wondering how to get decent
home standards, how to get people out of fuel poverty, without
proper steer from the Treasury on this. That could have been done.
There are two impacts on other industries, on the housing industry
and on the landlords' industry.
Q105 Mrs Clark: So it is almost definitely
up to us, as parliamentarians, to enthuse the passion for housing
and push it up the agenda. Finally, on your own ideas and objectives,
solid but perhaps not especially radical or ambitious. Am I being
unfair? Do you think they will be enough on their own to achieve
the step change in energy efficiency which is needed?
Mr Warren: They will certainly
send very important signals to the marketplace and the marketplace
believes that these are amongst the most important options available
which can give them confidence to invest both in manufacture and
training, and training is going to be as important. It is to have
the people on the ground who can deliver the measures, but in
order to set that in motion, we have to have the confidence that
there is going to be the demand there.
Mr Bailey: I am not usually accused
of not being radical enough, so it is very unusual. To be honest,
I do not think they are enough on their own and we actually suggested
another measure at a seminar held by the Treasury and the Energy
Efficiency Partnership for Homes in September last year where
we thought that the VAT reduction could be extended to some of
the DIY markets. If I could raise this now, we accept that DIY
cannot get a 5% VAT rate under the Directive because there has
to be a service element. If it is supply and fit, then it is legal
under the Directive because of the service element. We suggested
they could interpret that as supply and deliver, which also has
a service element, and we were given an assurance at the seminar
in September that this would be considered. But there was no response
to this in the Pre-Budget Report.
Q106 Sue Doughty: You mentioned you
had been following what the Economic Secretary had been saying
on these issues. We talked about where we can and cannot have
the reduced rate of VAT. What is your interpretation, just to
clarify this whole thing around VAT and energy saving materials
and possibly energy efficient central heating and hot water systems
which you refer to in the Clean Dozen? What is your understanding
now of what is possible and what is not?
Mr Bailey: Supply and fit is certainly
deemed to be possible and that has justified the existing reductions.
Straight DIY is not possible, but we would say there would be
a service element if you extended supply and fit to supply and
deliver. We can see no reason, and this has been accepted in correspondence
with the Treasury, why the supply and fit which currently applies
to insulation material should not also be extended to boilers
and hot water systems etcetera. At the moment that is only 5%
on grant schemes relating to hot water systems and heating systems,
but it can certainly be extended to supply and fit hot water systems,
which it is not and it should be. The other thing is a slightly
wider subject than you touched on and concerns generating new
ideas, things like domestic heat pumps and micro CHP units could
certainly be applied to that.
Q107 Sue Doughty: Within those, do
you think it is realistic that the government could get on and
announce in the Budget and the Energy Efficiency Implementation
Plan?
Mr Warren: The answer is all of
those. We have really been having this debate about VAT for rather
a long while. It is plainly ludicrous that we are taxing energy
consumption at 5% and energy conservation at 17.5%. It is the
most blatant distortion of the marketplace in the wrong way that
one can conceive. It is not an argument that anyone can hope to
suggest is satisfactory, keep it like this. Treasury Ministers
time and again have said that they wanted to address this. They
have said that they need to continue discussions in Europe at
the same time relating to DIY and that is certainly perfectly
fair. We have acknowledged the fact that DIY alone cannot get
this reduced rate until there is agreement right across Europe,
but so far as the rest of it is concerned, it is just obfuscation.
It is perfectly possible under existing VAT rules to reduce VAT
in all these other areas to which Mr Bailey has referred.
Q108 Sue Doughty: We look forward,
hopefully, with happiness to Budget day and to crawling through
the documents to identify that.
Mr Warren: If I might say so,
I should be absolutely appalled, and our industry would be greatly
disheartened, were it to turn out at Budget day that we saw no
changes whatsoever, much as we saw with the pre-budget arrangements.
I cannot believe, having gone through this exercise twice, and
having got such unequivocal responses, that our industry and by
that I am incorporating all the other industries, not just the
energy efficiency industry, but all those who have responded at
some length to the Treasury on this and said unequivocally that
we needed to do something, will be told "We have listened,
but we are still not going to budge". Then, effectively,
what that would be signalling would be is that the Energy White
Paper is not serious and that the carbon commitments which are
anticipated, particularly for the residential area, just simply
will not be reached.
Mr Bailey: In 1996 I was, with
the Honourable Member for Nottingham South, responsible for an
attempt to amend the Finance Act, the Bill, as it then was, going
through Parliament, to reduce VAT to 5% on all energy saving materials.
The person who was then the Shadow Minister and who is now the
Minister, Ms Primarolo, got up in the House of Commons and said
"In the name of justice, democracy, jobs and energy efficiency,
we support a reduction of VAT to 5%". We lost that by one
vote, but we would say in the name of justice, democracy, jobs,
energy efficiency and social justice that they should do what
they said they would do in 1996.
Chairman: Thank you very much. No doubt
the Treasury will have noted your views which have been forcefully
expressed. We are very grateful to you for your time this afternoon.
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