Memorandum submitted by National Energy
Action (NEA)
WARM FRONT
VIEWS ON
THE DEVELOPMENT
OF THE
SCHEME
1. INTRODUCTION
The Warm Front scheme has come in for criticism
recently on the basis that it is not well targeted on fuel-poor
households and that the measures available are sufficient to lift
only a minority of those fuel-poor households who do receive a
grant out of fuel poverty. Whilst sympathetic to the case for
improving the effectiveness and targeting of the scheme, National
Energy Action (NEA) is of the view that this criticism is somewhat
unjustified since the scheme was not specifically designed to
address fuel poverty. The New Home Energy Efficiency Scheme as
it was known at its introduction in June 2000, predated the UK
Fuel Poverty Strategy and did not have the eradication of fuel
poverty as an objective. The original primary objective of the
scheme was to increase the take up of energy efficiency measures
in the homes of vulnerable low-income households. Judged against
this objective the scheme has been a considerable success and
more than 600,000 households will have received assistance by
April 2004.
Recent adverse comments on the adequacy and
targeting of the scheme indicate a clear desire to make the scheme
more effective in tackling fuel poverty, an objective which is
supported by NEA. There is an economic imperative for Government
in adopting this approach as failure to make the scheme more effective
in addressing fuel poverty now will result in more resources being
required to achieve their fuel poverty objectives in the future.
NEA sees significant scope to make the scheme a more effective
tool to address fuel poverty and would support changes designed
to achieve this outcome. However, it is the view of NEA that the
scheme should not be focused exclusively on fuel poverty status
at the time of application to the scheme. Although only some 40%
of those receiving Warm Front grants are fuel poor, many of the
remainder are low-income households living close to fuel poverty.
A further 20% of those receiving grants require to spend between
7.5% and 10% of their income to achieve an adequate heating standard.
This, together with the significant amount of movement in and
out of fuel poverty, suggests that to target the scheme too closely
on those in fuel poverty at any given time, even if such targeting
were achievable, would be a mistake.
The purpose of this paper is to identify the
changes which, in the view of NEA, would improve the scheme's
effectiveness in addressing fuel poverty.
2. SCHEME OBJECTIVE
As has been noted, addressing fuel poverty is
not currently an objective of the scheme. NEA believes that if
the scheme is to become more effective in addressing fuel poverty
then this must be a principal objective of the scheme. For reasons
which will be explored later, making fuel poverty the main objective
of the scheme is a prerequisite of improving its effectiveness
in addressing the issue. NEA does not believe, however, that the
scheme should simply address those households currently in fuel
poverty. To do so would produce too narrow a focus for the scheme.
Such a narrow focus would be difficult to achieve operationally
as, unless a perfect proxy for fuel poverty could be found, it
would require an expensive and intrusive assessment of income,
in addition to the energy efficiency standards, of the property
before measures could be delivered. It would also imply significant
numbers of abortive visits to properties with inevitable disappointment
and frustration for many households.
NEA believes that the principal objective of
the scheme should be:
["To address both current and potential
fuel poverty"]
This approach would enable the scheme to be
more focused on fuel poverty than at present while allowing sufficient
flexibility to provide assistance to a wider range of low-income
households than those currently in fuel poverty. It would recognise
the fact that fuel poverty is not a static problem and that significant
numbers of low-income households, while not currently in fuel
poverty, are nevertheless at risk.
3. SCHEME TARGETS
There is a hierarchy of targets associated with
the scheme. These targets relate to the UK Fuel Poverty Strategy
as well as the scheme itself. It is vital to ensure these targets
are expressed in ways that are consistent and contribute to the
delivery of the overall objectives of the strategy and the scheme.
At the Departmental level, the Public Service
Agreement target associated with the fuel poverty strategy should
be expressed as a target number of households to be removed from
fuel poverty over the relevant time period or, alternatively,
the number of households in fuel poverty at the end of the relevant
period. This would provide an incentive for Defra to ensure that
Warm Front, and the other schemes for which they have responsibility,
operate in ways that maximise their impact in reducing fuel poverty.
NEA believes that the targets for Warm Front
should be expressed in terms of an average SAP improvement target
for the households treated. Therefore, rather than the current
targets which relate to the number of homes treated, scheme managers
should be required to achieve a given average SAP improvement
for each property treated. Incentives to the scheme managers should
ensure that these targets are achieved. For example, increased
management fees could be paid for scheme managers who exceeded
the SAP improvement targets and penalties imposed if the targets
were not met.
Such targets would incentivise scheme managers
to identify and promote grants to those households living in properties
with the lowest SAP ratings as this would maintain a high average
SAP improvement across all properties treated. It would also provide
an incentive to undertake the maximum possible work in each property.
The targeting methods are unlikely to be perfect which will mean
that scheme managers will have to maximise SAP improvements wherever
possible to balance out those properties which would produce low
SAP improvements. This is in contrast to the current target of
the number of homes treated which provides incentives to scheme
managers to simply identify eligible clients irrespective of the
energy efficiency standard of their homes or their fuel poverty
status. The current targets actually provide incentives to market
grants to properties with the highest energy efficiency standards
and undertake the least amount of work in each property (not that
it is suggested that the current scheme managers operate the scheme
in this way).
Some work will be required to establish average
SAP targets which are realistic but challenging and which will
produce the desired results.
It may also be necessary to have secondary targets
relating to the number of homes treated to ensure a balance between
the amount of work undertaken and the number of homes treated
is achieved. The requirement to spend the budget allocations may
be sufficient to achieve this balance, in which case specific
targets for homes treated may not be required.
If Warm Front and Warm Front Plus are retained,
it may be necessary to have different targets for the two components
of the scheme.
4. ELIGIBILITY
AND TARGETING
There has been some confusion recently around
the issues of eligibility and targeting. The recent debate about
the effectiveness of Warm Front, and the desire to increase the
proportion of fuel-poor households receiving grants, has tended
to focus on eligibility and attempts to find a proxy for fuel
poverty which is more accurate than receipt of means-tested benefits.
Even if such a proxy could be found, ways to target the scheme
on fuel-poor households would still be required. Targeting is
a delivery issue.
It has been suggested that better targeting
of the scheme could be achieved by reducing the number of qualifying
benefits for the scheme. In this respect particular attention
has been paid to the disability benefits, some of which are not
means tested. It has been suggested that a significant proportion
of the non-fuel-poor households accessing the scheme do so on
the basis of these non-means-tested disability benefits. Reducing
the number of qualifying benefits may, however, create additional
problems. Tightening the eligibility criteria will exclude more
fuel-poor households from the scheme. Also, as was noted above,
there is a case for including more low-income households in the
scheme.
Unless it can be shown that any of the current
benefits give access to the scheme only to comparatively affluent,
non-fuel-poor households, NEA favours retaining the current eligibility
criteria for Warm Front. The issue of targeting should, in NEA's
view, be addressed by providing incentives for scheme managers
to identify fuel- poor households and those occupying the least
energy efficient properties.
The issue of those fuel-poor households who
are not eligible for the scheme under the current rules must be
addressed. The proposals for benefit health checks as part of
the scheme may go some way to addressing this issue by ensuring
that those households who are not claiming the benefits to which
they are entitled are included in the scheme. Further work is
required to ascertain the reasons why those fuel-poor households
not eligible for the scheme do not qualify before this issue can
be fully addressed.
NEA does not consider that adding an upper SAP
limit to the current eligibility criteria, as has been suggested,
would be an effective way to target the scheme on the fuel poor.
As the correlation between fuel poverty and SAP rating is not
particularly strong, the limit would either have to be set at
such a high level that it would not be an effective filter; if
it were set at a low level significant numbers of fuel-poor households
would be excluded from the scheme. Such a limit would also be
difficult to use operationally. It would require a survey of the
property before eligibility could be determined. This could lead
to a significant amount of abortive survey work. It would also
be very difficult to explain eligibility and might make the operation
of the scheme appear arbitrary to potential beneficiaries and
their advisors.
5. SCHEME STRUCTURE
5.1 Grant maximum
NEA considers that the current grant maximum
inhibits flexibility within the scheme. It imposes a limit on
the work that can be carried out in a property where the cost
of the relevant measures is greater than the grant maximum and
where the householder cannot meet the additional cost. The maximum
may also distort the delivery of the scheme in, for example, rural
areas or London where delivery costs are high. Increases will
be required to the grant maximum if higher cost measures such
as solid wall insulation are to be introduced into the scheme.
Some of these issues could be resolved by introducing
a range of different grant maxima for different circumstances:
property types, geographical locations etc. This could become
cumbersome, however and may lead to administrative complexities
with attendant increases in the cost of administering the scheme.
An alternative would be to replace the grant
maximum with an average grant such as that in the central heating
scheme in Scotland. An average grant would introduce more flexibility
and help to address instances where the required work exceeds
the grant maximum or where delivery is expensive such as in rural
areas. An average grant is unlikely to address the introduction
of more expensive measures in all cases. For measures significantly
more expensive than those currently available, other arrangements
will be required.
Another approach would be to remove the grant
maximum altogether. This would provide sufficient flexibility
to respond to the requirements of different areas and individual
properties, and to ensure that all available measures could be
delivered in each property.
NEA recommends that the grant maximum is removed
from the scheme. The competitive bidding process for installers
should ensure that prices for work remain realistic. However,
Defra and scheme managers should monitor the situation and introduce
mechanisms to prevent excess profits if there is any evidence
of this.
5.2 Measures provided by the scheme
It is vital that sufficient measures are delivered
in each property to address both existing and potential fuel poverty.
To achieve this it will be necessary to ensure that the scheme
has the flexibility to provide all the cost-effective measures
in each property treated. It will also be necessary to extend
the current range of measures to provide assistance to "difficult
to heat" properties particularly those with solid walls,
no loft space and properties off the mains gas network. This latter
point is particularly important as some 1.4 million fuel-poor
house holds live in properties with solid walls and a similar
number live in properties not connected to the mains gas network.
To address fuel poverty in these properties
consideration should be given to the inclusion of solid wall insulation,
both internal and external as appropriate, and to a wider range
of heating options, including renewable and other sustainable
heating systems. It may be necessary, in some cases, to consider
communal solutions as some renewable or sustainable energy sources
may only be viable when applied to groups of properties.
If oil heating is introduced into the scheme,
in spite of environmental concerns, then the supply issues must
be addressed. Oil suppliers, unlike gas and electricity suppliers
are currently unregulated. There is no obligation on them to provide
a range of different payment methods. Suppliers offer discounts
for oil which favour those households who can afford to pay for
bulk supplies, however many low-income households will not be
able to purchase fuel on this basis.
There is also an issue where some households
opt for a new heating system only and refuse to have any insulation
installed. NEA believes that this approach is short- sighted and
that provision of a heating system should be conditional on the
installation of all relevant insulation measures.
The scheme should also provide heating systems
to all eligible households and not just those over 60 years of
age. It is clear that an efficient heating system is a prerequisite
for affordable warmth. Without extending the provision of heating
systems in this way, the proportion of non-elderly grant recipients
lifted out of fuel poverty will be limited.
Whilst insulation and heating measures are appropriately
seen as the key basic measures of the Warm Front scheme, it should
be noted that there is growing concern on the part of building
and housing professionals that, unless ventilation is also tackled,
current measures may lead to future problems. As the support and
participation of health professionals is increasingly gained,
consideration should also be given to the extent to which they
may also share these concerns. Where small amounts of mould growth
and condensation exist in homes, insulation and heating improvements
will change the way the building behaves and will usually resolve
the problem. However when severe mould growth and condensation
exist, improvements to the ventilation of the property will be
necessary to eradicate the problem. The danger that cold damp
homes will become warm damp homes is one that must be properly
addressed through a ventilation component in Warm Front. Recent
research indicates a strong link between mould growth and respiratory
problems such as asthma. Ventilation measures can be as simple
as extraction fans with humidistat controls, or may be more complex;
for example, heat recovery systems. Warm Front is likely to be
best served by user-friendly devices that are simple to install
and maintain, such as extractors or whole-house positive pressure
ventilation systems, installed in lofts or kitchens. Consideration
should be given to the extension of the scheme in this way.
Extending the range of measures in this way
will clearly have implications for the resources required in the
scheme. Measures such as solid wall insulation and alternative
heating systems will be more expensive than the current measures.
The addition of ventilation measures into the scheme will also
increase the costs per property. This will require additional
resources if the current rate of progress is to be maintained.
However, NEA feels that additional resources are already needed
for the scheme if the Government's fuel poverty objectives are
to be achieved. This view is also supported by recent work on
resource requirements undertaken on behalf of the Government's
Fuel Poverty Advisory Group.
5.3 Role of Scheme Managers
NEA considers that the current split in responsibility
between the scheme manager and installers, where scheme managers
are responsible for marketing and promotion, surveying and the
delivery of energy advice, should be maintained. The increased
complexity of the scheme with more measures and, potentially,
a wider range of heating systems, highlights the importance of
the independent surveying role. There is also a role for a more
proactive approach by scheme manager surveyors in terms of specifying
the location of heating controls, pipe runs etc. NEA also believes
that the scheme manager should specify the type of boiler used
where replacement boilers are installed. Such boilers are currently
specified by installers.
5.4 Repeat grants
The current scheme regulations mean that an
eligible household can receive only one grant, although currently
there is scope for a second grant if circumstances change and
an additional grant is required in the same financial year as
the first. This leads to a situation where an eligible household
with an old but functioning heating system, may get a grant for
some minor insulation work. If the heating system breaks down
outside the financial year in which the original grant was given,
the household will not be able to have a replacement heating system
under the scheme. NEA believes that this requirement should be
removed, and that eligible households should be able to receive
additional and subsequent help from the scheme. If the grant maximum
is retained then it could be used as a kind of account that could
be drawn on until exhausted. Alternatively, if the grant maximum
is removed, then eligible households should be permitted to receive
grants for any available measures.
If such an arrangement is introduced, it may
be necessary to introduce quotas on scheme managers to restrict
the number or proportion of repeat grants. This will ensure that
first time applicants can access the scheme and prevent scheme
managers from "mining" their data bases of previous
grant recipients to the exclusion of new applicants.
5.5 Energy advice
NEA supports the provision of energy advice
in the scheme. The scheme offers an ideal opportunity to provide
advice in the most effective way ie face-to-face in the client's
home while energy efficiency improvements are being carried out.
Recent research suggests that this is the most effective method
and occasion to deliver advice. Good quality energy advice can
have a major impact on the comfort and the fuel bills of the household,
and will be vital if vulnerable households are to use any new
heating systems and controls effectively.
Improvements to the current delivery could be
made by providing advice after insulation measures have been installed
rather than at the survey stage. This would either require an
extra visit by the scheme manager advisor or for the advice to
be delivered by the contractor. The former would increase the
cost of administering the scheme. Improvements could also be made
in the material left after the advice has been given, particularly
following the installation of a new heating system and controls.
As a minimum, all agencies delivering advice
in the scheme should operate to the Energy Efficiency Partnership
for Homes Energy Advice Code of Practice.
5.6 The public sector
Since its introduction in 2000, the scheme has
provided grants to private sector households only. The government
has argued that public sector tenants should be provided with
affordable warmth via the capital investment programmes of their
landlords. This position is only tenable if public sector landlords
devote sufficient investment to eradicate fuel poverty in their
properties. It is also clear that the current Decent Homes Standard
will not guarantee affordable warmth. Unless the energy efficiency
requirements of the Standard are set at a level that can guarantee
affordable warmth, and public sector landlords devote sufficient
resources to ensure that all social rented properties meet the
standard, then NEA would support the extension of the Warm Front
scheme to the public sector.
5.7 Benefit health checks
NEA supports the recent introduction of benefit
health checks on a trial basis. NEA supports the inclusion of
benefit health checks as a permanent feature of the scheme. In
addition to increased eligibility and take-up, such checks can
result in increased income which in itself has a major impact
on fuel poverty. NEA would be keen to see a proactive approach
to benefit health checks, which should be combined with the more
general promotion of the Warm Front scheme, rather than the current
approach which reacts to enquiries. Arrangements should also be
made for adequate follow-up action. Lack of knowledge of benefits
is often only part of the reason for non-take-up. The bureaucratic
nature of the process and application forms can often put people
off and it will be necessary to ensure assistance is available.
Formal links with the Department for Work and Pensions and local
welfare rights services would be helpful.
5.8 Scheme monitoring
It is vital that the impact of the scheme in
terms of the numbers and proportion of fuel-poor households, assisted
and the impact that the improvements have, is monitored to assess
its effectiveness in addressing fuel poverty and progress towards
meeting the Government's fuel poverty objectives. NEA would propose
that, to do this, a sample of grant recipients be monitored each
year. The monitoring should include:
— The fuel poverty status of each household
before and after the measures.
— The SAP rating of the property before
and after the measures.
— Details of the technically feasible
work that was not done and the reasons.
— Assessment of comfort and client
understanding of how to get the best out of their heating system
and the health risks of low temperatures.
— Satisfaction with work and the resolution
of any problems.
It has proven difficult to obtain detailed statistical
information on the scheme. Figures that are published by the scheme
managers and Defra are aggregated to a point where they are of
little use, and there are often significant time delays in publication
which make informed discussion on the current situation difficult.
NEA's view is that, as the scheme is funded with public money,
the widest possible information about the scheme, consistent with
maintaining any necessary commercial confidentiality, should be
published. The publication of information on the scheme should
be expedited. Recently the flow of information on the scheme has
improved, however more still could and should be done. Early publication
of detailed information on the scheme should be a mandatory requirement
of scheme managers and this will require a reporting specification
to be part of the administration contracts.
5.9 Interface with other schemes
NEA's view is that there should be a single
publicly-funded scheme which addresses the energy efficiency needs
of low-income households and makes a significant and sustainable
contribution to the Government's fuel poverty targets. The scheme
would be easily understood by both households and the professionals
advising them, and would avoid the regressive nature of schemes
funded through energy consumers' fuel bills, such as the fuel
supply companies' Energy Efficiency Commitment (EEC). A single
comprehensive scheme would also ensure consistent national coverage
and avoid the complexities of scheme integration. However, pragmatically,
NEA recognises that such a comprehensive single scheme is unlikely
to come about in the short term. It is therefore necessary to
ensure that the maximum impact is achieved from current schemes.
To do this it will be necessary to encourage effective integration
of existing schemes, particularly Warm Front, EEC and local authority
capital programmes.
Before such integration can take place it is
necessary to determine how the schemes will integrate and to design
them so as to encourage integration. For example, if it is decided
that, in order to provide a comprehensive package of measures
in all properties, Warm Front should provide some of the measure
and EEC provide the remainder, then the eligibility criteria of
the two schemes should be the same and the measures complementary.
Incentives may also be required to scheme managers to encourage
such integration. Alternatively if the intention is for EEC to
fill some of the gaps left by Warm Front, for example by providing
measures to fuel-poor households who are not eligible for Warm
Front, then the eligibility criteria for the two schemes will
have to be complementary and their range of measures similar.
Integration could also be achieved by permitting
and/or encouraging measures trading between the different schemes.
This could eventually lead to carbon trading. NEA's view is that
any arrangements for measures or carbon trading between schemes
should be transparent and should avoid duplication.
14 October 2003
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