Examination of Witnesses (Questions 460-479)
JENNY SAUNDERS
AND LESLEY
DAVIES
5 JUNE 2008
Q460 Mr Clapham: Is this something
that you have taken up with government at all or taken up with
the energy companies?
Jenny Saunders: I am a member
of the Government's Fuel Poverty Advisory Group and we have raised
this over the past two years. We have asked for action on this
but again I think the crunch came just a few months ago when the
high profit levels were being reported and energy prices were
going up. I think it was just at that point that the energy probe
was called. We hope that it does result in some action.
Q461 Mr Clapham: One of the things
that you say in your submission that you propose prepayment charges
be capped at the level charged to standard credit customers. To
some degree that is different to what, for example, Ofgem are
saying. Ofgem calculate that equalisation of prepayment tariffs
for different debit or standard credit will cost the average household
£14 to £6 per year respectively. If you introduced,
as you want to do, that capped level of charge to standard credit
customers, there would be a spreading of the cost, would there
not?
Jenny Saunders: There would and
that is why we went for the lower figure. It is £6 a year
across every customer and we think that that is a fairer outcome
than the existing differential. That is our judgment and we hope
that those people who are on standard credit on low incomes would
be assisted through a social tariff and that would be the mechanism
to mitigate that cost for them. That is what we are hoping that
DWP will address in some kind of offering to pensioners.
Lesley Davies: Could I make one
point about the differential, and it may be a question for Ofgem
again. You can also describe the differential as a margin that
is there waiting to be competed away by suppliers in the market.
It would be an interesting question to ask of Ofgem why they think
that margin, in a market that they think is truly competitive,
has not been competed away when they keep talking about suppliers
looking for new ways of marketing to consumers because that is
the thing that I do not understand why that margin exists in a
competitive market.
Q462 Mr Clapham: 4.5 million households
are living in fuel poverty, Jenny. Is it possible to say what
number of those households would be on prepayment meters?
Jenny Saunders: I cannot remember
off the top of my head what the estimate is but I think people
on prepayment meters are more likely to be on a low fixed income.
They are not all fuel poor, we accept that, but then it is not
easy to identify everybody by their payment methods who are in
fuel poverty. They are more likely to be on a low fixed income,
they are more likely to be in debt. They are the people who are
having these meters fitted now for debt recovery so we think that
link can be made.
Q463 Chairman: A lot of people on
standard credit terms are also in fuel poverty and on low incomes.
Jenny Saunders: They are but they
can be assisted through other mechanisms.
Q464 Mr Weir: In the last budget
the Chancellor announced that the leading energy companies had
increased expenditure on social tariffs to £150 million per
year. Do you think that will make much difference to the fuel
poverty figures?
Jenny Saunders: If I can make
the connection, a 1% increase in the price of energy results in
40,000 people falling into fuel poverty. Energy prices only have
to go up by 2.5% for that initiative to have been eroded because
it was estimated that that amount of money could take 100,000
households out of fuel poverty. I would put it in that context,
but I would say it is not an unwelcome first gesture and we would
see it as something to build on.
Q465 Mr Weir: It does a little bit,
not a lot that we are seeing.
Jenny Saunders: Yes.
Q466 Mr Weir: Looking at social tariffs,
there is a vast difference between the various companies. Can
you tell us who gives the best social tariffs and who gives the
worst?
Lesley Davies: The only data that
we have access to is an energywatch report which used the criteria
that BERR may have adopted for assessing social tariffs and that
suggested that British Gas and EDF were the best and RWE and SSE
were the worst, but that has to come with a huge caveat, not least
because, to defend the suppliers, SSE have sought to hold off
their fuel price increases more than many of the others, so I
am not sure whether you can actually just baldly say best and
worst in that context.
Q467 Mr Weir: Is one of the problems
that they are so different? Would you support a standard social
tariff?
Jenny Saunders: Yes, that is the
reason why because it is so difficult to compare the offerings.
Some of them have been made obviously on a voluntary basis and
they are welcome initiatives, but we cannot with any surety understand
which is the best deal for certain people and also they are not
available in great enough numbers. They are capped at the moment
and our job is to make sure we get as many people onto those tariffs
as possible.
Q468 Mr Weir: A standard tariff would
allow everybody throughout the country to know exactly what the
social tariff is. What action would you have liked the Government
to have taken in the Energy Bill on social tariffs?
Jenny Saunders: It is not too
late for them still to take action. Certain Members of the House
of Lords were keen to put down an amendment. We would like to
see an enabling clause that will require companies to offer a
social tariff with a clearly defined objective. We would like
it linked to eligibility for cold weather payments. We would like
to see it have a package of being the company's lowest offering
linked to an energy efficiency offering and referred back to DWP
for assistance with additional income maximisation advice. That
is a holistic approach. That is what is needed and in terms of
new policies they are the kind of progressive initiatives that
should be brought forward. Energy prices are going to keep increasing;
the companies are telling us that. For a long time they said no,
we have extra gas storage, we have long term contracts now and
we are certain that things will stabilise. You are scaremongering
if you say prices are going to stay high. They are now telling
us that they are staying high for security and for carbon reduction.
We have to respond to that without annual knee jerk, bring the
companies in, what are you going to do? We need to set a framework
for this going forward so we are not always just appealing to
their better nature, appealing to voluntary initiatives. It should
be a statutory duty. This is an essential commodity for the health
and wellbeing of every household in this country and we cannot
leave it to market forces.
Q469 Mr Weir: We talked earlier about
a windfall tax. Is it the case then that we are really looking
at a future where energy companies are going to have to invest
more of their profits back into helping social customers and energy
efficiency and in fact they are going to have to make less profit
because of that in the future on an annual basis, not just a one-off
windfall tax?
Jenny Saunders: We want the companies
to make a reasonable profit because obviously they do need to
invest in new generation plant, they do need to make those investments
and we are not disputing that, and also the energy companies are
not social agents of government and we do not want them to behave
as such. We want them to be responsible and take care of their
vulnerable customers. The Government has to respond perhaps with
some additional income payments and stepping up their action.
It is amazing that the Warm Front budget has been cut at this
time and that is the Government's contribution to this agenda.
Q470 Mr Wright: Moving straight on
to the Warm Front issue, what are your feelings in terms of the
performance of Warm Front since its implementation?
Jenny Saunders: There are two
elements, I think, to this question. One is around the framework
for the scheme set by Defra and one is on the delivery by the
installers and the scheme manager. I have recently started to
sit on the Scheme Manager's Board so I am trying to get my head
round some of these issues because we have a maximum grant for
Warm Front in England which is lower than the equivalent schemes
in Scotland, Wales and Northern Ireland. People are being asked
to pay a contribution to the work which we think is unacceptable.
We would like to see the average grant increased but we have to
be pragmatic. The Government has set the budget for the next three
years at a lower level. We do not think that the programme should
be left to provide the existing measures that it is providing.
It is limited and we need to bring in new technologies. There
is such an irony that at the time the Government has more revenue
from higher increases in energy prices, it has cut the budget
for Warm Front.
Lesley Davies: The other thing
to bear in mind certainly with the grant maxima is how are the
top-ups picked up? Clearly most low income consumers would find
£400-£700 completely out with their budgets to take
advantage of Warm Front which is a really good scheme in delivering
benefits when all of the things fit. We know from things that
our members have told us that it is local authorities who pick
up the difference. It is the British Legion that picks up the
difference, so there is an awful lot of responsibility being met
elsewhere. If someone else is picking up the bill why would you
feel the need to address the issue of top up, but it can, if those
moneys are not available, mean that people who really, really
need the benefit of Warm Front do not get it because they do not
have access to the funds to make the top up.
Q471 Mr Wright: I think most MPs
have been involved in terms of some of the issues surrounding
the top ups on this, but one of the issues that has been raised
with eaga and with others is this question about the client can
actually get the job done cheaper in the locality than by the
preferred installer from eaga. This has been flagged up on numerous
occasions where perhaps the £2,700 would be sufficient if
they were allowed the flexibility of getting a Corgi registered
local installer to do exactly the same job as the one that has
been given the contract. Is that something that has been raised
as an issue?
Jenny Saunders: It certainly has.
There was a quality study carried out for the board that made
these comparisons on costs that Warm Front were being charged
by installers and other companies providing a national scheme
for heating and insulation. It appeared that Warm Front was not
paying over the odds. It is comparing like with like. Some people,
if we were to hand over that grant, would be quite capable of
going and arranging the work themselves, but others would not.
For a government scheme you have to have monitoring; you have
to have some insurance; you have to have health and safety considerations
at the forefront. That is my view that it may be done cheaper
locally in some instances, but overall I do not think that you
would have the quality control and you would have that certainty
that you are getting a good quality of work.
Mr Wright: The fact is that with gas
installations you have to be Corgi registered. The regulations
are very strict in terms of installation for protection and everything
else. If that person is a Corgi registered installer and can do
the job for £500 cheaper, surely that should suffice the
regulations because that person has to register on an annual basis
for his or her Corgi standard?
Q472 Chairman: We are addressing
these questions to eaga in a few minutes' time as well. We have
technically four minutes left and two areas of questioning left,
so we need to be brief on this.
Jenny Saunders: There is certainly
more that we can do to bring together the Warm Front and the CERT
schemes into a more holistic package. We might get some more cost
efficiencies in there as well.
Q473 Mr Wright: Finally, you have
put forward a case for an improved hybrid programme with CERT
as well as Warm Front. Can you tell us how it would operate?
Jenny Saunders: What we have tried
to do through our subsidiary charity that NEA runs—Warm
Zones—and in the 11 areas it is operating it tries to bring
together the different grants available—Warm Front, the
local housing board funding—but they all have slightly different
objectives. One is a carbon reduction target, one has a social
need. If we are to have something that is more meaningful for
the household that we could not have to pay administration costs
twice over, we might have some of those efficiencies and you would
have a better package offered. It could be then that local authorities
identify the need in a local area and they can draw down funding
from a central pot. It is that kind of thing we are exploring
as we go through into the next stage of obligations on the suppliers
from 2011. Let's be a bit more creative and think about the tariffs
being built in; a social tariff linked to an energy efficiency
package that might look different to just loft insulation or cavity
wall.
Lesley Davies: It could then be
the focus for a really strategic approach to dealing with fuel
poverty which we have discussed already is pretty lacking. The
only concern I have with that type of scheme though in my experience
is when you hive off the least popular part from the popular scheme
it tends to suffer by withering on the vine and not getting the
budget that it had previously had. I would have that cynical concern
about such a scheme.
Q474 Mr Binley: I have three questions
about incomes. You have both been pretty critical of the Government
in terms of the way it distributes additional income for the purpose
of overcoming fuel poverty. What more could the Government do
through the benefit system? Is there anything you would advocate?
Lesley Davies: We certainly want
to see the winter fuel payment extended to people who are non-pensioner
households that are currently eligible for the cold weather payment
because I think that will cover about half of the people who are
in fuel poverty. That would certainly be one thing that the Right
to Fuel Campaign would advocate.
Q475 Mr Binley: Is it a very inefficient
system of dealing with what is a sizeable issue?
Jenny Saunders: The winter fuel
payment is going to about 11 million older people and it maybe
is not reaching those people who are in fuel poverty.
Q476 Mr Binley: How do we improve
it?
Jenny Saunders: One proposal might
be that we tax you on the payment that you receive, so for higher
tax payers—
Q477 Mr Binley: Is that not more
expensive for the taxpayer all this administration? I want a more
focused sharper point to what you are trying to do. I agree with
what you are trying to do but I want it more focused and sharper.
Jenny Saunders: We recognise that
the winter fuel payment is not really a fuel poverty measure.
The Government estimates that it takes out about 100,000 people
out of fuel poverty as it is defined as an income measure. It
is very popular with older people and we do not want to see it
taken away. We want to see some additional kind of payment to
those who are on pension credit and I think that is something
we want to explore with DWP over the next few weeks how we can
get an additional payment for them.
Q478 Mr Binley: In truth we have
no real answers at the moment about how to spend taxpayers' money
more efficiently to achieve the object you want to achieve. That
is my concern.
Jenny Saunders: The sustainable
way is by putting in more insulation and better heating systems,
by improving our housing stock, but we recognise that that takes
time. That is where we would best spend taxpayers' money, but
we have an immediate crisis where people just cannot afford it
because their incomes are too low. An additional payment is what
is needed.
Q479 Mr Binley: Will the increased
winter fuel payment cover the increased costs of energy this winter?
Jenny Saunders: It depends how
much the companies put the bills up by.
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