Examination of Witnesses (Questions 1-19)
MR DEREK
LICKORISH AND
DR BRENDA
BOARDMAN
8 DECEMBER 2008
Q1 Chairman: Good afternoon, ladies and
gentlemen. Can I welcome you to the first of our evidence sessions
on our short inquiry into fuel poverty issues. May I just say
for the record from the outset that, first of all, the Committee
are very grateful for the written evidence we have received. We
have had a number of representations from organisations who would
have liked to have given oral evidence. Can I apologise to those
who may read these proceedings and say to them that, sadly, it
was not possible to include everybody who volunteered for the
onerous task of coming before us. That does not mean to say at
all that we will not take note of what you have written, but we
have done our best to make certain that those who do come before
the Committee can speak from a knowledgeable standpoint on this
subject. I apologise to those who were keen to come but who have
not been called. For the record, may I welcome for the Fuel Poverty
Advisory Group Derek Lickorish, their Chairman, and from the Environmental
Change Institute from the University of Oxford, Dr Brenda Boardman.
There will be votes in the House at 5.34 when this part of our
evidence session will conclude. I just say to all concerned, if
we can be as focused as we can that would be very much appreciated.
Turning to the evidence that we have had, and particularly the
contributions from the Fuel Poverty Advisory Group, paragraph
1.1 of your evidence,[1]
Derek Lickorish, presents a somewhat depressing picture of progress
towards dealing with the subject of fuel poverty and the Government
in recent days has made some announcements which continue to address
the issue. Can I ask you at the outset, given a clean piece of
paper and starting where we are, and given that the 2010 target
looks unlikely to be met but people continue to offer hope and
optimism that the 2016 target will be reached, what do you think
ought to be done at this stage to give more priority to this subject?
Mr Lickorish: I have five points
to make. The first one is that we need to set out a roadmap and
quantify the task. At the moment with the volatility in the energy
market it is very difficult to see exactly what the size of the
problem is. You will know that in England we see around four million
homes in fuel poverty and in the UK somewhere between five and
5.4 million. Because of the seismic shift in the price of energy,
around 125% since 2004, or 90% in real terms, we now need to see
a very robust and mandated social tariff to help the poorest of
society. Again, looking at this clean sheet of paper we now see
that Post Office Counters Limited have a contract to pass benefit
out to the recipient, around £20 billion per annum. We see
that there is a great opportunity to leverage that touch with
the consumer to help identify and target those in fuel poverty
and also to perhaps create a bank account which would open up
a whole range of new energy products to that group of customers
who could then take advantage of direct debit discounts. I would
also like to see some changes in CERT where we see the problem
with expensive to treat properties as opposed to hard to treat.
Tower blocks are not addressed through CERT because the whole
mechanism is to incentivise suppliers to get the biggest bang
for their buck as far as reducing carbon is concerned. I would
also have a huge look at Winter Fuel Payments, which I know is
one of the questions that you have raised, £2.7 billion being
paid out each year. It is a universal benefit, not means-tested,
and within that we have the higher rate taxpayers costing us something
like £200 million a year and I think there is a question
over that. Those are the five things as a start into this conversation
that I would like to see addressed.
Q2 Chairman: In five points, can
you tell us why we are still having a discussion about fuel poverty
because we seem to have been at it for a long time but the policies,
sadly, have not delivered?
Mr Lickorish: Well, the policies
delivered back in 2004 when the figure fell to around 1.2 million
homes in fuel poverty and 75% of that reduction was brought about
by the improvement to people's incomes and a tremendous amount
was done to improve customers' incomes. Around 20% of the reduction
was due to energy efficiency measures, but sincethen we have seen
a steady increase in the price of energy and, as I mentioned a
few moments ago, a 90% increase in the cost of energy in real
terms and that hides customers off the gas grid who use LPG or
kerosene where they are paying substantially more for their energy.
Kerosene is 100% more expensive than a customer would be paying
for mains gas. The averaging effect of all this hides some very
serious and big issues, but the single biggest thing that has
occurred has been the dramatic increase in the cost of energy.
Q3 Chairman: Dr Boardman, you start
your evidence to us by saying: "A clear fuel poverty strategy
is needed to identify how the 2016 obligation is to be achieved".[2]
What are your five points, or one or two would do very nicely?
Dr Boardman: I do not think I
have got five, you will be glad to know. The most important thing
is a coherent strategy, as Derek said, a roadmap, which says which
policies are going to deliver what numbers of people out of fuel
poverty even if prices continue to rise. One of the problems behind
your question as to why we are still talking about it is because
too much of the emphasis has been on incomes, much though they
are needed, but incomes and fuel prices are symptoms. The real
cause is the energy inefficiency of the housing stock that is
occupied by low income households. What we need to do is focus
the money very strongly on making those homes energy efficient.
It is which specific policies, not just we want one million cavity
walls insulated but which houses, whose money, how much is the
Government's, how much is the utilities', how is it going to be
delivered, is it through local authorities or through the utilities.
A whole lot of really quite basic questions need to be answered
in that new strategy. In the more immediate future I would do
three things. I would have a very strong benefit entitlement campaign
to make sure that the people who are entitled to benefits are
actually receiving them. There is reputedly something like £10
billion of unclaimed benefits. When I talk about a benefit entitlement
campaign, I mean a campaign that makes sure people have got the
money in their purse, not just saying, "You should be entitled
to this", not just saying, "Why don't you phone up this
number", but actually holding somebody's hand, going through
the paperwork and getting the money into their purse. That would
be number one. I read some of the evidence that you have received
and I was very interested in the Citizens Advice Bureau evidence
that said in terms of top-up problems they get a lot of problems
in England where the maximum grant is £2,700 under Warm Front,
but they get virtually no problems in Wales where it is £3,600.
So I would immediately increase the maximum grant and try to make
sure that eradicates the problems that people have with top-up
because they just do not have the capital.
Q4 Chairman: In your agenda for the
future, where do you see the creation of the new Department for
Energy and Climate Change? Does that give an opportunity to reprioritise
this subject? In terms of, well, let us call them PSAs although
they seem to be going out of fashion at the moment, do you think
there needs to be something from the, let us call it, DECC—I
hate it, it sounds like Ant and Dec—the new department?
Do they need to have a PSA which properly reflects this subject
to take on board the points that you have been making?
Dr Boardman: I do not think there
is any doubt that the issue has gone down the political agenda.
In 2003 it was up there, in the Energy White Paper it was one
of the four objectives, but since then it has progressively reduced
in stature. Therefore, it would be important for DECC to have
an obligation, whether it is a PSA, a DSO, I do not know, that
reflected fuel poverty as a real concern.
Mr Lickorish: I think it is the
only way we are going to get the roadmap that is necessary. There
is no doubt that there is a huge political interest in the subject
and the announcements regarding the Community Energy Saving Programme
and increases in CERT are all very welcome, but the roadmap can
only come about through having a PSA.
Q5 Chairman: Do you think that with
the former department that was responsible, Defra, and the fact
that its principal responsibility was climate change, and that
prioritisation has now been passed to the new department, dealing
with fuel poverty has really been pushed down as a sort of side
benefit from the climate change agenda rather than something that
in policy terms stands on a par with it?
Dr Boardman: I do not think you
can do either of them separately, you have got to focus on both
at the same time. My rather unkind view is the closer we get to
2010 or 2016 and the more people who go into fuel poverty the
less the Government does about it.
Mr Lickorish: Just a final point
on that. In the recent announcement of 2 December from the Climate
Change Committee there are about 12 pages of the 400 or so commenting
on fuel poverty and the statistics there relate to 2006 and, of
course, the projections going forward to 2022 are wholly inaccurate
in the light of what has happened recently on fuel prices.
Chairman: Both of you have given us some
very helpful words of introduction, but will you forgive the Committee
that subsequently colleagues may wish to target their questions
to one or other of you and in the interests of time it may not
be possible for both of you to answer.
Q6 Paddy Tipping: Dr Boardman, you
placed a lot of stress on energy efficiency.
Dr Boardman: Yes.
Q7 Paddy Tipping: I get a lot of
letters from constituents who say it is about prices, it is these
wicked companies that put the prices up but are not taking them
down. Do you not think we ought to be focusing on fuel prices?
Dr Boardman: There is undoubtedly
a lot that needs to be done on fuel prices and I am not sure that
at the moment Ofgem are dealing with those opportunities sufficiently.
The reason I stress energy efficiency is because whatever you
do on prices and whatever you do on incomes you have got an annual
recurring problem. If you can get the homes more energy efficient,
especially if you can get them really energy efficient, through
one large single payment you have tackled the problem and you
have not got recurring costs. If you have got a really energy
efficient house then the size of your fuel bills is substantially
reduced and, therefore, even a large increase is not so noticeable.
Q8 Paddy Tipping: Mr Lickorish, you
talked about maximising income and clearly that is something we
ought to be doing, having the social work programmes as well as
carbon saving programmes. The two approaches are distinct, are
they not?
Mr Lickorish: They are distinct.
My emphasis was more on a social tariff which is coming at it
in another way because if you look at the definition of 10%, currently
with an annual fuel bill of around £1,300, and we know that
some of the poorest of society are living on £6,500, you
need a very, very efficient home to ever get to the point where
you are going to pay less than 10%. With the huge reliance that
the UK has on fossil fuel and, therefore, subject to that worldwide
volatility, I am firmly of the view that you need a mandated social
tariff and an explicit fuel poverty levy placed on all megawatt
hours and therms sold and that would then create the means to
give a substantial subsidy to those who can afford it the least.
I think you have to do that to level the playing field amongst
all the suppliers because some suppliers will have a greater latency
of fuel poverty in their old customer bases and, therefore, to
get them to address it equally would put one company at a disadvantage
compared with another. I am committed to the notion that a fuel
poverty levy and a social tariff is the means to get us to the
point where we have achieved the full energy efficient measures
that need to be undertaken, but that is going to take 10 years
in my view.
Q9 Paddy Tipping: So why has the
Government been so keen on a voluntary approach to social tariffs
when they have had plenty of opportunities recently to take a
mandatory approach?
Mr Lickorish: I agree with you.
I think we are pussyfooting around with it. Inevitably, if you
look at one of the major suppliers at the moment they have withdrawn
certain aspects of their social tariff. That goes back to the
point, I think, where there are different levels of fuel poverty
in the old suppliers' traditional areas and, therefore, that will
make them hesitant particularly when there is lack of clarity
about whether a social tariff is going to occur. I think if that
clarity was made that would level the playing field and enable
them to be innovative above that level and address what we hope
will be a relatively short-term issue in the whole scale of things
before we can address the energy efficiency needs of the housing
stock.
Q10 Paddy Tipping: Dr Boardman, if
I could ask you about SAP ratings. Is it possible to get a SAP
rating of 81 across the whole breadth of housing stock in the
UK?
Dr Boardman: It is a tad challenging!
It is extremely difficult, and it will be extremely difficult,
but either we are concerned about fuel poverty and we want to
eradicate it or we are not. At today's prices and at the incomes
of the poorest people, as Derek was saying, say the poorest 10%,
you have got to be looking at something like a SAP 81 to make
sure that the poorest 10% of householders are not in fuel poverty.
That is not at all the same as saying it will be easy or cheap
to do, it is just saying if we give fuel poverty eradication the
priority that I think we should give it then we have to understand
the implications.
Q11 David Lepper: Can we just focus
on actual figures, sums of money that you think ought to be invested
in dealing with this. Mr Lickorish, Fuel Poverty Advisory Group
have said that it is going to need £1 billion per annum between
2008-16 to eradicate fuel poverty. I cannot quite recall whether
you were talking about completely or vulnerable households there.
Could you just expand on that a bit more?
Mr Lickorish: Yes. That figure
was calculated some time ago. Certainly we see a current figure
of around £5.5 billion over the next few years. There are
other views which think we will have to spend something like £14
billion if we are going to tackle some of the very expensive to
treat properties as well. I do not wish to fudge the issue but,
going back to my earlier comment, a lot of the preparation of
those figures was based on previous energy prices and, as I alluded
to earlier, when you look at £1,300, just focus on what people
earn, think about the 10%, that changes the figures substantially,
hence why DECC have to take on the task of a roadmap. I cannot
answer you precisely with accurate figures in the light of the
volatility in energy prices today.
Q12 David Lepper: Would you take
the same position, Dr Boardman?
Dr Boardman: Substantially. I
brought a few copies of a report that I did last year in case
anybody would like to have them, an executive summary, Home
Truths,[3]
and in that I had a very conservative estimate—sorry about
that—that there were five million households and each needed
to have about £7,500 to get to about a SAP of 81. This is
on a community-wide approach, a low carbon zone approach. There
are economies of scale by doing every house in a street and there
are economies of scale by doing a lot per house and not keep revisiting.
That, divided by the following eight years in order to reach the
2016 target, was about £5 billion, which is quite like Derek's
figure. If I was wrong and it is closer to £13,000 per house,
which is a figure that I think the Energy Saving Trust are more
supportive of, that brings it up to £8 billion per annum.
That is for each of the next eight years, 2009-16 inclusive, because
of the obligation in the Warm Homes and Energy Conservation Act.
Q13 Lynne Jones: Is that £8 billion
a year?
Dr Boardman: Yes. Can I just clarify.
It is £8 billion a year for energy efficiency improvements
assuming they are all 100% targeted on the fuel poor, there are
no administrative costs, no income support and no costs of social
tariffs in that.
Q14 David Lepper: The Government
seems to be shifting the share of funding from central Government
to the energy supply providers. Do you feel that is the right
way to approach things or should the proportions be different?
Dr Boardman: Is this for both
of us?
Q15 David Lepper: I am happy, whoever
wants to get in first.
Dr Boardman: We both have a view.
I am deeply worried by the CERT approach. I think it is wrong
that only 40% of the benefit is in the homes of the priority group.
The energy efficiency levy in Northern Ireland manages to fund
80% of its funds on fuel poor and that would be a more appropriate
target for us. I object quite strongly to the fact that the rest
of the money, about half the money, is actually going from one
rich household to another rich household. I do not see why they
need it at all. I know we want to promote enthusiasm in the general
population about energy efficiency, but I do not see why we have
to give subsidised activity as through CERT. The other thing about
CERT that I am nervous about is that it is based on a theoretical
assumption, it is not based on actual measurements. We have had
huge amounts of investment in CERT and we still have electricity
use rising. I am hoping that the supplier obligation post-CERT
is a completely different animal, not at all the same sort of
approach, a target that is, for instance, in carbon per household
or something like that. I am hoping that CERT comes to a shuddering
halt fairly quickly.
Mr Lickorish: I think this highlights
the tension between having a carbon saving and a fuel poverty
saving and that has always been a problem in trying to resolve
it. Looking forward, we need to see transparency in CERT. CERT
is a very efficient way of saving carbon in terms of the cost
per tonne of carbon saved and the effective outsourcing to suppliers
works if it is to achieve that objective, but then it becomes
more difficult for the fuel poor.
Q16 David Lepper: Finally, sticking
with figures, have you made any assessment of the numbers of people
who could be removed from fuel poverty from the two funding schemes
that were announced in the autumn and winter, the Home Energy
Saving Programme and the Pre-Budget allowance?
Dr Boardman: Neither CERT nor
Warm Front are particularly good at removing people from fuel
poverty. They are both couched in terms of outputs, x number of
measures—cavity wall insulations, loft insulations—neither
of them have targets based in terms of removing people from fuel
poverty and neither of them are very good at doing it.
Mr Lickorish: Warm Front is saying
that the £100 million increase they got would assist them
with 55,000 households, around half of which would receive a heating
measure.
Q17 Mr Drew: Is not the problem with
the nature of this area that you have people who on lots of measures
would appear fairly wealthy but they live in a very old property
and may be very old themselves, so the notion that they are fuel
poor is not really shown up necessarily in the way the statistics
outline? That is a problem in my area because these people will
not, for whatever reason, put energy efficiency measures into
their households. How do you reach these people? Is this not a
real problem?
Dr Boardman: It is a ginormous
problem. They are people that we call capital rich and income
poor and they are poor on a daily basis, I do not think there
is any doubt about that. They are living in the family home, it
is a big capital asset, or it was a big capital asset—it
may still be, I am not sure—and they are extremely reluctant.
I was talking to a lady from Luton, a Beacon Council the other
day and she said they have had a scheme to help people release
equity for two years and so far one person has taken it up. It
is seen as being unfair to the children if you start raising equity
to invest. This is not an easy problem. I do not really have a
clear answer.
Q18 Mr Drew: You would accept it
is at the crux of why people are so reluctant to engage in energy
efficiency schemes?
Dr Boardman: Yes. To be more positive,
one of the solutions that I have put forward in the past is that
we do not have enough really attractive reasonably sized places
that are a sort of sheltered housing scheme. I had this with my
own mother when she was looking for somewhere to move to, that
there is not an attractive place for people to move to in a city
centre, nice and warm, recently built, with a warden which would
entice them and be seen as an attractive alternative to the family
home. At the moment we do not have enough of those.
Q19 Lynne Jones: You have both been
fairly critical about the current systems that are available to
help people in fuel poverty. I guess that you want to give more
emphasis to actual energy efficiency measures and less to income
support and then where there is help with income and paying bills
that should be focused on those in need rather than the universal
benefit. Could you actually outline how we might move in a politically
acceptable way, bearing in mind that there are a lot of people
currently receiving £300-plus, £400 a year which is
taking an awful lot of money and far more than is being spent
on energy efficiency. How do you move from the present situation
to what you would think of as more acceptable? You are outlining
where we want to be but how you get there is perhaps what we need
to know.
Mr Lickorish: We all agree it
is a very difficult political manoeuvre and certainly I would
start with higher rate taxpayers. That would save £200 million
a year, but I know relative to the £2.7 billion that cost
is not significant. There is a general recognition that the public
purse is stretched to the maximum and if you set out a roadmap
that was clear about policy and what that overall strategy was
you would then have a platform from which to articulate what you
are trying to do. At the moment it is quite confused.
1 Environment, Food and Rural Affairs Committee Fifth
Special Report of Session 2007-08, HC 1099, Ev 3. Back
2
Environment, Food and Rural Affairs Comittee Fifth Special Report
of Session 2007-08, HC 1099, Ev120. Back
3
Not printed. Back
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