Examination of Witnesses (Questions 60-79)
MR RON
CAMPBELL AND
MR MARTIN
CHADWICK
8 DECEMBER 2008
Q60 Paddy Tipping: Energy prices
have shot up significantly. Are we right to focus on energy efficiency
as the way of resolving this or do we want to look at greater
measures to increase household incomes?
Mr Campbell: I think we have to
look at all three aspects of fuel poverty. Historically, NEA has
taken the view that improvements to heating and insulation represent
the most rational and sustainable approach to fuel poverty and
to providing affordable warmth, but even at the point of comparatively
low energy prices we were always conscious of the need to do something
about both household incomes and energy prices per se. We do think
that action is needed across all three of these areas, and certainly
on energy prices.
Q61 Paddy Tipping: What is your view,
Mr Chadwick?
Mr Chadwick: I think the Campaign
sees the importance of the long-term benefits of improving the
energy efficiency of a property. If it is possible to fuel poverty-proof
someone's home, then the vagaries of the benefits or the incomes
of the people who then live in that home do become less important,
but it has to be a two-pronged attack; you cannot do it just one
way.
Q62 Paddy Tipping: Sticking to one
prong, can you see SAP 81 across the whole of the housing stock
in the UK?
Mr Chadwick: The Campaign would
like to see that but recognises that there are great practical
difficulties in getting there.
Mr Campbell: A number of years
ago the Government took the view that SAP 65 was a standard that
would effectively fuel poverty-proof the housing stock. Since
that period, 2004 or so, energy prices have increased to the extent
that we may now be looking at an energy efficiency standard approximating
SAP 80 to obtain that same fuel poverty-proofing objective. NEA
does not, as such, commit itself to any particular standard. We
recognise that SAP 80 would be an extremely rigorous and demanding
standard. I think our priority is to ensure that those measures
that can contribute towards delivering affordable warmth in terms
of heating and insulation improvements are implemented to the
extent that is feasible. We do not necessarily commit to any particular
theoretical SAP standard, but we want what is possible to be done
in terms of energy efficiency.
Q63 Paddy Tipping: Energy prices
have shot up, Mr Campbell, but they seem slow to come down. I
wonder whether there is a case for arguing in some circumstances
for subsidising fuel prices. Is that an issue that you would be
prepared to argue?
Mr Campbell: We would certainly
be prepared to argue the case for some form of social tariff that,
in effect, reduced fuel prices and that provided preferential
tariffs to particularly vulnerable households. Yes, it is an issue
that we are extremely interested in.
Q64 Paddy Tipping: Mandatory rather
than voluntary?
Mr Campbell: Certainly our view
is that a social tariff must be mandatory to be effective and
it must be universal in its form. We recognise that Ofgem and
the Government to some extent would disapprove of this view. They
feel that this removes some competitive dimension from the market,
which we are at a loss to understand since there is no competitive
dimension to social tariffs. Energy suppliers dictate who will
be eligible for the tariff; they put a ceiling on the tariff;
and they most certainly do not intend to seduce other suppliers'
customers over onto their preferential social tariff, so we think
that in order to ensure consistency of benefit that it should
be mandatory and the degree of benefit should be prescribed and
the eligibility criteria should be prescribed.
Q65 David Lepper: You heard what
the previous two witnesses had to be say about the difficulty
of fixing a precise figure for eradicating fuel poverty in vulnerable
households overall and the range of sums of money that they told
us about. Would you each like to say whether you would agree broadly
with what they told us or do you have different views about that,
attaching a figure, if possible, that should be spent on dealing
with this?
Mr Chadwick: I think that is really
difficult to do. I would be rather reluctant to commit the Campaign
to a specific figure but the scale that Dr Boardman was talking
about seems to us to be correct.
Mr Campbell: There has been considerable
work done on this issue. The Fuel Poverty Advisory Group has had
work carried out on its behalf relating to the costs of eradicating
fuel poverty. There have been other pieces of individual research
carried out. I understand that in responding to the claim in the
High Court for judicial review undertaken by Help the Aged and
Friends of the Earth the Government did some work on costing the
required finance for eradicating fuel poverty. My recollection
is that the figure that they arrived at was in the region of £14
billion. I do also think however that that was based on the scale
of fuel poverty in 2006 rather than a contemporary scale of fuel
poverty.
Q66 David Lepper: You have already
mentioned that the changes in fuel prices have affected things.
The other issue that I raised with our two previous witnesses
was about, whatever the sum that is needed, the balance of that
funding between central government and the energy providers. What
is the view of your two organisations about that? It is argued
that it is a kind of regressive taxation in the CERT scheme and
so on.
Mr Chadwick: I think the issue,
as much about where the money comes from, is equally the way in
which it is spent. I think you are quite right to raise the enormous
scale of what is required, but I think the Campaign would like
to see some way of using the money that produces, as I hinted
earlier, in a more joined-up, rational sort of scheme. We take
the view that we would like to take some of the market elements
out of tackling fuel poverty so that there is less competition
between the fuel companies. By all means take some of the funds
from the fuel companies and from their customers to achieve the
ends you wish, but perhaps implement the schemes in a different
way so that they are better value for money, more targeted and
possibly even more efficient because there is not a duplication
of competition between various schemes and funders at the same
time.
Q67 David Lepper: Mr Campbell?
Mr Campbell: You can understand
why the Government chooses to, in effect, impose a levy on domestic
energy consumers in pursuit of funding energy efficiency improvements.
Although it makes sense to link energy costs to energy efficiency
installations, our own preference would be for government social
policy objectives to be funded through the Exchequer through direct
taxation and through the government rather than through energy
suppliers. In addition, I think there is a serious problem, as
was mentioned by the earlier witnesses, with transparency as it
relates to the Carbon Emissions Reduction Target. This money is
constantly referred to as suppliers' money, suppliers' funding
or suppliers' contributions. This is not the case; this is domestic
energy consumers' funding and contributions.
Q68 David Lepper: And the description
of it as a form of regressive taxation?
Mr Campbell: To some extent, yes.
Q69 David Lepper: And finally I will
ask as I asked our previous witness, the two particular elements
of funding that the Government has announced on 1 September this
year and then in the Pre-Budget statement—and you have heard
some of the assessments about the perhaps limited nature of the
work that could be done—have you made your own assessment
of the impact likely from those two schemes that were announced?
Mr Chadwick: I think we were pleased
to see the amount of funding available for Warm Front in the short
term, somewhat increased if anything, but we are rather concerned
that within two or three years it will be down to quite a low
amount again, which probably will not be sufficient. The Campaign
would like to see a substantial increase in the amount of money
available to the Warm Front programme. We would like to see an
end to people struggling to pay excesses and dropping out of the
scheme because they just cannot find the money to pay and disappearing.
Q70 Chairman: What is your definition
of "substantial"?
Mr Chadwick: I think the Campaign
would probably like to see the budget doubled.
Q71 David Lepper: Mr Campbell, do
you have a view?
Mr Campbell: I just want to say
that we were not convinced by the pious hope that these additional
charges would not be passed on to domestic energy consumers because
why would they not be if the opportunity exists? In terms of the
amount of money that is available, it is always gratifying for
there to be significant additional funding for energy efficiency
works, and we certainly endorse the area-based domestic energy
efficiency programmes. It seems to us to be absolutely crazy to
create a programme where individuals make individual applications
to an agency which then scrutinises this individual application
and eventually implements the improvement works on an individual
basis. It seems that a community-based and area-based approach
is so much more coherent and so much more effective.
Q72 Paddy Tipping: Should that community-based
approach be based on local authorities? Should they be the drivers?
Mr Campbell: I think there may
be a number of possible variants on that particular theme but
it also seems absolutely unavoidable that local authorities are
a key partner.
Q73 Paddy Tipping: What is your view,
Mr Chadwick?
Mr Chadwick: I think we take the
same line that local authorities should be very well in touch
with the needs of their local communities. We see quite a large
role for the home improvement agencies allied to local authorities.
We would like to see a greater degree of flexibility in measures
offered to clients. Particularly speaking from my own agency as
well as the Campaign, I think that flexibility of support for
some of the most disadvantaged householders would be a real advantage
as would the ability to respond extremely quickly. It is no good
saying to someone who has just lost their heating and hot water,
with a husband who is terminally ill and wondering how the carers
are going to bathe him, that if they apply to Warm Front they
might have a central heating system in several months. A scheme
that gets that kind of flexibility, the ability to respond very
quickly into it, and takes account of the different costs of measures
and the different natures of different communities has to be local
authority-led, probably monitored as part of a national scheme,
and not giving too great a freedom to local authorities but asking
them if they would like to implement a scheme in a more flexible
way. The home improvement agencies, on the whole, do seem to have
proved themselves capable of offering a flexible approach that
cares for clients and gives good value for money.
Q74 Lynne Jones: Am I correct in
interpreting your view that rather than a CERT-type scheme you
would like the energy companies to contribute through some kind
of taxation, perhaps initially through a windfall tax and, if
so, how would you ensure that that was not simply passed on to
consumers and perhaps also in a regressive way?
Mr Campbell: I did not mean to
be interpreted in that way. I think that energy suppliers' involvement
in the CERT programme is to some extent unhelpful. I think from
NEA's perspective the most rational and the most equitable source
of funding would be from the Exchequer. It would be less regressive
and it would enable the Government to deploy these resources in
a way that was more effective than would be done by energy suppliers
and, of course, people would at least be aware of the fact that
they were investing in these programmes through their taxation.
Whether that would change their attitude to the works I do not
know, but it would at least remove what we think is an unhelpful
anomaly in the way the programme is funded at the moment.
Q75 Lynne Jones: You would agree
that you would do that by doubling the Warm Front programme and
just financing it from the taxpayer, raised somehow through increased
taxation?
Mr Campbell: Well, as I said earlier,
if we were designing a domestic energy efficiency programme, particularly
one that was primarily directed towards fuel-poor households or
vulnerable households, I do not think we would adopt the kind
of structure that Warm Front has. As I say, we would be looking
for an area-based or community-based approach. We would be looking
for something that would achieve economies of scale and we would
be looking for something that was not based on individual applications
made on a fairly ad hoc basis.
Q76 Lynne Jones: But whatever the
scheme was, if it is an area-based scheme, you are talking about
doubling the amount of money paid for by the taxpayer as compared
to what is spent on the Warm Front scheme?
Mr Campbell: It would be considerably
more. The current level of funding for the Carbon Emissions Reduction
Target is £2.8 billion over a three-year period. Funding
for Warm Front in the current financial year, which is actually
the highest it has ever been in the history of the programme,
is at £400 million, so CERT is a major programme in terms
of resources.
Q77 Lynne Jones: Moving on to this
idea of a roadmap that we were discussing earlier, how would you
design such a roadmap in terms of the appropriate combination
of income maintenance through, for example, Winter Fuel Allowances
and targeting those to those people suffering most from fuel poverty
and money spent on the energy efficiency measures? Have you any
thoughts on how you would move in the direction towards eliminating
fuel poverty in line with the Government's existing targets?
Mr Chadwick: I think with Winter
Fuel Payments we recognise that the targeting is quite poor at
the moment. We would like to see it extended certainly to people
who would get Cold Weather Payments at the moment, so that limited
group, and perhaps to people with disabilities and long-term illnesses
as well as to the current group who are eligible. We also recognise
that it would indeed be a very courageous government that took
the Winter Fuel Payment away, say, from higher rate taxpayers.
Whilst we think that would be a good thing to do, we recognise
how difficult it would be as well.
Q78 Lynne Jones: So you just pour
lots of extra money in to extend the scheme and keep it as it
is meanwhile; is that really practicable?
Mr Chadwick: I think there are
some very, very difficult decisions to take on this.
Q79 Lynne Jones: What about the idea
that if you concentrate on energy efficiency you could over time
perhaps spend less on income support?
Mr Chadwick: I think that is a
possibility. Although we have not done research into this, and
I am certainly not on top of how this might work, where I came
from originally saying that an area-based approach would pull
all sorts of different agencies together, I think you might find
that there are certainly economies and useful outcomes from combining
the interventions of several different agencies. If in an area-based
approach one person is going to go across the threshold, to give
good energy advice, to make an assessment, to do a technical survey
for what measures might be installed, that person can go on to
have health outcomes, safety outcomes, housing outcomes that will
pull together budgets from completely different sections and different
funding streams. However, I have to say that we have not researched
that and I certainly have not.
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