The
Committee consisted of the following
Members:
Chair:
Andrew
Rosindell
†
Anderson,
Mr David (Blaydon)
(Lab)
†
Berger,
Luciana (Liverpool, Wavertree)
(Lab/Co-op)
Blunkett,
Mr David (Sheffield, Brightside and Hillsborough)
(Lab)
†
Bottomley,
Sir Peter (Worthing West)
(Con)
Coffey,
Ann (Stockport)
(Lab)
†
Coffey,
Dr Thérèse (Suffolk Coastal)
(Con)
†
Colvile,
Oliver (Plymouth, Sutton and Devonport)
(Con)
Donaldson,
Mr Jeffrey M. (Lagan Valley)
(DUP)
†
Hinds,
Damian (East Hampshire)
(Con)
Jackson,
Glenda (Hampstead and Kilburn)
(Lab)
James,
Mrs Siân C. (Swansea East)
(Lab)
†
Lewis,
Brandon (Great Yarmouth)
(Con)
McDonnell,
John (Hayes and Harlington)
(Lab)
†
Menzies,
Mark (Fylde) (Con)
†
Vara,
Mr Shailesh (North West Cambridgeshire)
(Con)
†
Williams,
Roger (Brecon and Radnorshire)
(LD)
†
Williamson,
Gavin (South Staffordshire)
(Con)
†
Wright,
Simon (Norwich South)
(LD)
Eliot Barrass, Committee
Clerk
† attended the
Committee
The following also attended,
pursuant to Standing Order No.
118(2):
†Blackwood,
Nicola (Oxford West and Abingdon)
(Con)
Third
Delegated Legislation
Committee
Monday 28
March
2011
[Andrew
Rosindell
in the
Chair]
Draft
Warm Home Discount Regulations
2011
4.30
pm
Mr
Shailesh Vara (North West Cambridgeshire) (Con):
I beg to
move,
That
the Committee has considered the draft Warm Home Discount Regulations
2011.
It
is a pleasure to serve under your chairmanship, Mr
Rosindell. As I have already indicated to you and to the shadow
Minister, unfortunately the Minister of State, Department of Energy and
Climate Change, my hon. Friend the Member for Wealden (Charles Hendry)
is unable to be here today, so I will speak on behalf of Her
Majesty’s
Government.
The
Minister of State, Department of Energy and Climate Change, my hon.
Friend the Member for Bexhill and Battle (Gregory Barker) laid the
regulations before the House on 28 February. The Committee will have
seen from the documents already available to it that the instrument
will enable the warm home discount scheme to take effect. The scheme is
designed to provide financial assistance to more of the most vulnerable
and low-income energy consumers. A voluntary agreement has been in
place for the past three years between the Government and the energy
companies to provide financial assistance to vulnerable consumers. That
agreement ends this
month.
The
warm home discount scheme builds on the success of the voluntary
agreement, and will allow the Government to provide stronger direction
on targeting support to the people who most need it. Through the
scheme, participating energy suppliers will provide support worth up to
£1.1 billion over the next four years. The scheme is indeed
vital to those who will benefit. We are in challenging times in
relation to our future energy challenges—and to our economy. It
is clear that we need a new approach to those challenges, but we must
also create a fairer, balanced and stronger deal for
consumers.
For
more than five years, the number of households in fuel poverty has
risen, with an estimated 4 million in England alone. I make it clear
that the Government are committed to tackling fuel poverty and to
supporting low-income and vulnerable consumers to heat their homes at
an affordable cost. That is why I am asking the Committee to consider
the
regulations.
We
must also ensure that the resources are used effectively to tackle
properly the problems underlying fuel poverty. On 14 March, the
Secretary of State announced that an independent review of the fuel
poverty target, including its definition, will be undertaken this year
by Professor John Hills of the London School of Economics. I stress to
the Committee that the warm home discount is not the only way in which
the Department of Energy and Climate Change is dealing with fuel
poverty; it also has other policies.
Energy
efficiency, the forgotten relative of the energy world, has a huge role
to play. Reducing demand not only reduces our emissions and helps our
security of supply, but is cheaper, particularly for the consumer. My
noble Friend Lord Marland has just taken the Energy Bill, in which the
green deal features as the Department’s flagship policy, through
the House of Lords. The green deal is unique in its potential to
improve the energy efficiency of the country’s homes across the
board, unlocking significant investment in the household sector alone.
Up to 14 million homes could benefit from the green
deal.
Our
housing stock is horribly energy inefficient. The average British home
uses more energy than one in Sweden, a country partly inside the Arctic
circle. The domestic green deal policy is an opportunity for
householders to make up-front improvements to the energy efficiency of
their homes, repaying over time through savings on their energy bills.
It will help protect people against price rises through greater energy
efficiency savings, with special support being given to the most
vulnerable.
Our
energy company obligation—the ECO—will run alongside the
green deal. It will provide assistance for fuel-poor and low-income
households, as well as those in hard-to-heat homes, who will need extra
help because energy savings alone are not enough. We intend to provide
that help by refocusing the obligations on energy companies, and to
assist vulnerable households who currently under-heat their
homes.
We
have already announced that for the next two years, until the energy
company obligation is introduced, we will fund a more targeted Warm
Front programme in England. I am pleased to announce that from April
this year, Warm Front will reopen to new applications, with eligibility
criteria that will ensure that valuable support distributed through the
scheme is targeted at those who are at risk of fuel
poverty.
Upgrading
the housing stock will not happen overnight. In the interim, vulnerable
and low-income households will continue to face problems paying for the
energy that they need to heat their homes. The warm home discount
scheme will address exactly that, by requiring energy suppliers to
provide more than £1 billion of support to low-income and
vulnerable consumers. We estimate that about 2 million households a
year will benefit.
Through the
warm home discount scheme a core group of older, poorer pensioners will
receive support. That group has a higher risk of fuel poverty, because
more than half of all fuel-poor households contain someone who is over
the age of 60. More than 80% of all fuel-poor households are in the
lowest three income deciles. We have determined that receipt of the
pension credit guarantee credit, which goes to some of the poorest
pensioners, is one of the best ways to identify the group. The warm
home discount regulations provide for the core group to be found
through data matching and to form the largest part of the scheme over
its four years.
Initiating
this part of the scheme will also depend on the agreement of the House
to further data matching regulations, which we intend to lay shortly
for the House to consider. Those regulations would enable a legal data
sharing gateway so that information could be shared between energy
suppliers and the Government. That would mean that energy
suppliers’ customer records
could be compared with information that is held by the Department for
Work and Pensions on recipients of pension credit. Eligible core group
members will receive a rebate of £120 on electricity bills in
the first year of the scheme, which will rise to £140 by the
final year. The scheme will also require energy suppliers to provide
rebates to a broader group of people who are in, or who are vulnerable
to, fuel poverty. That could include other groups such as those on low
incomes; those with a long-term or terminal illness or disability; or
low-income families.
A
smooth transition from the current voluntary agreement between
Government and energy suppliers to provide support to vulnerable
households through discounted tariffs will be achieved through the
legacy spending element of the scheme. Suppliers will be able to choose
to fund some activities other than the provision of rebates and
tariffs, such as providing energy advice, energy efficiency measures or
debt relief through the industry initiatives section.
Our intention
is that suppliers’ contributions to the policy will be
proportionate to their market share. The Energy Act 2010
provides the Government with the power to set up a reconciliation
mechanism to allow the costs of the scheme to be distributed
fairly between energy suppliers. This ensures that no supplier is
disadvantaged by having a higher number of core group households
eligible for support. Further regulations to allow this reconciliation
mechanism will be laid if the House supports these scheme regulations.
I commend the regulations to the House.
4.38
pm
Luciana
Berger (Liverpool, Wavertree) (Lab/Co-op):
It is a
pleasure to serve under your chairmanship, Mr Rosindell. I
want to start by passing on my best wishes to the Minister of State,
Department of Energy and Climate Change, the hon. Member for Wealden,
and his family and thanking the hon. Member for North West
Cambridgeshire for taking his place today. I appreciate that as the
Minister is not here I may not get answers to all my questions, and I
would be grateful if they could be passed on to the Minister so that he
can reply in writing if necessary.
The
Opposition are broadly in agreement with the principles behind the
order. It is right that we build on the voluntary social tariff
agreements that were introduced by the previous Labour Government. In
its most recent report, the Department of Energy and Climate Change
fuel poverty advisory group stated that it
“believes that
the voluntary agreement between gas and electricity suppliers and the
Government to provide social price support for the fuel poor has been a
success”.
The
Government’s response to the consultation on the warm home
discount recognised that, noting that between 2008 and 2011 a combined
sum of £375 million was spent by energy companies in providing
assistance to vulnerable consumers under the agreement.
When
Labour was in government, we recognised that there was more to be done,
which is why we legislated to make the support from energy suppliers
compulsory. When he was Secretary of State, the Leader of the
Opposition, my right hon. Friend the Member for Doncaster North (Edward
Miliband),
said:
“I
propose that when the voluntary agreement ends in 2011, discounts for
the most vulnerable will continue not through a voluntary arrangement
but through legislation for compulsory
support from the energy companies. We will legislate to increase the
amount spent, and we intend to target new resources at the most
vulnerable consumers”.—[
Official Report, 15 July
2009; Vol. 496, c.
295.]
We
therefore support the measures to use data matching to find those in
the core group who might be eligible for a rebate. We also favour
support being extended, through the broader group, to groups in
addition to older, poorer pensioners. It is sensible to have consistent
and clear language in consumers’ bills to describe rebates.
Legacy spending should help to create a smooth transition from the
voluntary agreement. We also welcome the fact that smaller suppliers
will be able to participate on a voluntary
basis.
There
is much with which we agree, but there are a few issues that I want to
raise with the hon. Member for North West Cambridgeshire. First, on
data sharing, concerns were raised in the DECC consultation on the warm
home discount that not everyone who is entitled to pension credit
receives it. How confident is the hon. Gentleman that all those who
should be covered by the core group will be identified through the data
share process? What restrictions will there be on the use of those data
by energy
companies?
Secondly,
there are concerns about the make-up of the broader group and the
discretion given to energy companies to fund it. Could the hon.
Gentleman assure us that the Government will evaluate how effective the
discretionary nature of the broader group will be and, if necessary,
take steps to expand the core group if households are falling through
the
gap?
Macmillan
Cancer Support also has concerns about how the broader groups will work
for those with terminal illnesses. Its research shows that higher
utility bills are one of the major additional costs that cancer
patients face. One in five people with cancer turn off their heating in
the winter, even though they still need it. Macmillan Cancer Support
also found that the cold has a significant effect on the recovery of
cancer patients. Some 85% of health and social care professionals
believe that the cold affects cancer patients’
recoveries.
Concerns
have been raised that, as there is not the same obligation to fund the
broader group in the same way as the core group, many terminally ill
people will not be effectively covered. I hope that the hon. Gentleman
will reassure us that that will not be the case. Will he explain the
basis for rejecting proposals to include terminally ill people in the
core group, rather than the broader spend, which Macmillan estimates
would cost only 4% of the total scheme
budget?
Third-party
organisations have also raised concerns that they would struggle to act
as referrers, because their current resources are stretched to the
limit. What plans do the Government have to ensure that third-party
organisations are given the support needed to work with energy
companies to identify those people who may be eligible for the warm
home discount?
Thirdly, we
have heard about the proposals for legacy spending, and it is right
that measures are put in place to manage the transition from the
existing social tariffs to the new scheme. National Energy Action,
however, has raised concerns that the legacy spend will not be as
effective at addressing fuel poverty as the current arrangements. The
NEA is very concerned that many of the beneficiaries of the current
voluntary agreements will be on the edge of fuel poverty, or already in
fuel poverty, and may not receive support under the
regulations.
Fourthly, will
the hon. Gentleman pledge today that if these arrangement lead to
significant numbers of households being left without support, the
Government will look again at the scheme and, if necessary, make
changes to address
it?
I
want briefly to mention the Government’s recently announced
independent review of fuel poverty chaired by John Hills, to which the
hon. Gentleman has referred. Concerns have been raised that the Hills
review will be used to amend the definition of fuel poverty to reduce
the fuel poverty figures. I hope that will not be the case. Will the
Government evaluate the warm home discount based on the outcome of the
Hills
report?
Finally,
I want to raise the issue of how the warm home discount will fit with
the other measures that the Government are planning to introduce to
support fuel poor households. Since the Government were elected, there
have been significant changes to fuel poverty funding, which will leave
households struggling to keep warm. In the spending review last year,
the Chancellor announced that the Warm Front scheme will be reduced by
two thirds and will not be replaced by the green deal until 2012. The
hon. Gentleman talked about the ECO, but we have little detail of how
it will work to alleviate fuel poverty when it is introduced alongside
the green deal. Last week’s Budget means that winter fuel
payments will be reduced by up to £100, because the Chancellor
decided not to continue with the supplementary payment.
We agree with
the principles behind the measure, but, taken in isolation, it
represents little more than a sticking plaster approach to tackling
fuel poverty. On its own, it is clearly not the long-term solution.
More needs to be done to improve household energy efficiency and reduce
the cost of energy bills. More worrying, however, is the lack of detail
on the other Government schemes that the warm home discount is intended
to supplement.
With the
reduction in winter fuel allowance, cuts to the Warm Front scheme and
the green deal not set to start until 2012, we are greatly concerned
that there will be a significant gap in support for vulnerable
households this winter. I hope that the hon. Gentleman will pass my
concerns on to the Minister, the hon. Member for Wealden. I hope that
he will ensure that the regulations are only a first step, and that the
estimated 5.5 million households that struggle to keep warm are given
the support that they desperately need.
4.45
pm
Dr
Thérèse Coffey (Suffolk Coastal) (Con):
I
want to ask the Minister a short question. Within the scope of the
regulations, is there help for customers who primarily rely on domestic
heating
oil?
Mr
Vara:
The core group and broader group rebates will be
paid on electricity accounts, which ensures that support can be
provided to vulnerable and low-income households who are off the mains
gas grid.
4.46
pm
Mr
David Anderson (Blaydon) (Lab):
It is a pleasure to serve
under your chairmanship, Mr Rosindell. I join my hon. Friend the Member
for Liverpool, Wavertree in sending my best wishes to the family of the
Minister
of State, Department of Energy and Climate Change, the hon. Member for
Wealden. If the Minister who is here today cannot answer the questions
that I raise, we would like responses to those eventually.
I am the last
person in the world to feel sorry for utility companies, but it is
right and proper that we consider their response to the measures. What
response has there been so far? We obviously welcome the deal, but such
companies might have to provide £1 billion worth of support to
people through the deal. The news in the papers this morning is all
about the plight of the power companies following last week’s
Budget statement. In particular there is concern about potential issues
such as the carbon floor price, and the possibility that the money
raised from the windfall tax on utility companies will be passed
forward on to the power-generating companies. They have said clearly
today that coal-generated electricity in this country might end even
sooner than we thought. If that happens, we will end up either with
blackouts and electricity shortages, or we will have to fill that gap
by investing very rapidly in new output, which will almost certainly be
generated by gas. That will obviously involve a cost to the energy
companies, which, before last Wednesday, they were not expecting. Is it
a question of the right hand of the Treasury and the left hand of the
DECC not working together? Has there been any response to that so
far?
At the bottom
of the debate is a huge unfairness in this country, where some people
are still paying more than others for their power simply because they
are poor. It cannot be beyond the wit of man to work out a system under
which everyone in this country pays for the power they use in exactly
the same way. Nobody should have to pay more because they choose to pay
by a different method. People who have prepayment meters pay up to 25%
more than those who pay by direct debit or other methods. Surely we
should be focusing on that area. In his introduction, the Minister
rightly said that we have not done enough on energy efficiency in this
country. We all need to do more, but we need do it in a much fairer
way, particularly for the poorer people of this
country.
4.49
pm
Roger
Williams (Brecon and Radnorshire) (LD):
Unlike the hon.
Member for Blaydon, I feel very little pity for energy-generating
companies. Indeed, we only have to look at the profits that have been
made by such companies against a background of fuel poverty in many of
our constituents’ homes. I welcome the measure, but who will pay
for it? The hon. Gentleman has said that it may be the
energy-generating companies.
Mr
Anderson:
It will be.
Roger
Williams:
I very much doubt that, because a certain amount
of evidence that was given to Select Committees in the previous
Parliament showed that the people who are paying are the other
consumers. In fact, the energy generating companies and their
shareholders are unaffected by the proposed discounts. That is grossly
wrong. The discounts should be funded by the energy companies’
profits, not by the consumers. I understand that the hon. Gentleman who
will reply to the debate is not a Minister in the Department, but I
would like him to pass on that comment and possibly respond to
it.
The
Chair:
I point out that, for the purposes of this meeting,
Mr Vara is acting as
Minister.
4.50
pm
Sir
Peter Bottomley (Worthing West) (Con):
We now know why
Whips are referred to as Ministers, because they have to fulfil those
responsibilities whether they speak or not. I congratulate my hon.
Friend the Minister on the way he has discharged his duty and, like
others, I send my personal best wishes to our hon. Friend the Member
for Wealden.
May I refer
to the regulations and the explanatory notes? In the introduction on
page 21, it gives an interpretation. I do not expect an answer now, but
I would like the Department to feed in to Government generally that
although we can understand what marriage and civil partnerships mean,
there are households that in all other senses ought to qualify but do
not. For example, if an elderly child—say, aged 60—lives
with a parent who is 85, that is a family relationship just as natural
as people who have chosen each other by choice, whether as civil
partners or as spouses. I also can think of an elderly couple who may
be twins, same sex or not, in their 70s and living together who are not
regarded under the definitions as in the same kind of relationship as
those who have connections of choice, as spouses or civil partners, or
living together as though they are civil partners. If I am wrong, I
would be delighted to hear it. A letter would satisfy me, but I want to
put on the record that that is one of the problems that we face not
only in this measure but in some
others.
I
congratulate those who put together the explanatory memorandum. In many
ways, it is admirable. It points out that the rise in fuel poverty in
the past four years was not a deliberate act of commission or omission
by the previous Government, but a result of the increase in fuel
prices, and a growing number of people have had to spend more than 10%
of their disposable income on fuel. That is one of those things. It may
improve as the price drops, but it is one of those matters of record.
If someone simply says, “Did the number of people who were in
fuel poverty increase in the last four years of the Labour
Government?”, the answer is yes. In practice they did, but it
was not the result of what the Government did; it was the movement of
fuel prices
themselves.
Turning
to page 61 of the explanatory memorandum, in figure A11.1 and on the
following page in table A11.1, there is a summary of equality impact
assessment findings, which I commend to most people at university,
whether they are doing a first or a further degree, which shows a
degree of analysis that most people would not expect Government or
their advisers to be doing. It is worth while, it is important and we
should try to understand it as we consider approving the
regulations.
We
are aware that there have been problems with Warm Front. Each of us in
our constituencies may have had people who have been waiting for up to
10 months for a new boiler. During the freeze that we had a year ago
and the cold period that we had in December, a number of us had to take
action. I want to say to those with whom we engaged that I hope they do
not mind the pressure that Members of Parliament put on them. When
someone is cold and alone, they cannot afford to heat themselves and
they need a new boiler that will cut their fuel bill and increase their
chance of surviving a
cold snap, it is our duty to take that up. I am glad that the Minister
is able to report an extension to the Warm Front scheme and I hope that
many of our constituents will benefit. The climate will benefit as well
by having more fuel-efficient boilers. I congratulate him and our
colleague the hon. Member for Wealden (Charles Hendry) on what they
have done with the support of their
Department.
4.54
pm
Mr
Vara:
I thank the shadow Minister as well as various
colleagues who have spoken: the hon. Member for Brecon and Radnorshire,
my hon. Friend the Member for Worthing West and the hon. Member for
Blaydon. I will endeavour to reply as best I can. To the extent that I
am unable to do so, I am happy to ensure that a written reply comes
either from me or from my hon. Friend the Member for
Wealden.
The
hon. Member for Brecon and Radnorshire asked whether the companies
would be paying the cost. I assure him that we will be requiring
payment from the companies—the suppliers—of
£1.1 billion. The Government in the past have spent a
significant sum of money, but this cost will come from
suppliers.
Roger
Williams:
My point was whether that amount of money will
be generated only by increasing the bills of other consumers, or
whether it will come out of the shareholders’ funds. Increasing
the payment by increasing electricity bills for all customers is not
what was intended by the previous Government and should not be intended
by this
Government.
Mr
Vara:
I very much take on board what the hon. Gentleman
says, and I assure him that we will be monitoring the position
assiduously. We will be having an annual report published by Ofgem to
monitor the
situation.
I
understand the marriage issue—for my hon. Friend the Member for
Worthing West to raise it is valid—but we also have familial
relationships, such as the elderly, twins and so on. If more than one
person is living in a household, a bill payer who satisfies the
eligibility criteria will be entitled to a rebate. For each household,
there will only be one bill to
pay.
In
response to the hon. Member for Blaydon, pricing is a matter for the
regulator, Ofgem, which monitors and keeps under review the variation
in payment methods and costs. I will be happy to write with further
information on Ofgem’s recent reviews. As I said earlier, I am
more than happy to provide additional
information.
This
has been an excellent debate, contributed to by a number of people, for
which I am grateful. The shadow Minister asked how we would identify
the core group. Last year, a pilot scheme—the energy rebate
scheme—had considerable success. We will not be taking anything
for granted, and we will continue to monitor the system so that success
continues to
improve.
As
for restrictions on data use, we hope to have another statutory
instrument finalising the details in Committee in the future. However,
I can assure the shadow Minister that we will be monitoring the
position and, as I said, ensuring that Ofgem publishes an annual report
on the scheme.
The shadow
Minister raised the issue of terminal illnesses. Clearly, there is much
sympathy for the people concerned, and we will ensure that proper
criteria are given to the companies because it is important to target
the vulnerable and needy who most need the assistance. As for third
party organisations, the companies will have £30 million
annually, which they must spend on targeting third party organisations
and pursuing other methods of ensuring that the needy and vulnerable
are targeted, on top of what is proposed in the draft Warm Home
Discount
Regulations.
The
shadow Minister mentioned National Energy Action’s concerns,
which we very much hope will be alleviated by the fact that the energy
suppliers can continue to provide support—discounted tariffs and
so on. A smooth transition from the present voluntary payments to the
new scheme is intended. I emphasise that it will be monitored
regularly.
We
will review whatever Professor Hills has to say, in line with the
existing policy, as and when he produces his final report. It would be
premature to comment now. However, the shadow Minister’s point
is taken on board.
The warm home
discount is in addition to the existing payments. The minimum payment
will be £120, which will be targeted on the needy and
vulnerable.
On
the concern about the interim gap and people falling through the
system, that should not be the case. The matter will take effect later
this year, when winter starts again, so no difficulties are
envisaged.
The
challenges ahead remain, but the glass is definitely half full. We must
rebuild our energy infrastructure and our economy at a time when we
need to, but that means investing in our social economy as well. The
scheme will reach out to those who need assistance, but the facts
remain: millions of households are in fuel poverty, and the Government
are committed to tackling the root causes of fuel poverty. We know that
for such a grave cause we must approach a solution from many angles,
with the green deal and the energy company obligation, as well as the
Warm Home Discount Regulations. I commend the draft
regulations to the
Committee.
Question
put and agreed
to.
Resolved,
That
the Committee has considered the draft Warm Home Discount Regulations
2011.
5.1
pm
Committee
rose.