Draft Warm Home Discount
Regulations 2011

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.