Mrs Anne Main (St Albans) (Con):
Will the Minister outline whether people in receipt of the higher disability living allowance, who often have impaired mobility,
will be included in the super-priority group that he has just mentioned, as they often have a greater need of heating?
Gregory Barker: I am very happy to confirm that for my hon. Friend, who takes a keen interest in these matters. I can also confirm, in response to the question that I was asked earlier about children, that we will focus on those in receipt of child tax credits whose income is less than £16,190.
Mark Durkan (Foyle) (SDLP): Given the importance that the Minister rightly attaches to fuel poverty and the categories that he has said should be prioritised, does he believe that 15% will be adequate? If, in the context of spending pressures, the budget for the overall programme is cut, will he enhance their prioritisation by going above 15% of his residual budget?
Gregory Barker: Of course, CERT is an obligation on the fuel companies and is not part of the Treasury tax and spending regime as such. It will not be included in the comprehensive spending review. I share the hon. Gentleman's concerns, given that we want to focus on the fuel-poor and that 15% seems a relatively limited amount of money. That is why, as I am going to say-he is pre-empting my speech-when we come to consider the long-term basis for the right form of supplier obligation when CERT ends at the end of 2012, we will need to ensure that it is effectively focused on the most vulnerable households and on the fuel-poor. That will be the key consideration when we are looking to frame a new and appropriate supplier obligation.
As I have said, the green deal is a real game changer. It takes policy out of Whitehall and on to the high street. The green deal is a dramatic change from the status quo. The green deal, we believe, will fundamentally alter the scale of delivery. In terms of scale, to put it in context, the green deal is even more ambitious than Mrs Thatcher's sale of council houses in the 1980s. Whereas that transformed the lives of about 2 million families, the green deal has the potential to touch more than 14 million homes around the country. Now, there can be no one-size-fits-all model. Our green deal legislation must promote the emergence of a new and dynamic market, working for the incredibly diverse mix of homes in the UK. There must be greater consumer choice, but with a recognition of the need for fairness and, in particular, of the urgent and pressing challenges of fuel poverty.
The green deal will, we believe, unlock billions in new private capital to support energy efficiency, but that will not work effectively without the engagement and support of local communities. Local communities have a key role in driving this ambitious change. We have seen that in Kirklees, where community engagement has been vital for a universal take-up.
Caroline Lucas (Brighton, Pavilion) (Green):
The Kirklees example is an excellent one, and Green councillors have been instrumental in that. They were rolling out free insulation-that was the difference; it was free. Where does the hon. Gentleman think that the money will come from for the Government to be able to roll out such a scheme? Does he agree that we ought to be considering mechanisms such as levying a windfall tax
on the energy companies, given that they will be getting windfall profits from their involvement in the emissions trading scheme-at least until 2013? Should we not be using money like that to enable such a scheme to be rolled out to everybody rather than depending on people in poor households having to take out what looks like a loan?
Gregory Barker: First, I welcome the hon. Lady to the debate. I am sure that she will be a key-and welcome-feature of such debates for the rest of the Parliament. Of course, CERT is already a levy on the energy companies and we have a clear idea of where the money is coming from. She mentions that in Kirklees the scheme is free, and that is an important point. We simply cannot afford to give free insulation to the whole country, even though it worked extremely well in Kirklees. However, through legislation and opening up new markets with new regulation, we can ensure that there is no cost up front to every single householder. Unlike other pay-as-you-save schemes that were trialled by the former Government, there will be no reference to the credit score of the household. It will not be a personal loan, a green mortgage or a charge on the property.
What will happen is that the right interventions for that particular property will be delivered and the costs of those interventions will be rolled up in their entirety and repaid through the energy bill for that property over 25 years. If that owner moves away, the cost will simply transfer to the energy bill of the next occupant. If the occupant changes energy company, the cost will simply transfer to the new energy company. We will make sure, through legislation, that it is impossible for a new energy provider to come in and provide energy without taking on the costs associated with the green deal finance. There is a real golden rule.
We cannot guarantee that this will be the case in all instances, because behaviour change is also relevant, but the guiding principle is that the savings in every household that receives such interventions on the pay-as-you-save model must always be greater than the financing costs. The householder, be they in rented or private accommodation, should see not only an increase in the insulation in their home, a reduction in their carbon emissions and an increase in warmth and quality of life for them and their family, but-and this is an important point-a reduction in their total energy bill. That needs to be put clearly and fairly on the bill. We must scotch the idea that the green deal is a loan, a mortgage or a charge, because it is not, and it is really important, in order to get consumer confidence, that we communicate that message.
Mark Tami: I thank the Minister for giving way. I hear what he says, but is not the danger, as the hon. Member for Brighton, Pavilion (Caroline Lucas) has said, that this will be seen as a loan? Will the most vulnerable people, in particular, who find themselves indebted from a whole range of loans, not see it at as one more loan and choose not to take it?
Gregory Barker: No; I hope that by the time we have finished explaining it properly and getting over this new paradigm, it will not be seen as a loan because it is not a loan. I hope that the hon. Gentleman-and, indeed, all Members-will join me in explaining that to our constituents. This is a really fundamental point, because he is absolutely right that if people perceive it as a loan, which it is not, there will be a reluctance to take it up, particularly in the current environment. There is another element. We accept that for the poorest in society, who cannot make the savings because they do not have the cash to heat their homes in the first place, there will be a need for direct subsidy or intervention. It is on those people and the hard-to-treat homes that we want to focus the ongoing obligation on the energy suppliers.
Barry Gardiner: The final point that the Minister made is particularly important, but let me go back to the main point about the up-front funding costs of installing the energy-efficiency measures. Will he confirm that although those costs will be met through the energy companies, the Government will none the less have to guarantee those costs? Will he confirm that the cost of that guarantee to the public finances could be in the region of £162 billion if every family in the country took up the Prime Minister's offer of the £6,500 limit?
Gregory Barker: I am happy to reassure the hon. Gentleman that no such guarantee is involved or required. I have had extensive meetings not only with the chief executives of energy companies, but with very senior members of the banking community, active participants in the capital markets and retailers such as Marks and Spencer, B&Q, which has been extremely supportive, and others, including installers. Across the industry-in financing, instalment and retail-there is universal acceptance of this model and there will be innovation in the capital markets. Some companies will choose to take the charge on to their balance sheets, but others will choose to participate in partnership with a financing company. I think there will be a real appetite among UK institutions-this is the game-changing element-to purchase what will in effect be a form of bond with a 25-year life. I think they will be securitised together and parcelled up, and will then make attractive investments for UK pension funds, which currently suffer from a relatively limited choice of secure, long-term investments from which to fund their annuities. I can guarantee for the hon. Gentleman that, just as the green deal is not a personal loan, mortgage or charge, nor will it sit on the Government balance sheet or require a Government guarantee.
To make sure that the customer makes a net profit out of green deal investment, the Minister will presumably have to categorise what will be admissible for green deal insulations. If he categorises any form of microgeneration as admissible, as increasingly it is under Warm Front, he will have to make those calculations in
the green deal programme in respect of any incentives that might be given for the use of that heat, in particular for insulation such as solar-thermal. Has he therefore excluded microgeneration from the green deal programme? If so, does that mean that the net amount per household that he would imagine being used with the green deal is much lower than the £6,500 suggested prior to the election?
Gregory Barker: It has never been the intention for the green deal to encompass, in its purest form, microgeneration, for which there is the separate support mechanism of feed-in tariffs. We will look closely at those tariffs to ensure that they are appropriate. We want to drive a far greater sense of ambition around microgeneration than was anticipated in the Energy Act 2010, which was passed in the previous Parliament. We are keen and ambitious for microgeneration, but I do not want it to be confused with the green deal, which is about energy efficiency, so it will not be included in that. However, we hope that providers that insulate homes under the financing of the green deal will, as I have outlined, take that opportunity to offer packages for appropriate microgeneration that also might not require any up-front payment because they are supported by a feed-in tariff.
It is important to stress the priority of energy efficiency over microgeneration, because there is no real point in adding microgeneration systems to energy-inefficient homes, but there is a great deal of sense in adding them at the same time as increasing energy efficiency. Of course, that would also require a smart meter. I hope that this package of measures will be available under the green deal umbrella, but the green deal financing we have been discussing and the £6,500 are for energy-efficiency measures. There is nothing magic about the £6,500 figure, but we had to come up with a figure and there has to be a cut-off point. We reached the figure with the help of BRE, but we might consider increasing it when proposed legislation comes before the House if that proves sensible. However, £6,500 is what we are committed to now. We hope that the game-changing nature of the new deal, the involvement of new players and the creation of new markets and financing tools will create a host of opportunities as well as driving real behaviour change.
Mr MacNeil: I am listening quite closely to what the Minister says about insulation, carbon footprints and new financing. Is he saying that when it comes to the householder paying, they will not be facing any higher than average bills in any particular year than they would have faced had they not entered the green deal? It is quite important that people fully understand. Is the Minister saying that bills should go down and that householders should not experience any greater costs than they had prior to entering the green deal?
That is what I am saying, with the caveat that there are two big variables, the first of which is behaviour change. If someone decides, in their newly insulated home, to turn up the dial and hoover in the nude, that will affect the energy bill. Likewise, if there is a spike in oil prices or a surge in gas or electricity prices, that will affect bills. On an equalised basis, assuming there is no major behaviour change, the assumption
in the model we are working on will be that the financing costs will always be less than the overall costs of installation.
Our ambition goes way beyond just household energy efficiency. Households, businesses, industry and the public sector all need to pull together to achieve the change that we need. For businesses, energy efficiency can make sense provided that they are not constrained by unnecessary bureaucracy. The green deal will apply to businesses too, and especially to small and medium-sized enterprises. It has the potential to help many companies improve not only their green credentials but their bank balances and their overall competitiveness.
I want our reforms to take energy efficiency away from the corporate social responsibility managers and plant it firmly on the desk of Britain's finance controllers. Pioneers in this area are already demonstrating that energy efficiency makes real sense for business. To pick just one example, Marks and Spencer made a saving of £50 million last year alone through energy-efficiency measures. It is just one of thousands of progressive British businesses that realise that energy efficiency has a direct impact on profitability.
Marks and Spencer launched Plan A in January 2007, in which it set out 100 commitments to achieve in five years and the aim of improving fuel efficiency by more than 20%. Critical to Plan A has been genuine and consistent leadership from the very top of the organisation. Providing leadership from Government Departments is a responsibility that we cannot shirk, and that is why the new Prime Minister has committed the coalition to cutting emissions from central Government Departments by 10% in just 12 months. I am pleased to inform the House that work is well under way, but the 10% cut in Whitehall is just the starting point. We are engaged in a major, long-term drive to reduce emissions and save energy costs right across the wider public sector, which alone accounts for 3% of total UK carbon emissions.
The public can watch our progress: all Government Departments are now committed to publishing their energy use online and in real time. Seventeen Departments will publish energy consumption data for their headquarters buildings by the end of July, following the first meeting of the new cross-departmental energy committee. However, I am pleased to say that the Department of Energy and Climate Change, the Home Office and the Ministry of Justice have already made their energy-use information available online and in real time. We have also asked the private sector to join Ministers in this cross-cutting group, so that we can hold Departments to account and ensure that we learn the very best practice from business. This Government are determined to get our house in shape in short order, and we are already delivering clearer leadership, greater transparency and real change.
Caroline Lucas: I am grateful to the Minister for his support of the 10:10 campaign, which aims for 10% cuts in 2010. However, he will know that the campaign will not finish at the end of 2010 and that, if we are serious about tackling climate change, we need 10% cuts year on year thereafter. Can he make any statement now about what will happen at the end of 2010?
The hon. Lady is absolutely right. The important thing about our 10% cut is that it is a commitment made by the Prime Minister and it is being driven from the very top in government. She is absolutely
right that 10% in one year is simply not enough, but it will be a terrific shock to the system in Whitehall and a great start. In the committee of which I am a member, and which is chaired by my right hon. Friend the Secretary of State, I have been very clear that it is only a starting point.
Achieving such reductions will get progressively more difficult, because behaviour change and the simple interventions that can be made at first cannot be repeated once they have been done. The task will require investment, but we are confident that most of that investment will pay for itself. The new models of investment-involving the energy services companies and the private sector, as well as enlightened and progressive facilities management contracts-mean that the cost of the infrastructure changes that will be needed will not necessarily fall on the public purse.
We are pushing very hard to draw in expertise from the private sector, and I am glad to say that that is largely being provided on a pro bono basis. We want to ensure that the Government, instead of being a national embarrassment, become a showcase for the best in British energy conservation. It is not at all impossible that, if we attach renewable energy sources to our estate, the public sector could one day become a net exporter of energy. Those are lofty ambitions and strategies but we will not superimpose arbitrary targets on them. There have been too many targets cluttering the landscape in the past. We know what we have to do, and the best thing that we can do is to get on and do it.
The potential benefits of energy efficiency are absolutely clear. This coalition Government are committed to making the UK a leader in energy efficiency, and to doing so with a completely new level of ambition and at a scale never before attempted. We are radically improving and refocusing existing policy measures, and we plan to bring forward completely new measures to deliver a real step change in ambition and delivery across both households and the business sector.
However, I would say this to the Opposition: there is much that unites us on this whole agenda, and we are building on the work begun by the right hon. Member for Lewisham, Deptford (Joan Ruddock) and her Front-Bench colleague, the hon. Member for Islington South and Finsbury (Emily Thornberry). The Liberal Democrats and the Conservatives supported the Climate Change Act 2008 in a constructive spirit, and I hope that we can forge a new consensus across the new House of Commons on energy efficiency and tackling fuel poverty. We should send a strong and united message to business and consumers alike that the time for action is now, and that we are united in laying out a new and clear framework for the long term.
I am glad to report that the new coalition has hit the ground running. We have a strong and ambitious green agenda, with energy efficiency at its very heart. The green deal will be at the centre of this Session's flagship Energy Bill, along with other measures to drive low-carbon transformation and build energy security. It is clear from the Chancellor's Budget, which committed to introducing a floor price for carbon, and yesterday's publication of the work of the green investment bank commission, that we are making real progress already. There is a great deal more to do, and time for action is short, but I know that, by focusing on energy efficiency at the very outset, we are starting in the right place.