Energy Bill

Federation of Master Builders (EN 09)

Written Evidence to the House of Commons Public Bill Committee on the Energy Bill


Executive Summary and Recommendations

1. The Federation of Master Builders (FMB) strongly supports the intentions of Part 1 of the Energy Bill on Energy Efficiency, but believes the Bill needs to be strengthened in order for these intentions to be realised.

2. There are around 26 million homes in Britain over half of which were built before the 1960s; 5 million are Victorian terraced properties. Government estimates show that one third of all homes did not meet a basic standard of ‘decency’ in 2007, which means they suffered from poor internal amenities and/or damp and/or lack of thermal comfort and/or disrepair.

3. Energy savings must be made from the UK's building stock so that climate change targets are not missed. 85% of all existing homes will still be standing in 2050

4. The Energy Bill should be amended to ensure that Part 1 is clearly linked to the achievement of carbon reduction and fuel poverty targets, which have been determined by existing legislation.

5. The Bill should require the Secretary of State to prepare and publish an energy efficiency strategy for meeting these targets, and specify a means for reporting to the House on progress towards achieving such targets.

6. The Energy Bill must ensure greater market certainty so that businesses have the confidence to invest.

7. The FMB recommends that members of the Public Bill Committee introduce the ‘Warm Homes Amendment’, which is supported by over 70 organisations (see Annex A).

8. The Government must act on the ‘Low Carbon Construction’ Innovation & Growth Team (IGT) report, published in November 2010, and introduce a suite of measures beyond the Green Deal finance, including fiscal incentives, to ensure the Green Deal is a success.

9. The Green Investment Bank must support Green Deal by making the finance offer more attractive to householders and more freely available from a wider range of providers.

10. Consideration should be given to the creation of an independent third party body that would handle the financial arrangements on behalf of small firms wishing to undertake Green Deal financed works.

11. The Energy Bill should bring forward minimum standards for the private rented sector so they come into force in 2016 in line with the official fuel poverty target. The minimum standards should also be raised over time.

Introduction

12. The Federation of Master Builders (FMB) is the largest trade association in the UK building indus try, representing nearly 10,500 building companies. Established in 1941 to protect the interests of small and medium-sized building firms, the FMB is independent and non-profit-making, lobbying continuously for members’ interests at both national and local levels.

13. The FMB is a source of knowledge, professional advice and support for its members, providing a range of modern and relevant business building services to save them time and money. The FMB also offers advice to consumers via its ‘find a builder’ and ‘check a builder’ websites.

14. There are around 26 million homes in Britain over half of which were built before the 1960s; 5 million are Victorian terraced properties. Government estimates show that one third of all homes did not meet a basic standard of ‘decency’ in 2007, which means they suffered from poor internal amenities and/or damp and/or lack of thermal comfort and/or disrepair.

15. The Energy Bill provides an opportunity to deliver significant carbon savings from the domestic sector. Britain’s 26 million homes contribute 27% of the UK's total carbon emissions and 85% of these properties will still be standing in 2050 when the UK is under a legal obligation to have reduced carbon emissions by 80%.

16. It is essential, therefore, to focus on the challenge of retrofitting existing homes and the need to introduce an ambitious programme to improve the energy efficiency of our existing housing stock in line with the UK’s carbon targets.

17. The Minister of State for Energy and Climate Change, Gregory Barker MP, has said he would like to see 14 million homes transformed under the Green Deal by 2020. This would require work to be completed at the rate of 1.75m homes per annum; this is around 33,000 per week or nearly 4,800 per day.


Part 1, Energy Efficiency

Meeting targets

18. To facilitate the transition to a low carbon economy, the Energy Bill should establish the link between the Government’s energy efficiency programme for the built environment and the overarching strategy for meeting the legally binding emissions reduction targets determined by the Climate Change Act 2008.

19. Once the Green Deal and the Energy Company Obligation provisions have been tied to the requirements of the Climate Change Act the Government must be required to prepare and publish a comprehensive strategy for meeting these targets by retrofitting homes and businesses.

20. Without a comprehensive energy efficiency strategy the chances of achieving our carbon objectives are greatly reduced. Without this robust policy framework businesses, big and small, will lack the confidence required to invest. Currently businesses that are essential to the delivery of the energy efficiency programme are struggling to grasp the benefits of investing in the Green Deal. Research by the CBI suggests that the Government still has much to do to convince businesses otherwise.

21. This commercial uncertainty is made evident in the results of a recent independent survey of FMB members. Only just over a fifth of respondents thought that clients were likely to take advantage of the Green Deal when it launches in autumn 2012. These are the views of small building firms that are in contact with homeowners and landlords on a daily basis.

22. The Committee must find a robust solution to the need to accommodate for these changes to the Bill. Therefore, the FMB recommends that members of the Public Bill Committee introduce the Warm Homes Amendment, which is supported by over 70 organisations (see Annex A).


Fiscal Incentives

23. The success of the Green Deal is dependent on the level of consumer interest. The FMB has long advocated the need to cut VAT on domestic repair, maintenance and improvement work as a reduced rate would offer a plethora of benefits. A reduction in the rate of VAT to 5% on Green Deal upgrade work should be used to incentivise the transition to a low carbon built environment. This offers the simplest and most cost effective means to encourage owners to carry out energy efficiency improvements on their properties.

24. The ‘Low Carbon Construction’ Innovation & Growth Team (IGT) report, published in November 2010, recommended the introduction of ‘a suite of measures beyond the Green Deal finance, including fiscal incentives, to ensure the Green Deal is a success.’

25. In the March Budget, the Chancellor of the Exchequer said: "Our Green Deal to reduce the energy bills for homes will be introduced next year, and I now confirm that we will act to incentivise and encourage its take up." The Committee must not miss the opportunity to press the Government on their plans to incentivise Green Deal take up.

26. According to independent research commissioned by the FMB, 70% of small building firms believe a cut in VAT to 5% would produce the biggest increase in consumer interest in energy efficiency upgrades. Over a quarter (27%) felt a reduction in council tax would be the biggest incentive for consumers.

SME access to the Green Deal

27. The Committee should press the Government on recent announcements about linking the Green Investment Bank to the Green Deal as it has the potential to lower the cost of finance and to create a greater choice of Green Deal providers and suppliers.

28. This is particularly important as the involvement of small and medium sized contractors will be essential to the successful delivery of an ambitious programme of energy efficiency retrofits. Currently there is no mechanism for enabling them to participate in the delivery of Green Deal financed retrofits. This is a problem that the Green Investment bank could resolve.

29. Failure to resolve the SME access issue would result in the potential loss of most of the 192,136 private contractors in the construction industry who employ fewer than 60 people and who could otherwise be part of the Green Deal’s delivery mechanism. Most of these businesses are in contact with homeowners and landlords on a daily basis, and where work is already being done to a property it would be extremely unwise to miss the opportunity to make the Green Deal available.

30. A mechanism needs to be found that allows small firms to access Green Deal finance in order to access the market as Green Deal providers. Government needs to facilitate the forming of relationships between small Green Deal installers and Green Deal finance providers. This could either be done individually or as small firms acting as a consortium. Alternatively, consideration should be given to the creation of an independent third party body that would handle the financial arrangements and act as a conduit between Green Deal recipient and the Green Deal installer.

Minimum standards

31. The recent amendments that deal with minimum standards in the private rented sector are a welcome step in the right direction. However, the Bill should be amended further in order to bring forward minimum standards in line with the 2016 target for the elimination of fuel poverty. It is well know that the private rented sector offers some of the poorest conditions for occupants. The sector also includes some of the country’s oldest housing stock. According to the 2007 English House Condition Survey 41% of private rented homes were built before 1919 in comparison to 22% of owner occupied homes. It is clear, therefore, that a combination of carrot and stick methods must be used to bring about the much needed improvements in this sector without delay.

June 2011

Appendix A

UK ENERGY BILL 2010

Warm Homes Amendment

Page 1 Line 3 under "Part 1 Energy Efficiency" insert new clauses:

Clause 1 Purpose of Part 1

(1) The principal purpose of this Part 1 is to deliver energy savings from the building stock which will make commensurate contributions to -

(a) the achievement of the target contained in Section 1(1) of the Climate Change Act 2008 and the carbon budget set for each budgetary period under Part 1 of the Climate Change Act 2008; and

(b) the elimination of fuel poverty by the target date required by Section 2(2)(d) of the Warm Homes and Energy Conservation Act 2000

(2) In performing functions under this Part the Secretary of State will have regard to-

(a) the principal purpose set out in subsection (1) above, and

(b) the recommendations from time to time of the Committee on Climate Change where these are adopted by the Secretary of State.

Clause 2 Duty of the Secretary of State to improve energy efficiency

(1) The Secretary of State must prepare and publish a plan for achieving the principal purpose set out in Section 1(1) in England

(2) The plan must establish specific aims and describe the proposed means of achieving them together with methods for reporting on progress towards meeting them.

(3) In preparing the plan, the Secretary of State must take account of any plans produced under section 60(2) of the Climate Change (Scotland) Act 2009

(4) Where an aim is designated under this section, the Secretary of State must take all reasonable steps to achieve the aim

(5) The plan prepared under subsection (1) must be published no later than 12 months after the day on which this section comes into force.

(6) The Secretary of State must, as soon as reasonably practicable after publishing a plan under this section lay it before Parliament.

(7) The Secretary of State must, within 1 year of each order setting a carbon budget under section 8(1) of the Climate Change Act 2008, review the plan prepared and published under this section.

(8) Where, following a review under subsection (7), the Secretary of State varies the plan, he must, as soon as reasonably practicable after so doing, publish the plan as so varied.

Clause 3 Annual report on progress

(1) Section 1 of the Sustainable Energy Act 2003 (annual reports towards sustainable energy aims) is amended as follows

(2) In subsection (1) (sustainable energy report) after paragraph (e) insert "and (f) achieving the aims established by the plans produced under section 2 of the Energy Act 2011 and section 60(2) of the Climate Change (Scotland) Act 2009"

Prepared 8th June 2011