The Coalition Government welcomes this report of
the Energy and Climate Change Committee and it's useful recommendations
on the subject of fuel poverty.
We are still in the first 100 days of the new Government,
and as the Committee will appreciate, we are still working through
many of the policy issues that have an impact on fuel poverty.
We have responded to all of the recommendations of the Committee
as fully as we are able to at this stage.
A key part of the solution is undoubtedly to address
the thermal efficiency of the housing stock. The Coalition Government
wants every household to have the opportunity to benefit from
better insulated homes which will not only be warmer but in turn
will also help householders save money.
The previous Government made a good start, but if
we are to achieve our ambitious targets to do all that is practicable
to eradicate fuel poverty and reduce our greenhouse gas emissions,
then we have to fundamentally alter the scale of delivery and
that is what the Green Deal will be designed to do, having the
potential to reach over 14 million homes across the country.
In taking this work forward, we are aware that the
answers to the issue of fuel poverty are not always to be found
in the corridors of Whitehall, and we are open to ideas from all
sources as to how we can make progress with tackling the problem
of fuel poverty.
A number of the Committee's recommendations are directed
at policy areas that are the responsibility of the Department
of Work and Pensions, they have been consulted in the preparation
of our response, and the final reply agreed with them.
Fuel Poverty: targets and trends
1. Despite efforts to increase incomes and energy
efficiency, the Government's 2010 target for the eradication of
fuel poverty amongst vulnerable households in England is going
to be missed. Its 2016 target, for the eradication of fuel poverty
amongst all households in England, looks increasingly difficult
to hit. However, we welcome the Government's support for the retention
of this target. (Paragraph 14)
2. We are unconvinced by the Minister's arguments
against the establishment of a road map for tackling fuel poverty.
We accept that, as a result of the complex interaction of incomes,
energy prices and energy efficiency, reducing fuel poverty is
a difficult task; but that simply strengthens the case for a road
map. Greater clarity is needed on: the range of actions necessary
for tackling fuel poverty; how they interact together; who owns
each action; the milestones towards 2016; what is going to happen
if those milestones are not reached; and funding. We accept that
large price increases have made it very difficult to hit the 2010
target, but the absence of a road map towards that target has
been a contributory factor. The Government should not repeat that
mistake with the 2016 target and must produce a road map as soon
as possible. (Paragraph 15)
The statutory target is for the eradication of fuel
poverty, as far as reasonably practicable, in vulnerable households
(the elderly, families with young children and the long term sick
and disabled) in England by 2010. Fuel poverty in other households
will also be tackled, with a target that by 22 November 2016,
as far as is reasonably practicable, no person in England should
have to live in fuel poverty. Fuel poverty is a devolved issue,
Scotland and Northern Ireland have targets to eradicate fuel poverty
by 2016 and Wales by 2018.
The Government is totally committed to helping those
households that are in fuel poverty. We recognise the need to
help more of the most vulnerable to keep their homes warm at an
affordable cost. This Government is committed to radically improving
and refocusing existing policy measures and bringing in completely
new measures to deliver a real step change in ambition for energy
efficiency in this country.
We have started doing that by extending the Carbon
Emissions Reduction Target (CERT) to the end of 2012 and give
it a greater focus on helping more of the most vulnerable low
income households. CERT will raise an estimated £1 billion,
but the assistance available needs to be more focused on the vulnerable.
We have therefore retained the current 40% Priority
Group but have supplemented that by introducing a Super Priority
Group (SPG) target requiring suppliers to deliver 15% of their
target to the most vulnerable households.
Suppliers will be required to install at least one
major insulation or heating measure to ensure that SPG households
receive a significant benefit in their homes.
This is just the first step. We will be setting
out our detailed plans for Green Deal in due course. These will
recognise the importance that all householders, including the
most vulnerable, have the opportunity to benefit from this step
change in household energy efficiency.
The Green Deal is a key element of our policy to
improve household energy efficiency. We want the Green Deal to
be relevant to all households. To this end we will ensure that
as policy around the Green Deal develops, the needs of those in
fuel poverty continue to be recognised.
We will continue to look at ways in which we can
make further progress towards the fuel poverty goals, including
giving consideration to a road map, and remain committed to doing
all that is reasonably practicable to eradicate fuel poverty in
all households in England by 2016 (2018 in Wales).
The Government will, wherever possible, look to be
inclusive on this issue, as it is clear that concern about fuel
poverty goes beyond party boundaries. Although we may come from
different sides of the political argument, and may have different
priorities or apply different principles to problems that lead
to different solutions, there is much more common ground on this
issue than is often the case.
Targeting the fuel poor
3. Whilst we have not looked in detail
at the benefits system we are concerned by the evidence we heard
about the difficulties being caused by the new work capability
assessment. We therefore urge the Department for Work and Pensions
to work closely with organisations such as Macmillan Cancer Support
and other relevant bodies to ensure these concerns are addressed.
The Work Capability Assessment (WCA) was introduced
in October 2008 to assess entitlement to Employment and Support
Allowance for all new claims. It replaced the Personal Capability
Assessment (PCA) used to assess entitlement to incapacity benefits.
The new assessment deals more effectively with the types of conditions
that are prevalent today, specifically it is better than the PCA
at addressing the needs of people with mental health conditions.
The WCA focuses on the functional effects of an individual's
condition rather than the condition itself, to provide a comprehensive
assessment of an individual's ability to work, taking into account
the modern workplace and developments in healthcare.
The assessment was developed in consultation with
medical and other experts alongside specialist disability groups
including Mind and others, and is based on the body of evidence
which demonstrates that work can be beneficial for individuals
with health conditions and disabilities and may even promote recovery.
In March 2009, a Department of Work and Pensions
(DWP) led review of the WCA began. The purpose of the review
was to establish whether the WCA is achieving its aim of correctly
identifying an individual's capability for work, and to consider
how it can better account for an individual's adaptation to their
condition, enabling a more accurate assessment of their functional
capability to work.
The review engaged closely with medical and other
experts and specialist disability groups. After the review was
complete, DWP undertook further work with disability groups to
seek to address their concerns, resulting in an addendum. The
review and addendum were published in March 2010.
The review found that, generally, the WCA accurately
identifies individuals for the right support. The review made
a number of recommendations for improving the WCA, which we will
now be implementing.
Implementing the recommendations of the review will
ensure that the WCA is fairer, more consistent and transparent.
There will be greater provision for claimants who are awaiting
or in between courses of chemotherapy, and for those with certain
communication problems, as well as those with severe disability
due to mental health conditions. The recommendations will also
take greater account of how someone has adapted to their health
condition or disability, and will simplify the wording of the
Additionally, the Government also has a statutory
commitment to arrange an independent review of the main elements
of the WCA every year for the first five years of operation.
This review will look at the WCA in operation and is distinct
from the department-led review which focussed on the technical
accuracy of the assessment and whether it could better account
for how individuals adapt to their condition. The review will
be conducted by Professor Malcolm Harrington, acting as lead reviewer.
Professor Harrington is a highly respected occupational physician
and will be supported by a scrutiny group, who will review progress
at intervals and peer review the final report.
4. Using benefits as a proxy for fuel
poverty is a rough-and-ready approach which means that some people
in genuine fuel poverty do not receive assistance, and others
who are not in fuel poverty do receive help. This is inefficient
and inequitable. However, there are significant logistical and
bureaucratic obstacles to the establishment of the kind of detailed
domestic energy efficiency database which would allow more accurate
targeting of resources. We welcome the work the Government is
developing on the National Energy Efficiency Data Framework and
look forward to seeing the results of the pilots underway. Taking
into account those results, the Government will need to consider
whether it would be cost-efficient and feasible to develop a more
sophisticated database of domestic energy efficiency. The Government
should also consider how it could utilise, with appropriate safeguards,
the national programme of installing smart meters in all homes
given the opportunity it provides for data collection. (Paragraph
As noted by the Committee, the Government is developing
a National Energy Efficiency Data (NEED) framework that will include
a range of data, helping to inform policy decisions on fuel poverty
and energy efficiency. Whilst smart meters can provide information
on energy usage patterns, on its own, energy usage is not a good
proxy for fuel poverty or particularly helpful in signalling the
energy efficiency of households. Coupling energy data with other
information, for example energy efficiency measures installed,
or type of house, should provide much greater insights into possible
Following an initial scoping study, with the agreement
of specific individual energy suppliers, DECC has delivered two
pilot projects involving the analysis of energy consumption and
other data on the building stock, covering residential and business
energy sectors. In the residential sector, these included matching
to annual meter-point consumption data, and information in the
Energy Saving Trust's Homes Energy Efficiency Database. In the
non-domestic sector, data from the Valuation Office Agency was
used to provide information on type of activity, class of building,
age of building and floor space. The reports of these projects
(which only contained aggregated results) have been circulated
to energy suppliers at working level, as well as to other data
Based on these encouraging pilots, we are now embarking
on the development of the national data framework, NEED.
Between now and next summer, an initial matched database
will be created, containing energy consumption data already held
securely by DECC for agreed statistical purposes and other geographical
data and buildings data.
Initially, the database will be used solely for internal
Government analysis, within the context of existing data agreements.
Results of this work will be produced at Great Britain or regional
level. During this phase consultation will commence with all major
stakeholders to understand how to fully realise the potential
of this exciting endeavour, including consideration of how to
better enable data sharing within Government for purposes of meeting
national energy efficiency targets.
Our current intention is to develop controlled arrangements
for giving certain access to other users to data outputs, subject
to confidentiality and data protection restrictions. This phase
will also need to agree where and on what basis he different datasets
should be held and made available to different parties, in doing
so seeking to maximise the overall benefits to all potential users,
whilst maintaining the confidentiality of all detailed data.
5. Given the imperative of using scarce
resources effectively, we are dismayed that it has taken five
years to get data sharing happening, and then only as a pilot
with regard to one cohort amongst the fuel poor. We urge the Government
to assess the results of the pilot speedily and, contingent on
the outcome, hope soon to see measures brought forward to extend
the scope of data sharing. (Paragraph 30)
The Energy Rebate Scheme, a one off exercise testing
the use of data-sharing for targeting money off energy bills,
represents an important new step in the use of Government information.
It has required an intense work programme between Government
and the big six energy suppliers to allow us to develop the detail
of the scheme.
We have taken a prudent approach, undertaking the
exercise on a modest scale in view of the significant risks we
know are involved in data sharing. A large part of this is the
sharing of Government data simultaneously with the six largest
energy supply organisations who each have different IT systems.
We estimate that up to 250,000 pensioner households
will receive a one off £80 rebate on their electricity bills.
The cost of this rebate and most of the delivery costs have been
met by the energy suppliers under their 2008 Voluntary Agreement
with Government. Letters informing people that they were or could
be eligible for the Scheme have been sent out from Government
from early June and energy suppliers began crediting rebates to
customers' accounts in July 2010.
The results of the Scheme so far are very promising.
Once the Scheme is completed, the Government will look at what
lessons could be learned from it and what role data-sharing could
have in future fuel poverty policies.
6. As a means of tackling fuel poverty,
the case for Winter Fuel Payments is weak. Its payment is unfocused
and not targeted on people in or near fuel poverty. However, as
a universal means of supplementing pensioner incomes, which is
easily understood and easy to pay, the political case for the
retention of Winter Fuel Payments is strong. However, it would
be more intellectually honest to rename the benefit; concede that
it a general income supplement; and stop accounting for it as
a fuel poverty measure. (Paragraph 34)
We accept that the Winter Fuel Payment is not solely
a fuel poverty measure - it also provides reassurance to older
people that they can afford to keep warm in the winter months
when heating bills are higher. Each winter the Winter Fuel Payment
helps over 12.3 million older people in around 9 million households
with fuel bills, at a cost of around £2.7 billion.
We therefore think that "Winter Fuel Payment" is an
appropriate name for this benefit and there are no plans to change
7. We welcome the Government's household
energy management strategy, which contains a range of measures
designed to increase levels of domestic energy efficiency. In
particular, we welcome the provisions requiring local authorities
and energy companies to deliver programmes which are sensitive
to the needs and characteristics of local areas. We hope that
this work will, with the outcome of the CESP trials, lead quickly
to the provision of energy efficiency measures being delivered
on a comprehensive street-by-street basis, in a way which obviates
the need for households proactively to come forward. This would
be an ambitious long-term objective, which we would like to see
included as an important part of the fuel poverty road map we
are advocating. (Paragraph 45)
The Previous Administration published its Household
Energy Management (HEM) Strategy on 2 March 2010, setting out
two main targets for household energy efficiency; to:
- insulate all remaining lofts and cavities by
2015, where practical;
- offer up to 7 million more significant measures
such as solid wall insulation and renewable heat to households
The Green Deal is a completely different framework
bringing in capital from the private sector. It is commensurate
with the scale of the challenge we face. The old approach was
never going to deliver the scale of change we need.
The Green Deal will provide household and business
energy efficiency improvements at no up-front cost, with consumers
repaying through the savings they make on their energy bills.
We are committed to putting in place the necessary
steps to ensure that the benefits of the Green Deal can reach
every household, even the poorest and those in the hardest to
Green Deal consumers will be entitled to:
- An independent assessment of the energy performance
of their property, identifying the best opportunities for efficiency
- Improvements carried out by kite-marked installers.
We think quality assurance will have a big part to play in driving
uptake of the Green Deal.
Householders will be able to choose the right solutions
for them based on clear advice setting out their options and potential
We have committed in the Queen's speech to legislate
in a first session energy bill for finance tied to the energy
meter, which should allow for the full Green Deal to be available
By extending a more ambitious and targeted Carbon
Emissions Reduction Target (CERT) to December 2012 we are starting
a massive and urgent increase in home energy insulation for the
nation, paving the way for the Green Deal.
A comprehensive evaluation of Community Energy Saving
Programme (CESP) began at the end of March 2010. The energy saving
measures, householder experiences, and the processes that define
CESP will all be evaluated. The ongoing results from the evaluation
(with a final report due in March 2011) are expected to provide
valuable lessons about whole house and community energy saving
approaches and will help inform future energy efficiency policy
8. The Warm Front Scheme has done
some very good work in improving the energy efficiency of vulnerable
households and thereby reducing fuel bills. We accept that it
is difficult to prioritise certain categories of eligible Warm
Front customers above others. However, the Warm Front Scheme is
experiencing extremely high demand and diminishing budgets. Furthermore,
we know from the NAO's work that the Scheme does not always target
effectively those who are actually fuel poor. In that context,
we think the Government should look again at this issue and seek
to focus the work of Warm Front on those who need its support
most. We accept also that the Warm Front is not an emergency scheme;
however, we think there is scope, in the longer term, for the
Government to move resources away from the Warm Front Scheme towards
a CESP-style, street-by-street approach as advocated earlier,
and for the Warm Front Scheme to move towards providing an emergency
service for the most vulnerable people in fuel poverty with urgent
heating needs. The Government should start considering the longer
term cost benefits of such a transition. (Paragraph 55)
9. We recommend that the Government
reviews the operation of the Warm Front Scheme to ensure that
any barriers which may be preventing it being accessed by people
with cancer or other debilitating conditions - such as time-limited
grants - are removed or modified. (Paragraph 57)
As noted by the Committee, Warm Front has helped
to improve the energy efficiency of over 2.1 million vulnerable
households through the provision of heating and insulation measures.
The Scheme will continue to install measures throughout financial
Warm Front funding is linked to the three year Government
spending cycle and no decisions have been made over future Warm
Front budget beyond March 2011. Funding for the Scheme is to just
over £1.1 billion for the current spending round until March
Further funding for Warm Front, and any potential
changes to the Scheme will be considered as part of the Spending
Social price support
10. Funding the new feed-in tariff
through fuel bills will disadvantage most those people who are
on low incomes and who are experiencing fuel poverty. The Government
will need to keep the impact of this policy under review. (Paragraph
The fuel poor who install small scale generation
will benefit from lower fuel bills as well as a revenue stream
from their electricity generation and export. We are aware of
a number of installers currently looking at installing solar
photo voltaics on social housing whereby the tenants would benefit
from the free electricity without having to pay any costs towards
the upfront installation costs. Housing associations and local
authorities are also looking at ways in which they and their tenants
can benefit from the Feed in Tariffs (FITs) scheme.
The poor can also benefit from FITs revenues if they
are involved in community schemes. For those who do not benefit
directly from FITs, we will continue to work to ensure that we
mitigate the impacts on fuel poverty through other policies intended
for that purpose.
11. We welcome the introduction of
mandatory social price support as an imperfect but necessary means
of helping those most in need. We note that the Government intends
to consult on eligibility criteria and benefit levels, but that
it is minded that a significant proportion of the new resources
should be focused on older pensioners. A case has been put to
us for extending social price support to other groups. While we
are sympathetic to that case, there is a risk that extending support
to many more people (for example, the four million people who
are eligible for Cold Weather Payments) would mean that, unless
additional resources are found for the scheme, the rebates paid
to all recipients would not be large enough to make a significant
impact on fuel poverty. We are therefore not convinced of the
case for extending eligibility, given the resources likely to
be available. We note, however, that the Government is minded
to ensure that some support is provided to those who currently
benefit from the voluntary agreement. We welcome this, and look
forward to clarification from the Government about the nature
of that support. (Paragraph 65)
12. A further case was put to us that
some categories of people with cancer - equating to around 400,000
people - should be eligible for social price support. We note
the strength of the argument put to us and recommend that the
Government look to see how people with a serious medical condition
could benefit from social price support as part of its consultation
later this year. (Paragraph 66)
The Energy Act 2010 contains powers that enable the
Secretary of State to create schemes in secondary legislation
to mandate energy companies to provide support for the fuel poor.
We will take decision on whether to introduce mandatory support
following the Spending Review.
Households off the gas grid
13. We are pleased to note the Minister's
enthusiasm for the potential for novel technologies to help alleviate
fuel poverty for people off the gas grid, but are disappointed
about how long it has taken to assess these technologies. It is
clear that work on this is at a very early stage and we urge the
Department to report back on the trials currently underway at
the earliest opportunity. Households off the gas grid pay more
for their fuel and are more likely to be in fuel poverty and the
Government should ensure that it takes effective steps to help
them. (Paragraph 72)
The Warm Front Scheme is already helping vulnerable
households that are off the main gas grid with eligible households
being entitled to a grant of up to £6,000 where an oil heating
system or low carbon heating technology is recommended. Warm
Front is currently undertaking trials to assess the suitability
of Air Source Heat Pumps and the provision of solid wall insulation
for park homes.
The extension of a restructured CERT to 2012 was
announced on 30 June 2010. The provision of an insulation minimum
will lead to increasing rates of insulation over the CERT extension,
including in areas which have to date been less cost-effective
for suppliers to operate. Further, suppliers will now be awarded
a carbon score for solid wall insulation based on the main heating
fuel of the property it is installed in (rather than the standard
gas/electricity score used for other measures) helping to encourage
promotion in off gas grid properties.
The Government is conscious of the difficulties faced
by off grid energy consumers and recognise that more needs to
be done in this area. This is why we have included a commitment
in the Coalition Agreement to seek to extend protection and support
to off grid energy consumers.
14. We note the difficulties inherent
in seeking to regulate the market for fuels bought by people off
the gas grid. However, this group is disproportionately likely
to be fuel poor and we believe the Government must review urgently
the case for regulating this market. As a more modest step, we
urge DECC to discuss with HM Treasury the case for flexibility
in the timing of winter fuel payments, so that people off the
gas grid have the opportunity to maximise the fuel they are able
to buy. (Paragraph 75)
Whilst we have sympathy with the difficulties faced
by off grid energy consumers, the Government supports the retention
of competitive markets in the supply of heating oil and liquid
petroleum gas (LPG), as we believe it is in the best interests
of both the industry and these consumers. Responsibility for
the robust enforcement of competition law in the UK lies with
the independent competition authorities, the Office of Fair Trading
(OFT) and the Competition Commission (CC). Both general consumer
protection legislation and competition law applies to this sector.
The Government does however have sympathy with the
difficulties faced by these consumers and recognises that that
more needs to be done to support them. That is why we have included
a commitment in the Coalition Agreement to seek to extend protection
and support. to off-grid energy consumers.
We will therefore need to identify an efficient package
of measures and explore better ways of targeting support at vulnerable
households off the gas grid, ensuring that any programme that
we implement complements the measures we take on fuel poverty
in general. For example, options to be explored include the further
roll out of household energy efficiency measures and/or proposals
to promote renewable heating. Affordability will obviously be
a key concern when considering the options for consumer support
to this group.
Winter Fuel Payments are paid to individuals aged
over the female State Pension Age in the qualifying week (the
week beginning on the third Monday in September). The process
to establish entitlement of over 12.3 million older people takes
six weeks and the first payments, to the poorest pensioners, are
sent in November. Using a single qualifying week enables large
numbers of payments to be made before the New Year (in anticipation
of colder weather in the winter period) at low administrative
cost. Individuals, including those who are off the gas grid, choose
when to purchase their fuel and it would be inappropriate for
the Government to pre-empt such decisions.