Draft Disclosure of State Pension Credit Information (Warm Home Discount) Regulations 2011
The Committee consisted of the following Members:
Blears, Hazel (Salford and Eccles) (Lab)
† Campbell, Mr Alan (Tynemouth) (Lab)
Donaldson, Mr Jeffrey M. (Lagan Valley) (DUP)
† Doyle-Price, Jackie (Thurrock) (Con)
Field, Mr Frank (Birkenhead) (Lab)
† Goggins, Paul (Wythenshawe and Sale East) (Lab)
† Hendry, Charles (Minister of State, Department of Energy and Climate Chan g e)
† Irranca-Davies, Huw (Ogmore) (Lab)
† McCartney, Karl (Lincoln) (Con)
† Mulholland, Greg (Leeds North West) (LD)
† Munn, Meg (Sheffield, Heeley) (Lab/Co-op)
† Raab, Mr Dominic (Esher and Walton) (Con)
† Ruddock, Joan (Lewisham, Deptford) (Lab)
† Sandys, Laura (South Thanet) (Con)
† Vara, Mr Shailesh (North West Cambridgeshire) (Con)
† Weatherley, Mike (Hove) (Con)
† Williams, Mr Mark (Ceredigion) (LD)
Alison Groves, Committee Clerk
† attended the Committee
The following also attended, pursuant to Standing Order No. 118(2):
†Williams, Roger (Brecon and Radnorshire) (LD)
Fifth Delegated Legislation Committee
Tuesday 12 July 2011
[Mr. David Amess in the Chair]
Draft Disclosure of State Pension Credit Information (Warm Home Discount) Regulations 2011
10.30 am
The Minister of State, Department of Energy and Climate Change (Charles Hendry): I beg to move,
That the Committee has considered the draft Disclosure of State Pension Credit Information (Warm Home Discount) Regulations 2011.
It is a pleasure to serve under your chairmanship, Mr. Amess.
The Minister of State, Department of Energy and Climate Change, my hon. Friend the. Member for Bexhill and Battle (Gregory Barker), laid this instrument before the House on 23 June 2011.
The Committee will recall having considered the Warm Home Discount Regulations on 28 March. The regulations enabled the warm home discount scheme to take effect on 1 April this year. This additional instrument, to be discussed today, forms part of the delivery of the warm home discount scheme by allowing information to be lawfully shared between energy supply companies and the Government, allowing the majority of the scheme’s resources to be provided automatically to older, poorer pensioners.
Over the past five years, the number of households in fuel poverty has risen. In 2009, there were an estimated 4 million fuel-poor households in England alone, and the price rises recently announced will make it even more challenging for the poorest to heat their homes. Members of the Committee will recall recent debates on the green deal clauses in the Energy Bill. Domestic green deal finance is an opportunity for householders to improve the energy efficiency of their homes at no up-front cost, unlocking the benefits of energy efficiency for millions of consumers. However, there will be some, including the vulnerable and lower-income households, who may need an additional or different measure of support. That is why we are designing the green deal to integrate fully with the new energy company obligation, or ECO.
In addition to helping deliver carbon savings, the ECO will also support the poorest and most vulnerable, who will be specifically targeted through a new affordable warmth target. This will provide up-front support to help such households heat their homes more affordably. So, working in tandem over the next decade, the ECO and the green deal will help to protect households from rising energy prices in the future through greater energy efficiency savings.
In addition, for the next two years, until the ECO is introduced, we will fund a more targeted Warm Front programme in England. However, this improving of energy efficiency will not happen immediately, and we
know that some low-income and vulnerable households need direct financial help with the costs of their energy bills. The warm home discount scheme will provide support to help such households by requiring participating energy supply companies to provide support worth up to £1.1 billion over the next four years.On 28 March, my hon. Friend the Member for North West Cambridgeshire confirmed that through the warm home discount scheme, a core group of low-income pensioners would receive support. This group has been prioritised as our analysis shows they have a high risk of fuel poverty, with over half of fuel-poor households containing someone over the age of 60, and more than 80% of fuel-poor households being in the lowest three income deciles. Over the four years of the scheme, about £580 million will be provided to this group. The Warm Home Discount Regulations 2011 require that these pensioners are provided with a rebate on their electricity bill from their energy supply company. This rebate will be worth £120 this winter, rising to £140 by winter 2014-15. An estimated 4.5 million rebates will be made to pension credit recipients over the four years of the scheme.
In order to help suppliers identify people in the core group, we also need to allow them, and Government, to share information. Sharing sensitive and personal information in this way, without seeking individual consent first, requires a legal gateway. The process has a key advantage in that it allows the rebate to be received by most customers without having to claim it. This helps to ensure that many of the most vulnerable receive the support they need automatically. For our pilot last year, nearly 90% of customers who received the rebate did so automatically, and we expect a similar percentage to receive the benefit automatically this year. Those who are not found automatically will have the opportunity to claim.
The instrument the Committee is considering today is made under section 142 of the Pensions Act 2008, which confers power on the Secretary of State to make regulations allowing for such information sharing. These disclosures would be unlawful without legislation. This instrument allows the Department for Work and Pensions and the participating energy suppliers to share data to find pensioner customers who are eligible for support. It sets out whose data may be shared, ensures that data are used only to provide assistance to those customers, and puts in place robust offences to protect the data. I will explain each of these areas in more detail.
In terms of the information-sharing process, the instrument allows the Secretary of State to disclose information to participating electricity suppliers about pension credit customers and for the participating electricity suppliers to provide information about their domestic electricity customers to the Secretary of State. Those records will then be compared – a process called data matching. Where there is a match, the Secretary of State can confirm to each supplier which of their own customers must be provided with a rebate. Where there is not a match, the Secretary of State will write to those pension credit recipients to ask them to contact a dedicated Government call centre and confirm that they are eligible. Once they are confirmed as such, the energy supplier will be required to provide a rebate to them.
The energy supply companies can only provide information about their customers for the purpose of identifying those eligible for the rebate and to test the
matching system—and only when required to do so by the Secretary of State under powers given in the Warm Home Discount Regulations 2011.We expect data matching to work because we used that approach successfully in the 2010 energy rebate scheme pilot, which was run as a partnership between energy suppliers, DWP and my Department. That led to more than 200,000 of the poorest pensioners receiving an £80 rebate on their bills.
The Government take the responsibility for the secure handling and storage of data very seriously. Energy suppliers and the DWP’s information directorate, which will be conducting the data matching exercise, will need to meet DWP’s stringent security guidelines before any transfers can take place. We have also ensured that the scheme complies with the Data Protection Act 1998, when it comes to the security, retention and destruction of data.
In addition, the regulations set out an offences regime for unlawful disclosure of information. That will help to ensure that shared information is protected and is used only for the reasons set out. If a person was guilty of one of the offences set out in the regulations, they could be liable for a fine of up to £25,000 or a prison sentence of up to two years. Those new offences demonstrate how seriously the Government take the safety and security of data.
The instrument also sets out whose information can be shared in any particular year and, from that, the eligibility for the rebate required under the warm home discount scheme 2011. The eligibility criteria will need to be met by DWP and energy company customers on a certain qualifying date. That date will be set annually and made public in advance. In 2011-12, we expect the qualifying date to be 11 September 2011.
In year one of the scheme, only those who are in receipt of the guarantee credit element of pension credit will eligible. We expect that around 800,000 poorer pensioners will receive a £120 rebate this winter. In subsequent years, people who are in receipt of the savings credit element as well as the guarantee element of pension credit will be gradually brought into the scheme too, starting with the oldest first. By winter 2014-15, all those who receive the guarantee credit element of pension credit will be included. The value of the rebate also increase annually from £120 this year to £130 next year, £135 in 2013-14 and £140 in the winter of 2014-15.
In all cases, the rebate will be available only where the pension credit recipient or their partner pays their own electricity bill and is with a participating energy supply company. That will always include the six major UK energy suppliers, but other smaller companies and suppliers can also choose to participate in the core group. The rebate will be provided on electricity bills to ensure that those off the gas grid will also be eligible.
Some concerns have been raised about how energy supply companies will use this information about their customers. This instrument sets very tight parameters around the use of this information, limiting it to requiring electricity suppliers to give their customers an automatic rebate on their electricity bills under powers given in the Warm Home Discount Regulations 2011, and to being able to offer their customers advice and assistance in specified areas. Those areas include advice and assistance
on energy and thermal efficiency, reducing energy consumption and the use of microgeneration equipment or wood-burning appliances. Suppliers may also offer to place a customer on the priority services register and provide advice and assistance on debt and disconnection. Any other reason, such as marketing, is not permitted and would be unlawful.We accept that the pensioners who will benefit may not be evenly distributed between the energy supply companies. As a result, we are putting in place a reconciliation mechanism to allow the costs of the scheme to be distributed fairly between the energy suppliers based on their market share. Regulations to allow for that were laid by the Minister of State, my hon. Friend the Member for Bexhill and Battle, on 10 June this year. The instrument is vital to allow legal data sharing to take place between the energy suppliers and the Government, and for 4.5 million supplier-funded rebates to be provided to low-income pensioners during the next four years. I commend the instrument to the House.
10.40 am
Huw Irranca-Davies (Ogmore) (Lab): It is a pleasure to serve under your chairmanship this morning, Mr Amess. I thank the Minister for the detail in which he explained the statutory instrument. I have been busily scribbling out some things that I was about to ask him, because he has answered them fully already. However, I wish to explore some detail a little further. It is worth saying at the outset, particularly in the light of his reassurances, that it is the intention of the Opposition to support the measure. It is a sensible way forward, and it is an integral part of the Warm Home Discount Regulations that were accepted by the House in March.
It is right that we build on the voluntary social tariff agreements that were introduced by the previous Labour Government as set out by my then colleague, the then Member for Liverpool, Wavertree, in the delegated legislation Committee that considered the Warm Home Discount Regulations 2011 in March last year. We support the measures to use data matching to find those in the core group who might be eligible for a rebate and, in that case, those in receipt of pension credit. We also favour support being extended through the broader group to groups in addition to older, poorer pensioners. Having said that and given our support for the instrument, let me probe the Minister’s thinking a little further, particularly on data sharing, data matching and the relationship with electricity suppliers.
Concerns were raised during the Department of Energy and Climate Change consultation process on the warm home discount that not everyone who is entitled to pension credit actually receives it or applies for it. Will the Minister expand on how confident he is that those who should be covered by such a well-intentioned measure will be covered, particularly given the worries about the penetration of pension credit? Will they be identified? Can they be identified? What more does the hon. Gentleman consider can be done to make sure that those who do not identify themselves as being recipients of pension credit can be identified? Is he in discussions with colleagues in the Government to drive such matters forward? It would be a tragedy if the flaw that has already been pointed out in the consultation were to become real or if those people who are not taking up pension credit could
not be identified in some other way. Perhaps such matters are outside of the measure, but it would be helpful to explore the Minister’s thinking so that the provision can penetrate further to the core groups that we want to reach.The flip side of the issue is about the restrictions on the use of data and data sharing by energy companies. The Minister laid out clearly how the regulations make unauthorised disclosure of the information a criminal offence. We welcome that. In fact, such action has penalties of up to £25,000. What confidence does the hon. Gentleman have that the £25,000 limit is appropriate and high enough? Such a sum to an average member of the public in the street sounds a significant amount, but as a one-off charge to a seller, an energy company or someone who is guilty perhaps of mis-selling or using the data inappropriately when face to face with a vulnerable customer, does the hon. Gentleman consider that the £25,000 charge is sufficient to act as deterrent? Perhaps he will outline what other deterrents will work alongside that to ensure that we do not have inappropriate use of data sharing for other reasons. A little more data from the Minister would be helpful, not only on the fine, but on the other measures.
Will the Minister go a little further and explain whether the data can be used for more than just offering advice? There may be good reasons for using the data that have been shared to help that vulnerable group of core clients, but that would raise the possibility of inappropriate use of the data with mis-selling of products and services taking place at the same time.
Clearly, there is a temptation for any of the myriad companies out there to overstep the mark, perhaps inadvertently. We know that at least one of the big six energy companies has already faced investigation in a different sphere for mis-selling. Will the Minister expand further on how he sees that grey area of one-to-one confrontation between a customer and an energy company, and how to prevent the energy companies from overstepping the mark and using the information inappropriately for the benefit not of the customer, but of the company?
By what mechanism will the data sharing process proceed? I ask that because all members of the Committee are, sadly, aware of previous instances under various Governments of data sharing when data have been made accessible to more than one agency or Department, and have been corrupted, decrypted or gone missing. Will the Minister give an assurance on data security, including transfer, and particularly when shared?
Finally, when does the Minister intend to return to the House to update us on progress of the whole process, when it has worked well, whether he needs to report any glitches to the House, and how he intends, in the light of my previous comments, to modify the process to ensure that it drives down to that core group of vulnerable constituents and consumers whom we want it to benefit.
The need to see action that works on fuel poverty could not be more pressing. The latest official figures in 2008 suggest that as many as 4.5 million households were in fuel poverty, but recent uSwitch research shows that fuel poverty levels in the UK are spiralling dangerously with as many as 6.3 million, or almost a quarter of households classed as fuel poor. Previously, the focus of
much of the discussion in the House and elsewhere about fuel poverty was on lower-income households and pensioners. That was understandable, but the fuel poverty net is now being thrown much wider, and according to uSwitch it is spreading rapidly into the more affluent middle classes. Hon. Members know from their postbags that constituents are facing rising energy bills. If fuel poverty is redefined, and calculated after housing costs, as is being suggested, fuel poverty levels cold rocket to as high as 9 million, or one third of all households. It is not just lower-income households and pensioners who are and will be classed as fuel poor, but more affluent, middle class families.I will not detain the Committee by rehearsing well-founded arguments that my colleagues and I have made previously about how the Government have systematically removed support for fuel-poor households, scrapped the Warm Front scheme, which provided 2 million households with 21st century heating, and reduced winter fuel payments by £100. However, with funding to the Warm Front scheme cut and the green deal and the ECO not expected until late next year at the earliest—we are still waiting to hear from the Minister and the Secretary of State about a rearranged date for the delayed Energy Bill that recently went through Committee—the warm homes discount will be the only game in town that is specifically designed to help to tackle fuel poverty. My question to the Minister is very simple and direct: is that measure on its own good enough? I suspect that it is unlikely to be, but the Opposition support it—as the only game in town—as well as the regulations, albeit with some caveats.
I ask the Minister to expand on those comments and queries, particularly about the security of personal data and how the measure can be made to impact on the core people whom we most need it to reach. Anticipating his good intentions on the regulations, I look forward to the Minister’s response, as well as to the comments of other members of the Committee.
10.50 am
Charles Hendry: I am grateful to the hon. Gentleman for his approach and his constructive engagement. It is appropriate to put on the record that this journey started under the last Administration. We engaged actively with the work done by the right hon. Member for Lewisham, Deptford. I hope that she is pleased to see that that work is now coming to fruition with the national programme and roll-out, and the regulations are integral to that process.
The hon. Member for Ogmore asked about the level of pension credit take-up. He is right to be concerned about that, and we share his concerns. We are looking initially at the guarantee credit, the take-up of which is as high as 83%, so making it one of the parts of pension credit with the highest take-up. Like other Departments, we will continue to work with other groups, such as the not-for-profit sector and those who specialise in giving support and advice to the elderly, to encourage as many pensioners who are eligible for pension credit as possible to come forward and claim it. One of the great attractions of the scheme is how automatic it will be. It is a very good measure for enabling us to identify those who are most likely to be affected by fuel poverty. We should always bear it in mind that the fuel-poor are probably poor generally, and that fuel poverty is one element of
the wider poverty issue. The pension credit is therefore a very good way of targeting older people who are most likely to need help.The hon. Gentleman asked about the £25,000 fine. Different levels of fine can be instigated in different courts: there is a lower level at the magistrates court and a higher level in the Crown Court. There is also the threat of imprisonment for people who break the law. The other issue is reputational damage, and we should not underestimate the impact of a company being seen to misuse people’s private data, especially in the light of what has happened in the past few weeks. On its own, the incredible damage that can be done to a company will be sufficient to ensure that companies stick to both the spirit and the letter of the law. From all the discussions that we have had with them, we know that they want the scheme to work. They believe that data sharing is an important part of the process, but they want to use it only for the permitted reason, and they clearly understand the broader consequences.
The hon. Gentleman asked about the range of advice that can be offered. I draw his attention to regulation 5(3), which states that “relevant assistance” means
“energy efficiency measures, thermal efficiency measures and advice and assistance relating to energy and thermal efficiency”.
It then gives more detail on that, so we have therefore set out the sort of advice in the regulations. We do not want there to be a barrier when advice is given to people who might benefit from it, so making it more difficult for them to receive that advice, but we want to ensure that they are not sold products that are irrelevant to the process and which might result in their having higher bills. Our worry is always about someone telling people, “By the way, your wiring doesn’t look good. My mate round the corner can fix that for you on Tuesday, and it will cost you a couple of hundred quid.”
Huw Irranca-Davies: I thank the Minister for his clarification and for drawing our attention to the details that are set out. Without rehearsing our very constructive discussions in the Energy Bill Committee, does he agree that it is very important that any subsequent guidance for operators under the scheme, and under the ECO and the green deal, covers not only high-level corporate responsibility, but the individual ethics of people out in the field who will be discussing, I hope in a helpful way, how they can improve people’s property and not overstepping the mark by simply flogging their company’s latest bonus product?
Charles Hendry: I could not agree more strongly. I think that the success of the measures will depend significantly on the consumer’s experience and engagement. If it does not work for consumers, they will back off and say that they do not want their data to be shared, which will threaten the whole programme.
Taking a similar approach to, for example, the roll-out of smart metering, we are developing a mandatory code of practice that will be attached to licences and to which people who want to install smart meters will have to adhere. It will give a significant amount of comfort about what such people are allowed to do in the course of a visit. The threat is not what company head offices might say to people—there will be clear guidance—but an over-enthusiastic person on the doorstep.
I also hope that one of the attractions of the scheme is that because it is automatic, it will often not involve a household visit in any case. It can be done by correspondence, in a letter from the company saying, “We understand you’re eligible; a discount will be available to you,” which will diminish significantly the opportunities for cross-selling.
Huw Irranca-Davies: That is helpful. Perhaps I can probe the Minister further on the nature of the automaticity, because people might receive either an e-mail or a letter saying “Well done, we have now sorted this out for you. You will receive a rebate. By the way, here is a package of things that you may be interested in.” Will he clarify that it is his intention that the same spirit and letter of the regulations will apply to correspondence by e-mail or letter as to face-to-face, person-to-person contact? Inappropriate material or information that might count as mis-selling should not be given in that type of contact any more than in face-to-face contact.
Charles Hendry: The regulations are clear about that. They say:
“In a scheme year the Secretary of State is authorised to supply an electricity supplier with relevant information”.
They then define what relevant assistance means. That will apply to any contact that takes place between supplier and customer. It will not be door-to-door; the regulations specifically bar certain types of activity, but permit other types. They are as robustly framed as possible to ensure the consumer protection that I am sure we all feel is appropriate in an area as sensitive as this will inevitably be.
The hon. Gentleman asked for more detail about how the data sharing process will work. The DWP will treat data handled under the warm home discount scheme with exactly the same level of security as all Government data. We will agree with the energy supply companies contractual arrangements that specify full adherence to the Data Protection Act 1998, secure measures for handling, destroying and transferring data and the identification of a data controller for each stage of the data matching process. All personal data will be encrypted before any transfer between energy suppliers and the DWP, in accordance with the DWP’s encryption policies to protect personal data. The data sharing regulations will strengthen the legal safeguards even further by including an offence of unlawful disclosure. Again, significant protection will apply to the handling and transfer of information.
The hon. Gentleman also asked how we will update the House on progress. We expect that in the normal run of things, oral and written questions will be asked in the House, to which we will be pleased to respond. We expect to respond more fully next summer and to provide as much clarity as we can to Members on how the scheme is progressing. I realise that the scheme will be of great interest to our constituents across the country, and that people will be keen to know that it is working as intended.
The hon. Gentleman moved on to more general issues relating to fuel poverty. I think that we all understand and share the concerns that he expressed about fuel poverty and how it has grown. It was not the last Government’s intention that it should increase as it has;
it decreased for some years and then rose sharply, in spite of legally binding targets to end fuel poverty in this country, initially for vulnerable households and then for all households.We are trying to move from a sticking-plaster approach to a more comprehensive approach. Either we must give rebates each year for all time to people who live in poorly insulated, draughty homes so they can pay bills for gas and electricity that they would not need if their homes were properly and efficiently insulated, or we must take a much more fundamental approach. That is the basis of the green deal. We welcome the support that the Opposition have given to the green deal proposals.
Alongside that we are continuing with the Warm Front programme. It will be more targeted over the next couple of years but then will be replaced by the ECO and the green deal. So the measures we are introducing today are to be seen alongside those measures to provide additional support to some of the most vulnerable households. It is impossible to structure a scheme that helps every single vulnerable household. The assessment we have done and the discussions we have had with the organisations that work most actively in these areas show that the groups they have been most concerned about are older households where there will also be the greatest illness and immobility issues. People will be housebound more and so will use more electricity and gas. There has been a general agreement that this is the right group to target. I hope that the hon. Gentleman would see this as one measure alongside others, but also
moving very firmly in the direction of the longer-term solution, which is a much more efficiently insulated housing stock.Huw Irranca-Davies: I thank the Minister again for his clarification on those issues. Could I ask one final question? Continuing our constructive and sometimes critical support of the green deal, we want to see the Energy Bill come through as soon as possible. I know he will not be able to tell us today what date that will be, because it is agreed through the usual channels, but are we likely to hear before the recess when we will see that Bill back? While the regulations do not depend on it, it is good that we support them today and pass them. They are so integral to the overall approach that the Government have been laying out that we need to see that Bill as soon as possible. That was our intention in Committee; we gave it a good debate but in a timely manner as well.
Charles Hendry: You are being very tolerant, Mr. Amess. We have moved slightly away from the regulations but I understand why the hon. Gentleman is interested in these matters. The timetabling will be set out by the Leader of the House in the usual way but the issue we have been most concerned about is the start date. We have been talking about the measures coming in during 2012. That remains on target. There is no slippage in those targets. We are still working towards the original time scale that we set out. I hope that has answered the questions that have been raised.