Draft Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) (Amendment) Regulations 2013
The Committee consisted of the following Members:
† Barker, Gregory (Minister of State, Department of Energy and Climate Change)
† Berger, Luciana (Liverpool, Wavertree) (Lab/Co-op)
Cryer, John (Leyton and Wanstead) (Lab)
Donaldson, Mr Jeffrey M. (Lagan Valley) (DUP)
Hamilton, Fabian (Leeds North East) (Lab)
† Hemming, John (Birmingham, Yardley) (LD)
† Jones, Graham (Hyndburn) (Lab)
† Lavery, Ian (Wansbeck) (Lab)
† Leech, Mr John (Manchester, Withington) (LD)
† McCabe, Steve (Birmingham, Selly Oak) (Lab)
† McPartland, Stephen (Stevenage) (Con)
† McDonald, Andy (Middlesbrough) (Lab)
† Penrose, John (Weston-super-Mare) (Con)
† Reckless, Mark (Rochester and Strood) (Con)
Sandys, Laura (South Thanet) (Con)
† Syms, Mr Robert (Poole) (Con)
† Wheeler, Heather (South Derbyshire) (Con)
Marek Kubala, Committee Clerk
† attended the Committee
First Delegated Legislation Committee
Monday 21 January 2013
[Mr Charles Walker in the Chair]
Draft Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) (Amendment) Regulations 2013
4.30 pm
The Minister of State, Department of Energy and Climate Change (Gregory Barker): I beg to move,
That the Committee has considered the draft Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) (Amendment) Regulations 2013.
It says in my brief that with this it will be convenient for us to discuss the draft Electricity and Gas (Energy Companies Obligation) Order 2012.
Gregory Barker: It is a pleasure to serve under your chairmanship, Mr Walker. It may be a truism that one starts to feel old as the policemen get younger, but one really starts to feel old when a Committee Chairman looks so young. With that gratuitous licking out of the way—
The Chair: Extraordinarily gratuitous.
Gregory Barker: The Government are today proposing amendments to the regulations on the green deal framework. We have been further developing the framework over the past few months; I am sure that in due course, in the light of experience, we will be able to improve it even further. In readiness for the full launch later this month, a series of statutory instruments are being developed and laid before the House. The changes are necessary to optimise the legal framework and take advantage of what we have already learned. By and large, they are technical in nature.
I will first speak briefly about the green deal, which is our transformational energy efficiency programme. I am delighted that it is going live next week, unlocking unprecedented opportunities for both consumers and UK businesses, small and large. The green deal will provide a long-term, stable and transparent policy framework that consumers can trust, and that allows businesses to invest with certainty. It will allow consumers to pay for some or all of the cost of energy-saving property improvements through savings on their energy bills. It can also be used to lever in billions of pounds of private investment to improve the energy efficiency of the UK’s properties. It will empower small and medium-sized businesses to enter a new market, and offer consumers more choice and innovation where, beforehand, there has been monopoly provision and little innovation.
There is already huge interest from industry in getting involved in the green deal. It is exciting to see a steady stream of new participants becoming approved and using the green deal quality mark before the roll-out on
28 January. We already have 462 installer organisations registered. This year, things have already got off to a flying start, with local authorities playing an active role in helping to kick-start our “Go Early” initiative. The Government have supported it by providing £22 million to stimulate early demand for the green deal in seven core cities, and by helping other local authorities to drive initiatives that boost energy efficiency.Our cashback scheme, worth £125 million, was formally launched on 14 January, and will reward households in the owner-occupier, private rented and social sectors that take early action to improve their properties through the green deal. Households making a number of improvements could receive more than £1,000. A £2.9 million communication campaign will help to build an understanding of, and trust in, the green deal over the coming year.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): I noted the launch of the communication budget before Christmas. Will the Minister give us more information about how the money will be spent, and where, for example, we can expect to see green deal adverts?
Gregory Barker: Certainly. In the scheme of things, £2.9 million is not a huge amount, so we will use it in a focused way. The campaign will primarily be about public relations, rather than advertising-driven. We have retained Freud, which has worked on a number of successful Government advertising and marketing campaigns. However, I am pleased to confirm that there will be some mainstream advertising in national newspapers. Of course, online digital advertising will be increasingly important. There will be some conventional advertising around the green deal going live at the end of this month, but of course we will also continue to roll out advertising and PR campaigns and competitions as the market really takes off and starts to develop through the year.
People should expect a steady number of marketing communications from the Government around building trust in the green deal kitemark and encouraging people to take green deal action. We should remember that although this is the coldest part of the year and energy efficiency might be on people’s minds now, the time of year when people typically opt to undertake this work is later in the spring, because people do not want to start taking out windows or undertake building work at this time of year. The communications will be staged, but the hon. Lady should expect to see some activity in the national, local and trade press from the end of this month.
The framework regulations create an authorisation regime to regulate the conduct of green deal market participants and to ensure that consumers are protected. We have debated consumer protection at length at various stages of the green deal, and members of the Committee will know that rigorous consumer protection lies at the heart of the green deal framework.
The framework regulations cover conditions that must be met when a green deal plan is established, and how that plan should be disclosed. The amendments that we are proposing will make enhancements to the green deal framework. We have increased the frequency of some reporting requirements from annual to monthly for all
green deal participants. That is particularly important in the early stages as the market grows. These requirements include the requirements to report the number and value of plans, including cancelled plans, and the number of resolved and outstanding complaints. This is to ensure that we can monitor compliance, in order to protect consumers without imposing undue burdens on business, and protect the reputation of the green deal.Other changes enable us to streamline key processes. We are improving the clarity of our complaints system by defining when a complaint should be directed to green deal assessors, and when to providers. To further ensure effective policing of activity in the market, green deal accreditation bodies have been added to the list of organisations that can report a breach of regulations by a participant directly to the Secretary of State.
In addition, an important technical update is being made to the circumstances in which an energy performance certificate must be updated by the green deal provider or customer. These include circumstances where an emergency efficiency measure has been removed, the provider has changed, or the liabilities of the bill-payer to make payments has changed. This update will ensure that customers and businesses have access to up-to-date energy information for their property.
These are relatively discrete amendments. As I have said, I expect that later in the year we may be able to improve this framework even further, in the light of experience. I am happy to take any questions.
4.38 pm
Luciana Berger: It is a pleasure to serve under your chairmanship this afternoon, Mr Walker.
As the Minister said, the regulations focus largely on technical changes to allow green deal plans to be reported on energy performance certificates, and measures to force green deal providers to provide, monthly or annually, information relating to the number of green deal plans sold, the number of resolved and unresolved complaints, and the details of green deal payments. There are also provisions to give the Secretary of State the power to impose sanctions, should providers fail to report this information on a regular basis, and the power to settle unresolved disputes.
We support much of what is being introduced. As the Minister will know from our many previous debates on the green deal, Labour believes that consumer protections will be a vital part of a successful green deal scheme. The key to that will be the Government’s ability to monitor the progress of the scheme on a regular basis, and to take action accordingly. To that end, in the Committee stage of the Energy Act 2011, Labour put forward amendments proposing regular reports to Parliament from the Secretary of State, to allow for greater scrutiny of the green deal as it progresses. Some of our proposals were accepted by the Government, but many were not, so we are pleased that the Government have at least returned to the issue of reporting and made changes to allow for more frequent reporting by green deal providers—something for which we called.
I have some questions for the Minister. First, what estimates has his Department made of the extra cost to green deal providers and assessors of the increased reporting requirements? How much of that cost is likely to be passed on to the consumer? The regulations
specify that the Secretary of State can impose sanctions in the event that a complaint cannot be resolved by the green deal ombudsman, or when the complainant has gone through the ombudsman procedure but has failed to be satisfied that the dispute was resolved. I should be grateful if the Minister outlined the exact range of sanctions that will be at the disposal of the Secretary of State. What information would he have access to in considering unresolved complaints, and on what criteria would those be judged? What would be the procedure for appealing against a decision made by the Secretary of State? Who would be liable to cover the cost of any appeal or complaint? Will the Government be exposed to any liability as a result of adjudications made by the Secretary of State?Finally, the Minister will know that we have expressed many concerns about consumers being left open to large penalty charges if they chose to pay off the green deal before the end of the repayment period. Those charges could run to thousands of pounds. The Minister has argued in response that that could happen only when a green deal provider would make a loss as a result of an early cancellation, and that the provider would have to prove that that was the case. Will the Minister take this opportunity to outline how the provider would make that case, and how and by whom it would be judged?
I am doubtful, after examining the regulations, about whether the EPC reporting requirements would provide sufficient information to enable a judgment to be made about whether a provider would make a loss, but I was also unable to identify from previous orders and debates how else that information would be gathered. For the sake of clarity, and as we are just days away from the scheme going live properly, will the Minister explain how providers and assessors will be able to prove that they have made a loss as a result of an early repayment, and how information provided in the order may or may not be used as part of that process?
I thank you for your stewardship of the Committee this afternoon, Mr Walker, and look forward to receiving sufficient reassurances from the Minister to enable us to support the regulations.
4.43 pm
Gregory Barker: We are delighted that the green deal will be going live next week, unlocking unprecedented opportunities for consumers and businesses alike. Taken together, the regulations will help to improve the efficiency of homes across the UK, reducing carbon emissions and, crucially, helping households to manage their bills. The shadow Minister has made some sensible requests, probing the rationale behind the provisions before the Committee, and I am happy to respond to them as best I can.
Cost is of real importance, and we are mindful of the need to provide the best value to the consumer. There is a fine line to be trod between consumer protection and the recognition that protection often adds to a higher socialised cost for all customers. I am pleased to say, having discussed the matter at length with industry, that we believe that little or no increased cost will arise as a result of the reporting changes. Providers were consulted, and they said, by and large, that this information would be collected as part of their usual business model.
Given that it is part of business as usual, filing this information with the Department would involve no meaningful additional burden.On sanctions, it is right that the Secretary of State should have appropriate powers. The Secretary of State will have access to an investigative report carried out by the ombudsman and the investigation service. The costs of investigation will be borne by the green deal provider, unless a disclosure and acknowledgment complaint is involved. I believe the cost is £335 per complaint to the ombudsman, but if that is not correct, I will write to the hon. Lady to clarify the matter.
On repayment charges, a formula is already set out in the consumer credit regulations, and the provider is required to show the customer that they have set the repayment fee in accordance with the statutory formula. We have debated this issue previously in Committee. With the green deal framework, we do not propose to introduce a new layer of complexity, or to add to the existing statutory framework. Basically, the onus on the provider, not the consumer, to demonstrate that they have incurred a loss. That is where the burden of proof should lie, and that very much favours the consumer. I hope that those few points will go some way towards reassuring the hon. Lady.
Ian Lavery (Wansbeck) (Lab): Could the Minister give an example of when a consumer would incur penalty charges?
Gregory Barker: I would be loth to give an example that could be over-analysed, because I am not expert in these matters. There is clearly a great range, and individual circumstances will vary from place to place. If a plan were redeemed at a very early stage, there may be a cost to doing that. We have to recognise that there is a cost to offering fixed-rate finance; when these things are done to scale, there are underlying costs to hedging against future interest rate rises. The important thing is that the underlying finance providers levelise that cost, and that it is shared equally. Of course, we could start building in provisions so that people can escape without penalty, but the reality is that the overall cost of the financial products, which will be reflected in the interest rate and charges, would rise.
The situation the hon. Gentleman describes is more likely to happen where somebody signs an agreement, a product is fixed and then, a short way down the line, they change their mind. What needs to be clear is that if there is any charge, it must be appropriate; there cannot be punitive charges, nor must charges be seen to be unfair. Fairness will really underpin this. Again, the onus will be on the provider to show that they have suffered loss.
I am sorry that is not as clear as it might be, but that is because I do not have a proto-example to rattle off for the hon. Gentleman, and it would be slightly dangerous to give one, because I might mislead not people in the Committee, but people in the outside world who might be hanging on my every word.
Luciana Berger: The Minister mentioned that any penalty charge could, if it were spread across all people who took up the green deal, impact on the interest rate.
As we expect the green deal to go live officially in the coming weeks, can he give the Committee some indication of what that rate will be?Gregory Barker: I cannot give the hon. Lady an update on the answer I gave her last week, or in recent weeks, but I can tell her that her wait—I know she is eagerly looking forward to the interest rate being revealed—will be short. We are expecting it probably in the next few days. We will be able to proceed, as she will be relieved to hear, certainly ahead of the first green deal plans going live.
The interest rate, as I keep saying, is only one of the value drivers. Ultimately, what is most important is the overall cost of the product that the consumer is purchasing; that is the thing. Through innovation, market competition, greater choice and economies of scale, over time we will see massive falls in the price of a whole range of products. In particular, the price of solid wall insulation will fall substantially. We have already started to see that happening, through innovation and a dynamic market. That, more than anything else, will drive consumer take-up.
Luciana Berger: I thank the Minister for giving way again; he is being awfully kind. I shall endeavour not to make further interventions. For the record, however, he said that the most important value driver will be the cost of the products, but does he not accept that, in the initial stages of the green deal, if a package is taken out on a 7.5% interest rate, for measures costing £10,000 up front, the interest repayments will be £12,000, which is more than the cost of the measures? In the initial green deals, the most important value driver for someone deciding whether to take up such a package will be the question of whether the interest rate costs are greater than the cost of the measures.
Gregory Barker: I do not dispute the hon. Lady’s maths, but we are talking about a long period—decades—and we are not taking into account inflation. Often the green deal is the only finance available to many households. Her party has been waging some good campaigns on payday loan sharks, and on the inadequacy of the finance available to the most vulnerable in society. She ought to be saying, were the rate 7.5%—I am not saying it will be—that single-digit interest for the sorts of things that will transform people’s homes is no bad thing, provided that the money is repayable against something that represents good value to the consumer and meets the golden rule. It must meet the golden rule. I do not see an individual number as being bad and another good; the question is whether they meet the golden rule and deliver value to the consumer as part of an overall package.
The hon. Lady is absolutely right: we need competitive interest rates. That is why we are putting money into supporting the Green Deal Finance Company—the Department of Energy and Climate Change and the green investment bank are putting money in—and why we have encouraged its establishment as a not-for-profit body. She is absolutely right to focus on competitive interest rates, not available elsewhere on the high street, as an important element. I would not say, however, that they are important to the exclusion of everything else.
The most important thing is that the fundamental, underlying offer to consumers has to represent good value.Mark Reckless (Rochester and Strood) (Con): The Minister has referred to all manner of funding schemes, but I assume that the root source of all the funding will be the taxpayer or the consumer. Will he clarify the extent to which the green deal that he is so strongly promoting—and the regulations, which support it—replaces or is additional to schemes from energy suppliers? In those schemes, more than 250,000 customers pay for insulation and similar measures for customers’ homes.
Gregory Barker: My hon. Friend asks a good question, but there are two different things here. The green deal framework, which basically uses a small amount of public sector money—a small amount from DECC and a slightly larger amount from the green investment bank—is fundamentally and overwhelmingly a private sector proposition. Over time, it will, we hope, leverage in billions of pounds in new, private sector investment. What makes it special is that we have created a statutory framework and a new model of financing that offer
security to lenders and accessibility to all consumers. The way in which we established the new statutory framework allows us to offer the finance in a competitive way that has not been seen before.The previous schemes to which my hon. Friend referred—for example, the carbon emissions reduction target, which ended on 1 January—are being replaced with the energy company obligation. ECO is a new obligation on energy suppliers to deliver improvements, particularly to the fuel-poor, to the value of about £1.3 billion a year, broadly speaking. Unlike previous schemes, which have been monopoly-supplied by the big six and involved very little consumer choice and diversity, this will be much more open and transparent. It will be open to competition and will deliver much better value to the consumer, who is footing the socialised cost through their electricity bills, and the recipient of the measures, who will get much more for the particular intervention. On that basis, I commend the measures to the Committee.