Energy and Climate Change - Minutes of EvidenceHC 142

Back to Report

Oral Evidence

Taken before the Energy and Climate Change Committee

on Wednesday 6 February 2013

Members present:

Mr Tim Yeo (Chair)

Barry Gardiner

Ian Lavery

Mr Peter Lilley

John Robertson

Sir Robert Smith


Examination of Witnesses

Witnesses: Peter Smith, External Affairs Manager, National Energy Action, Alexandra Willey, Special Projects Manager, Affinity Sutton, Simon Gordon, Private Rented Sector Consultant, Residential Landlords Association, and John Sinfield, Managing Director, Knauf Insulation, representing the Insulation Industry Forum, gave evidence.

Q1 Chair: Good morning. Thank you for coming in and I am sorry we are starting a few minutes late. I will not ask you to introduce yourselves; we do know who you are. We had rather more private business to conclude than we had anticipated. We are quite tight for time. I need to wind this session up in about just over 45 minutes, so I am asking my colleagues to be disciplined in the length of their questions and if we could get through as much as we can with concise answers that would be helpful. Could I start with a general question? From the point of view of your different organisations, what would be the most important indicators of Green Deal success and why?

Simon Gordon: Mr Chairman, take-up, obviously. From our point of view, specifically, take-up by private landlords who face possibly the most difficult situation of all because they have the oldest properties, 40% of the private rented sector is pre-1919. So it is vital from our point of view-and I am sure everybody else will say similar-that there is take-up, it is properly monitored, and the monitoring is effective and comprehensive.

Peter Smith: Certainly, from National Energy Action’s point of view, generally it is warmer homes. Sadly, a lot of households at the moment are under-consuming energy within their households and we think it is very important that they increase the amount of warmth within their homes. Obviously, if you could get to that point, you would see reduced levels of fuel debt and reduced costs to the NHS and local health sectors as a result of households being warmer in their homes, and fewer excess winter deaths.

Alexandra Willey: I would agree with my colleague about the take-up to some extent as well: who, why, when, from whom the take-up is taking place and how long that lasts at each level of the journey, if there is any drop out at all. For us it is definitely whether the actual savings are made and, if not, why not? So much of the image and customer satisfaction will be based on, "Well, we thought we were going to get these savings" and for us what we are finding with our study is not only are the savings quite hard to pin down-there might have been a milder winter, people might be on direct debits so if they are saving they might not know-but also we are starting to find that actually SAP does over-predict in some instances and it is certainly not consistent. If that is going to be the case, we need to understand how to refine the model so that it does work better, and even refine the marketing so perhaps it is not just about the savings.

John Sinfield: Absolutely, it is about take-up. There is an aspiration to deliver 14 million property retrofits over the next eight years and it is about seeing a nice, steady growth towards a trajectory that will deliver those retrofits. It is about the whole house retrofit, not just cherry-picking the bits and pieces. If we are going to address the issue of energy efficiency in our housing stock, we have to deal with the whole house retrofit.

Q2 Chair: Do you anticipate any negative outcomes, obviously unintended negative outcomes, and will it be easy to monitor whether we are getting problems as well as advantages?

Alexandra Willey: Certainly, what we have found from our studies is, in some instances, issues with condensation and inappropriate use of ventilation. Once you have made a house warmer, it is not just about explaining to residents how to live in an energy efficient home but actually to live in a retrofitted home can be slightly different. There do appear to be some mechanisms in place to address this, for example, the requirements in the Code of Practice to ensure no adverse issues associated with ventilation. It will be possible to report on such things under the Green Deal provider reporting requirements, but I think a great deal more monitoring will have to take place, perhaps with some consumer organisations, such as Which?, Consumer Focus, to see what sort of queries go to the energy advice helpline.

Peter Smith: From our perspective, it depends on how households access the scheme or which bit of the scheme. If households who are eligible receive support through the Affordable Warmth element of the Energy Company Obligation, then they should be able to get measures upfront without having to enter into a Green Deal finance arrangement and, therefore, mitigate some of the risk associated with that mechanism, a mechanism that the Government concede themselves is inappropriate for low usage households. In instances where a household has lower usage than typically, the occupancy assessment might suggest there is a risk that households are on the wrong side of the golden rule, and they could run into arrears and ultimately, sadly, disconnection from supply. So it is important that households access the right bit of the scheme.

John Sinfield: From a manufacturing and supply chain perspective, then, as an industry we have done a huge amount of work on developing systems and working with bodies to ensure that the training, the installation, the accreditation of systems is robust but, as Alexandra says, you cannot factor in every element of the human behaviour in a property. That has to change. Once a house has been retrofitted, people have to treat their properties differently. As an industry, that is an element that we need to work with Government to address.

Simon Gordon: On the human side in particular, and obviously in the private rented sector, because this is all going to be caught up in the relationship between landlord and tenant, we need to know-slightly echoing Peter or supporting what he said-why things do not take place, why the Green Deal is implemented, why things go wrong, why people back off from it. Is it that the tenant was not willing to consent to the Green Deal? Is it there is a poor credit rating for the tenant? Is it that there is a poor credit rating for the landlord? Is it that there is something to do with planning regulations or building regulations? We need to be absolutely certain about all this, to gather information to make certain that the scheme is properly implemented in the private rented sector.

Alexandra Willey: To add a slightly more positive note as well, I think unintended consequences could be positive. It is important to understand whether people who have taken up the Green Deal are reporting increased warmth, increased comfort and even increased value in their property or increased pride in their property.

Q3 Sir Robert Smith: I had better remind the Committee of my interest in the Register of Members’ Interests relevant to this inquiry: one is an oil and gas interest, a shareholding in Shell, and the other is that I own rented property. I also have a non-financial interest as honorary Vice President of Energy Action Scotland. DECC plans to track regularly the number of Green Deal plans taking place. Will this be an important indicator or is it too early in the process?

Peter Smith: Certainly, from a fuel poverty perspective, there is no requirement to take up the Green Deal plan to access the Energy Company Obligation, which is the primary way in which we hope low income and vulnerable households would access the energy efficiency improvements under the scheme.

Alexandra Willey: Certainly it would be important for us to know how many people take those up, but, as I said at the beginning, it is the why, when, and who is taking it up that would be really of interest to us.

Simon Gordon: Again, it is important, yes, but I agree with Alexandra.

John Sinfield: It is a good measure but it is a very top line measure. We need to understand where the finance is coming from, how much of that is financed, how much of that relates to the ECO subsidy, and what types of measures are being taken out. Are we getting the whole house retrofit that the scheme is designed to deliver?

Q4 Sir Robert Smith: The Future Fit project had a drop-out rate of 23%. Were you able to work out the reasons for that?

Alexandra Willey: Sure. They were reasonably varied and, because there was no payment mechanism attached to Future Fit, it was self-funded by the organisation. It ranged from health issues, moving out, moving to a different house, family problems, perhaps they were having more family members to stay, and then simply time and the perceived disruption.

Peter Smith: Returning to your question about Green Deal plans and the numbers, one of the requirements set by DECC is that if the assessor is aware that the householder consumes less energy or does not consume enough energy and, therefore, might not be able to make the savings, then they are supposed to seek written acknowledgement from the householder that that is the case. We would be very interested in noting instances of Green Deal plans where that acknowledgement has been sought or given and, therefore, tracking those households to make sure that they do not run into arrears or, as I said earlier, possible disconnection.

Alexandra Willey: I know transparency of costs is always a challenge within industry, but it was really important for us to understand how much it cost to keep people engaged and to make sure they did not drop out once they had taken up the plan. For us, it was up to £1,300 a property in order to do that. That was with our pre-existing engagement mechanisms, but I think it would be really interesting to find out how much engagement it requires of organisations to keep people on that plan.

Q5 Ian Lavery: DECC says that one of the objectives of the Green Deal is job creation, in particular in the insulation industry. My question is to Mr Sinfield. I believe that the Insulation Industry Forum, which you represent, recently suggested that because of DECC policy there has been a loss of perhaps up to 1,700 jobs in the industry. Do you think that these job losses will be mitigated by the Green Deal?

John Sinfield: Certainly, DECC’s view is that those job losses will be mitigated by the Green Deal. Our concern as an industry is that, as we sit here today, there are nearly 4,400 people who have lost their jobs because of the gap and the lack of transition between the schemes that ran to the end of last year-the CERT and the CESP scheme-and the Green Deal kicking off. DECC’s contention is, because solid wall is more labour intensive than loft and cavity and other more simple measures, that jobs will grow. Our concern is that the delivery infrastructure is being dismantled. Companies are closing down; people are losing their jobs because there is no viable transition between the schemes. We are waiting for the Green Deal to take off, and those companies do not have a visibility and a pipeline to allow them to retrain, re-skill and develop the new business model for delivery of the solid wall systems that we have all been developing.

Peter Smith: To add to that, it is not just CERT and CESP. It is also the Warm Front Scheme, which, as I am sure you are aware, provided low income and vulnerable households with insulation improvements through a Treasury-funded scheme that closed in January, with the consequence that some contractors-especially heating contractors-are going out of business at the moment. If you look at the provision for support for heating measures for low income and vulnerable households through the Energy Company Obligation, I believe it is restricted to two elements of the programme: the Affordable Warmth bit of the programme and potentially the carbon saving communities’ bit of the programme. We are particularly worried about heating contractors and the provision of heating measures, specifically in off-gas grid properties as well, where the cost to install a heating system is considerably higher than for those on gas.

Q6 Ian Lavery: The estimates from DECC in June last year suggest that the Green Deal could lead to an increase in the number of installers from 4,700 in 2007 to approximately 9,800 by 2015, with a knock-on effect-and I am sorry to bamboozle you with figures but it is really important-of roughly between 29,000 and 50,000 jobs by 2015. More recently, it has been suggested that up to 60,000 jobs could be created by the Green Deal by 2015. A lot of figures, a lot of differences and a lot of variances. Do you think these estimates are anywhere like being realistic?

John Sinfield: They could be, but then this is the same policy that 18 months ago was going to deliver 250,000 jobs. The number of jobs that are going to be created through the Green Deal has continually been revised down. It is a range. It is an estimate based on the analysis of the DECC economists. I can only speak to what is happening in reality on the ground, and our view is that today people are losing their jobs because there is a gap between the Green Deal starting and the old schemes finishing, including Warm Front certainly.

Q7 Ian Lavery: Do you think that 60,000 jobs come 2015 is realistic, 60,000 new jobs because of Green Deal?

John Sinfield: Sixty thousand new jobs because of Green Deal? I think that would be a challenging target to achieve.

Q8 Ian Lavery: Would you like to give a prediction?

John Sinfield: No, I wouldn’t.

Peter Smith: Certainly, modelling undertaken to support the energy bill revolution campaign, which advocates the hypothecation of carbon taxes back into more ambition on energy efficiency, showed that there is a great potential for jobs and contractors’ jobs in the energy efficiency industry if the Government put adequate resource into those programmes. I think it showed that the biggest stimulus that the Government could undertake at the moment is a big retrofit of energy efficiency across the country.

Q9 Ian Lavery: On the energy efficiency industry, how important is it to monitor the number of insulation installers and other professionals in that industry and how best do you think that could be achieved?

John Sinfield: As it is one of the key drivers behind the policy, I think it is very important to measure and monitor those numbers. We have achieved it through utilising some of the trade associations, which cover the vast majority of the installer base, through regular email questionnaires, and I am sure those trade associations would be more than happy to collect that information on behalf of the Committee.

Q10 Ian Lavery: Ms Willey, you have suggested that there is a gap in the knowledge and skills in the energy efficiency retrofit industry and in the supply chain. Would you like to give a little bit more detail briefly on that issue?

Alexandra Willey: Yes. When we carried out Future Fit, it was before the Green Deal consultation had come out and any of the framework had been put into place. We found from using our own in-house training facilities and some energy consultancy advice, existing supply chains in the social housing sector-so that was our existing contractors, our own surveyors-that there was definitely a gap between traditional surveying methods and energy efficiency surveying methods. I think a lot has been done around that, and I know there is an awful lot of training now required in order to become certificated as a Green Deal assessor, for example, and also that there are different levels of training all the way down the line.

That said, as an assessment tool I think SAP is still something that we would perhaps stress needs a bit more work around and understanding of, and also the combination of the public-facing role and the technical skills required to carry out the assessment now have to be combined within an assessor. Again, that is something that we found has never necessarily been combined within our industry. We might have had a resident liaison officer or a housing officer who would carry out the face-to-face interaction with the resident, say, around occupancy, and it would be the surveyor who would carry out the technicals. So we would be very interested to understand how those two skill sets have been merged.

Peter Smith: One other point on who is capturing the jobs information and the economic opportunity around Green Deal, or energy efficiency generally, we think local authorities have a key role to play, in terms of capturing the wider jobs aspect of energy efficiency retrofits. So, as well as installing the insulation itself, there is a requirement to go and put-I don’t know-aerials back on the side of buildings and paint them. There is a wider set of opportunities for perhaps lower skilled work, which sit alongside extensive energy efficiency jobs, which we think local authorities could capture quite neatly through their reporting on HECA. Similarly, local enterprise partnerships, LEPs, could also track the extent of job creation and opportunities around energy efficiency as well.

Q11 Ian Lavery: Mr Sinfield, do you agree that there is a lack of knowledge and skills in the industry? I think you have suggested that there is. Is there any evidence that the lack of this knowledge and skills is being filled anywhere?

John Sinfield: No, I agree with Alexandra. It is about a different skill set. It is a very different skill set to go in and do a full Green Deal assessment, and to talk to people about their own personal energy use habits, than it is to go and do a relatively simple survey of a property to see whether or not they can have, for example, a loft or cavity wall installed. It is a completely different skill set. The industry is ready to retrain and wants to retrain. The question is how we bridge the gap between where we are and where we need to be.

Q12 Mr Lilley: When you talk about these job figures, you are talking about gross jobs, aren’t you? You are not making any allowance for the fact that the £100 million that, say, is spent on a given programme in insulation could or would have been spent on £100 million of something else in the economy. You are not netting off the jobs lost by diverting demand to this industry, are you?

Peter Smith: I am aware of the issue that you are flagging up. Certainly, it is one that persists, in terms of the debate about the transition to the low-carbon economy and the opportunities arising from that. From my perspective, I think it is probably best to ask the Department, whose impact assessments I base my numbers on.

Q13 Mr Lilley: You have no reason to suppose that £100 million spent on insulation creates more jobs than £100 million spent elsewhere in the economy?

Peter Smith: I do. The evidence that I was flagging up earlier, which Cambridge Econometrics have produced, suggests that in contrast to other interventions by Government, particularly a VAT cut or a road-building programme, the net effect of that is more positive compared to investing in energy efficiency or the jobs boost you would see from energy efficiencies.

Q14 Mr Lilley: Why is that? Because they are lower paid jobs?

Peter Smith: Potentially. I think there are a variety of skill levels involved in energy efficiency installations, certainly at a contracting level; but potentially yes.

Q15 Sir Robert Smith: Just remembering some of the central heating scheme installations in Scotland, and some of the disruption to people’s households and the quality of the work, in terms of this Green Deal the work in someone’s house is going to be much more intrusive. The loft insulation can be difficult enough if people have used it for storage, and obviously cavity wall is out of sight and out of mind, apart from the legacy of the World in Action documentary still persisting in some people’s minds that it might damage their house. Solid wall insulation must involve much more customer-facing skills in terms of the finished product. Is that going to be a challenge?

John Sinfield: It will be a challenge, but it is a challenge that the industry wants to take on because, if you look at the housing stock, there will come a time when the last cavity is filled and the last loft is topped up. We have to address the row after row of Victorian terraces. I think something like 60% of the properties we will have in 2050 have already been built, so we have to address the existing housing stock. We stand ready to learn and to re-skill ourselves, and to develop the systems that are needed to bring forward that change.

Simon Gordon: For the private rented sector, Sir Robert, the disruption is avoided if, of course, the work is carried out during a void between one tenant leaving and another tenant arriving. The work could be carried out under the ECO scheme, but, as the Committee may be aware, there is a problem now developing about whether private landlords can actually use the ECO scheme. I can develop this now or later on.

Sir Robert Smith: I think it comes up later.

Q16 John Robertson: The group of questions I have are mostly to you, Peter. It is on fuel poverty in general. You pointed out that, although some fuel poor households may not be able to benefit from ECO measures, they will be paying a contribution towards the ECO in their bills and, therefore, may end up subsidising the ECO measures in the better-off households. Do you think ECO will turn out to be a regressive policy or an effective method of reducing fuel poverty?

Peter Smith: The key thing there is to monitor the extent of extensive measures in hard-to-treat properties that are inhabited by low income households. The biggest proportion of ECO is the £760 million a year that will be spent on carbon saving. In their impact assessment, the Government flagged that that is more likely to support more affluent households that use more energy because they are able to bring more Green Deal to bear and, therefore, do the jobs in a more cost-effective way. Our concern is that, if low income and vulnerable householders do not benefit from that bit of the programme, then the overall effects would be regressive.

Q17 John Robertson: Yes. I have had my loft done. I also have a number of multi-storey buildings in my constituency, which are basically concrete blocks. What do they get when we are dealing with ECO? How do we help them?

Peter Smith: I don’t know if Affinity Sutton wants to comment because they have high-rise stock, but largely the work would be external cladding on the outside of the building or connection to a district heating network. Both of those might present challenges within ECO, in terms of the various uplifts that the suppliers will get for those programmes. Those tower blocks that are not in a carbon saving communities area may particularly struggle, so at the moment we are looking in terms of how you can lever in other finance, other capital contributions into those types of programmes. I would be happy to speak to you about our thoughts around that.

Q18 John Robertson: Do you want to say anything about that?

Alexandra Willey: I would add, yes, that social housing providers being excluded from the Affordable Warmth element of ECO is obviously something we are lobbying against, for many reasons but one of the main ones being-as Peter has said-it does exclude people who are effectively paying for ECO accessing any of it. Although the argument is that the social housing sector has better performing stock, fuel poverty has always been based upon not just the performance of the property but the income of the household as well. Even though we do have an average SAP of 69, which is higher than the UK average, not many of our properties are SAP80, which is allegedly what it takes to preclude people from fuel poverty.

Q19 John Robertson: What indicators do you think would help to monitor the effect of the Green Deal and ECO on fuel poverty?

Peter Smith: I certainly think getting to grips early on with the numbers on a monthly basis. Ofgem have said that they will report to the Secretary of State on a monthly basis on ECO, so within that update we think there should be a monthly indication of how many households are benefiting under Affordable Warmth, how many households are benefiting through the Carbon Saving Community Obligation, how many low income and vulnerable households have been provided with the extensive measures in hard-to-treat properties. Those types of figures will help us ascertain early on whether or not there is a gap in provision and that low income households are getting left behind.

John Sinfield: That also highlights one of the key measures that I believe the Committee should be looking at, which is the price of carbon within the ECO scheme. If the price of carbon within the ECO scheme is low, that means the ECO scheme is operating effectively and measures in carbon and energy savings are being delivered at the lowest possible cost to all bill payers.

Peter Smith: One quick other point, just to come back to HECA and local authorities’ responsibility under the guidance of HECA. Every two years local authorities are supposed to report their contribution to the Government’s Green Deal and Energy Company Obligation programmes. Through that, there is a way of ensuring that we are tracking the success of the programme from a low income and vulnerable households’ perspective.

Q20 John Robertson: How can you direct them towards ECO, these vulnerable and low paid people?

Peter Smith: We support the Government’s recent views expressed in a consultation about the consumer landscape, where it advocates that there should be locally based energy advisers who are able to provide advice, not only about energy efficiency but fuel debt advice, benefit entitlement checks, and try to get that integration of a range of issues that are important to low income and vulnerable households, to try to combine that with the provision of energy efficiency and do that very much at a local level. If you do that, then they have a supportive ally who is not motivated by money, whose interests are the tenant or the householder. We think that that is a very-

Q21 John Robertson: You are on record as saying that the annual expenditure on heating and insulation programmes for fuel poor households should be reduced from the £1.1 billion, which includes the Warm Front community energy saving programmes, carbon emissions, and so on. How are you going to do that? What should DECC do to achieve this?

Peter Smith: We did not say we would reduce it. We said that, sadly, it is reducing by about a half. We believe that the Government should recognise the legitimate use of tax-funded support for energy efficiency for low income and vulnerable households, so they could review their decision to close the Warm Front Scheme. They could provide an ongoing fund as opposed to non-recurrent funding for local authorities to support the Green Deal and ECO. Absolutely, they should recycle the carbon tax associated with the carbon floor price into an ambitious energy efficiency programme.

Q22 John Robertson: Mr Gordon, just so you are not left out, private lettings and residential landlords have a bad name, and they have not done what they are supposed to have done in relation to the upkeep of homes. How do you get these people on board to sign on to this?

Simon Gordon: Obviously, Mr Robertson, I dispute some of what you say. I would accept that the sector-

John Robertson: I did not say everyone, but in general there is a bad name.

Simon Gordon: There was a slight sweeping statement there.

John Robertson: Everybody laughs when you say that.

Simon Gordon: We would accept-in fact, I was in a meeting only yesterday on universal credit where we were discussing this-that the sector does not have the best of reputations, of course. It is still bedevilled with the image of Rigsby and Rising Damp, unfortunately. That, of course, was meant to be amusing. The RLA would take the view that the time has come for the gloves to come off and we should no longer refer to "rogue landlords". We should actually refer to "criminal landlords" and they should be driven out of the sector by local authorities using the powers that they have.

That being said, on your specific question, the overwhelming majority of landlords, of course, would want to provide good quality accommodation that is warm, decent, energy efficient and not damp. Energy efficiency helps landlords as much as it helps tenants. Coming back to the first point I made, monitoring is vital for the sector to help drive landlords who, like everybody else, are going to be a little bit slow off the mark-like all sections of the population, like owner-occupiers-into the Green Deal. The sector is the only sector where there is going to be an element of compulsion because, as you will be aware, in 2018 F and G rated properties will not be rentable. Landlords will not be able to rent them out if they are still F and G rated. They have to go into E.

There are two points I would make about that. One is there are constant rumours that the Government may bring that date forward. If there is any intention to bring that date forward the private rented sector must be told. There must be clarity about this. Decisions must be made. The second thing is-and why monitoring is so important to get everybody up to at least an E-if there are thousands of landlords left in F and G, when we get to 2018 the property market will shrink and the housing crisis we have-

Q23 John Robertson: But there is good reason for getting rid of F and G.

Simon Gordon: There are perfectly good reasons, I accept that.

Q24 John Robertson: As I see it, the problem is with the Government’s policy on bedroom tax and people that may have to leave housing and be pushed towards some of the people you represent and others you do not represent. Therefore, there will be a rush to get accommodation without actually looking at the facility obviously.

Simon Gordon: To a certain extent you are taking us into areas that are not directly concerned with this inquiry, but I accept-

John Robertson: If you do not have a house ready, then you will fill it anyway.

Simon Gordon: I accept the challenge. Providers and participants in the Green Deal will probably go to the private rented sector last. Owner-occupiers, the social sector, the public sector, will be much easier to do than the private rented sector because it is more disparate for a start. I think we have to push the providers, the participants, to go to the private rented sector. It has to be properly monitored, so everything is done to encourage landlords to get up to E. That has to be coupled with-what I said earlier-local authorities using their powers to get rid of criminal landlords so that the really bad landlords, who probably have the F and G rating, are not there in the market to swoop on the very people you are talking about.

Q25 Barry Gardiner: Mr Gordon, what you just said about landlords being as recalcitrant as the rest of the population rather belies the figures that came out from ARLA, doesn’t it? ARLA noted that 62% of landlords had responded that they would consider taking out Green Deal, and ARLA suggested that "Landlords’ awareness of the Green Deal far outstrips that of the general public". This idea that you have just come up with, that they in particular need to be incentivised, is in direct conflict with what the Association of Residential Landlords is saying, isn’t it?

Simon Gordon: No, to be fair, Mr Gardiner, what I pointed out was the difficulty if they are not incentivised.

Q26 Barry Gardiner: I think the record will show what was said. Let me ask you another question then. Why should one of your landlords be able to discharge their legal duty to provide a dwelling free from category 1 excess cold hazard under the Housing Health and Safety Rating System by initiating a Green Deal arrangement that would impose a financial burden on what may be a very vulnerable and poor tenant?

Simon Gordon: You are asking a highly technical question. I do not know whether I can entirely answer it in full. The-

Q27 Barry Gardiner: Let me phrase it in less technical and simpler language. The fact is you have a statutory obligation if you are renting a property to have it so that heat can be maintained in it to a certain level.

Simon Gordon: Yes.

Q28 Barry Gardiner: Your landlords will be able to fulfil and discharge that statutory obligation, by getting their tenants to pay for it through the savings that are made through the Green Deal. Do you think that that is fair and equitable?

Simon Gordon: Inevitably, if there are costs to landlords they will pass them on to the tenant. Landlords are business people.

Q29 Barry Gardiner: No, the point here surely is precisely the opposite. The costs are not going to be borne by the landlords. The costs should be borne by the landlords. Under statute they have an obligation to have their property at that level, but the costs will be borne by the tenant-potentially a very poor tenant-who is going to have to pay those costs back in the electricity or gas bill. I am asking you whether you think that that is fair.

Simon Gordon: It may not be fair, but that is the way the scheme is designed.

Q30 Barry Gardiner: Thank you. That is very helpful. In that case, Mr Smith, how important is it to monitor the level of Green Deal take-up by tenure type, do you think?

Peter Smith: I think it is important and previous programmes have shown that there are blind spots, in particular the private rented sector. Monitoring it by tenure, but by which element of the scheme households are receiving support in, would be important to address that question, because that might flesh out some of the tensions that you were highlighting in your previous question. Where you have a tenant who feels that their landlord is offsetting their responsibilities on to them-and I think we were discussing this earlier-in some ways it is going to be a very difficult conversation to have with your tenant to say, "You should benefit by this scheme but if you don’t you might get disconnected". It is pretty high risk stuff from the tenant’s point of view.

Q31 Barry Gardiner: How important is it to monitor the extent to which ECO is used to fund energy efficiency improvements in the private sector, social housing and local authority housing sectors?

Peter Smith: I think it is very important. We need to get a feel of where delivery is happening, what is driving that, is it through the guidance that the Government has put in place through HECA, for instance, which is acting as a tool to drive up local authority involvement in the scheme?

Q32 Barry Gardiner: What is going to be the best way of doing it?

Peter Smith: Through taking some of the discretionary elements out of the guidance within HECA, and ensuring that local authorities have to report in a standardised way on their activity on Green Deal and ECO on a yearly basis. At the moment, the guidance for HECA is very much discretionary-you could report on this if you wanted to. Whereas, we believe that it is important to track delivery across all HECA areas appropriately, and that there is a standardised format or template to do that, otherwise you will get a great variety, in terms of the quality of submissions to DECC on those important issues.

Q33 Barry Gardiner: Ms Willey, in terms of the Future Fit programme that you have been engaged in, can you elaborate on the role that you see for the Green Deal and ECO in the social housing sector?

Alexandra Willey: Sure. As I said, I think ECO were excluded from the Affordable Warmth element, but certainly we will actively try to source the carbon saving element for our residents. I think the Green Deal is very much a private sector owner-occupier tool. That is what it has always been posited as. We carried out Future Fit because we knew that the pay-as-you-save mechanism was going to be around, was going to hit us at some stage, and we wanted to understand how we and our residents could best benefit from that. At the moment the Green Deal is not quite right for us as an organisation. I would not like to speak for the whole sector, but the main reason I am here today is to try to find ways that it can be monitored and perhaps even amended, so that it could work for all sectors. At the end of the day, it is a funding mechanism for energy efficiency when they are very few and far between.

Q34 Barry Gardiner: If you were to give us your top two ways in which it could be amended to better serve the social housing sector, what would they be?

Alexandra Willey: It is hard to limit it, but I think there is-

Barry Gardiner: You can always write to us and send us more.

Alexandra Willey: I will.

Barry Gardiner: The Chairman is very strict on time.

Alexandra Willey: If I were to take two, I think there needs to be much more focus around the tenant behaviour. What we are finding is energy usage is quite unique to the individual within a household, so on the occupancy assessment go further than just the three or four bullet points on, "This is how you might be able to save energy". Also, for us at the point of handover to the next tenant-which does happen with us perhaps more than any other sector, apart from perhaps the private rental sector-information in the Green Deal opening statement should not just be financial but, if we are going to set these savings on typical energy usage in homes, people need to understand how to live according to typical energy usage, because that is not typical right across the board.

Peter Smith: One important point about your last point there is that, if households are concerned that there is a Green Deal charge associated with the property, one of the ways that they might think that they are doing themselves a favour is reducing their energy consumption. If that happens in contrast to the energy usage of the previous household, then they are getting into a worse situation. They are reducing their energy consumption. They are reducing the amount of savings that they are making.

Barry Gardiner: It is an extremely important point, particularly within the social rented sector, when you do have a high turnover of people coming through, because those changes in lifestyle will have a very big impact on the prospective savings. There is no such thing as a standard average family. Yes. Thank you.

Q35 Ian Lavery: Looking at the golden rule, which is obviously very important, it states that, "Your expected financial savings must be equal to or greater than the costs attached to the energy bill". I think again Ms Willey has expressed some doubts about the accuracy of the SAP, which is the standard assessment procedure, the measurement system for energy saving. I wonder if you could provide any figures to illustrate these potential inaccuracies.

Alexandra Willey: Unfortunately not. I wish I could because I know they would be very valuable evidence. We are still validating our figures. All I can say is that it appears that certainly in some instances it is over-predicting but, more importantly, it is just not consistent. In every instance it is not matching the projections that were made, so that leaves us with enough anxiety that it would not work. We cannot really have a situation where, on average, even 75% of our residents would benefit and they would work because that still leaves 25% who might be paying more and who could be pushed further into fuel poverty. As soon as we have those figures, we would be very, very happy to share them with you.

Q36 Ian Lavery: I think you have noted that the figures and the methodology have been improved since Future Fit?

Alexandra Willey: Yes.

Q37 Ian Lavery: Do you have any concerns about the updated methodology?

Alexandra Willey: To be quite honest with you, I am not fully in tune with that. I have not seen the most recent methodology. All I have heard is that it is getting a lot better. Effectively, it is a design tool for new build-that is what SAP was built for-and I think trying to make it fit, and make more and more amendments to make it fit to this situation, might not be the best option. But I am not of a technical background so I would not like to comment further.

Q38 Ian Lavery: Does anybody else think it is important that we monitor whether the golden rule is being met? I hope the answer to that is "yes", and the next question would be: how best could this be achieved?

Peter Smith: Absolutely we think it is important to make sure it is being met. I explained the risk earlier that, if you are a household with low energy usage or lower energy usage than a previous occupant who took out the Green Deal, then there is a risk that you might be on the wrong side of the golden rule and, ultimately, that might result in arrears and ultimately disconnection. The body that has oversight of those issues is going to be the fairly complex arrangement between the Energy Ombudsman, the Green Deal Ombudsman, Gemserv, Ofgem, and the Regulated Industries Unit. That landscape will be confusing to people, because it is not absolutely clear how issues, such as not meeting the golden rule, might be unpicked at an oversight or compensatory level. I believe it is the Green Deal Ombudsman that will have responsibility for providing Gemserv with advice about various settlements, if households are on the wrong side of the golden rule or the Green Deal process is not followed religiously. Then Gemserv have to instruct the Secretary of State, and you can see that that is going to cause confusion in terms of process I think.

Alexandra Willey: I think there is an opportunity that has already been flagged in the occupancy assessment, where there is room for a discussion around previous bills. I think that needs to be made more stringent because I think what we are finding from Future Fit is it is incredibly difficult to get that baseline, the before picture, and it is also that people are very unaware of how much energy they use in a home. It is very difficult to nail down and I think there is that opportunity to get the figures from the resident themselves, but I also think there should be a wider obligation with the data transfer service that perhaps it is unclear, certainly to me-and there may be others that have further information on this-whether as well as the amount of energy being used going forward is going to be shared, whether there is any room if consent is acquired for understanding what the previous year’s usage has been and perhaps applying other factors to that.

Peter Smith: Also, we do not know whether or not the Green Deal Ombudsman is going to be publishing figures, in a public way, about the amount of disconnections or arrears-related issues where a Green Deal charge is on the meter. The thinking is very much that arrears with Green Deal will be lumped in with energy arrears, but we will not know potentially the extent of householders that are running into trouble-either in arrears or are disconnected as a result of Green Deal-because of the integration with existing debt problems or fuel debt protocol. So that is an issue.

Q39 Ian Lavery: Are there genuine concerns that there might be a number of people disconnected because of this?

Peter Smith: I think disconnection is going to be a very extreme situation.

Ian Lavery: I would hope so.

Peter Smith: What you might see, as is typically the trend with energy at the moment, is that householders are running into arrears and those arrears are a bit of a millstone around their neck, to be frank. If you are a prepayment customer then you need to pay some of your arrears on a proportionate basis to the amount of energy that you are consuming. Say you buy a £10 top-up card, a certain proportion of that, say £4, will be spent on your arrears leaving you with £6 worth of credit. I think that that is more likely, that you will see householders paying down fuel debt as opposed to being disconnected. That is still a very significant issue for householders, and it takes money out of the local economy because, if they are paying down fuel debt, then they are unlikely to be spending their money in the local shop or on a night out.

Q40 Mr Lilley: How can one ever know whether the golden rule is being met as a result of the Green Deal? Or put another way, how can one ever know that any change in usage of energy in a household is a result of the Green Deal or changes in behaviour? Can one ever know that?

Alexandra Willey: Something we are struggling with at this very moment with Future Fit is to understand what might have resulted in the energy usage in the year following the works, where perhaps it was unexpected. I think there is going to be a real need for some more qualitative assessment of the Green Deal, in terms of customer satisfaction surveys that include things like we are planning on going back to visit all of our Future Fit tenants and take them through a questionnaire of, "Has your life changed significantly in the last year, in terms of has there been some unemployment so you have spent more time at home? Any sickness? Has anybody been living with you who was not living with you before?" There are certain things that have to be understood, so that you can get a picture of whether the golden rule is working as a trend. But I would agree that it is incredibly difficult to pin down specifically.

Q41 Mr Lilley: If you do not know, aren’t you asking for a great leap of faith by householders and tenants to invest in something where they do not know in advance, and will not even know in retrospect, whether it has been beneficial or not?

Alexandra Willey: Sorry, just to jump in again, I think that is why we have argued about the Green Deal being predicated on the financial mechanism. I appreciate that was necessary in order to get it through legislation and to get a change in approach, but throughout Future Fit we were pushing the comfort and warmth benefits and "You might save money", rather than the focus being on "You will definitely save money" and certainly not, "You will definitely save this much money". That is why we are very keen to monitor what happens in the early stages of the Green Deal, to see if people are still happy, even if they have not necessarily saved the right amount, and there are other benefits that could be used to market it.

Peter Smith: It comes back to this: "You are better off than you would otherwise have been" and I think that is going to be a very hard thing for consumers to wrestle with, especially with a backdrop of energy prices continuing to rise.

John Sinfield: I think it points to the central concern that we have as an industry, which is: what is going to drive demand for the Green Deal? Is it about the theoretical energy savings or is it about improving the quality and energy efficiency of your property? The market, whether it is the financial market, the installation market, the economy, needs volume and it needs volume through the Green Deal to make it a success. The question that we have is: what is going to drive that volume?

Chair: We will have to leave it there as we are out of time, but thank you very much indeed for coming in.

Examination of Witnesses

Witnesses: Rt Hon Gregory Barker MP, Minister of State, Department of Energy and Climate Change, Tracy Vegro, Director of Household Energy Efficiency, Department of Energy and Climate Change, David Thomas, Deputy Director, Green Deal Consumer Demand, Department of Energy and Climate Change, and Chris Nicholls, Economic adviser, Department of Energy and Climate Change, gave evidence.

Q42 Chair: Minister, good morning and welcome back to the Committee. We are delighted to see you again, and your officials. Sorry we are running slightly late. We will aim to wind up just after 11 o’clock. I am sure that is helpful to you and it is certainly helpful to us. We have another meeting on the back of this one. We will not have any long introductions. There has been some research, relatively recently, suggesting only one consumer in five had actually heard of the Green Deal. Do you have any concerns about take-up rates?

Gregory Barker: Sorry, one consumer in what?

Chair: In five.

Gregory Barker: Will what?

Chair: Had heard of the deal.

Gregory Barker: If we have got to one consumer in five after about eight days I would say that is fantastic progress beyond our wildest dreams. What I can tell you is that 42,000 people visited the Green Deal website on the first day that the Green Deal went live, and I am very encouraged by the feedback that we are getting.

Q43 Chair: Have you set internally progressive targets for take-up?

Gregory Barker: No. I think progressive targets are a bit of a waste of time. We know that we have a very large amount of work to do over the next 10 years or more. We can either spend our time hypothecating and making forecasts and targets, or we can actually crack on and work with the private sector. We are now into deployment of the Green Deal. This is a market-based mechanism. There is clearly a role for Government to work in partnership with the private sector, but this is very different from Government monopoly programmes that have preceded it. We need to work with it and spend our time doing helpful things rather than making forecasts that we can almost guarantee will not turn out to be correct.

Q44 Chair: Do you think the up-front assessment fees are going to have any effect on take-up?

Gregory Barker: I am sure they will have an effect on take-up; exactly what that effect will be we will discover over time. We do know that people are already moving. We know that there is a range of different offers and they will continue to develop over the months and years. Obviously, we watch that very closely because people have raised this as an issue. If it were found to be an insuperable barrier to progress then this is something that we would look at with a view to action, but I think, on the basis of the very early responses that we have seen, this does not seem to be a huge barrier and there are actually some companies who are offering assessments without a fee. We will have to see how that market develops. We do not want to skew the market so early on.

Q45 Chair: Will you be monitoring the number of applications that do not go forward to a Green Deal being taken up?

Gregory Barker: It is very difficult to do that very objectively because we do not have access to that information ourselves. As I said, this is a private sector driven proposition so obviously there will be quite a lot of anecdotal evidence. There will be some companies who will want to share their information with us, but, in terms of having a comprehensive data set, which would be sufficiently robust to make a very clear judgment on, we do not have that at the moment. We are less than two weeks into the Green Deal, so it is early days.

Q46 Chair: You have said that you would like to track the extent to which consumer interest is rising.

Gregory Barker: Absolutely, and we will continue and there are different ways in which you can do that. Obviously, modern advertising and research companies have tools that allow you to do that, but what I do not want to do is create a big DECC-centred bureaucracy of doing that.

Q47 Mr Lilley: The answers to the questions I was going to ask may be in this splendid document given to me by my colleague, your impact assessment, but I would just like to know the answers to simple questions: how much is the Green Deal going to cost per annum or over a five-year period; what number of homes you expect to have improved the efficiency of over that period, and what the net benefit per home will be and what the carbon reduction will be? Will I find it all in here if you do not have it in your head?

Tracy Vegro: We have our economist.

Gregory Barker: We have our economist, but all I would say, Mr Lilley, is that is a forecast.

Q48 Mr Lilley: You do not make forecasts.

Gregory Barker: That is an impact assessment, and the one thing I can guarantee you is that all of those numbers will not turn out to be correct. There are huge variabilities. We are creating a new market here, and I do not place a huge amount of faith on anyone’s ability to accurately forecast how a completely new market is going to develop. So poring over an impact assessment that was prepared what, nearly two years ago now?

Chris Nicholls: It was completed in June. The final impact assessment was in June but we started the impact assessment process a couple of years ago.

Mr Lilley: 11 June 2012.

Gregory Barker: Yes, that was when it was finished. That was when it was signed off, but the actual work that was undertaken started when?

Chris Nicholls: Some of the research is 2010.

Gregory Barker: 2010, so it is really quite old data. So the important thing is that we now-

Mr Lilley: I was hoping you would just say "Yes" or "No". So I cannot find it there and you will not tell me now? It is a simple question.

Gregory Barker: If I could finish, the important thing is that we now have real time data. Rather than hypotheses based on abstract assumptions, we are starting to get real time data and, over the coming weeks and months, we will do our best to get real responses from real consumers, real communities, real costings based on real businesses, based on real economic models, rather than a set of assumptions made in 2010 about a future market.

Q49 Mr Lilley: When DECC publishes its estimated impacts of all its policies together, it does have some assumptions about these things, but you will not tell us what they are?

Gregory Barker: We do have assumptions, but what I am saying, Mr Lilley-and I will hand over to my colleague to talk in more detail-is we are now entering a new stage. The assumptions there are very large assumptions based on an entirely new market that we did not have any firm evidence to base it on. It was all very forecast driven. We are now at the start of being able to deal with real live evidence and we can make much more accurate forecasts.

David Thomas: Shall I try to add something to that? The key number in the impact assessment, which is looking forwards March 2015, is 1 million Green Deals. When we talk about that, we talk about Green Deal in the broad sense, i.e. installations involving ECO, installations not involving ECO, people paying for things through Green Deal finance and people not paying through that. That is the number in the impact assessment and that is the number that we have in mind in broad terms. However, as the Minister has said, it is an impact assessment. The key question that it is trying to answer is whether the costs will outweigh the benefits or whether the benefits will outweigh the costs. The very clear answer from the impact assessment is that it is worth proceeding with the Green Deal and ECO policy. The question then is: what will the market actually deliver? As the Minister said, it is a new market. No one is quite sure exactly what the market will deliver. We have a reasonable degree of confidence that it will deliver that. Of course, we will be monitoring what happens in practice. I think some of the more detailed numbers my colleague Chris has to hand.

Chris Nicholls: Yes, I am very happy to run through some of them.

Q50 Mr Lilley: Before we go too far further, I mentioned the impact assessment here. I also mentioned a document you produced called "Estimated Impacts", which are two different things. The estimated impact is the overall impact of all your green environmental policies, which you say will have a net benefit to households as a whole. You are making assumptions about the savings made by the Green Deal, in particular, and ECO, and that they will offset the huge increase in the cost of energy due to the subsidies and costs of moving to higher cost sustainable energy. So you do have-

Gregory Barker: Not exclusively. They are one of the factors.

Q51 Mr Lilley: The other is a bold assumption that products fuelled by electricity will become 27% more efficient. Am I right?

Gregory Barker: I do not have the 27% figure off the top of my head, but you are absolutely right, Mr Lilley, that we are likely to see substantial savings in electricity from an increase in energy efficiency productivity.

Q52 Mr Lilley: They will happen even if we do not do the Green Deal.

Gregory Barker: Yes, there are separate drivers.

Q53 Mr Lilley: Households will never know whether they are benefiting from that 27% improvement in efficiency of their washing machines, and everything else, or whether it is a result of the Green Deal.

Gregory Barker: I think they will, actually.

Q54 Mr Lilley: Given that you do use these estimates, it would be helpful to the Committee if we could know what they are and if we have a little note saying so.

Gregory Barker: I am sure we can give that detail.

Q55 Barry Gardiner: Minister, this is a bit up and down and all over the place, isn’t it, really? Because you are saying, "Yes, of course we made estimates. We made projections, but we do not think any of them are going to hold good". It is all very well to be cavalier in that way and say, "Now we are in a phase where we will begin to get real time information", which all of us will welcome, but the point here is can we then hold the Government to account in a way that says "Yes" or "No", they have or they have not achieved their objective? That is why you do impact assessments. That is why you make these promises. That is why you come out and say, "We do believe it is going to save 2.2 million tonnes of carbon dioxide emissions from burning gas and other heating fuels", which you did. The Association for the Conservation of Energy now says you have now come out and said it is going to be only 0.7 million tonnes of CO2, a 70% reduction. That is a 70% reduction in your own stated emissions reductions from gas and other heating fuels in the space of, what, a year and a half?

Chris Nicholls: Yes.

Q56 Barry Gardiner: So how are we meant to hold you to account? Are we meant to say, "Oh dear, even before they started they had not delivered on their 2.2"? Are we supposed to say, "Well, thank goodness, they have now revised their figures, and presumably sacked the people that gave them the original estimates, because both are before the scheme has actually gone live, and now it is found that it is only 0.7 so we will hold them to account on the 0.7"? Where do we hold you to account here?

Gregory Barker: One of the major reasons is that we overachieved last year on our insulation targets, by substantially improving and amending the totally inadequate insulation scheme that we inherited from the previous Government. Perhaps Mr Nicholls would like to give a bit more detail.

Chris Nicholls: Yes. The original estimate was based on the policy mix that we were expecting when we were initially doing the first impact assessment. That had a greater focus on carbon saving. As the policy has developed, there has been a greater focus towards combating fuel poverty, so the Affordable Warmth element has meant that, as we are trying to help the fuel poor and vulnerable households heat their houses, that will in itself increase some emissions or there will not be such significant reductions in emissions. That is-

Q57 Barry Gardiner: Sorry, I am trying to connect what you are saying, Mr Nicholls, with what the Minister was saying. My question was about a reduction in the estimates of 1.5 million tonnes of CO2.

Chris Nicholls: That is right.

Barry Gardiner: The Minister seemed to imply that that 1.5 million tonnes had been achieved last year, so that we were only going to get 0.7.

Gregory Barker: No, that is not what I said, in fact.

Q58 Barry Gardiner: Oh, sorry, you said that the impact of the wonderful work you had done last year had meant that you had had to revise your projection as to what could be achieved in the future.

Gregory Barker: We overachieved last year.

Barry Gardiner: 1.5 million is the difference, so how do we account for that 1.5 million tonnes?

David Thomas: The numbers always get quite complicated and we can send you a more detailed note. The important thing to bear in mind is when these numbers were prepared and what has changed since. As Mr Nicholls has said, some numbers were produced some years ago. Since then, there was a very open process of consultation that everyone contributed to. The consensus of that consultation was that we should move away from such a strong focus on carbon in increased fuel poverty. There have been various other changes as well. Inevitably, each year-

Q59 Barry Gardiner: Sorry, in your own written submission to us you said, "Potentially saving 4.5 million tonnes of CO2 per year by 2020 through the Green Deal and ECO."

David Thomas: That is correct.

Barry Gardiner: "Saving carbon is the principal objective of the programme."

David Thomas: Exactly.

Gregory Barker: The principal but not the only objective, Mr Gardiner.

Q60 Barry Gardiner: So that objective has been relatively downplayed and fuel poverty has been brought up as an objective?

Gregory Barker: It is a balance, and it is quite possible to have more than one objective.

David Thomas: I just need to clarify on the numbers. The 4.5 figure is still the correct figure. It is our latest figure. It is not a 70% drop on the previous figure; the previous figure that compares to the 4.5 was 5.6, so there has been a fall.

Q61 Barry Gardiner: I was only talking about the emissions from burning gas and other heating fuels, which had gone from 2.2 to 0.7. That was the 1.5 I was talking about, but I accept the other figures that you have said.

Gregory Barker: Could Mr Nicholls explain?

Barry Gardiner: Yes, if Mr Nicholls wants to continue.

Chris Nicholls: As I mentioned, there were two primary aspects to the reduction: the focus towards the fuel poverty and the policy, but also the emerging evidence on the amount of energy savings from solid walls. Over the last year or so, there has been increasing evidence from our statisticians collecting information on costs and the amount of energy it takes to heat Britain’s houses over the last few years. It suggests that solid walls do not save as much energy as suggested in the SAP calculations. So what we have done is we have made some adjustment factors in that calculation, in order to account for what we believe is now a realistic energy saving from solid wall insulation.

Gregory Barker: I would expect those figures to continue to evolve, as both product standards improve as well as our understanding of how they react in real time grows, because solid wall is a very small measure.

Q62 Barry Gardiner: I am sure we will develop further clarity as it goes on. If I may just develop that line, Peter, and I am sure you will weigh in in due course. The difficulty is getting these specific individual targets. Are you going to publish those? Are you going to set out, as you were saying for solid walls, "We believe we can attain this much saving" for different elements of the scheme?

Gregory Barker: I am trying to resist micromanaging, if that is what you are suggesting.

Q63 Barry Gardiner: It is not micromanaging. It is allowing us to hold you to account, isn’t it?

Gregory Barker: But you are familiar with the market, Mr Gardiner. We are not Gosplan. This is not some huge micromanaged Government scheme where we will be having a desk in DECC that works out how much Mrs Bloggs’ insulation should be. By and large, this is going to be delivered by the private sector through a variety of delivery agents, without any form of state funding, all done through a framework established by law but which is primarily driven by the market. We want to drive innovation, we want to drive consumer choice but this is not a Government programme in the way that Warm Front was.

Q64 Barry Gardiner: No. But you do want to save 450 million tonnes of CO2. That is your primary objective.

Gregory Barker: We do, but we are not going to do it by micromanaging it. We are going to do it by primarily unleashing the market.

Q65 Barry Gardiner: I am not talking about micromanaging. Mr Nicholls was extremely helpful. He laid out the fact that revisions in the technological assessment had meant that there had been a variation to the amount of saving of emissions that you thought you would get from solid wall insulation. Fair point. I understand that leads you to revise the figures. But, unless you are transparent about this, unless you are prepared to let us know what each of these different areas is expected to achieve to make up the 450 million, it is much more difficult for the public and for Parliament to hold the Government to account for what it purports to be doing. That is why I want it.

But if I can go to another element of, sort of, shifting on the scheme? Minister, I have a very helpful letter from you setting out the basis of the Green Deal, dated December last year, in which you say, "There are a number of important consumer protections, which will be embedded into the Green Deal: the savings will always be greater than the costs". I know you probably were not here when Mr Lilley questioned our previous witnesses, but he was very strong on this point. I also have your response to the shadow Secretary of State when she asked, "If he will take steps to ensure that customers are not charged more for the home improvements under the Green Deal than they save in cheaper energy bills". To which you said-in direct contrast to the notion that savings will always be greater than the cost-"It is not possible for a Government to guarantee people will save money". This does go to the heart of the questions that people have been putting to the Green Deal for quite a long time now, about whether the cost of the deal will save them money.

Gregory Barker: No, Mr Gardiner, what this goes down to is people deliberately trying to dissemble, in order to make out that there is no difference between a projected cost and a guarantee. A guarantee has a financial cost. If you want to guarantee savings-guarantee in the full sense of the word-that will have a financial cost, and that will mean higher bills or it will mean lower impacts. But there is a difference between saying a model should project under the golden rule that the savings will be greater than the financing. That is different to a guarantee.

Q66 Barry Gardiner: Of course it is. Do you consider, Minister, that the constituent who received your letter, which said, "There are a number of important consumer protections, which will be embedded in the Green Deal, number one, the savings will always be greater than the cost" was being given a financial protection, or do you think that that constituent will believe that they had been given a guarantee by the Government Minister that the savings will always be greater than the costs?

Gregory Barker: They were not being given a guarantee. What they were being told is that the basis on which their assessment will be given is that, on a like for like basis, the projection of savings should always be-and we insist upon it-greater than the financing cost. But that is not the same as a guarantee.

Q67 Barry Gardiner: Minister, I know that and you know that because we have read the small print, but that is not what that says to that constituent.

Gregory Barker: No, but that is also made explicitly clear in the Green Deal assessment. If there is any case where consumers have been mis-sold products, where products have been inappropriately sold because, under any reasonable use or any reasonable expectation, they do not deliver the savings that were suggested in the assessment, then they will have full consumer redress. We have gone to great lengths to make sure that the Green Deal does have very strong consumer safeguards. That is why this morning, Martin Lewis of, possibly one of Britain’s most trusted independent consumer champions-do we have the quote there?

Tracy Vegro: I think he said it is a good deal for consumers.

Gregory Barker: Yes, he spoke out very strongly in favour of the Green Deal and-

Tracy Vegro: And the highest consumer protections that have been afforded, I think he said.

Gregory Barker: -the very strong consumer protections. But to try to pretend that is somehow saying a guarantee is the same as a projection, and that there is not some sensible common-sense user obligation-

Q68 Barry Gardiner: I have never pretended that. I have always been saying exactly the opposite. It is your letter that I believe pretends that, because it says quite clearly, "The savings will always be greater than the cost". There is not an asterisk. There is not a footnote. There is not a small print. Not in that letter.

Gregory Barker: I would agree. If we missed out the words "projected" savings, I agree with you that would be an improvement. But we have always been absolutely consistent. That is why Martin Lewis of said, "From a purely financial perspective, provided the work qualified for full financing, it seems a good bet for those keen to improve their homes who cannot afford to shell out for major improvements". He also recommends that it is a myth that the interest rate is too high and also a myth that there is not strong consumer protection.

Mr Gardiner, what I would say is that everybody doing a Green Deal will not be doing so on the basis of a letter from me. They will be doing so on the basis of a professional, independent assessment, from someone who is professionally qualified and who will be able to give them an assessment based on the unique qualities of their home.

Q69 Barry Gardiner: And the projected usage?

Gregory Barker: And the projected usage thereof, yes.

Q70 Barry Gardiner: Minister, earlier in our session I asked Simon Gordon from the RLA-who is still with us-why it should be that one of their landlords might be able to discharge their legal duty to provide a dwelling free from category 1 excess cold hazard, under the Housing Health and Safety Rating System, by initiating the Green Deal arrangement that would put a financial burden on a potentially poor and vulnerable tenant. I asked him whether he thought that was fair. His response was, "It may not be fair but that is the way the scheme is designed". Do you agree with him?

Gregory Barker: No, I wouldn’t. I do not agree with your suggestion that it is imposing a financial burden. The whole premise of the Green Deal-as we have just been batting, back and forth-is that the projected savings should be greater than the cost of finance, otherwise it is not going to meet the golden rule. The savings are greatest where the need is greatest. For the coldest homes, for the most poorly insulated, for the sort of homes that you are alluding to, Mr Gardiner, those are the very homes where the savings are clearest and where the occupant can benefit most.

Where it is most marginal is in the better insulated homes, in those where the incremental improvements are a lot less. But if you are talking about very poorly insulated homes-as you must be in order to fit that category-the majority of Green Deal measures would very likely offer significant savings above and beyond the financing. In no way are you imposing a financial burden. It is a novel way of financing it. As you know, successive Governments, which either you served in or which Mr Lilley served in, have failed to deal with this problem and have bequeathed a building stock to 21st century Britain that is totally unfit for purpose.

Q71 Barry Gardiner: I have let you have your say. Let’s now just come back to two points. One would be that, of course, the projected savings for the family that might initially occupy that property might be substantial. It might have a number of people in that property but, over time, particularly in the private rented sector-and you know that the churn is very considerable-one of the problems, therefore, is that the usage cannot be projected on a long-term basis on the basis of the initial tenant. Those savings will vary. In fact they may not be achieved, particularly in the situation where you might go from more to fewer occupants in that property. That is one point.

Gregory Barker: If I could just respond to that, because that is a very valid point and it is something that we take great care to incorporate into our thinking. As a result, there is a need for two assessments-one that projects forward the use under the occupants and the second is typical usage. If you are going to put a family of five into a one bedroom flat, who stay at home all day, that will perhaps give a rather distorted view of the savings that are available. But alongside that, equally they will also say, "The typical usage would also be this" and that will have to take into account the golden rule. Obviously it goes the other way, if you have a five bedroom family home-well, not a five bedroom home, perhaps that is a slightly wild example-or a three bedroom family home that is occupied by a couple and three children, and perhaps you have young children in the house and a stay-at-home parent, you will get a different energy profile than if you have that house subsequently occupied by a single person who is out at work, clearly. But that person will know before moving in. There is full disclosure. They will know whether or not there are any financing charges, and will be able to know the rating of that home. They will be able to take a view, in exactly the same way that people say, "Well, I am not going to move into that house because the Council Tax is too high" or, "I am not going to move into that house because the rent is too high", so there will be opportunities.

Q72 Barry Gardiner: Minister, in a perfectly functioning market, that would be a perfectly satisfactory answer. But it is not a perfectly functioning market, as you well know. The housing market-and particularly the private rented sector-is a market that is driven by compulsion, which is driven by shortage and therefore it is often the case-

Gregory Barker: I don’t know about "driven by compulsion".

Barry Gardiner: The exigencies of life I was talking about, not by you or me standing over somebody. People find themselves with a shortage of properties and, therefore, they are often forced to take deals that in a perfectly functioning market they would not take. That would be my response.

David Thomas: If I may, as the Minister said, that is why we thought about this very carefully during the design of the policy. That is why the golden rule is predicated on the typical savings to the property, not the actual people who are in it at the time. So if, in the examples the Minister described, you have lots of people crowded into a small home or the other way round, that will not influence the golden rule. The golden rule is based on the typical usage in the property. Therefore that is a core protection.

Q73 Barry Gardiner: It is a protection in one direction. I think you have accepted the principle that the typical usage may subsequently not be the actual usage.

I now want to get to the second point, and that is that here is a situation-and we are not talking about typical usage, we are talking about actual usage-where somebody is going to find that they are paying more than they should. They are not achieving the savings that were predicted for them. Let me put it that way. The fundamental point here is surely this. The landlord has a statutory duty to get that property up to the proper standard in the first place. Why is the tenant paying for this at all?

Gregory Barker: This is not a bypass for landlords’ statutory duties.

Q74 Barry Gardiner: Well, it is. It is a way of a landlord meeting their statutory duty. Through the Green Deal they can install all the measures that they need to bring the property up to that level, and then happily transfer all the burden of it on to the tenants.

Tracy Vegro: I suppose the principle, though, Mr Gardiner, is around the up-front cost of capital is stopping landlords doing that. As we have said, the golden rule is set relatively conservatively, it does not allow for inflation and energy prices and so on. Over time, if the tenant were coming in the very next day, and of course we might have to expect that, all the calculations we did-my economist colleague will correct me if I am wrong-absolutely tried to factor that in. In certain terms of the law on landlords, we are working with a big working group now about how we will go on to do the PRS regulations.

Q75 Barry Gardiner: Ms Vegro, tell me this, is it possible for a landlord to fulfil their statutory obligation-

Gregory Barker: Which statutory obligation are you talking about, Mr Gardiner?

Barry Gardiner: The statutory obligation, "To provide a dwelling free from a category 1 excess cold hazard under the Housing Health and Safety Rating System".

Gregory Barker: How long has that been in force?

Barry Gardiner: I have no idea.

Gregory Barker: It is rather germane to the question.

Barry Gardiner: It is not actually. The point is a landlord can put a property on the market-

Gregory Barker: But it is very germane. If that is a new obligation on landlords, then you would have more of a point. If it is something that has been sitting on the statute book for years and has been observed in a breach, then this is a response to that. I would press you, Mr Gardiner, to tell me: when did that statute on which you are basing your case go on the statute books?

Chair: We may be able to find that information in the next few minutes, so we will come back to that.

Gregory Barker: A bit like Labour’s fuel poverty legislation that promised to abolish fuel poverty.

Q76 Barry Gardiner: I am not here to trade political insults with you. Mr Barker.

Gregory Barker: I am saying it is all relative.

Q77 Barry Gardiner: What I am asking you about is somebody with a property, which may be a rundown property, which has not been used for many years, that they then put on to the market in the private rented sector, and they can use the Green Deal to fulfil their statutory obligation to raise it up to a reasonable, habitable level. In fact, instead of them paying to do that, it would be the tenant who then comes into that property who would then be paying for the costs. Is that possible?

Gregory Barker: It is possible, but of course the fact of the matter is, if they did not do it through the Green Deal, the likelihood would be the landlord would simply recoup the cost of doing that through raising the rent.

Q78 Mr Lilley: No.

Gregory Barker: No, they would not do that by raising the rent.

Q79 Mr Lilley: Unless the market pays a higher rent for an improved property. It will be assessed by the market not by the landlord.

Gregory Barker: If this is a statutory obligation, which is universally imposed upon the entire market, then it would expect the whole market to price that into the rent and move up.

Q80 Mr Lilley: The whole market.

Gregory Barker: Which it is, particularly under-

Q81 Barry Gardiner: In a perfect market, Minister.

Gregory Barker: You just told me, Mr Gardiner, that it is not a perfect market. There is a property shortage. So if there is a property shortage, and there is an universal obligation, I would expect market rents to move up. You cannot have it both ways.

Q82 Barry Gardiner: Apparently the statute came in the Housing Act in 2004. It is immaterial to the question of whether somebody can put a property on to the market in the way that we suggested, and you have acknowledged this.

Gregory Barker: This is another example of Government passing legislation that has proven to fail to make a difference, because it has been in place for eight years.

Barry Gardiner: Minister, if you think about the example I was putting to you, the example I was putting to you was somebody who brought a property on to the market. Not somebody who was already on the market. That is the example I put to you, that is the question that I asked you, and that is why the date of the regulation itself was not material. Your own officials and you yourself have accepted it is quite possible that somebody could bring a property into use, into the private rented sector as a landlord, and fulfil their statutory obligation by means of the Green Deal.

Chair: We are going to have to move on.

Q83 Mr Lilley: First of all, I would hate you to get the impression from my colleague that I am against this policy. It is almost the only policy of DECC that I am not against. But I have a puzzle, and that is how can one tell for any individual property afterwards that it has worked? How can one tell that the change or lack of change of energy consumption in that property is due to the failure of the insulation? How would you ever know?

Gregory Barker: You are absolutely right. Because of behavioural change and because of impacts of externalities-like the weather, for example-it is more difficult, but it is predicated on like for like usage. The BRE and the Centre for Carbon Measurement rigorously test all products before they can become Green Deal accredited, so far as is possible, to ensure that they deliver.

Tracy Vegro: Minister, if I may, for the Energy Companies Obligation Ofgem are going to have to monitor the carbon saving estimates, and there is a set process for that. That is one of the things where the data monitoring should be better under the new programme because-

Q84 Mr Lilley: But not house by house.

Tracy Vegro: No, but some of it will be on an area basis, so there are lots of levels. It is still to be decided at how frequently we report on some of this and how much we put into the public domain, because obviously the Office for National Statistics protocols and things will apply. Relatively there should be a lot more transparency. One of the other things we picked up, last year there was an Office of Fair Trading report into the insulation sector about how very few of the savings did materialise because work was not always done to the appropriate standard. Again, anything that is going to have a Green Deal plan has to be done to the set standard, so people have to be accredited. That should be an additional protection, and obviously the process we have we hope we will never have to use, but that would at least tell us if there were particular breaches or particular products seem to be failing.

Gregory Barker: You are absolutely right that it is difficult to be very precise to ascribe the savings that may come from Green Deal measures versus behaviour change or external impacts, such as the weather with cold winters. But common sense tells you, and experience of meeting people who have had this work done, that it does have an impact. It might be difficult to be absolutely precise, but one can be quite clear that people have measures done, and that is the experience of people I have met in like for like houses who have had these measures put in. You just have to make sure that you get the balance right.

Chris Nicholls: There will be some analysis that we can do at an individual measure level. The information that I mentioned earlier about the information provided by the energy suppliers to DECC, which gives information on each household’s energy consumption over the last few years, we are able to match that to Green Deals taken out and the measures that have been taken out. So we will statistically be able to determine whether, in general, households are saving more money than they would be typically paying, and thus meeting the golden rule.

Chair: I am very sorry we are very short of time. We will have to pursue this in writing. There are a couple more questions that I want to deal with quickly.

Q85 Sir Robert Smith: When you are doing these calculations of carbon savings, will you be able to differentiate between the Green Deal and the ECO funded Green Deals?

Chris Nicholls: I am not sure what information is provided on the distinction between the ECO and the Green Deal from the Landmark information.

Tracy Vegro: We will clarify that. If I am correct, I think the answer is that the Landmark database should help us with that alongside the data that Ministers are directing Ofgem to collect. But we will clarify that later.

Q86 John Robertson: Minister, I am sure you will be pleased that I do not have time to have our usual to and fro conversation. If I could ask you some questions about fuel poverty and on the Energy Company Obligation, which I will call ECO just for the record. How do you respond to the concerns raised by Consumer Focus, Energy Bill Revolution, the IPPR and National Energy Action that the Green Deal and ECO will not be enough to tackle fuel poverty?

Gregory Barker: "Enough to tackle fuel poverty" is quite a challenge because successive Governments-if we are honest, over decades-have not been able to crack fuel poverty. We are very clear that this will mark a distinct improvement on previous schemes, and that it will not only just involve chasing the gas price, which historically has been the main driver of fuel poverty. If you look at the fuel poverty numbers, they have just tracked the rise and fall in wholesale gas prices. By focusing on hard measures to improve the efficiency of the home, this will mean our policy is not just driving fuel poverty for a temporary occupant through subsidising their fuel bill, but will ensure that we are leaving a legacy that means that future tenants will-

Q87 John Robertson: I have a lot of housing that does not fit the bill for ECO. You cannot improve their efficiency because they are concrete blocks, and the amount of money that councils are going to have will be limited. In some cases cladding, which would be nice, will not happen.

Gregory Barker: That is a very real problem that you raise, Mr Robertson. Part of the frustration has been that, despite a lot of money being spent on fuel poverty in recent years, because of the way it has been spent-particularly through one monopoly provider-there has been very little innovation in the insulation sector compared to other sectors. There have been some welcome advances. It has not all been static. But what we are seeing now is that, by opening up the market, we could see a welcome leap forward, so properties that historically have been very problematic to treat, for example, large blocks of flats, are now seeing new products come forward. I was looking at an insulation product, I cannot remember what it is called, but I think Carillion are sponsoring a bespoke treatment for blocks of flats, which in the past would have gone untreated.

Q88 John Robertson: I appreciate that, and I am not attacking Glasgow City Council because I believe they have done more than probably any other council in the country.

Gregory Barker: They can only work with the products in the market.

Q89 John Robertson: They can only work with the money they have, as well, which is a problem. You mentioned something earlier about targets. You do not like targets. You do not want them because you feel it is a false target. But how can we measure the impact of the Green Deal and ECO on fuel poverty and other targets, if we do not have targets to basically call you to book on?

Gregory Barker: We do have obligations to reduce fuel poverty, and obviously the fuel poverty numbers will directly reflect our success. Obviously, they will be influenced not just by the application of the Green Deal and of ECO but also by other externalities, like if gas prices continue to rise or if they fall. It is quite possible that if we get to a point where we can drive down the gas price-through shale, for example-that will have a major impact on fuel poverty, and it would be wrong to be able to claim that all for the Green Deal.

John Robertson: That is another argument.

Gregory Barker: So there are a number of factors that drive fuel poverty, not just insulation. That is why we have asked Professor John Hills to come up with a definition, which we have been consulting on. We will be publishing a new fuel poverty strategy later this year, which will bring all of these different strands together, and it will be the first time that Government has updated the fuel poverty strategy since I think 2001.

Q90 John Robertson: Having a strategy is great, but you have to have a target for the strategy. You have to know where you are going and what you expect to get.

Gregory Barker: Yes, absolutely, and better definition. The key to targets is having a clear definition of what we mean. What we want is fewer targets, so that you have a better chance of meeting them, and a much clearer definition, which allows you to meet those targets more effectively and channel resources more appropriately to the people who need them the most and where they can be most effectively deployed.

Chair: For the avoidance of doubt, we are as keen as you are to see the Green Deal succeed, and the work of this Committee will be directed to try to help you achieve that goal. Thank you very much for your time. There are some issues that I think we are getting clarified now in writing, and there may be one or two additional points as well. I am sorry we have to cut it short. We have someone waiting for us down the corridor. Thank you.

Prepared 21st May 2013