Environment, Food and Rural Affairs CommitteeWritten evidence submitted by Calor Gas Ltd
THE WORK OF THE RCPU, ITS ABILITY TO ACT AS RURAL CHAMPION IN THE HEART OF GOVERNMENT, AND ITS EFFECTIVENESS IN DELIVERING RURAL DEVELOPMENT
Calor welcomes the opportunity to give evidence to The Environment, Food and Rural Affairs Committee regarding the work of the RCPU. Calor Gas Ltd has been delivering rural energy solutions since 1935 and 75% of our business takes place in rural areas off the mains gas network. Over 77 years Calor has developed an in depth understanding of the complexities and unique energy and housing challenges that rural communities and businesses face. Calor wants rural property and business owners to have a strong voice within Government, and for their needs and issues to be taken into account when forming policy across all areas of Government, but particularly within energy and housing policy (primarily within DECC and DCLG). In line with Calor’s business expertise and rural experience, our evidence will focus on energy and housing policy within:
The approach of the Rural Communities Policy Unit
The proposed Rural Policy Statement
1. The Approach of the Rural Communities Policy Unit
With the abolition of the Commission for Rural Communities in 2011, Calor believes that it is essential that a similar body continue to exist to ensure that the rural voice is heard within Government. The CRC was an acknowledged expert in rural affairs, raising awareness of rural needs amongst policy makers and the wider public. Whilst areas of CRC expertise were merged into Government departments, the loss of this independent rural scrutiny body was significant. The establishment of the Rural Communities Policy Unit was essential to ensure that the needs of rural communities continued to be heard within Government. The stated vision of the RCPU is “to provide a centre of rural expertise within Government” and “to advise policy-makers in Whitehall departments on the likelihood and possible scale of rural impacts, and to suggest actions that might be taken to mitigate these.” Calor believes that, to date, the RCPU has been successful in fulfilling this vision and is playing a vital role in ensuring that the countryside is represented within Government and that rural interests and issues are taken into consideration when forming policy.
2. Successfully Engaging With Rural Communities
It is often difficult to successfully engage with, and create effective policy for, rural communities who may be sparsely located, with community boundaries which do not always adhere to Government statistical geographic output areas. Communications channels such as the internet are not as widely available in rural areas as in urban, primarily due to the lack of high speed broadband services. Rural areas tend to contain a higher proportion of elderly people than urban areas—a group who are notoriously difficult to engage with. Furthermore rural communities often suffer from “dormitory syndrome” whereby residents leave the community during the day to work in urban areas, only returning to the community in the evenings and weekends. As such engaging with rural communities from a national or Government level can be challenging, and therefore local knowledge and networks are vital in achieving successful engagement. Calor supports the RCPU’s approach of proactively working with rural representative organisations such as the Rural Community Action Network (RCAN), both at a national level through their umbrella body ACRE and at a local level through the Rural Community Council network. Through our own rural community initiatives, Calor has found that engagement at a local level, utilising existing community networks, is the most effective way to engage with rural communities, and Calor commends the RCPU in also adopting this approach.
3. Rural-Proofing Policy
Government has stated that it is committed to ensuring that policies and programmes are “rural-proofed”—ie properly take account of the needs and the potential of rural residents, businesses and communities. However in delivering products and services into rural communities and by working with rural communities on various social responsibility projects, Calor has seen evidence that despite the Government’s stated intention, the needs of rural communities are not always taken into account in Government policy and programmes.
Developing policy which can be equitably applied within both rural and urban areas is challenging. Calor has seen how Government departments such as DCLG and DECC have failed to rural-proof policy. Calor has experienced this within the energy sector, particularly regarding energy efficiency and carbon reduction policy, where there is a discernible lack of both credible independent information and formal assistance schemes relevant to householders in off-gas grid Britain.
CERT, CESP and Warm Front have not been effective in reaching rural areas. In April 2012, in answer to a Parliamentary Question placed by Barry Gardiner MP asking what proportion of CESP and CERT funding had been spent in off-gas grid areas, the Minster for Climate Change, Greg Barker MP, stated “the CERT evaluation report indicated that proportionally few people in off-gas grid homes had benefited from the scheme.” He also confirmed that “there have also been only a small number of CESP schemes in rural areas (which are more likely to be off the gas grid).” There are a number of reasons for this failure, including the strict scheme eligibility criteria, the cost of physically delivering assistance schemes into rural areas, and the complexity of rural building design and fabric which often does not allow technological solutions to be delivered within the permissible cost per tonne of carbon saved—ie. external wall insulation.
Despite the acknowledged failure of such schemes, new energy efficiency policy proposals continue to fail to be adequately rural-proofed. In the recent Green Deal consultation document DECC admitted that the Green Deal not yet been rural-proofed. Indeed Calor raised this concern in our consultation response—sentiments echoed by other rural organisations, including ACRE.
In light of past failures and current evidence that Government departments are still failing to adequately rural-proof their policies, it is essential that DEFRA and the RCPU continue to provide guidance and advice to support Government departments in rural-proofing their policies.
4. Success of the RCPU to date
As a business working primarily within rural areas Calor has found the RCPU to be approachable, transparent, and supportive regarding various rural issues that Calor has raised with them. The RCPU has been particularly supportive regarding issues around energy and housing policy, facilitating meetings between Calor and other Government departments such as DECC and DCLG, and representing our concerns to Ministers within DEFRA. We have welcomed the opportunity to build relationships within the RCPU and look forward to continuing to work proactively with the RCPU in in a collaborative and proactive manner to achieve the following:
Ensure current and future Government energy policy does not unfairly disadvantage rural householders.
Address the shortage of affordable rural housing.
Reduce the high rate of rural fuel poverty.
“Rural-proof” the Green Deal—ie ensure there is equality between rural and urban households.
Support local businesses at the heart of the rural economy.
Ensure rural communities, residents and businesses are fairly represented in all policies.
Calor believes that it is adequate for DEFRA, through the RCPU, to fulfil the role of ensuring that Government policy across all departments is adequately rural-proofed and that policy makers take into account the likely impact that proposed and existing legislation might have on rural communities and businesses. Furthermore, there exist a number of organisations and oversight bodies able to both represent rural interests and hold Government to account over specific policy decisions. The Rural Community Action Network (RCAN) with its’ umbrella body, Action with Communities in Rural England (ACRE) in conjunction The Rural and Farming Network, the Rural Coalition and Campaign to Protect Rural England (CPRE) all have a role to play in supporting DEFRA and the RCPU in delivering their aims.
5. The Proposed Rural Policy Statement
Calor welcomes the Government’s intention to publish a Rural Statement. DEFRA has announced that the Rural Statement will “underline the Government’s commitment to promoting a prosperous rural economy and thriving rural communities. It will show how the Government is supporting rural areas through existing and future policies and programmes, and explain what DEFRA is doing to champion rural needs and interests across government.”
5.1 Housing as a Rural Priority
Calor welcomes the inclusion of housing as a stated rural priority, and looks forward to seeing how Government intends to ensure a robust rural housing sector, particularly regarding the construction of new-build homes in rural areas. Housing is already scarcer and less affordable in rural areas than in urban. The Countryside Alliance warned last year of a lack of affordable housing causing “a vicious cycle which if not broken leads to the break-up of communities, a loss of services and results in villages that have no long term future”. Calor has major concerns regarding proposed DCLG revisions to Part L of the Building Regulations which we believe will not only unfairly affect rural residents, but also negatively impact the growth of the rural construction sector.
Housing construction will play a critical role in the UK’s economic recovery. However annual housing starts fell 6% in the 12 months to March 2012, compared with the previous 12 months. The problem is exacerbated in rural areas; the Federation of Master Builders confirm that SME rural house-builders are in sharp decline already and face build costs for developments of three houses or fewer which are up to 70% higher than for general estate housing. Yet against this gloomy backdrop, current UK policy gold-plates the Energy Performance of Buildings Directive by requiring Zero Carbon homes by 2016, with an interim step in 2013. The EPBD in fact only requires “low and near zero Energy buildings” by December 31st 2020, with an interim step in 2015. DCLG have calculated that the additional costs resulting from the gold-plating of the EPBD will be between £6–11 billion. Rural builders are ill-equipped to take on the extra costs of complying with the tightening Building Regulations which they estimate to cost up to an additional £8,600 per unit.
Furthermore, under the Building Regulations revision, DCLG are proposing the removal of the Fuel Factor from 2013 as part of the drive towards Zero Carbon Homes by 2016. The Fuel Factor in current Building Regulations allows a slightly higher emission level in all newly built rural properties because off-grid fuels all emit more carbon than natural gas, and without it rural housing would need to be constructed at a higher cost than urban housing. Research by NIFES shows that the removal of the Fuel Factor could add up to £7,850 to the cost of building a home in rural areas.
Rural areas will, therefore, face the “double whammy” of the gold plating of the EPBD and the loss of the Fuel Factor which together could add over £16,000 per unit to the cost of rural new build. House building is likely to be depressed further in rural areas as a result.
The lack of affordable housing, already a major problem for the rural economy, will be significantly worsened by the planned DCLG revisions to the Building Regulations. It is interesting to note that Building Regulations are now fully devolved to Wales and Scotland. In Scotland the Regulations do not discriminate against development in off gas grid areas by inflicting additional cost penalties. Likewise Wales, having only had responsibility for less than a year, is currently consulting on removing the current regime which penalises rural areas.
5.2 Energy as a Rural Priority
The Prime Minister has stated that “green energy must be affordable” yet DECC’s own estimate of the impact on electricity prices in 2020 arising from their energy and climate change policies is +27%. In 2011 the Government suggested that households would be paying 7% less by 2020 as a result of energy policies, than they would be paying if those policies had not been undertaken. However, both Policy Exchange and the Renewable Energy Forum have calculated that 65% of households would be worse off as a result of the policies, ie a few would gain at the expense of the many. The impact on rural areas is likely to be relatively worse because rural fuel choices tend to be more expensive, and houses harder to heat.
This is set against a background of rising fuel poverty; between 2004 and 2009 fuel poverty increased from 1.4 million households to 4 million households. In 2009 OFGEM predicted a rise in fuel poverty of 50%—to six million households. In rural areas this problem is exacerbated. The DCLG English House Condition Survey shows nearly three times as many households in fuel poverty in rural areas as in urban and that the numbers are increasing compared to urban areas. As such, energy policies which deliberately or unwittingly increase energy bills particularly disadvantage rural households.
Rural households also currently find themselves at a disadvantage through the way in which Energy Performance Certificates are currently calculated. The UK EPC assessment process, triggered before any building is erected or converted, grades houses by their notional cost of providing energy for heating and hot water per square metre. As all fuels used to heat properties in off the gas grid are more expensive than natural gas, homes in rural areas will automatically receive a worse EPC score than the same sized home in a mains-gas area. This has serious implications for the future treatment of rural property owners as the Government has made it clear that incentives intended to assist the uptake of more energy-efficient or renewable technology, such as the Renewable Heat Incentive and Feed-In-Tariffs are being limited to homes that meet minimum EPC levels. Under the current and proposed EPC design, it will be much harder—if not economically impossible—for rural owners to benefit from supposedly universal measures and incentives.
Calor would like to see rural housing and energy issues, such as those outlined above, addressed in the Rural Statement. The cost of proposed Government energy policy, combined with the existing shortage of affordable rural homes, proposed changes to Building Regulations, and design of the current EPC, all create damaging knock-on effects for c.5 million rural inhabitants. These can be corrected by bringing Building Regulations back in line with the EPBD, retaining the Fuel Factor, and ensuring appropriate design of the EPC. Calor believes that the Rural Statement provides an opportunity to highlight these critical issues, whilst the RCPU has the opportunity to work with Government departments to find solutions which take into account the needs and considerations of rural communities.
6. Conclusion
Calor believes that a thriving rural economy can play a key role in the recovery of the overall GB economy however the right policies must be in place to ensure that rural communities can play their part in the overall recovery. The RCPU has a vital role to play in ensuring that rural needs are taken into account when forming policy across all Government departments. Many of the existing energy and housing policies, and future policies proposed by DECC and DCLG, represent a significant disadvantage to rural households. The bias against rural areas must be corrected whilst future policy must be rural-proofed to ensure that rural areas are not unfairly impacted. The RCPU will play a critical role in ensuring this.
August 2012