Appendix: Government Response
Introduction
The Levy Control Framework (LCF) is designed to help
DECC achieve its fuel poverty, energy and climate change goals
in a way that is consistent with economic growth whilst minimising
the impact on consumer bills. HM Treasury (HMT) has responsibility
for the Government's public spending framework, and the LCF forms
part of that. The LCF caps expenditure of all DECC's existing
or new policies which are funded by consumers and that are classified
as public expenditure. We are very grateful to the Energy and
Climate Change Select Committee (ECC) for conducting its inquiry
into the LCF and its report of that inquiry, Levy Control Framework:
Parliamentary oversight of Government levies on energy bills,
published on 17th February 2014. We are also grateful
that the Committee gave Parliament an opportunity to debate the
report during an Estimates Debate on 3rd March 2014.
The Committee has made a number of important and
helpful recommendations which have been considered by Ministers
and their officials in both DECC and HMT.
This memorandum is the Government's formal response
to the report. In the following sections we provide the committee's
recommendations in bold italics followed by the Government response.
Recommendation 1
There should be a single annual report covering
all the DECC levy-funded schemes along with other Government initiatives
which affect energy bills but which fall outside of the Levy Control
Framework (LCF), such as the Energy Companies Obligation (ECO)…
The Government agrees with this recommendation. The
Department will publish information on spend and outcomes of consumer-funded
policies as a Command Paper, and aims to do so by the end of the
calendar year.
Transparency and openness are important principles,
which is why as well as giving Parliament the opportunity to scrutinise
actual and forecast levy-spending, the Department will work with
the NAO to agree an appropriate and proportionate audit regime
is put in place.
It should be noted that expenditure associated with
Contracts for Difference and with the Capacity Market will be
included in the Department's Budgets, Estimates and Accounts.
The derogation from the clear line of sight principles applies
only to the Renewable Obligation, to the Feed in Tariff Scheme
and to the Warm Homes Discount.
...This report should contain:
· Future
plans, and comparisons of agreed budgets and final spend (outturn)
for each funding stream and/or programme and energy company;
The Government agrees that it should include this
information, while noting that it may not be possible to disaggregate
this information by energy company for reasons of commercial confidentiality.
· Easily
identifiable "costs per customer" for each scheme on
a consistent basis across years and between reports, including
information on the impact that government decisions have upon
requirements over time. This information is not provided currently;
and
The Government agrees it should report on the impact
policies have had on the average household bill and will set out
this information in the annual Prices and Bills report, which
is due to be published later this year.
However, to provide Parliament with the most complete
picture of final spend and forecasts, the Department proposes
to publish the report on consumer funded policies separately,
later in the financial year. This will allow the most complete
spend and outcomes for 2013/14 to be reported, along with estimates
for 2014/15 and the most accurate forward look for 2015/16 and
beyond.
In future years, the Department will work to better
align the reporting cycle for both scheme costs and household
bill impacts.
· Measurable
outcomes achieved through spending, including as a minimum the
progress made against carbon targets and any other specified objectives
of the schemes, and the impacts on consumers. This should include
an appraisal of the relationship of the LCF to its overall policy
targets.
The Government agrees that as far as is possible
the information published should include the outcomes achieved
by each policy in the Levy Control Framework, relative to the
objectives of the schemes.
Recommendation 2
We consider that the effective spending and
taxation proposed should be subject to some level of Parliamentary
authority before it arises. While we understand the difficulties
that including the items within Estimates could cause for the
Departmental Accounts, we believe it would be highly desirable
that there should be a means for Parliament to express its views
from time to time on the sums involved and the purposes for which
they are intended, despite the fact that no monies are actually
issued from, or surrendered to, the Consolidated Fund. The Government
should look further into how this might be achieved.
The Government acknowledges and appreciates the important
role of Parliament in scrutinising expenditure. The Government
agrees with the Committee's recommendation to look at this issue
further, and has done so. We will ask that the Liaison Committee
considers the Command Paper we intend to publish as being within
scope for potential selection in Estimates Days debates. This
would give Members the opportunity to scrutinise the Department's
report and perform Parliament's very important role of holding
the Government to account for the money it spends.
Conclusion
This memorandum forms the Government's response to
the recommendations set out in the Committee's report: Levy Control
Framework: Parliamentary oversight of Government levies on energy
bills. The Government has and will continue to regularly publish
information on its consumer-funded polices, keeping the Committee
and other stakeholders informed.
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