Energy Bill [Lords]

Public Bill Committee, 16 June 2011.

Clause 64 - Promotion of reductions in carbon emissions: gas transporters and suppliers

Alan Whitehead (Labour, Southampton, Test)

I beg to move amendment 115, in clause 64, page 43, line 34, at end insert—

‘(baa) requiring the funding for this obligation to be equally available to any Green Deal provider for installing energy efficiency improvements to homes;’.

David Crausby (Labour, Bolton North East)

With this it will be convenient to discuss the following:

Amendment 116, in clause 65, page 46, line 38, at end insert—

‘(baa) requiring the funding for this obligation to be equally available to any Green Deal provider for installing energy efficiency improvements to homes.’.

Amendment 117, in clause 66, page 49, line 46, at end insert—

‘(2A) The power to make orders under this section may be exercise so as to require the funding for this obligation to be equally available to any Green Deal provider for installing energy efficiency improvements to homes.’.

Amendment 118, in clause 67, page 51, line 4, at end insert—

‘(2A) The power to make orders under this section may be exercised so as to require the funding for this obligation to be equally available to any Green Deal provider for installing energy efficiency improvements to homes.’.

Alan Whitehead (Labour, Southampton, Test)

The amendments, to various clauses, would all do the same thing: direct attention to what I trust will be a substantial part of the energy company obligation, which is energy efficiency improvements for fuel-poor households, and hard-to-treat properties when the person living in the house is experiencing fuel poverty. In those circumstances, it is likely that the fuel bill savings will be insufficient to pay for the full cost of improvements and so cannot be funded by the green deal alone. The aim of the amendments is effectively to ensure that when someone, through the ECO, has what might otherwise have been a green deal makeover to their home, the work that is done is bid for in an open and fair way, and not monopolised by the utility energy companies.

The amendments arise from the worry that, under existing supplier obligations within certain community energy saving programmes, there seems to be evidence of a difference in the quotations for CESP funding, depending on whether the energy supplier carries out the work in the contract, or the housing association or another party carries out the work and is then funded through CESP. It can be inferred from that that some energy suppliers are paying their in-house contractors a different rate for work that has perhaps not been tendered for competitively. The ECO will be funded by a levy on all fuel bills, and such action is not commensurate with that principle. There is not a level playing field for those who supply improvements under the ECO scheme. We must put a question mark against the extent to which there are uncompetitive practices in how the ECO works that could prevent a healthy market from developing overall for the installation of energy efficiency measures.

The ECO is essential if the green deal is to work in low-income households, and when they cannot afford to heat their homes adequately, green deal improvements will not necessarily just reduce fuel bills, but may enable the householders to heat their homes adequately—a different principle from that under the general green deal arrangements. As people will put a premium on heating their homes adequately, rather than simply saving money on their fuel bills, they are likely to have insufficient resources to repay the costs of the improvements and so will qualify for the ECO.

The amendments will ensure that the best deal is achieved when improvements are needed and provide transparency and a level playing field. In any event, as we have heard, it is unlikely that the arrangements would be the same as those for the straight-up green deal, in relation to procedures for the assessor and the number of quotes to be obtained, particularly in the case of a tenant of another organisation. There should be a level playing field when a first look is taken at the funding for the arrangements; that would give an assurance that the mechanisms that might otherwise have been employed—obtaining an assessment and making sure that it leads to a series of quotes—are built into the process.

Luciana Berger (Labour, Liverpool, Wavertree)

The Government’s document on the ECO sets out the relationship between the green deal and the ECO. It states:

“It will not, however, fall to the consumer to bring Green Deal finance and ECO together. We would expect ECO support to be integrated into the Green Deal framework so that where ECO financial support and Green Deal finance combine to deliver improvements, the details are arranged behind the scenes. The consumer will see one seamless package and offer from a Green Deal provider.”

The aim of the amendments is to ensure that the ECO is available for any green deal provider and not monopolised by the big six energy companies, because a monopoly on the ECO could give the energy companies a competitive advantage and enable them to outsell other green deal providers. We want the widest possible range of providers involved in the green deal, but of course we also want to ensure that there is value for money. If the improvements are delivered by a third-party green deal provider, it will be important to ensure that the ECO is cost-effective.

I said in Committee last week:

“The draft document on the ECO”,

prepared by the Department of Energy and Climate Change,

“recognises the need for an open market to ensure the maximum possible scale and range of energy efficiency delivery overall.”––[Official Report, Energy Public Bill Committee, 7 June 2011; c. 70.]

That document states:

“it may be difficult and expensive for smaller Green Deal providers to engage and negotiate with energy companies even when they can deliver energy efficiency improvements very cost effectively. Also, for equally natural business reasons, an energy company might also be a Green Deal provider and might have a preference for funding their own internal Green Deal activity. The company might prefer to provide ECO subsidy to its own Green Deal transactions, as this would allow it to grow the Green Deal side of its business and gain market share (at the expense of other Green Deal providers which had no such access to funding).”

We want to ensure that that does not happen, and that is the purpose of the amendments.

Concern has been expressed by several organisations that the green deal, as it stands, relies too heavily on big corporate names, and favours vertically integrated businesses that will dominate the marketplace from the outset with a one-stop-shop approach, which could be bad for the market and consumers if it leads to less competition.

According to the consumer advice group, Which?, only one in five of the public find their energy supplier trustworthy. Research by YouGov for the Great British Refurb campaign found that 46% of the public trusted their local authority to deliver a green deal scheme, compared with just 28% trusting their energy supplier and only 9% trusting DIY firms or supermarkets. We want consumers, especially those in vulnerable households, to be able to access their ECO via organisations that they trust.

There are strong economic reasons for ensuring that small and medium-sized enterprises have equal access to the green deal market, which we talked about in an earlier sitting. As we know, the construction sector is dominated by small firms that have been hit particularly hard by the recession. Despite some growth, construction activity fell by 4.7%. The amendments would ensure that those small and medium-sized construction companies have an equal opportunity to take part in what will be a fantastic green scheme.

The Federation of Small Businesses has highlighted that, under current proposals, small contractors are already at risk of being excluded from delivering the work, because there is no finance mechanism to allow businesses that are not tied to major green deal providers to offer an alternative service. Energy companies, major retailers and banks could therefore dominate the market, and the choice of providers available to consumers could be reduced. The purpose of the amendments is to avoid that outcome and ensure that there is as wide a market as possible.

The Minister last Tuesday made some important points about the green deal market, and they are worth reiterating in support of the amendments that we are discussing. He said that he wanted a fully engaged small and medium-sized enterprise sector, and added:

“We want to ensure that local green deals really do add value to the local economy.”

He also said:

“The green deal will stimulate the market in the UK, driving growth across the supply chain. We very much hope that there will be opportunities for all types and sizes of company in supplying and installing a broad range of measures under the green deal. We have been working closely with business representatives covering a wide variety of company types and sizes to ensure that our framework can work for as many as possible.”

I reiterate that the purpose of the amendments is to ensure that those words mean something in practice. The Minister said that I was right to highlight that the ECO is critical to a competitive green deal market, and said:

“Additionally, we fully recognise that we need to include in our consultation how best to design the ECO to ensure that we promote an open and competitive market that will make the ECO’s opportunities available, including to smaller local participants.”––[Official Report, Energy Public Bill Committee, 7 June 2011; c. 74.]

I was very disappointed when the Government voted against our amendment on social enterprises, mutuals, charities and non-profit-making organisations. We were sad that the Minister could not support it, but we hope that he will consider the amendment before the Committee, to ensure that the green deal market will be as wide as possible. The ECO will make up a substantial proportion of the green deal market, so all providers should have equal access to participation.

Gregory Barker (Conservative, Bexhill and Battle)

Good morning, Mr Crausby. With your permission and for the benefit of the Committee, before I move on to the amendment, I would like to summarise some of the points from last week that we have followed up, and which are relevant to today’s proceedings. We had a very detailed debate on the private rented sector on Tuesday. As always, I thought it would be helpful if I were to run through the commitments that I made and the progress that I have made since the issues were raised by the Committee.

Several Committee members, including my hon. Friend the Member for Wells and the hon. Member for Brighton, Pavilion, raised a range of important issues about the role of letting agents. I made a commitment to check with parliamentary counsel. They have confirmed that a landlord could not circumvent the prohibition by engaging an estate agent or letting agent, and that those agents would be acting as the agent of a particular landlord in those cases, leaving the landlord liable.

On the substantive issue of marketing, we have confirmed that we already have the powers, when making regulations under the Energy Bill provisions, to include marketing the property. I am not yet in a position to commit to making such provisions, but we have time ahead of secondary legislation to look at that matter in more detail, as we discussed. I assure my hon. Friend the Member for Wells and the hon. Member for Brighton, Pavilion, that we shall do so seriously. I am happy to continue to work together as we undertake that process.

My hon. Friend the Member for Wells and the hon. Member for Liverpool, Wavertree, raised the issue of retaliatory evictions. I know that they feel strongly about it and have taken some time to get well acquainted with the issue. The Committee will be pleased to hear that I have taken the opportunity since Tuesday to speak directly to the Housing Minister, who has confirmed that he is happy for us to set up a joint working group to consider that specific matter and try to garner a new and up-to-date evidence base. We look forward to establishing that group and progressing its recommendations over the summer.

As to enforcement in the private rented sector, the hon. Members for Brighton, Pavilion, and for Ogmore, and my hon. Friends the Members for Norwich South and for Wells, will be pleased to hear that I have already written to the Local Government Association to seek its views, now that we have amended the Bill.

I have also written to the hon. Member for Hyndburn to explain the links between the minimum standards enforcement and the housing health and safety rating system. In short, they may be used in combination to ensure that local authorities have at their disposal the most effective enforcement mechanisms. For example, local authorities already have rights to enter properties under the rating system, where there is an immediate threat to life, to make improvement works and charge the costs to the landlord. I have written to the hon. Member for Ogmore to explain the barriers to further extending such powers of entry. I have also written to the hon. Members for Brighton, Pavilion, and for Hyndburn with more details on tribunals in respect of the tenant energy efficiency regulations.

Lastly, I would like to thank my hon. Friend the Member for Winchester for suggesting using trade organisations to reach a range of non-domestic tenants and landlords to raise awareness of the green deal. Acting on that sensible and creative point, I have written to the Minister with responsibility for business and enterprise, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), to follow through with those suggestions.

Caroline Lucas (Green, Brighton, Pavilion)

I am grateful for the speed with which the Minister has acted on the issues that we raised in Committee; that has been helpful. However, I have read the letter and I am still not clear on one thing, which I wonder whether he will clarify. It is about the role of third parties acting on behalf of tenants. We have established that third parties will be able to make green deal requests on behalf of tenants under the provisions. Will third parties be able to make requests for relevant energy efficiency improvements, and take a case to the tribunal if necessary? There was an issue with third parties acting in tribunals, and we had a big discussion about how complex that could be.

While I have the floor, I will add two small further points. Will the Minister clarify that the request may be made by tenants in privately rented properties of any energy efficiency standard, rather than just those falling below the E rating? Will the measure be open to long leasehold tenants—owner-occupiers in blocks of flats—as opposed to short-term tenants, to make requests of freeholders?

Gregory Barker (Conservative, Bexhill and Battle)

I think that the answer to all the hon. Lady’s questions is yes. I only hesitate slightly when it comes to her definition of shorter rather than longer-term leaseholds, but I do not think that there is a problem there. It is certainly our intention, as I stated earlier in Committee, to have green deal max. The provisions should be deployable in exactly the way she has suggested.

Today we will focus on the detail of the energy company obligation, known as the ECO. As I set out previously, the ECO will be entirely focused on the needs of the lower-income and most vulnerable tenants and property owners, and on hard-to-treat properties. In earlier sittings, hon. Members across parties have spoken powerfully about the importance of the twin objectives of helping the vulnerable and reducing emissions to prevent dangerous climate change. As I have said, we will consult in the autumn on the scale and reach of the ECO and on the balance of the twin, and not always mutually exclusive, objectives. I am sure that the Committee will understand that I cannot prejudge the consultation, but I am keen to hear more of the Committee’s views and to garner as much wisdom in the Committee Room as I can. I will certainly listen and reflect on the contributions.

Claire Perry (Conservative, Devizes)

I would like to follow up on the compliment made by the hon. Member for Brighton, Pavilion, on the Minister’s openness and willingness to respond to questions raised. Is he aware that the hon. Member for Liverpool, Wavertree, blogged on the Politics for People website last week, saying that she felt that the Bill was not “up to the task” of delivering energy efficiency, and that there was a “staggering lack of detail” in the proposals? The Bill is currently in Committee, which is about creating a framework, and the Minister has said that he will introduce legislation. Does he share my sense of disappointment? The Committee has been working extremely well and co-operatively. Does he agree that this might be an opportunity for the hon. Lady to withdraw her comments?

Gregory Barker (Conservative, Bexhill and Battle)

I did see the blog. I was surprised by it, because it directly contradicted the comments that the hon. Member for Liverpool, Wavertree and Opposition Members made in Committee. It was a slight case of Jack in town and Bunbury in the country, but I realise that those comments appeal to different audiences. I hope that we will see a little more consistency in future, but perhaps we should not dwell on that. [ Interruption. ] Oscar Wilde: “The Importance of Being Earnest”—we do not get the class of Conservative Minister that we used to.

I have lost my place.

Huw Irranca-Davies (Labour, Ogmore)

Perhaps I can help the Minister while he looks for his notes by asking him to write to the Committee to explain that phrase—I have never heard it before.

Gregory Barker (Conservative, Bexhill and Battle)

I refer the hon. Gentleman to “The Importance of Being Earnest”, in which a character takes on one persona when in town and an alter ego when visiting his relations in Shropshire.

Claire Perry (Conservative, Devizes)

Does the situation not pertain more to Dorian Gray than to the “Importance of Being Earnest”?

Gregory Barker (Conservative, Bexhill and Battle)

It is rather ungallant to suggest that “The Picture of Dorian Gray” is more applicable to the hon. Member for Liverpool, Wavertree, so I shall stick to my previous allusion—although some might suspect that there is a portrait somewhere.

David Crausby (Labour, Bolton North East)

Order. May we get back to the Bill?

Gregory Barker (Conservative, Bexhill and Battle)

I reassure hon. Members that if ECO companies choose to distribute subsidies in fundamentally anti-competitive ways, broad powers in the Bill will tackle that. For example, they will be obliged to deliver their obligation, or a substantive chunk of it, in particular ways. I assure Committee members that when I was in opposition, I spent much time talking with stakeholders and thinking through the nature of the Bill. We have thought about how the new framework would work, what we wanted behind it, and our aspirations for it. My hon. Friends and colleagues have worked with me on the proposition, first in opposition and then in Government. The intention to have more competition to drive a healthy market has always been at the forefront of our minds. We have always intended to introduce measures that not only shatter the idea of the previous Government’s one-provider monopoly, but get beyond the big six and way beyond Warm Front and the carbon emissions reduction target model. This is an ideal opportunity to marry our energy ambitions with the coalition’s localism and big society agendas.

We absolutely intend to ensure that there is a strong and vibrant local alternative, but, by definition, we cannot prescribe exactly what that should be. The local response will be different in different parts of the country and in different communities. We want to create as much diversity and choice in local provision as possible through an overarching, non-prescriptive framework, as well as through underpinning powers that prevent consolidation into one or two market players, which we saw in the energy sector as a whole under the previous Government.

I am not persuaded that it would be right to use the powers before there is any evidence of need. In doing so, we might inadvertently risk putting costs on to ECO companies for no real benefit. At the same time, I fully recognise that green deal providers may be looking for assurance that ECO subsidy will be available on a genuinely and reasonably open basis. That is why my Department and my officials are actively exploring with energy companies, local authorities and a plethora of smaller stakeholders and SMEs the possibility of a mechanism to bring together energy companies and green deal providers in an open market. That would not be dissimilar to the ideas to which the hon. Member for Southampton, Test alluded in his remarks. We are in the same sort of place. I would be interested to explore further with him, outside of the Committee, how that might work in practice. I would welcome his input into our conversations with market participants about creating this framework and an open market where measures for the ECO subsidy are traded via a broker or market along the lines that he suggested. That is exactly what we are thinking.

Obviously we want to ensure that that does not create an additional burden, that it is not complicated to enter and that it is non-bureaucratic, so that we do not simply set up a market mechanism for its own sake. If we could stress-test some of our ideas with the hon. Gentleman, that would be helpful.

The brokerage function that we have in mind, which will form part of the consultation, will introduce transparency and liquidity into the market, as well as having a number of advantages over regulations, although the possibility of regulation would remain as a backstop. I would expect to be able to say more about that specific function and how we anticipate it working in the consultation in the autumn. In light of that, I ask the hon. Member for Southampton, Test to consider withdrawing the amendment.

Alan Whitehead (Labour, Southampton, Test)

I thank the Minister for those remarks. We are very much in the same area on the need to ensure that these arrangements are transparent, fair and clearly advantageous across the board to those in receipt of them. On that basis, I will consider taking up the Minister’s kind offer that we look at this further as we go through the process. I beg to ask leave to withdraw the amendment.

Tessa Munt (Liberal Democrat, Wells)

I beg to move amendment 43, in clause 64, page 44, line 2, at end insert ‘not to be limited to properties on which there is to be a Green Deal Plan as defined under Part 1, Chapter 1, section 1,’.

I am sorry, my notes were removed from my office the day before yesterday, along with my iPad, so I am slightly at a loss. I am without what I thought I should have.

David Crausby (Labour, Bolton North East)

We will consider that to be your speech.

Huw Irranca-Davies (Labour, Ogmore)

In assistance and sympathy with the hon. Lady, I will speak briefly on the principle of the amendment, which is worthy. From the wording of the amendment, I understand that it intends that ECO funding should be available to properties not in the green deal plan. We have had a fair bit of debate on that in earlier clauses, so I will not rehearse that again.

The important principle, which the Minister may address in his response, is whether it will be possible for ECO funding to be available to those properties not in the green deal plan. That would extend the ability to be specifically targeted by ECO resources beyond those properties where the green deal is willingly taken up, making a significant impact in particular on those properties that are hit by fuel poverty. I believe that that is the principle of the amendment, and we have some sympathy with it. We do not want the scheme to be restricted to those who would solicit approaches from firms because they are interested in those properties within the green deal. We want it to be targeted. I think the Minister sympathises with that idea, too. The ECO should extend to those properties where a green deal package is neither offered nor sought, but where ECO funding would deliver significant impact. I am thinking particularly of communities in his constituency and in mine, where the ECO could have a major impact. The green deal will be attractive, but the ECO alone would have a much more significant impact.

I hope my contribution reflects the principle of the hon. Lady’s amendment, and I welcome the Minister’s response on whether the spirit of the amendment is what is intended by the Bill.

Graham Jones (Labour, Hyndburn)

To follow on from that, I would like the Minister to clarify the situation for those who choose not to take up the green deal or are in hard-to-treat homes. Under the Bill, because what we are discussing involves loans, some people will be precluded from entering into a green deal for one of a range of reasons, such as being greatly indebted. Some people living in F and G rated properties will need assistance, which the ECO might provide even if the green deal is not on offer to them.

Gregory Barker (Conservative, Bexhill and Battle)

I am sorry to hear that things were stolen from the office of my hon. Friend the Member for Wells. I am sure the House authorities will take that matter very seriously.

It is helpful that my hon. Friend has moved her amendment because it allows me to give her explicit reassurance. The amendment would allow the Secretary of State to specify that ECO delivery does not have to be limited to homes that take out the green deal. I am happy to say that the amendment has no practical effect: although a close interaction between the schemes is intended, there is absolutely no legal bar to the ECO being delivered outside the green deal. That may, for example, be the case in some fuel-poor homes, which could attract 100% ECO subsidy. I imagine that is what the amendment anticipates.

There has occasionally been blurring in the minds of some Committee members in previous debates, but one must be clear about the difference between a green deal assessment and a green deal plan. Obviously, before any home accesses the ECO there will need to be a green deal assessment, which is the umbrella name. In the poorest households, however, the tenant or householder could, for reasons to which other Members have alluded, be unable or have declined to take up the offer of the green deal framework under the golden rule of pay-as-you-save.

I cannot conceive of many cases in which no measure would be worth pursuing under the green deal, but I can see that some people might be reluctant to take it on. In such cases it is conceivable that the ECO could be used for any substantial improvements to the home without a green deal package, in the conventional sense, being used. I totally reassure my hon. Friend on that point.

Graham Jones (Labour, Hyndburn)

I would like a bit more clarity. Let us take the worst example: a poor parent in a G rated property whose financial problems preclude them from having a green deal loan, but who has three young children who do not deserve to be punished. Theirs might be a hard-to-treat home, which might attract part-ECO, but they would not be entitled to the green deal element because of the parent’s lifestyle. Such a situation arises frequently in my constituency. When young children are involved, how will we help such parents who are precluded from receiving the green deal?

Gregory Barker (Conservative, Bexhill and Battle)

We do not expect there to be many cases in which people are unable to access the green deal and in which there are savings to be made. We must remember that the green deal only works on the golden rule. As a result of green deal measures, bills will be no higher—and ideally lower—in such cases. It will not be a conventional loan.

Graham Jones (Labour, Hyndburn)

Many such families will probably be on prepayment meters, so they will be asked to pay as they go, on their own volition, not by direct debit. They will have to go to a payment point to make prepayments. People who use prepayment cards will be precluded from receiving the scheme because the green deal provider will not feel that it will get a return on its investment. If the Minister cannot clarify the matter now, will he say later how the few households he described—and I think there will be quite few in my constituency—will have their issues resolved?

Gregory Barker (Conservative, Bexhill and Battle)

The hon. Gentleman makes a fair point. We are particularly concerned about justice and fairness in relation to prepayment customers. We are working on proposals, which we will bring forward in the autumn, related to the types of groups that he identifies, who have previously been left behind by other schemes and programmes, however well intentioned. We are determined that the green deal will be as inclusive as possible, and that fairness will sit at the heart of the proposals. That is why we are working on a much more detailed response to the issues he raises. I can assure him with regard to a solution. Is it possible, practical, likely that there will be cases such as that, where green deal measures, for one reason or another, are not appropriate or applied, and simply ECO is delivered? Absolutely, yes, and that is specifically allowed for in the legislation. Therefore, we do not believe that the amendment is necessary.

Tessa Munt (Liberal Democrat, Wells)

On the basis of what I have heard, I beg to ask leave to withdraw the amendment.

Alan Whitehead (Labour, Southampton, Test)

I beg to move amendment 113, in clause 64, page 44, line 7, at end insert—

‘(bac) enabling the Administrator to direct a transporter or supplier to structure the funding of its carbon reduction target such that no individual to whom the action may be targeted under subsection (bb)(i) is a net financial contributor to the carbon emissions reduction target.’.

The amendment seeks to introduce what might be termed the equivalent golden rule, as far as ECO and those likely to be in fuel poverty are concerned. I have to say at the outset that it is flawed. If I really knew what I was doing, I would have also put a similar amendment into the next clause relating to electricity markets. However, as Oscar Wilde said, an idea is not responsible for its disciples. Should the Minister be minded to take the idea on board—regardless of the person who proposed it—he will later be able to introduce an amendment to the relevant clause to complete the idea.

The underlying point of the amendment is that ECO will be a levy that affects the bills of those who eventually pay for that levy. There are issues relating to targeted arrangements, particularly for those people who would otherwise have benefited from the green deal and who, as I alluded to in relation to a previous amendment, would perhaps seek the changes, not because they would achieve lower bills under the central green deal, but because they would achieve a better level of comfort, thermal efficiency and heating in their homes. Therefore, the real prospect exists that as a result of those changes, and because of the imposition of a levy, people who have benefited in such a way could end up paying higher fuel bills.

The amendment would direct a transporter or supplier to organise funding of the carbon reduction target that is part of ECO in such a way that that does not occur. There is a variety of ways in which that could be done, and under the amendment it would be up to the transporter or supplier to undertake the necessary work. The Committee has previously discussed whether broader measures, such as rising block tariffs, could be introduced to spread the load arising from ECO in an equitable way. There is a serious concern about people who could go into fuel poverty, because of the imposition of the levy through ECO, to a greater extent than being taken out of fuel poverty because of actions taken under ECO.

There is a serious issue about the efficacy of the targeting that should be part of ECO, as it concerns those people who are in lower income brackets and who may well be or are in fuel poverty. As the Minister has already mentioned that such people are a prime target of ECO, I hope that he will accept the principle of the amendment, at least, and incorporate it into ECO’s implementation.

Luciana Berger (Labour, Liverpool, Wavertree)

I want to reinforce one of my hon. Friend’s points in support of the amendment. We do not want to see people paying higher bills than they are already. Low-income households living just below the fuel poverty indicator could be pushed above the fuel poverty line, because of the introduction of ECO.

Gregory Barker (Conservative, Bexhill and Battle)

I appreciate the hon. Member for Southampton, Test raising that point, although it is difficult to be very specific now, when there is still a great deal to be determined about the size of ECO. We obviously need to do that in consultation with the Treasury.

Opposition Members wish to ensure that nobody is put in a situation in which their investment, either through the green deal finance or their up-front contribution, exceeds the savings generated by the measures, or in which the cost of ECO socialised across the whole customer base further pushes customers into fuel poverty. On the latter point, that is very unlikely. The CERT programme that we inherited from the previous Government is far from ideal, which is why we are moving beyond it and why we have reformed it as far as we could for its extension. It is rather opaque; it is not nearly as transparent and easily auditable as ECO will be, but at the moment we estimate that CERT costs about £1.3 billion a year, which averages out at about £45 per customer. We do not yet know the final annual size of ECO, but it is in the range of £1 billion to £2 billion. The important thing about ECO is that unlike CERT, which, as I have said, is more opaque and vague, it is a long-term programme, whereas CERT was initially one year and subsequently three years, and it had a one-year extension. ECO will be a decade-long programme that will give real strategic certainty as it rolls out to the energy companies and to those who are planning programmes predicated on ECO funding being available.

Caroline Lucas (Green, Brighton, Pavilion)

Regarding the regressive nature of funding ECO through a levy on fuel bills, does the Minister acknowledge that DECC’s own impact assessment in 2009 of extending the CERT target found that, in the short term, between 70,000 and 150,000 households would be driven into fuel poverty as a result of additional charges on domestic bills, but only between 21,000 and 31,000 would actually benefit? When we see that order of magnitude, it is clear that if a blanket levy is placed on all fuel bills, it runs a real risk of driving more people into fuel poverty than it pulls out.

Gregory Barker (Conservative, Bexhill and Battle)

The hon. Lady refers to the 2009 proposition concerning the CERT programme, which was inefficient; it lacked the green deal and it was not the ECO. With the combination of the green deal measures and a much greater whole-house approach—a much more ambitious programme of works rolled out at scale—we are dealing with something quite different. I do not know off the top of my head what we expect the numbers to be, but we are alive to the situation. The average combined energy bill is now somewhere between £1,300 and £1,500 for a family in the UK and many have significantly higher bills, particularly if they are in inadequate accommodation. The sum of money that we are talking about is a very small fraction of the overall cost and we have announced several measures to try to ameliorate the overall burden of rising fuel costs, in addition to the long-term solution of the ECO and the green deal.

Huw Irranca-Davies (Labour, Ogmore)

To deal specifically with the ECO rather than with long-term financing that is wrapped up in the green deal, is the Minister in principle in favour of avoiding a regressive approach as a result of which the ECO element falls, wrongly, on those who are least able to pay? If so, does he intend to introduce measures to address that, or is his argument that the cost will be relatively small and part of a bigger range of things, so it will not have such an impact? That is what he seems to be saying. The purpose of the amendment is to ask whether he can introduce something that will avoid that regressive approach to financing the ECO.

Gregory Barker (Conservative, Bexhill and Battle)

The hon. Gentleman will know that we inherited from the previous Government a raft of measures such as CERT, which were simply levied across the consumer base. That is why, despite the deficit, the Chancellor took the view in his Budget that the renewable heat incentive, for which the previous Government had prepared, should not be funded from a levy on fuel bills. There is a limit to which such levies can be pushed before they become unfair and aggressive. We took the view that it would be fairer, and consistent with the coalition’s commitment to fairness, to fund it through general taxation. Likewise, the carbon capture and storage programme will not be funded by a levy; £1 billion will be funded from general taxation. We are alive to the hon. Lady’s wider point, and we have already taken steps to remove the renewable heat incentive from the fuel bill and on to general taxation, as well as the £1 billion carbon capture and storage programme.

Caroline Lucas (Green, Brighton, Pavilion)

I am grateful to the Minister for his response, and I acknowledge his two good examples of how the Government are trying not to make measures regressive, but why not follow the logic of precisely what he just said? If it does not make sense to put the cost of the RHI and carbon capture and storage on everyone’s bills in a blanket approach, surely more than anything else if we are trying to design a measure to tackle fuel poverty, it makes even less sense to do so regressively. Will the Minister follow the logic of the RHI and carbon capture and storage programme and do the same with the ECO?

Will the Minister also tell me whether his Department will do an impact assessment? He explained that the one I cited dates from 2009 and was with CERT, which was a different system, but what impact assessment is his Department doing, and what will the impact of the ECO be on both products?

Gregory Barker (Conservative, Bexhill and Battle)

I fully understand the hon. Lady’s point, and I think we are in the same place. That is why we have taken these measures. As far as the customer is concerned, whether something is paying for carbon capture and storage, the RHI or the ECO, the bottom line is how much it pushes up their bill. Additional burdens as a result of Government policy push up people’s fuel bills, and we are alive to the fact that we must not keep doing that, however well intentioned the programmes, because consumers are hurting.

Tessa Munt (Liberal Democrat, Wells)

I do not want to interrupt the Minister’s flow too much, but I want to pick up some earlier comments. I have mentioned many times outside this Committee the whole business of rising block tariffs. Has the Minister had an opportunity to think about how that might be changed, because it seems so desperately unfair and utterly ungreen if people pay so much for less?

David Crausby (Labour, Bolton North East)

We will come to that later

Gregory Barker (Conservative, Bexhill and Battle)

We will come back to that, but on the important issue of fairness and equity, there is a limit, because of the deficit and the tight fiscal situation that we inherited, to the amount that we can shift on to general taxation. We take on board the point, and particularly the irony, that we cannot have a fuel poverty alleviation measure that in itself, even if only at the margin, risks tipping some families into fuel poverty. That is why we will consult on different options for payment as part of the ECO consultation. One option is to use a per-kW-hour-usage basis rather than a blanket basis in the same way as CERT was levied. We are determined, within the boundaries of what is practicable, and without making it too complicated, to avoid being regressive, and to avoid the mistakes of the past.

I know that my hon. Friend the Member for Wells will contribute to the consultation on the ECO, and we will welcome innovative ways in which to create a fairer way of funding the ECO, recognising the constraints and that there is a limit to how much we can shift on to general taxation.

I am also clear that we already have legal powers to require a qualifying measure to adopt a particular financial structure, or to prevent it from doing so. Therefore, the amendment seems unnecessary. For example, section 41A(5)(b) of the Electricity Act 1989 expressly enables the Secretary of State to make provision

“as to the action which qualifies”.

Therefore, the Bill gives us the necessary elbow room to distinguish in that way. I can assure the hon. Member for Southampton, Test that our intention is to design the ECO in the best way possible given the constraints, but we are mindful of his points, and they will inform the consultation and the resulting secondary legislation.

On that basis, I urge the hon. Gentleman to withdraw the amendment.

Alan Whitehead (Labour, Southampton, Test)

I thank the Minister for that encouraging response about how the ECO will be levied. I would have thought, however, that a starting point for the consultation should be that the ECO is not levied on a blanket basis. The consultation should not regard that as an option. Levying by kilowatt-hour is an interesting proposition, and I hope that that might be a centrepiece for such consultation. It is important, however, to frame the intention of an equitable outcome in the consultation, so that it does not simply ask what one would like to do across a range of different thoughts. Rather there should be a principle that there is no blanket levy, and there are ways in which that could be avoided. The hon. Member for Wells mentioned one larger way in which that could be done, and there are other methods, as the Minister suggested. It is important that the consultation is framed clearly as to what its outcome should be. I would welcome the Minister’s assurance that that would be the case.

Gregory Barker (Conservative, Bexhill and Battle)

I cannot prejudge exactly—we have not begun to write the document—but I will certainly take the hon. Gentleman’s points on board. It is certainly not our intention to lead the witness or to stifle the debate. We want the consultation to be genuine and to tap into the good ideas out there. I am sure that it will be framed in the best way that we can design to elucidate those sorts of responses. Obviously, we do not want to prejudge, and we must also be careful that choosing one particular option does not result in unintended consequences that the Committee has not yet spotted. That is the point of consultation and engaging with stakeholders.

Alan Whitehead (Labour, Southampton, Test)

I am encouraged that the consultation will frame the question so that it actually defines its outcome in the way that we all want. On that basis, I beg to ask leave to withdraw the amendment.

David Crausby (Labour, Bolton North East)

With this it will be convenient to discuss the following: new clause 23—Duty of Secretary of State to make regulations regarding the installation of energy efficiency measures by energy suppliers—

‘(1) For the purposes of requiring energy suppliers to assist in combating fuel poverty by the reduction of home heating costs and to meet carbon dioxide reduction targets the Secretary of State must within twelve months of the passing of this Act make regulations establishing a scheme requiring energy suppliers to install specified energy efficiency measures in residential properties.

(2) Regulations made pursuant to this section must specify:

(a) the energy measures to be included;

(b) that priority for installation of those measures shall be given to the homes of persons living in fuel poverty;

(c) the carbon dioxide reduction target to be achieved as a result of those measures; and

(d) such other matters that are in the opinion of the Secretary of State required for the setting up and operation of the scheme.

(3) In this section:

“fuel poverty” has the same meaning as in the Warm Homes and Energy Conservation Act 2000.

“energy suppliers” means any person licensed to supply electricity pursuant to the Electricity Act 1989 and any person licensed to supply gas pursuant to the Gas Act 1986.’.

New clause 39—Supplementing the Energy Company Obligation—

‘(1) The Secretary of State must, within six months of this Bill receiving Royal Assent, report to Parliament with proposals on the ways in which the Energy Company Obligation could be supplemented by—

(a) auction revenues from the European Union Emissions Trading System,

(b) revenues from the Carbon Floor Price, and

(c) such other funds as considered appropriate by the Secretary of State.’.

Caroline Lucas (Green, Brighton, Pavilion)

I want to speak about new clause 39, which is in my name. It drives at the central point that the ECO simply is not big enough and is not set within an overall strategy of eradicating fuel poverty. Not only that, as we heard in the previous debate, unless we go down one of the roads that the Minister has outlined there is a real risk, as it stands, that those in fuel poverty could effectively subsidise the well-off—if those well-off people happen to live in hard-to-treat homes.

The whole debate comes at a time when, following the ending of the Warm Front initiative in 2012-13, England will have no publicly funded energy efficiency programme for the first time since the 1970s. That is serious when we consider the problem of fuel poverty in this country. The bottom line is that the ECO is being spread too thinly. It is being asked to do two different things, which do not necessarily coincide. In other words, the same pot of money is for both treating the homes of the fuel-poor and tackling those hard-to-treat properties, and those two sectors will not always include the same group of people—not by a long way. I urge the Minister to look again at whether the ECO could be fully targeted at the fuel-poor and whether, within that, there could be a special focus on hard-to-treat homes. If looked at in overall terms, a £2 billion pot is not that much when it comes to treating the homes of the fuel-poor. Indeed, the Institute for Public Policy Research has estimated that between £30 billion and £60 billion are required to overhaul the homes of the fuel-poor. There is the contrast between that and an ECO pot of between £1 billion and £2 billion, plus the fact that it will not necessarily be used only for the fuel-poor.

Gregory Barker (Conservative, Bexhill and Battle)

The hon. Lady is not comparing apples with apples with those figures because, over a 10-year programme, the figure would not be £1 billion or £2 billion. If it was set at £2 billion, it would be £20 billion, which is not so very different from the IPPR figure.

Caroline Lucas (Green, Brighton, Pavilion)

I take that point. I did not mean to be misleading. The Minister is right: the £1 billion to £2 billion is per year; the £30 billion to £60 billion is over a number of years. None the less, taking the higher figure, there is still quite a difference between £20 billion and £60 billion and we still do not know how much of that ECO pot will go to the fuel-poor and how much might be diverted to hard-to-treat homes, of which a number will certainly belong to people who are well-off and certainly well-off enough to pay for their own retrofitting and so forth.

The purpose of my new clause is to help the Minister out by suggesting some other pots of money that could be tapped in order to supplement the money in the ECO pot. We should use revenues from the European Union’s emissions trading system and the carbon floor price because those would be more progressive and there would be a certain logic in using the money for those kinds of measures. The new clause would therefore commit the Secretary of State to make a full assessment of the case for the use of EU emissions trading revenues, the carbon floor price and any other funding stream deemed fit to supplement the ECO in order to promote energy efficiency take-up in low-income households where the green deal financing mechanism does not stack up.

The European Commission has itself proposed that at least 20% of the revenues from auctioning of emissions trading permits should be earmarked for a range of climate or fuel-poverty measures. So this would fall neatly into that overall European Union strategy. Until now, the UK Government have not been in favour of the Commission’s suggestion for hypothecation, arguing that it goes against Treasury policy. But that is in stark contrast to many other EU states including Germany, Hungary, Poland and others.

Zac Goldsmith (Conservative, Richmond Park)

Let me echo the point about hypothecation. The Treasury has always been reluctant to do any kind of hypothecation, but the most successful environmental tax that I can think of is the landfill tax. It was acceptable because the money was seen to be ploughed back into the communities affected. It is one of the reasons why it was accepted and was effective. I know that this is beyond the remit of this—

Gregory Barker (Conservative, Bexhill and Battle)

This Minister.

Zac Goldsmith (Conservative, Richmond Park)

This Minister and even his Department. However, it would be useful to have a comment from him about hypothecation because green taxes can be made acceptable to the public only if they are transparent and it is clear that one thing is being taxed to make something else cheaper and easier. I echo entirely the sentiment behind the new clauses tabled by the hon. Member for Brighton, Pavilion, even though I recognise that they are beyond the remit of this meagre Department.

Caroline Lucas (Green, Brighton, Pavilion)

I thank the hon. Gentleman for his intervention. I entirely agree. It would be interesting to hear the Minister’s musings about the points raised, even though they do not fall within his responsibility.

Huw Irranca-Davies (Labour, Ogmore)

Before the hon. Lady concludes, could I say that it is a helpful and modest new clause? She is simply asking the Secretary of State for Energy and Climate Change to report to Parliament on measures that could supplement the ECO funding. That seems very sensible. It does not tie his hands. It is not that he must do anything. I hope that the Minister is sympathetic to the new clause because in view of how limited the pot is at the moment it would be good to look at ways in which it could be supplemented to tackle things like fuel poverty. It is a very modest new clause.

Caroline Lucas (Green, Brighton, Pavilion)

I thank the hon. Gentleman. I am not often accused of tabling modest new clauses, and on this occasion I will accept it as a compliment. He rightly points to an important issue. Many of us have commented on the Minister’s responsiveness to suggestions and proposals. I hope that this will also be viewed as a helpful amendment and that he will be able to accept it, and the Secretary of State will therefore look at other ways to supplement the ECO pot.

I sum up simply by mentioning the seriousness of the situation. We know that 40,000 premature deaths each winter result from cold housing. In the 21st century, that is an indictment of how matters have been organised to date. Earlier in our deliberations, we talked about the film “Poor Kids”. I saw it only recently on iPlayer, but I am sure that all who have seen the programme will agree that we must redouble our efforts to ensure that young people do not grow up in atrocious circumstances, which will damage their life chances. The amendment would give us the opportunity at least to consider other ways of supplementing the ECO. I therefore hope that the Minister will accept it.

Luciana Berger (Labour, Liverpool, Wavertree)

I wish to speak to new clause 23, which would ensure that the energy company obligation targets fuel-poor households.

The Minister said earlier that his Department is consulting on the scale and reach of ECO, and that it will have the dual purpose of helping fuel-poor households and hard-to-treat properties, in order to reduce emissions. However, we want ECO to be targeted exclusively at the fuel poor. ECO is paid by energy companies; ultimately, however, it is paid by their customers, including those living in fuel-poor households. It is not appropriate for the funding to be used by able-to-pay customers who live in hard- to-treat homes. There would be outrage if people knew that their ECO levy payments were going to households that could afford to pay for energy efficiency measures. Many fuel-poor households are hard to treat; as the Minister said, however, the two factors are not mutually exclusive. Targeting ECO exclusively at the fuel poor would therefore assist many in hard-to-treat properties.

I am sure that the Committee does not underestimate the scale of the task. The hon. Member for Brighton, Pavilion alluded to the documentary, “Poor Kids”, which I referred to last week. I reinforce the point; if any Members have not seen it, I urge them to watch it.

Steve Brine (Conservative, Winchester)

I continue the theme of the morning that only dull people are brilliant at breakfast, which may explain my next comment. I understand the essence of what the hon. Lady says, but I repeat what I said at an earlier sitting—that many people are property rich and cash poor. Is not the indiscriminate targeting of funds exactly what happened under the CERT scheme?

Luciana Berger (Labour, Liverpool, Wavertree)

I did not hear the hon. Gentleman’s last comment.

Steve Brine (Conservative, Winchester)

Is not the indiscriminate targeting of funds—that they are not paid only to the fuel poor—exactly what happened with the CERT scheme under the previous Government? Am I not right in making that assertion?

Luciana Berger (Labour, Liverpool, Wavertree)

The point is that we are looking at—[ Interruption. ] Would the Minister like to intervene?

Gregory Barker (Conservative, Bexhill and Battle)

The point that my hon. Friend was making is that CERT, a levy introduced by the previous Government for the provision of energy-efficient measures, was a blanket levy.

Luciana Berger (Labour, Liverpool, Wavertree)

I thank the Minister for that clarification.

As many Members have indicated, we need to learn from the lessons of the past and ensure that we do not repeat our mistakes. That is why we seek to ensure that ECO is as robust as possible, and that whatever is in the pot is used to help as many as possible of those who need assistance. I refer again to the “Poor Kids” documentary.

Huw Irranca-Davies (Labour, Ogmore)

In this very consensual Committee—there is much cross-party agreement—I want to avoid the suggestion that the CESP and CERT schemes were outright failures. Far from it, they made great inroads in tackling fuel poverty. In respect of the question asked by the hon. Member for Winchester, does my hon. Friend agree that we need to learn how to refine and modify such schemes so that future schemes deliver the maximum benefit, going beyond what previous schemes had achieved despite the fact that they were groundbreakers in their time?

Luciana Berger (Labour, Liverpool, Wavertree)

I thank my hon. Friend for his contribution.

I shall speak later about our concerns as to what will be in the ECO pot. As the hon. Member for Brighton, Pavilion said, the great concern is that there will be a gulf between what is in the pot and what is needed to assist those who live in fuel poverty. We want to ensure that the scheme is robust, and that it can help as many as possible of those who need assistance, especially as many energy companies are announcing massive increases in fuel prices, which are set to escalate as the years progress.

National Energy Action estimates that fuel poverty now stands at 5.5 million households, the highest level for 15 years. Different figures, of between 4 million and 5.5 million, have been shown for fuel poverty, but even if the figure were 4 million, that is 4 million households too many that spend more than 10% of their household income on energy bills. Urgent action is needed. Last week, a report by the Institute for Fiscal Studies found that all retired households increased fuel spending by 7% during cold snaps. The poorest 25% of those households also cut their food spending by the same proportion. However, the real tragedy is that things do not have to be that way.

The Government’s fuel poverty advisory group—FPAG—argues that fuel poverty is fundamentally different from other aspects of poverty and financial inequality. It differs significantly from general poverty, as appropriate levels of capital investment can deliver in many cases a permanent and sustainable solution. In January 2010, the Minister of State, Department of Energy and Climate Change, the hon. Member for Wealden, wrote on the Conservative party website that

“A Conservative Government would move swiftly to introduce our policies which will truly eradicate fuel poverty once and for all.”

It is true that the Government have moved quickly, but unfortunately we do not believe that they have been going in the right direction. They have been reducing support for the fuel poor rather than increasing it. In less than a year, the Warm Front scheme that previously provided more than 2 million homes with 21st century heating has been scaled back. We have also seen a cut in the winter fuel allowance by up to £100. The reduction in funding for the Warm Front scheme, which terminates in 2013, is of deep concern, given that heating and insulation improvements represent the most rational and sustainable approach in dealing with fuel poverty.

To echo a point made by the hon. Member for Brighton, Pavilion, when the scheme ends, it will be the first time in 30 years that there has not been a Treasury-funded provision to support those in fuel poverty. It is therefore essential that the Government ensure that the ECO programme does all that it can to meet the target of eradicating fuel poverty by 2016. The Minister and I have had many exchanges across the Dispatch Box at various DECC questions, and he has made some grand claims about the green deal and the effect that ECO will have on fuel poverty. He said:

“The green deal will be the game changer, and it will bring in billions of pounds.”—[Official Report, 16 December 2010; Vol. 520, c. 1035.]

On 19 May, he said that ECO

“is going to be much more effective than any measure that the Labour party introduced.—[Official Report, 19 May 2011; Vol. 528, c. 478.]

We want to ensure that the Minister makes good on those policies.

I was worried when the hon. Gentleman spoke on Tuesday about the 2016 target for eliminating fuel poverty, a target that is still more than four years away. The Government should be doing all in their power to reach that target. He said that the Government must have the means to do so, and that is what ECO could provide if it were adequately enshrined.

There are serious questions about how much funding will be made available through ECO, and whether it will be placed under the DECC levy control framework. Ministers have suggested that funding for ECO will lie between £1 billion and £2 billion a year, but we are still waiting to hear whether ECO will be placed under the same framework levy that must fund feed-in tariffs, the warm home discount and renewable obligations.

Huw Irranca-Davies (Labour, Ogmore)

May I suggest to my hon. Friend that, recognising the difficulties that the Minister has outlined repeatedly about the financial package at the moment is exactly the reason why not only our amendments should be supported, but the amendments tabled by the hon. Member for Brighton, Pavilion? That would give the Government the opportunity to consider alternative sources if their hands are tied at the moment.

Luciana Berger (Labour, Liverpool, Wavertree)

Indeed. We have seen signs in the past from the Government that the decision of the Office for National Statistics could be six months or many years down the line. On that basis, I would support the amendments tabled by the hon. Member for Brighton, Pavilion, and I hope that the Minister will consider the point. Can he confirm that, if the ONS determines in six months or a few years’ time that ECO should be placed under DECC’s levy control framework, it is unlikely that the level of ECO funding available would be above what is spent currently on CERT and CESP? If that is so, DECC will spend most or possibly even all the new ECO on carbon reduction rather than support for the fuel poor.

Huw Irranca-Davies (Labour, Ogmore)

I suggest that that is also one of the fundamental challenges that the Minister now faces. I am conscious that he has said the Government will do everything possible within the limits that they have. However, given the point that my hon. Friend raises about feed-in tariffs and other things that fall within levy funding schemes, the Minister will, potentially, have a pot of the same size with many more demands on it, which will put him in difficulty in achieving what he wants on fuel poverty, microgeneration and everything else.

Luciana Berger (Labour, Liverpool, Wavertree)

We are of course very concerned; in previous discussions the Minister has indicated that if the Office for National Statistics were to determine that ECO should fall in the levy framework he would seek to get the levy ceiling increased, in discussions with the Treasury. However, there is no commitment or definite confirmation from the Minister that that will happen, and we are concerned about what will be in the pot.

Significant concerns have been raised about how effective ECO funding will be if it is not targeted at the fuel poor. We received some written evidence from the End Fuel Poverty Coalition, which argued that if it is correctly designed

“the new Energy Company Obligation can make a significant contribution to a radical overhaul of the housing of vulnerable and low income households, however, the Government's current proposals will result in the ECO being spread too thinly.

Ministers intend for it to not only help the fuel poor but also subsidise expensive energy efficiency measures in households which are not fuel poor. ECO resources will be inadequate to achieve either of these objectives, let alone both.”

The Government’s draft ECO document clearly sets out those two key aims, saying that ECO will be entirely focused on the needs of lower-income people and those who are most vulnerable, and the properties that need the next most cost-effective measures that do not meet the golden rule, such as solid wall insulation. It states that in view of the scheme’s twin objectives, the powers under the Bill allow the establishment of two distinct obligations, one of which is set in terms of carbon emissions reductions, while the other is focused on reducing the cost of heating. It calls that an affordable warmth target.

I suspect that the Minister may be minded to reject the amendment, on the basis that those two aims would not be achieved without ECO funding extending beyond the fuel poor. However, that may not be the case. The Minister said on the first day of the Committee’s proceedings:

“Many of those in fuel poverty live in these houses that are hard to treat.”––[Official Report, Energy Public Bill Committee, 7 June 2011; c. 63.]

In fact, there are currently about 1.9 million fuel-poor households living in solid-walled homes in England alone. The Energy Bill impact assessment estimates, in its high scenario, that that there will be 670,000 solid-wall installations by 2016, so there are more than enough hard-to-treat fuel-poor households to ensure that that estimate is met.

Since we are currently carrying out only between 20,000 and 30,000 solid-wall installations per year, a limiting factor is likely to be industry capacity, not the availability of homes. Clearly, there is a real opportunity to achieve a reduction in fuel poverty and improve a significant number of hard-to-treat homes at the same time.

On the first day of Committee debate the Minister also said:

“Ultimately there will be a finite resource in any given year, and we must ensure that it is used effectively and that there is both a carbon element and a social element to it.”––[Official Report, Energy Public Bill Committee, 7 June 2011; c. 63.]

The amendment would be a win-win for the Government, allowing them to achieve those dual aims. In addition, delivering solid-wall insulation to fuel-poor households, through a full or high subsidy, is likely to have a knock-on benefit. The guaranteed take-up of full ECO funding would be likely to lead to quicker market maturation, and as a result the price of the measures would fall more quickly.

There is clearly a need for the Government to provide a significant level of support to low-income and vulnerable households. The amendment would ensure that those in the greatest need would be prioritised, so that they could benefit from the £488 that the Energy Saving Trust estimates they would save on their fuel bills by upgrading their homes above an F and G rating. Everyone in our society should have the right to live in a properly heated home. The Minister said that the proposals would be a game changer for fuel poverty. That is what the amendment is designed to be, and on that basis I hope the Minister will accept it.

Alan Whitehead (Labour, Southampton, Test)

As far as levies and imputed taxation are concerned, I am afraid that the landscape for the Minister’s ambitions for ECO is even worse than has hitherto been thought. The problem we start with is that, because ECO is likely to be classified as imputed tax by the ONS classification committee, it is likely to come within the Treasury’s proposed cap. I believe the sum total in the present spending round is £11.8 billion, including renewable obligations, feed-in tariffs and the warm home discount.

It is a matter of some conjecture, and I would say hope, rather than certainty, on the part of DECC that, should ECO be classified in the way I have described, the Treasury will kindly add additional room in the building of its cap to accommodate it, rather than simply saying, “Within the present spending round DECC will have to find the money it wishes to put into ECO from the £11.8 billion in the overall cap.” It would be nice to think—I sincerely hope this is the case—that there is a document in a safe somewhere that says, “Yes, for certain, DECC can have extra headroom in the cap we, the Treasury, have imposed on spending so that the ambition for, say, £2 billion a year for ECO can be accommodated within the overall cap,” signed “G.O.” at the bottom. The cap would then be £17 billion, rather than £11.8 billion, which would be generous of the Treasury under the circumstances. But the Treasury is not renowned, and certainly not under present circumstances, for its generosity in amending its caps in such cases.

There is a looming problem, to which a solution may exist, with the ambition of getting the level of the ECO to between £1 billion and £2 billion, as the Minister describes, within the present spending round. What is worse is that the present Treasury cap is generally regarded as including those things that the ONS has already declared to be within the category of imputed tax, which is not the case. Only one of the three things that are presently within the Treasury cap, and therefore in which the ECO might fall, has been declared by the ONS to be imputed tax and spend; the other two—FITs and the warm home discount—have unilaterally been declared by the Treasury, without reference to the ONS, as being imputed tax. That suggests that, rather than simply waiting for the ONS classification committee to come along and decide whether something is imputed tax, the Treasury is taking a far more draconian view. Under those circumstances, the idea that the Treasury would provide a generous new ceiling for imputed tax seems worryingly uncertain.

The last problem of Pelion and Ossa is that CERT has now been referred to the ONS for classification as imputed tax and spend.

David Crausby (Labour, Bolton North East)

I remind the Committee that with this it will be convenient to discuss the following:

New clause 23—Duty of Secretary of State to make regulations regarding the installation of energy efficiency measures by energy suppliers—

‘(1) For the purposes of requiring energy suppliers to assist in combating fuel poverty by the reduction of home heating costs and to meet carbon dioxide reduction targets the Secretary of State must within twelve months of the passing of this Act make regulations establishing a scheme requiring energy suppliers to install specified energy efficiency measures in residential properties.

(2) Regulations made pursuant to this section must specify:

(a) the energy measures to be included;

(b) that priority for installation of those measures shall be given to the homes of persons living in fuel poverty;

(c) the carbon dioxide reduction target to be achieved as a result of those measures; and

(d) such other matters that are in the opinion of the Secretary of State required for the setting up and operation of the scheme.

(3) In this section:

“fuel poverty” has the same meaning as in the Warm Homes and Energy Conservation Act 2000.

“energy suppliers” means any person licensed to supply electricity pursuant to the Electricity Act 1989 and any person licensed to supply gas pursuant to the Gas Act 1986.’.

New clause 39—Supplementing the Energy Company Obligation—

‘(1) The Secretary of State must, within six months of this Bill receiving Royal Assent, report to Parliament with proposals on the ways in which the Energy Company Obligation could be supplemented by—

(a) auction revenues from the European Union Emissions Trading System,

(b) revenues from the Carbon Floor Price, and

(c) such other funds as considered appropriate by the Secretary of State.’.

Alan Whitehead (Labour, Southampton, Test)

Someone has mentioned to me that before the break they heard me state that I wished to peel an otter. I assure hon. Members that I have no intention of doing that; I would not wish to get into trouble with animal rights lobbies. I was talking about piling Pelion on Ossa, which is what I was about to do. The carbon emissions reduction target is popularly supposed to have stayed outside the definition of imputed taxation; while that might have been an indication that its successor, the energy company obligation, will also stay outside it, that is not the case. CERT has never been looked at by the Office for National Statistics; indeed, I understand that CERT has just been referred to the ONS classification committee for precisely that purpose, so it is conceivable that if the ONS classification committee decides that CERT is indeed imputed taxation, it could come within a framework before CERT runs out at the end of 2012.

With regard to the upcoming potential range of funding for ECO, not only do we not know what the extent of the funding might be; we may well find that the funding, for reasons outside the control of the Department of Energy and Climate Change, is seriously circumscribed for the future. That is why it is doubly important that we are clear about what the overall priority for ECO is.

On occasion I have referred to the little diagram in the booklet produced by DECC that accompanies the Committee’s deliberations. It talks about green deal finance. The circle below that refers to

“the next most cost-effective measures”.

That relates to hard-to-treat homes. Then there is a reference to the ECO subsidy and measures providing affordable warmth to the vulnerable. That makes clear the idea that there could be two purposes for ECO—indeed, one might say two and a half purposes, inasmuch as it is certainly true that a disproportionate number of those hard-to-treat homes will be homes in which people who are vulnerable and fuel-poor live.

However, without a target arrangement as far as ECO is concerned, bearing in mind the limitations that there may well be on its budget, it is more than possible that the diagram in the document will end up with most of the second circle of ECO subsidy, or perhaps all of it, being taken up by the next most cost-effective measures, particularly as the document itself, as I have previously mentioned, states:

“The Committee on Climate Change recommended in their 2009 Report, ‘Meeting Carbon Budgets—the need for a step change’, that 2.3 million solid wall homes will need to have taken up solid wall insulation by 2022 in order for the UK to be on track to achieve carbon budgets.”

It may well be, as my hon. Friend the Member for Liverpool, Wavertree, has illustrated, that most of the homes that could be insulated by 2022 could be solid wall homes in which people in fuel poverty live. She referred to 1.9 million homes falling into that category. Even that figure is way outside what looks like the current funding envelope for the ECO. If we do the mathematics on the cost per home to install solid wall insulation, even that measure would require, according to the report from the Committee on Climate Change, far more funding than we think is likely for ECO in that period. That should be revisited.

The absolutely essential campaign on homes that are hard to treat and do not have cavity walls may need other forms of assistance behind it, in addition to ECO, if we are to reach the target. The purpose of ECO may be to deal with some solid wall homes, but essentially it is to support people who are vulnerable and in fuel poverty, and who may not be able to access the green deal due to their particular circumstances. As has been emphasised, if they accessed the green deal, they would, by and large, do so not to save money on their fuel bills, but so that they could heat their homes to acceptable standards of warmth, so that they were not cold, under-heated and deprived of a decent temperature in their homes.

Fundamentally, that aim runs over the question of the golden rule. If we had the provision in the Bill, it would give important clarification on where the ECO is going. It would also be an enormous help for those people who are already preparing to get under way; it would allow them to anticipate what the ECO will do. I spoke at a conference yesterday, and the lack of clarity about what the ECO will do was a widespread concern among those in the practical business of thinking about how to go along with green deal proposals, what role the green deal may play in that, and the extent to which the green deal will work in tandem with ECO where people are vulnerable and fuel-poor. The new clause has an enormous amount to commend it. I hope that the Minister will at least feel able to clarify, for all our sakes, where the ECO is going, and to accept it as an addition to the Bill.

Tom Greatrex (Labour, Rutherglen and Hamilton West)

I am grateful for the opportunity to make a few remarks about the ECO in relation to new clause 23 and clause 64. We have heard from members of the Committee—and, I think, from the Minister in an earlier sitting—about the split between the two areas that the ECO is intended to address. Various people have talked about Venn diagrams and how big the crossover part in the middle is. It is well understood that there is a degree of crossover; some hard-to-heat homes are inhabited by people who are fuel-poor.

On a number of occasions, including on Second Reading, I have raised the point, with regard to the development of the green deal, about hard-to-heat homes in my constituency and the constituencies of many others. In the part of the world that I represent, there are a lot of stone-built properties with high ceilings and big, draughty windows. Often, they are tenement properties; people who are familiar with Glasgow and Edinburgh will know of them. I just place on record that I do not represent Glasgow, in case any of my constituents read this contribution. Rutherglen is very different from Glasgow, although it is next to it. The properties are very similar, and were built by the same people at around the same time. They are hard to heat; they do not have lofts and often do not have walls suitable for cavity-wall insulation. However, a lot of them are social housing. Even those that are not are flats rather than large houses, and the occupiers are fuel-poor. That is where priority should be aimed.

I understand the point made earlier in response to the hon. Member for Brighton, Pavilion: this is a 10-year programme. We are talking about a possible £20 billion over 10 years. However, how we start is important. If the amount is in the order of £2 billion a year, we should start with people in fuel poverty, some of whom will be in hard-to-heat homes. That will give a degree of certainty, to refer to what my hon. Friend the Member for Southampton, Test, said about the discussions he has had. It is also important to set the priority for the Government. As time goes on and some of the issues are dealt with, it might be possible to extend the programme further to hard-to-heat homes where fuel poverty is not as acute an issue.

I also want to make a point referred to in the TV documentary mentioned by a number of hon. Members. This is not the direct responsibility of the Ministers here or of the policy that we are discussing, but dealing with fuel poverty can have a huge positive impact on other areas of public policy where there might be public spending implications, such as health and social care. There is a benefit for public policy and the Government in putting that initial focus on people who are fuel-poor.

I have a couple of points to make about the ECO, on which I have received representations from a Scottish perspective that may not have come to the attention of Ministers and their officials. I grew up in south-east England and have lived in Scotland for eight or nine years, and for the past year I have had the bizarre existence, as many of us have, of being in both one place and another. I cannot remember the quote that the Minister gave earlier to describe being in two places. Even at this time of year, I know the difference in climate between central London and the west of Scotland. Only a couple of weeks ago, we had to have our heating on at home during the day, which people in this part of the world probably did not.

Charles Hendry (Conservative, Wealden)

You should have put on a jumper.

Tom Greatrex (Labour, Rutherglen and Hamilton West)

I will let the Minister explain to my wife and young children that they should be putting on more clothes. I will say that he told me that, and she will come and have a word. I will see whether the Minister survives that experience.

The serious point is that there is a difference, as is shown in studies. I appreciate that some of the studies are hard to quantify exactly, but there is an appreciable difference in the amount of money people spend on their fuel bills in the west of Scotland and the west of England. Some studies from before the recent price increases put that at about £120 a year. There is a significant difference, partly due to the climate and partly due to the styles of property.

If the ECO is to work to a UK-wide home heating cost reduction target, WWF Scotland and others are concerned about parts of the country where there will be differences. I am not sure whether the Minister has had an opportunity to address that. He will probably tell me that it will be part of what is looked at in more detail in the autumn. It would be useful to get an indication of what will happen in geographical areas—not just Scotland—where there are significant differences that will need to be addressed if the ECO is to be the successful antidote to the market mechanism that the Minister has talked about in the green deal. I would be grateful for the Minister’s comments.

Gregory Barker (Conservative, Bexhill and Battle)

It is a pleasure to see you back in the Chair, Mr Crausby. In the last sitting, the hon. Members for Ogmore, for Liverpool, Wavertree, and for Brighton, Pavilion, spoke in favour of their new clauses, which are pertinent to clause 64. I will speak to those new clauses and clarify the purpose of clause 64.

I will take new clause 23 first and its emphasis on fuel-poor households. As I said in my introduction, the ECO will be introduced alongside the green deal in 2012 and will both address the needs of the fuel-poor and support households in hard-to-treat homes, saving carbon in the process. The hon. Member for Southampton, Test, referred to the diagram in the ECO document. I must point out that the even share between green deal finance and ECO subsidy, with the most cost-effective measures sitting evenly in between, is purely for illustrative purposes. It is in no way meant to be an accurate, to-scale model of the distribution of finances we anticipate.

Alan Whitehead (Labour, Southampton, Test)

Perhaps I could confirm that, as I have previously pointed out, it does say,

“Note: Diagram is not to scale”

in the bottom right-hand corner. I understand that point. My point was that because it is not to scale, what is where in those two circles is indeterminate.

Gregory Barker (Conservative, Bexhill and Battle)

The hon. Gentleman makes a good point. There is another point that has not come up in Committee. There has been an assumption that money is spent either in a prosperous, able-to-pay household or in a fuel-poor household. We are trying to be creative in looking at the ECO. It is entirely possible that we could end up subsidising the advancement of new technologies, but not at the point at which they are put into the household. Energy company partners could work on helping, either at the design or testing stage, to bring forward or scale up products that will have more than one application. For example, there has been little advancement in product design and economics in recent years on solid wall insulation or similar products, particularly for older properties which could be inhabited either by the fuel-poor—they often are—or people who are significantly wealthier. Working with the industry to identify how we can drive innovation and bring down costs in the product development stream is another possible avenue. It does not have to be a binary choice between subsidising a product at the point of installation in a wealthy person’s home or in the home of someone who is fuel-poor.

Luciana Berger (Labour, Liverpool, Wavertree)

Does that mean that the ECO could go directly to people developing products for the home?

Gregory Barker (Conservative, Bexhill and Battle)

That is exactly what I mean. In terms of product development, a move to subsidise either the roll-out or the scaling-up is entirely feasible. I am not saying that we will do that, but we are considering it. What is the best way to leverage up the subsidy? Is it to use it at the very end of the supply chain, at the point at which it is being installed in a home, or might a more discreet intervention earlier on in product development result in bringing to market cheaper, more effective products? We are keeping the door open on that. We should not just think that we have to pay full whack at the end of the supply chain process.

Caroline Lucas (Green, Brighton, Pavilion)

I am grateful to the hon. Member for Liverpool, Wavertree for getting that point clarified. While the Minister was speaking, I thought to myself, “He cannot possibly mean that there’s yet another call on this very small pot of money.” Of course, it is helpful to promote innovation, but the idea that the already hard-pressed pot of money, which, until now, most of us thought would be used primarily to help the fuel-poor immediately, will go on subsiding the industry to come up with more innovate products is deeply worrying.

Gregory Barker (Conservative, Bexhill and Battle)

Don’t get me wrong; I am not saying that the money will be an alternative source of research funding, but there is a point at which it could subsidise products with more than one application. By subsidising products that go into fuel-poor homes at scale, we would help to bring down the price of products that could then be installed in other properties. I am not saying that there will be a different type of funding, because we have budgets for research and development, but we should not believe that it will be a binary choice. The economic impact of helping to scale-up products that will go to the fuel-poor will have a knock-on economic effect on the availability of products.

The whole point of the green deal, creating a market framework and using the ECO is to inject investment and scale. We want to use a new framework to drive private sector investment into product development and create larger-scale investment that will bring down the cost of a whole suite of products. While the focus obviously remains on in-home applications, the cascading effect of that will be much wider than the simple binary choice between expensive products going into home A or cheap products going into home B.

Huw Irranca-Davies (Labour, Ogmore)

The Minister talks about driving investment into product development. That sounds very much like innovation, research and bringing forward new products. I wish to press him a little further, because that is a new departure for the Committee and its understanding of the ECO. How would the ECO money find its way to the private sector to develop such products, if not to incentivise new products and research, innovation and technology?

Gregory Barker (Conservative, Bexhill and Battle)

In general terms, subsidising at scale a new range of products—such as solid wall insulation or window treatment—designed to treat fuel-poor homes will give rise to support for a range of products that can perhaps be fitted in a complete development. When that learning is captured and the product is developed and manufactured at scale, or there is a large order, benefits will accrue throughout the supply chain.

Huw Irranca-Davies (Labour, Ogmore)

The Minister’s clarification is helpful. As other members of the Committee have made product placements, I will, too. Rockwool in my consistency generates hundreds of jobs and provides a good wall insulation product. According to the Minister, it could bring forward a new product specifically for households that might benefit from the ECO. It could make a claim on the ECO pot of money to develop it and bring it to market.

Gregory Barker (Conservative, Bexhill and Battle)

Obviously, we are talking in broad terms. It would not work with a small number of homes, but Rockwool could work on a project where it is retrofitting a large number of fuel-poor homes. If it were identified that it would be useful to work with a particular product for a type of property that was common across a large number of fuel-poor households, that intervention could be subsidised. The knock-on effect would mean that the scale, the learning and the product development would not be lost, but benefit the wider product development and range, and continue to bear down on the cost of the products. Many solid wall products, in particular, have not come down in price as quickly as we would like, because of a chicken-and-egg situation. However, once we start to invest in them at scale and see orders come forward, albeit specifically in response to dealing with problems of the fuel-poor, the benefits will accrue right across the sector.

Caroline Lucas (Green, Brighton, Pavilion)

Would not that scheme run better if it were driven by demand rather than supply? If the Minister wants to stimulate innovation, surely the way to do it is to ensure that a lot of ECO money goes to the many houses needing solid wall insulation. Once there is demand, that will drive innovation and get costs down. It seems perverse to do it the other way round, if that is also at the expense of giving scarce resources to those homes more directly.

Gregory Barker (Conservative, Bexhill and Battle)

Let me make it clear that we are not giving direct support for research and development; that is not the role of the ECO. However, the ECO could support specific measures in homes. Projects could identify the need for specific measures at scale purchase either through a green deal provider acting across a range of similar properties, or through a local authority that, as a green deal provider, signs up to improve many similar properties as part of a co-operative—in other words, has a sufficient volume of similar homes with similar problems to find it worth while to work with a supplier on a specific contract for specific insulation products.

Doing that would incentivise the supplier—for example, the company in the constituency of the hon. Member for Ogmore—to invest in that product; to come forward with a cheaper production price; to invest in research and development and in product development, and to create something which, in relation to product specification and price, better fits the needs of the fuel-poor. However, the resulting learning and economies of scale will benefit everyone else in the supply chain who might benefit from such an intervention, regardless of whether they are fuel-poor. The ECO will have the ripple effect of driving market development which, in turn, will help those—not necessarily the fuel-poor but those with hard-to-treat homes—who could benefit indirectly from such treatments.

Huw Irranca-Davies (Labour, Ogmore)

It may be only me, but that seems to be a slightly new departure in the use of the ECO. There might be great logic to it, but I am still struggling to understand whether there is a direct draw for companies, which may be good or bad, on the limited pot of money for the ECO. Will the Minister write to all the members of the Committee at the weekend to outline his thinking? It might be a fantastic innovation, but we are worried about the draw on what he has described as a very limited pot of money.

Gregory Barker (Conservative, Bexhill and Battle)

I am happy to do that. To be clear, I am not talking about using the ECO for supply-side subsidies, so that is not a departure; I am simply saying that the Committee should think more widely than the binary choice about whether the ECO will subsidise only the fuel-poor and not hard-to-treat homes, which are part of the same insulation product economy.

We are talking about driving market demand but, wherever it comes from, that demand will impact positively on the whole supply chain. The ECO will bring scale to a sector that, to date, lacks investment commensurate with the size of the challenge, and it will drive down costs. The opportunity for co-operatives and local community groups, in particular, to use their purchasing power smartly, rather than just on an individual house-by-house basis, will have a more punchy effect in driving innovation and bringing down costs.

Luciana Berger (Labour, Liverpool, Wavertree)

I appreciate and accept that those matters are not mutually exclusive, as do some of my hon. Friends. However, we want the ECO to reach fuel-poor households. We accept that millions of people are both fuel-poor and live in homes that are hard to treat, but the ECO should not go to people who live in homes that are hard to treat but who are able to pay. Will the Minister directly address that point? Does he believe that people in the able-to-pay sector should benefit from the ECO simply because they have hard-to-treat properties?

Gregory Barker (Conservative, Bexhill and Battle)

The bottom line is, does the hon. Lady think that we should not aim to bring the whole housing stock up to the standard that is needed to meet our climate change obligations? That is the flip side of what she has said.

Tom Greatrex (Labour, Rutherglen and Hamilton West)

I am not sure that that is what my hon. Friend the Member for Liverpool, Wavertree meant and it is certainly not what I meant in my contribution, which was about priority and where we start. As the Minister said, the programme might last 10 years, and £20 billion might be spent over that time frame, during which we might be able to improve some hard-to-treat properties in which the inhabitants are not fuel-poor. However, many people are fuel-poor and some of them live in hard-to-treat homes. Surely they should be the priority.

Gregory Barker (Conservative, Bexhill and Battle)

That argument is rather more nuanced than the one that the hon. Member for Liverpool, Wavertree advanced. We must be clear that a very specific climate change carbon agenda is at the heart of the green deal and the ECO; it is not simply a fuel poverty measure. Those two are not mutually exclusive, but we will not take a doctrinaire view of the ECO that might have the effect of hamstringing our ability to meet our carbon targets. Undoubtedly, we must be pragmatic in how we roll out the scheme. We are concerned about meeting a fuel poverty agenda, but we are equally concerned to drive down carbon emissions.

We know what will happen if we simply leave it to people voluntarily to choose to lower their carbon emissions: many will not do it. That is the experience from the insulation measures. We must do the whole thing, and within it, we can drive an aggressive war on fuel poverty. We will ensure that, wherever possible, we address the fuel-poor issue, which will have a strong priority, but I do not agree with the Opposition’s view that we should abandon the carbon reduction element of the programme.

Ian Lavery (Labour, Wansbeck)

To suggest that the view of the Opposition is doctrinaire is absolute nonsense. We are suggesting that we focus on fuel poverty. An estimated 44,000 people a year die as a result of cold properties. Does the Minister not agree that we should prioritise those homes through the ECO before we put any more finances into properties in which people are living comfortably?

Gregory Barker (Conservative, Bexhill and Battle)

I am sorry, but that is being doctrinaire. We know about fuel poverty, because it increased by 2 million people during the past four years under the previous Government. We know that the matter is extremely serious, which is why we will have a strong focus on it. Unlike the carbon emissions reduction target programme that we inherited from the previous Government, the scheme will not be vague or woolly; it will have a strong fuel poverty focus, hence the diagram—[ Interruption. ]

Luciana Berger (Labour, Liverpool, Wavertree)

Will the Minister give way?

Gregory Barker (Conservative, Bexhill and Battle)

No, I shall finish if I may. For the first time, the fuel poverty and climate change agendas are being brought and meshed together. I do not see those as mutually exclusive, but I return to the point that we have an imperative to meet our climate change targets. Reducing carbon emissions from the built environment is not something that we can put off until we have defeated fuel poverty. We will manage the programme pragmatically and we will focus on fuel poverty, but there is an important climate change element to it. We are not talking about insulating Blenheim palace or ridiculously large homes at a disproportionate cost.

Ian Lavery (Labour, Wansbeck)

The Minister has mentioned huge, valuable properties. Will such properties not be able to apply for the ECO?

Gregory Barker (Conservative, Bexhill and Battle)

No, additional criteria that will be introduced in secondary legislation will apply to properties of people who want to spend more than £10,000—there will be a permeable ceiling. We have spoken generally to give the consumer some context of the scale of interventions in the average household. We have said that they should have an entitlement, or an expectation, of a reasonable spend of up to £10,000. We fully accept that there will be exceptions to that rule—either larger homes that have larger heating bills, which means that it makes sense that they can afford a bigger intervention, or homes with a need to spend more. That may be through the paid-for-through-savings model, if a household is able to pay for it, or it may be from the ECO. However, we will have to be pragmatic and ensure that we do not ignore climate change.

Caroline Lucas (Green, Brighton, Pavilion)

The Minister has said in the past that he is a reasonable person, and he is. I therefore find it hard to understand why he appears to be saying that if we are tackling fuel poverty, somehow we are not tackling climate change. To me, the two things come together beautifully, and they could do so with the ECO. For example, if we have two properties that are both hard to treat, in one of which there is a fuel-poor family and in the other an able-to-pay family, the environment does not care which one we insulate first. As long as the emissions come down, it does not matter what position the family inside is in. However, if we as politicians say, “Let us combine the environmental and social agendas by prioritising properties that have the fuel-poor in them,” surely that is a gain for both the environment and the social side.

Gregory Barker (Conservative, Bexhill and Battle)

That is exactly what we are doing. The hon. Lady articulates our point entirely. However, there may be cases where it makes good sense to offer some form of subsidy, through the ECO, to the average home owner who is not fuel-poor, but who lives in an older or difficult-to-treat building. Someone on average earnings, or even on below-average earnings, but who does not meet the narrow definition of “fuel-poor”, should be entitled to some additional help to treat their home to bring it up to a standard that will help us meet our climate change targets. That is what the ECO is designed to do. It is not just about eliminating fuel poverty.

We must remember that when dealing with the fuel-poor, in some cases, the consumption of energy can go up. The rebound effect of the fuel-poor is disproportionately larger than that of a typical household. Often, what we are talking about in dealing with fuel poverty is installing heating systems and raising the warmth of the home. Obviously, we are looking to do that in a much more efficient thermal envelope, but we are not necessarily talking about making the same level of carbon savings as we would in another household.

Caroline Lucas (Green, Brighton, Pavilion)

An able-to-pay household may take the savings off its bill to jet off to the Caribbean three times a year. The idea that insulating a fuel-poor household that would benefit from thermal comfort would be worse for the environment than whatever an able-to-pay family might do with the money saved from its fuel bills, which may go on iPads, widgets, aviation and all kinds of carbon-intensive things, does not seem to be backed up with any evidence.

Gregory Barker (Conservative, Bexhill and Battle)

I do not suggest that there is hard evidence, because the situation will change. However, general economic analysis suggests that the rebound effect is typically about 15% in an average family, and up to 40% for the fuel-poor. I gave evidence to the House of Lords European Union Sub-Committee on the EU energy efficiency framework to that effect. Those figures are generally accepted. Any general theory is of course open to all sorts of exceptions, but I do not think that I am saying something controversial.

I am not talking about people who can fly off to the Caribbean three times a year, but about average families—people who simply do not fall into the category of fuel-poor, or our typical constituents, who certainly do not fly to the Caribbean three times of year. Many people in my constituency do not consider themselves wealthy, are not in the higher tax bracket and certainly do not fly to the Caribbean three times a year. However, it would be a bit of a struggle if they did not have any help with retrofitting their home to a decent standard that would allow us to keep on track to meet our carbon reduction targets. We need some flexibility here, and if we make the ECO about the fuel-poor only, we will risk undershooting and not achieving our climate change target, which is an important objective. If the hon. Member for Liverpool, Wavertree is saying that that is no longer Labour policy, that is an important departure.

Huw Irranca-Davies (Labour, Ogmore)

In what has been a broadly consensual meeting of minds, I think there is a real point of difference here. How will the Minister respond to the concerns not only of the Committee, but of that troublesome priest, Consumer Focus? It states:

“ECO resources should not subsidise ‘able to pay’ consumers taking advantage of the Green Deal finance mechanism”—

this is in respect of the ECO—

“other than those in hard to treat housing, since this will reduce its ability to tackle fuel poverty. The proportion of resources going to able to pay consumers in hard to treat homes must not undermine the ‘ring-fenced’ element for low income consumers”.

How will the Minister respond to that with a pot of money that he has repeatedly described as being finite and restricted? We need to make it go further, and he is arguing against the very spirit of that.

Gregory Barker (Conservative, Bexhill and Battle)

Not at all. I would be entirely in agreement. We will come forward in secondary legislation with a sensible and pragmatic approach, but we will not exclude ordinary, hard-working, average-earning families from support to help them improve their homes simply because they do not fall into the quite narrow definition of fuel-poor. If that is what the hon. Member for Ogmore is saying, we are in agreement with that.

It is important to remember that, alongside poverty objectives, the ECO is designed to maximise access to the green deal, and the more green deal finance we can leverage in, the better it is for us all. The ECO is a further measure, not an either/or. It is designed to trigger investment in homes, and a small element of the ECO in an able-to-pay household will quite often trigger further investments that would not otherwise be made. It is a way of leveraging in additional finance.

The hon. Gentleman and the hon. Member for Liverpool, Wavertree are painting an unnecessary division between the fuel-poor and ordinary, hard-working families. Such families may not meet the definition of fuel poverty, but they would nevertheless struggle to afford the currently relatively high cost of interventions on an average British semi-detached, terraced or small family house, because they could not fund that entirely through the pay-as-you-save model. It is important that the green deal is seen to be offering something extra to those homes.

Other models that the Opposition have mentioned, such as Germany, where a different type of subsidy for loans is used, have been subsidising average families. We are not discussing subsidies for the super-rich. We are trying to make the measures available, practical, simple and straightforward for ordinary working families. We need to get beyond simply shoving some lagging in the loft. We are discussing a comprehensive retrofit programme, not just a few basic measures. To do that and to meet our climate change targets means that some families—perhaps the hon. Member for Ogmore could define what he means by rich or well-off—and certainly ones that I know of, could warrant that sort of support.

Huw Irranca-Davies (Labour, Ogmore)

Could I suggest to the Minister that hard-working, low-income families in my constituency would perfectly accept and support the principle that the bulk of the ECO is directed towards people who are living in real fuel poverty?

Gregory Barker (Conservative, Bexhill and Battle)

The hon. Gentleman is changing his words again. We have gone from “only fuel-poor” to “the bulk of”. If he is simply saying “the bulk of”—I am not quite sure how that is defined—we are really not far away at all. That is pretty much where we came into the conversation. The shift—it is important that we flesh such things out—is that he and his colleagues have previously said that 100% of the ECO should go to those in fuel poverty. That is the point I am contesting.

Alan Whitehead (Labour, Southampton, Test)

What I attempted to make clear in my earlier contribution, which I hope the Minister will take on board, is that it is inevitable that the ECO will be rationed for the reasons the Minister gave and that I put forward in my comments. If the ECO were not rationed, it would be perfectly reasonable to say that the bulk of the money in an ECO programme should go to the fuel-poor and for the Minister to make the point about action on fuel poverty being linked to action on climate change and improvements to people’s property generally.

However, because we know that the ECO will be fundamentally rationed over the next period, the issue is how to prioritise what is the best outcome for the ECO overall. The best outcome would be to combine action on fuel poverty and action on climate change. It would not be the best outcome if the ECO were not rationed because the sort of circumstances that the Minister describes would rightly come into play, and everyone who would benefit from having their home uprated would have an ECO. However, I am afraid that that will not be the case. I am sure that the Minister is working very hard to ensure that the ECO is as large as it can be, but we know that it will be rationed. That is the fundamental point being made here.

Gregory Barker (Conservative, Bexhill and Battle)

Obviously, when we introduce secondary legislation, having engaged widely with stakeholders on a genuinely complex area, we will endeavour to steer our way through these issues. I am being drawn here, but I am trying to be clear about the matter. Opposition Members seem to be suggesting—although this seems to change in their interventions—that the ECO should be exclusively for the fuel-poor. I know that the hon. Member for Southampton, Test is not saying that, but other hon. Members have said in interventions that it should be exclusively for the fuel poor or “not for the able to pay,” which I think is what the hon. Member for Liverpool, Wavertree said. If it is not for the able to pay, that is the same thing as being exclusively for the fuel-poor. That is not semantics; it is just the basis of what she said.

I agree with the hon. Member for Southampton, Test. Our focus must be on trying to do as much as we can for the fuel-poor. I would be hesitant to put a figure on that, but it could be anywhere from 51% to 100%. The bottom line is that in order to meet our climate change targets, we have to tackle solid wall insulation. The reality is that the able-to-pay customer will not, at this point in time, shell out for solid wall insulation in large numbers. We know that because we have undertaken a great deal of research. The hon. Gentleman is an expert, so he will know exactly what we do. There is a market failure there. If we ignore that and focus exclusively on the fuel-poor—the bottom element in society—we will not meet our climate change targets. We are perhaps not as far apart on the matter as we thought we were at the beginning. I must make it clear that we have twin objectives, not one.

Caroline Lucas (Green, Brighton, Pavilion)

This has been an important debate. It would be dangerous to conclude from our discussions that we would prefer not to use the ECO exclusively in fuel-poor households because we are afraid that those households will heat their homes more fully to be more comfortable and they will therefore generate more climate change emissions. We cannot tackle climate change by keeping the fuel-poor in fuel poverty. If this scheme is not the right way to deal with that matter because, as we are discussing, households may use more energy as a result of insulating their homes better, we need to look at a range of other tools to tackle climate change. I am deeply worried that the tenor of the argument seems to suggest that because we are worried that emissions will rise, we will not do as much as we could for fuel-poor households.

Gregory Barker (Conservative, Bexhill and Battle)

That is a travesty of what I said. I absolutely did not say that. The hon. Lady sought to draw me on the impact of the rebound effect. That is not the purpose of our policy. Let me make it absolutely clear. The purpose of our policy is to tackle fuel poverty, and we will make a much better job of it than previous Governments have been able to. However, to tackle fuel poverty and our climate change objectives, we must tackle solid wall insulation, and that is relevant only partly to the fuel-poor.

Large swathes of normal, average housing in typical constituencies are occupied by people who by no stretch of the imagination are those that the hon. Lady is trying to caricature as taking three holidays a year in the Caribbean. They may be teachers, nurses, public sector workers, and people who work in supermarkets. They may not be fuel-poor, and they might be insulted if it were suggested that they were in a position to take three holidays a year. Some people who do not fall into fuel poverty will need help to make their homes fit the sort of standard that the hon. Lady and I know must be achieved if we are to transform the UK’s building stock to meet our climate change objectives. She cannot expect our climate change objective to be met by providing subsidy only to the fuel-poor. There is a grown-up, pragmatic balance to be struck, and I am confident that we will be able to do so through secondary legislation.

Claire Perry (Conservative, Devizes)

I am encouraged by what Minister says. We are all worried about fuel poverty, but the debate seems to be going down the path of dogma rather than pragmatism. He gave examples of where there might be a case for subsidy for a large housing scheme, or multiple houses, especially those with solid walls, which is a problem that I recognise in my constituency. It might be helpful if he could point the Committee to practical examples of where such an attempt has been made and failed, and where a market mechanism-changing device, such as the ECO subsidy, could help. That would certainly reassure many hon. Members.

Graham Jones (Hyndburn) (Lab) rose—

Gregory Barker (Conservative, Bexhill and Battle)

I rise and sit again.

Graham Jones (Labour, Hyndburn)

I reject that dogma. I said earlier that 60% of the housing stock in Hyndburn is terraced. Will the Minister clarify what he means by solid wall insulation? It is a great problem in my constituency, where people move in and out of work. How does he expect the green deal and the ECO to work, given that 60% of housing stock in my constituency is terraced, and occupied by the sort of people he describes? Will he clarify that?

Gregory Barker (Conservative, Bexhill and Battle)

That is a helpful example. If several streets of similar terraced properties in the hon. Gentleman’s constituency needed solid wall insulation, it would make real sense to do the whole lot at once. That would be much more effective. The Opposition are suggesting—

Graham Jones (Labour, Hyndburn)

I am not.

Gregory Barker (Conservative, Bexhill and Battle)

The hon. Gentleman is not, but some Opposition Members are suggesting that we go down the street deciding who is fuel-poor. We would end up with a patchwork approach whereby hard-working families who are not unemployed and do not strictly fall into the fuel poverty trap would be denied the upgrade that those next door were being offered.

Graham Jones (Labour, Hyndburn)

I raised that point several sittings ago, and did not receive an answer. It is good to be fleshing out an answer now, but it has taken several sittings. I would like the Minister to continue, and to provide more details of how the provision will work.

Gregory Barker (Conservative, Bexhill and Battle)

Well, I was doing that when the hon. Gentleman interrupted me. I thank him for his encouragement. He has identified exactly how we anticipate the ECO blending into a community roll-out scheme so that it would benefit the fuel-poor, and also other families who live in similar houses. A family may live next door to people who are not working, who live next door to a single mother, who lives next door to a family with four working people, who live next door to a widow with a half-decent occupational pension. They may all live in a relatively non-affluent area and not take three holidays a year in the Caribbean, but only some would fit into the strict definition of fuel poverty. It would be sensible, particularly if there was a community group, to offer them the opportunity for subsidy. The ECO could play an important role in a community-based solution and blending in the cost.

Huw Irranca-Davies (Labour, Ogmore)

I fully agree with the Minister. I shall describe a scheme to tackle fuel poverty that takes a spatial approach, area by area, that has economies of scale. It is called CESP—the community energy saving programme. It is already in place. In effect, the Minister is building on CESP and giving the ECO a spatial planning dimension. We fully support it, and nothing that we have said rules it out. However, we are against the finite pot that he continually stresses to the Committee should be disbursed to those who might be able to afford to do it themselves as and when he secures more money from the Treasury. Seeking carbon reductions and tackling fuel poverty together requires a degree of targeting, including in the spatial approach that he describes.

Gregory Barker (Conservative, Bexhill and Battle)

The hon. Gentleman is dancing around the subject. He says one thing in Committee and another on a blog. We are talking about allowing the ECO to be deployed in community-based schemes, so that whole streets and communities can be done; in that way, it will be most forcefully deployed.

People should not be picked out on fuel poverty alone. For example, Birmingham and Coventry city councils—I met the latter recently—aim to do their whole housing stock, but they can achieve that only by doing large groups of neighbourhoods together. That is exactly the sort of street-by-street roll-out that we want. However, it cannot be done if councils say, “Your neighbour’s getting solid wall insulation. We know that you only earn £2,000 a year more, but you don’t qualify for the fuel poverty definition so we can’t offer it to you.” It is about being inclusive and fair, and recognising that many hard-working families need help with insulation and not only the most fuel-poor. In the long run, it makes economic sense to cover the housing stock in that way; it is good economics as well as being fair.

Ian Lavery (Labour, Wansbeck)

I do not want to dance around the issue, but I ask the Minister to consider one simple factor. Are we not missing a golden opportunity as a Committee to help the 44,000 people who die every year, given that the ECO could perhaps prevent people from dying in future? Should we not be discussing that? Instead of just talking about the fuel-poor, should we not be looking to introduce legislation so that as well as the ECO meeting its objectives to target emission reductions it could save people’s lives?

Gregory Barker (Conservative, Bexhill and Battle)

I agree with the hon. Gentleman, but we should put it in context. Successive Governments have pledged in good faith to tackle fuel poverty. However, under the five years of the previous Administration the number suffering it increased by more than 2 million. It is simplistic to say that we could stop 44,000 people dying in cold homes. I agree with the hon. Gentleman that it pulls at the heartstrings, but the solution is rather more complex. If it was not, I dare say that the last Labour Government would have bequeathed us a rather better record on fuel poverty. It is not that they did not share the hon. Gentleman’s passion for helping those 44,000 people, but the reality is a lot more complex.

We are on the same page in wanting to tackle fuel poverty. We are coming forward with a programme that is designed to meet our climate change objectives and also to help with fuel poverty. It has the means to do so, and the means will be commensurate with the scale of the challenge—not since whenever, but for the first time. I will not be drawn down a road that artificially puts a premium on the fuel-poor and excludes those who might be just over the definition boundary but who live in comparable housing. We should be sensible enough and broad enough to do that together.

Caroline Lucas (Green, Brighton, Pavilion)

I recognise that hard-working families need help, too. For the record, my reference to people taking Caribbean holidays was more or less in the same category as the Minister’s referring to people living in Blenheim palace: it was for illustrative purposes and should not have been taken too literally. My point, however, was whether there will be any indication in secondary legislation about how the Government plan to allocate money within the ECO. We have had a big discussion about that this afternoon. Will there be some notional figures that give us a sense of how much of that money will be directed to the fuel-poor, rather than being used in the other ways that the Minister has described? We are all driving at a real prioritisation for the fuel-poor, and we can debate that definition—whether it is 100%, 90% or 80%—but can we look forward to that information in secondary legislation?

Gregory Barker (Conservative, Bexhill and Battle)

Yes, absolutely. This will be a complex proposition to try to navigate our way through a range of different scenarios. It is not only a choice between a rich man in his castle and the fuel-poor. We can think of lots of different scenarios from our constituencies, let alone right across the country. We must work not only with stakeholders, but with other groups who have a legitimate viewpoint that they want to feed into the consultation, so that, at a later stage, we come up with a complex, detailed analysis and solution relating to how we will get through those difficult areas. We want to reach exactly the destination that the hon. Lady describes, but it will involve a pragmatic blending of climate objectives, carbon reduction objectives and objectives relating to the fuel-poor, while, at the same time, being clear that we have long-term goals to meet.

Luciana Berger (Labour, Liverpool, Wavertree)

The Minister said that the Government will not put a premium on the fuel-poor, but he has previously said that the green deal and the ECO will be a game changer for fuel poverty. We will no longer have Warm Front, CERT or CESP; this will replace all those. In my estimation, 2 million of the 7 million solid-wall homes are households in fuel poverty. The whole ECO pot, if we get the £20 billion, would help only those 2 million households, and there would be nothing left. By National Energy Action’s estimates, there would still be 3.5 million homes in fuel poverty, if the ECO is solely targeted at homes that are both fuel-poor and hard to treat. That is why the amendment has been tabled and why we seek the Government’s support.

Gregory Barker (Conservative, Bexhill and Battle)

Let us be clear: I did not say that I would not put a premium on the fuel-poor—full stop. I said that I would not put a premium on the fuel-poor to the exclusion of every other category, particularly those who might be just outside the definition of fuel-poor. Our approach has to be pragmatic. I suggest that the hon. Lady does not try to parse my words to seek some artificial definition. We are absolutely committed to tackling fuel poverty. Compare it with what came before: the hon. Lady is speaking for a party who, after 13 years in office, has to defend a record that left 4.5 million people in poverty. Let us be clear about that. That figure went up by 2 million people in the final five years, after the previous Government had been in office for eight.

David Anderson (Labour, Blaydon)

Will the Minister give way?

Gregory Barker (Conservative, Bexhill and Battle)

I will try to move on now. There are no easy solutions.

Graham Jones (Labour, Hyndburn)

We know why.

Gregory Barker (Conservative, Bexhill and Battle)

I know why, because the hon. Gentleman and other Labour Members were party to a Government that failed to tackle that problem. They could have proposed the green deal and the ECO in the previous Parliament, but they chose not to. They could have proposed large at-scale solutions, but they chose not to. They decided to rely on the Warm Front scheme. If we had carried on with that, it would have been 80 years before fuel poverty was eradicated. It was absolutely up to Labour Members during their 13 years in government to make game-changing proposals that would have anticipated dealing with fuel poverty, carbon emissions, and the housing stock at the same scale as the Bill intends. In the first year of our coalition Government, we are introducing that game-changing legislation. They had 13 years, but they failed to crack it.

I realise that we are all moving forward together now. We are not trying to fight old battles; we are trying to build a consensus. Let us not try to build artificial divides that suggest that the Government are not concerned about fuel poverty. We will be judged on fuel poverty on our record and not only on our rhetoric. We are doing our best in the Bill to tackle the twin objectives of ensuring that we meet the climate change imperative and doing something transformational for the fuel-poor, albeit within the context of also having to deal with the record deficit that we inherited.

I move on to new clause 39. The Government are of course focused on the importance of our energy efficiency goals, but the hon. Member for Brighton, Pavilion and my hon. Friend the Member for Richmond Park will not be surprised to hear me say that the Treasury is responsible for the allocation of public funds. A duty on the Secretary of State to report on potential uses of central Government revenues would conflict with the Treasury’s responsibilities. We also have 300 years of prejudice against hypothecation to contend with. My hon. Friend raised the excellent example of the landfill tax, and I urge him to remind the Chancellor of the Exchequer of that when he next has the chance to talk to him. My hon. Friend made those points well, but we cannot include them in the Bill—not if I want to keep my job, at any rate.

None the less, the Committee’s support for the prioritisation of energy and climate change is fully appreciated, and the Committee can be confident that those issues remain high on the Government’s wider agenda. I refer my hon. Friend to the words of the Chancellor of the Exchequer in the most recent Budget, when he spoke about the need to bring forward incentives and other fiscal instruments that will help drive and support the programme. On that basis, and knowing how committed the coalition Government are to this flagship agenda—we are going to will not only the end but the means, to ensure that it is successful—I hope that the hon. Members for Liverpool, Wavertree and for Brighton, Pavilion will be content to withdraw the new clauses.

I will now outline the central purpose and effect of clause 64. It amends the Secretary of State’s existing powers and provides flexibility over how to design a future ECO. The new powers allow the Secretary of State to set out the basic structure of the scheme; for example, it might be focused on those who are most in need of assistance by requiring the companies concerned to provide support to specific groups of people, types of property or homes in specific areas, and by setting out what sorts of measures will be included and how they will be scored.

The clause also inserts a power for the Secretary of State to appoint a body other than Ofgem to be the administrator of the scheme. Indeed, the Secretary of State may appoint himself to be such an administrator. The future ECO is a key component of our overall strategy for domestic energy efficiency. The clause builds on existing legislation and the experience of existing schemes to enable us to create an obligation that ensures a step change in our approach to energy efficiency.

David Crausby (Labour, Bolton North East)

We will not be voting on the new clauses at this point, but it would be useful to know whether the movers of new clause 23 and new clause 39 want to press those to a vote at the appropriate time.

Luciana Berger (Labour, Liverpool, Wavertree)

Yes.

David Crausby (Labour, Bolton North East)

Caroline Lucas?

Caroline Lucas (Green, Brighton, Pavilion)

Yes.

Clause 68 - Overall home-heating cost reduction targets

Alan Whitehead (Labour, Southampton, Test)

I beg to move amendment 119, in clause 68, page 51, line 44, after ‘homes’, insert—

‘or may specify targets for the promotion of measures for reducing the cost to specified groups of individuals of heating their homes.’.

This is essentially a two-for-one offer on the part of Labour Members, and we have already had a substantial debate about a number of aspects of the targeting of ECO, so I will not go over them in detail again but, on this amendment, I would like to divide the Committee if necessary. I have six propositions which are all that need to be said, and then I will sit down.

First, we need to deal with hard-to-treat homes if we are to achieve our climate change targets. Secondly, ECO can deal with hard-to-treat homes. Thirdly, ECO will inevitably be limited in scope and will not therefore treat all hard-to-treat homes in the first few years of its operation. Fourthly, people in fuel poverty disproportionately live in hard-to-treat homes. Fifthly, targeting people in fuel poverty who live in hard-to-treat homes should therefore be undertaken within the limited scope of the existing ECO. Sixthly, targeting that raises the energy efficiency of a district even though some homes in that district might not be in fuel poverty makes sense, provided that the targeting relates to the likelihood of high fuel poverty existing in that district.

Those are reasons for the amendment, and I trust that the Minister will agree with them.

Luciana Berger (Labour, Liverpool, Wavertree)

In the previous debate, I put on the record that we at no point have said that we should abandon our carbon emissions reduction target. If the Minister looked back in Hansard, he would see that I had said it was not mutually exclusive. However, while we support the amendment, I echo my earlier points.

Seven million homes in the UK have solid-wall insulation. It is estimated that 2 million of those are also households in fuel poverty. If the ECO pot is at the £20 billion mark, that money will help those 2 million homes and no others, leaving anything between 3 million and 4 million households in fuel poverty, at current estimates. Nothing else is on the table, and the Minister has said that ECO is the game-changer for fuel poverty, so the ECO pot and whatever is limited within it should at least be directed at those households experiencing fuel poverty, and we would therefore not need to have 44,000 excess winter deaths every year. That is where our resources should be targeted.

Gregory Barker (Conservative, Bexhill and Battle)

I am sorry to hear the hon. Lady say that, because she is therefore ruling out support for community-wide schemes for the same types of housing across the board. She would only provide ECO support to those on a defined, fuel-poor income basis, not on the basis of the housing lived in. She is trying to have her cake and eat it. We cannot define eligibility simply on the income of the household, irrespective of the type of poverty. If we are to roll a scheme out effectively and economically, to whole areas and street by street, we cannot exclude next-door neighbours because they might be just above the fuel-poor definition.

Luciana Berger (Labour, Liverpool, Wavertree)

I refer to our debate, in which we said we were not being exclusive. We were talking about priorities, and that is the point. The priority for installing measures should be given to the homes of those living in fuel poverty, not given to them exclusively. Obviously, if the pot were bigger, we could treat all the homes in the UK.

David Crausby (Labour, Bolton North East)

Order. We are on amendment 119. We had a wide debate on clause 64. I would appreciate Members staying with me on the subject in hand.

Gregory Barker (Conservative, Bexhill and Battle)

Amendment 119 addresses an important element of what we want to achieve through the provisions in this part of the Bill. We recognise that in some circumstances additional or different support will be needed for specific groups of individuals—for example, and most obviously, vulnerable and low-income households, so that they can heat their homes to a more suitable level, avoiding the regular cold winter deaths with which we are all too familiar. Through provisions contained in the home heating cost-reduction target, the ECO has been specifically designed to enable us to provide such support.

For example, clause 64(6)(a) and proposed new subsection 5(bb) make it clear that the home heating cost-reduction target can be required to be met by action relating to

“individuals of a specified description.”

In fact, the legislation goes further and allows individuals to be targeted by reference to the type of property in which they might reside.

In the light of that, I assure the hon. Member for Southampton, Test and my hon. Friend the Member for Wells that the intentions of the amendment are fully met elsewhere in the Bill. I have indicated where those provisions are to be found, and I assure Opposition Members that we hold a similar position on the issue. On that basis, I urge the hon. Gentleman to withdraw his amendment.

Alan Whitehead (Labour, Southampton, Test)

I am sorry, but I would like to press the amendment to a vote. The amendment states that the Secretary of State “may specify targets.” It would give a power to the Secretary of State, and I see no reason why it should not be incorporated into the legislation, even if other passages in the Bill point in that direction. The amendment would provide a specific, encapsulated version of how the Secretary of State may specify targets. Even at this point, I ask whether the Minister is prepared to include the amendment in the Bill. It would incorporate a large number of concerns that have been aired by Opposition Members, justifiably and extensively debated, and largely agreed on by all parties. It would be a pleasant, cordial and friendly gesture for the Minister to incorporate the amendment into the Bill, and many hon. Members would be happier about what the Bill means in an overall sense. It would be a good deed in not such a good world and on not such a good day.

Gregory Barker (Conservative, Bexhill and Battle)

The hon. Gentleman makes an incredibly persuasive and charming case, and I am all in favour of generous, pleasant, cordial and amicable gestures in the Committee Room. However, I am also mindful that we are absolutely confident—I have just been reassured by my officials—that we have already accounted for the amendment in clause 66. I am also mindful that we have an obligation not to unduly amend this Bill, which started in the other place. There is a balance to be struck, and the more we amend the Bill, the more likely it is to be delayed on its return to the upper House. We cannot afford to amend the Bill unnecessarily and risk delaying Royal Assent until after the summer recess. I have to be frugal with the amendments that I offer, and cautious about any changes that we make. Where there is demonstrably a case that the measure is already covered in the Bill, I have to resist the hon. Gentleman’s charms and say that we cannot support his amendment.

Alan Whitehead (Labour, Southampton, Test)

Clause 66 is not the comprehensive clause that deals with all the issues; it deals with gas bill payers, and clause 67 deals with those who pay for electricity. The clause under discussion is an amendment to a subsequent clause, the terms of which can be universal, and that is not the same thing. I think it would be a good idea to press the amendment to a Division.

Clause 69 - Power of Secretary of State to require information: carbon emissions reduction targets and home-heating cost-reduction targets

Alan Whitehead (Labour, Southampton, Test)

I beg to move amendment 120, in clause 69, page 52, line 36, at end insert—

‘(ba) to assess whether these obligations are, among other things, being discharged transparently, cost-effectively, and consistently throughout the time period of the obligation and achieving value for money;

(bb) to assess whether these obligations are targeting priority groups and properties consistently and achieving value for money.’.

David Crausby (Labour, Bolton North East)

With this it will be convenient to discuss amendment 167, in clause 69, page 53, line 23, at end insert—

‘(6A) No later than one year after this section comes into force and in every subsequent calendar year, the Secretary of State will be required, by means of the information obtained by virtue of this section, to report to Parliament on the operation, costs and effect of a carbon emissions reduction order or home-heating cost reduction order.’.

Alan Whitehead (Labour, Southampton, Test)

The amendment follows on from amendment 119 and would ensure that the measures were being discharged transparently and cost-effectively, and would insert a provision for assessing whether those obligations were targeting priority groups and properties, in order to achieve value for money. It would ensure that the Secretary of State’s targeting arrangements were undertaken in a positive way, but since, regrettably, members of the Committee did not agree to amendment 119, I imagine that amendment 120 is fairly redundant.

Luciana Berger (Labour, Liverpool, Wavertree)

I wish to speak to amendment 167, the aim of which is to ensure transparency of the energy company obligation and its costs, because they are passed on to the consumer. As it stands, clause 69 requires specific information from energy companies in order for the Secretary of State to assess the effectiveness of the ECO, but it does not require information on costs to be reported, which is the essence of the amendment. Last week, the Telegraph reported, as did much of the press:

“Scottish Power became the first of the six major suppliers to disclose a new round of price rises. It told five million customers that gas and electricity bills would go up by 19 per cent and 10 per cent respectively.”

That was the first of many announcements from large fuel providers. One of the others said on Sunday that it intends to increase its prices, too, which signals the ever-rising costs of fuel.

With these rising prices, it is essential that we have a guaranteed transparency in revealing what proportion of rising prices on our gas and electricity bills is attributable to the ECO. Without that information on costs, it is not possible to assess exactly what costs are being placed on customers’ bills and whether they are achieving value for money. The Department of Energy and Climate Change report from May 2011, “Extra help where it is needed: a new Energy Company Obligation”, states explicitly:

“A key criticism of CERT has been the relatively poor transparency over costs and delivery. We are keen to improve this under the ECO, but this will require better and more frequent provision of data on a wider set of issues. We have included powers in the Energy Bill that would allow more detailed data provision requirements to be placed on suppliers to this end. In the meantime, we are looking closely at precisely what sorts of information would be helpful and of interest in terms of allowing better scrutiny of the scheme, and to what extent it might be practical and sensible to collect it. For example, we are exploring the scope for collecting some form of data that would allow us to better understand the cost the scheme is incurring suppliers to deliver, and to who and where the benefits are being delivered.”

Consumer research by Which? in November found that 87% of consumers would like to see in their bill details of those costs that are not directly related to their energy consumption, including costs of environmental and climate change programmes. Fifty-one per cent. said they wanted to see a detailed breakdown.

Under the current supplier obligation, the carbon emissions reduction target, energy companies promote energy efficiency measures and consumers receive free or subsidised installation, and energy companies recover that subsidy from bills; but there is no mechanism to report on those costs, and therefore only estimates are available. However, the costs are significant. DECC estimated in June last year that, assuming suppliers pass all their costs on to consumers in their energy bills, the average annual supplier cost per consumer bill will be £50 under the CERT extension, compared with £41 now.

Considering those anticipated expenses, it is urgent that consumers should be able to understand how costs are allocated on their fuel bills, particularly with reference to the ECO. It is therefore essential that the ECO should be transparent to customers and that its impact should be maximised. Why is the disclosure of costs not currently included in clause 66? Is the omission of that mandate in clause 66 an attempt to protect the fuel companies at the cost of consumer protection, transparency and competition? If is not, will the Government support the amendment, to ensure that all those pillars are maintained?

Gregory Barker (Conservative, Bexhill and Battle)

I will not delay the Committee by discussing amendment 120 any further. On amendment 167, I remind the hon. Member for Liverpool, Wavertree that the Government have already committed themselves to including annual reporting requirements in the Bill. As amended by new clause 6, the Bill requires the Secretary of State to report each year to Parliament on what has been achieved by our energy efficiency schemes—not just the ECO but the wider green deal. That is in stark contrast to the total lack of transparency in CERT, where we had about 300 million light bulbs.

We are committed to reporting on the progress and effectiveness of the ECO and the wider green deal. I agree with the hon. Lady that information on cost-effectiveness is an important component, and that is why we have taken powers in the Bill to ensure that there will be better reporting of the ECO than before.

As to timing, amendment 167 would require the Secretary of State to publish his first report on the ECO no later than one year after the Bill comes into force. The Bill, all being well, is likely to be given Royal Assent later this summer, so that would mean publishing the first report in summer 2012, before the ECO has even begun. I am afraid there is therefore a timing fault in the amendment as well. We do not need it, because the Secretary of State is committed in the Bill to an annual report to Parliament that will encompass all the issues.

Luciana Berger (Labour, Liverpool, Wavertree)

The Minister has only one paragraph left on his sheet, and he has not dealt with my question, which was why the disclosure of costs is not in clause 66.

Gregory Barker (Conservative, Bexhill and Battle)

The disclosure of costs is not specifically included, but cost-effectiveness will be very much part of the Secretary of State’s report to Parliament, and I am sure that parliamentary colleagues will take the opportunity to press on cost-effectiveness and on costs within that. I am sure that if we sat here long enough there would be other issues that we could think of, which should also be included, but which do not necessarily need to be specified in the Bill to ensure that the Secretary of State—whoever that may be in the decades to come—will come to Parliament and report to the House.

Caroline Lucas (Green, Brighton, Pavilion)

I was a little disappointed that the Minister did not spend a little longer on amendment 120, which deals with targeting priority groups. I know that we have had a big discussion about that but if the Minister finds it hard to target everything on a category called “fuel-poor”, would he consider widening that to low-income and vulnerable households and making them a target priority group which the ECO should be used exclusively for?

Gregory Barker (Conservative, Bexhill and Battle)

There will be plenty of opportunity to look at the definitions of this. We include hard-working families, the squeezed middle as well as the fuel-poor when we come to the secondary legislation. That will be the proper place for doing that. So I will not go into that any further. With that reassurance I hope that the hon. Members for Ogmore and for Liverpool, Wavertree will not press their amendment.

Luciana Berger (Labour, Liverpool, Wavertree)

On the basis of the Minister’s assurance about the opportunity we will have to revisit this and scrutinise it in secondary legislation, we will not press amendment 167.

Alan Whitehead (Labour, Southampton, Test)

I beg to ask leave to withdraw the amendment.

Gregory Barker (Conservative, Bexhill and Battle)

I beg to move amendment 16, in clause 69, page 53, line 23, at end insert—

‘(6A) In sections 28 to 30F and section 38 of the 1986 Act (enforcement of relevant requirements etc) a reference to a “relevant requirement” is to be treated as including a reference to a requirement imposed on a gas transporter or gas supplier under this section.

(6B) In sections 25 to 28 of the 1989 Act (enforcement of relevant requirements etc) a reference to a “relevant requirement” is to be treated as including a reference to a requirement imposed on an electricity distributor or electricity supplier under this section.’.

David Crausby (Labour, Bolton North East)

With this it will be convenient to discuss Government amendments 25, 26 and 72.

Gregory Barker (Conservative, Bexhill and Battle)

This is a minor technical amendment, which will ensure that an obligation imposed on an energy company by virtue of section 103B of the Utilities Act 2000, with which I am sure we are all familiar, is to be regarded as “relevant requirements” of the licence under which that energy company operates. The authority has powers to enforce “relevant requirements” and therefore if it is decided that the authority should administer the ECO it will be able to enforce an obligation imposed under section 103B by relying on its existing powers to enforce “relevant requirements”.

Schedule 1 - Reducing carbon emissions and home-heating costs: minor and consequential amendments

Caroline Lucas (Green, Brighton, Pavilion)

I beg to move amendment 132, in schedule 1, page 85, line 39, at end add—

David Crausby (Labour, Bolton North East)

With this it will be convenient to discuss the following:

New clause 31—Energy performance certificates on sale and rent—

‘(1) A valid energy performance certificate prepared in accordance with the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 (S.I. 2007/991) (for the purposes of this section “the Regulations”) must be provided free of charge to every prospective buyer or tenant at the earliest opportunity in accordance with Regulation 4 of the Regulations as amended by this Act.

(2) All materials used for the marketing of a property for either rent or sale shall include the asset rating of the building expressed in the way required by Regulation 11(a) of the Regulations.

(3) All written particulars about a building prepared for the purpose of providing information about the building to persons who may be interested in buying or renting the building must include a copy of a valid energy performance certificate for the building prepared in accordance with the Regulations.

(4) An energy performance certificate is only valid if it was issued no more than one year before the date on which it is made available.’.

Caroline Lucas (Green, Brighton, Pavilion)

Amendment 132 and new clause 31 seek to address the role of energy performance certificates in the house-buying process. I am sure hon. Members will agree that it is vital to encourage awareness of energy efficiency, particularly when people are moving house, which is often the best opportunity that many of us have to make improvements, whether we are renting or buying.

Greater use of EPCs would allow buyers or tenants to make a more informed choice about the energy efficiency of the home they are considering moving into. EPCs are the primary means of doing that, and their effective delivery is crucial if households are to be made aware of the energy efficiency of their homes and the measures that they could use to improve them, which might be financed by the green deal or through the energy company obligation or directly by home owners or social or private landlords.

I do not believe that a simple transposition of the recently recast EU energy performance of buildings directive into UK law is sufficient. Such a move would, for example, only require a new EPC if the existing one was more than 10 years old when the house was put up for sale or rent. Instead, I believe legislation should be enacted now, so that EPCs can be implemented in a way that maximises their impact and effectiveness, increases awareness of energy efficiency with prospective tenants and home buyers, kick-starts the green deal and gives industry the confidence to invest in energy assessment measures.

Subsection (1) of new clause 31 seeks to ensure that the EPC is provided to prospective tenants and buyers rather than, as is currently the case, made available on request. That, in effect, means that many people never see an EPC. If enacted, the proposed new clause would mean that when a prospective tenant or buyer inquires for the details the EPC must be provided as part of the property’s particulars. The measure simply brings forward the requirement in the EU energy performance of buildings directive, which must be implemented by member states by July 2013. I am simply suggesting that we bring that forward a little.

Subsection (2) of new clause 31 would ensure that all materials produced to market a property, such as a website listing, window display and brochure, will include the asset rating of the property from the EPC—in other words, the A to G ratings. Such a change would mean that the energy efficiency of a property would be communicated to prospective buyers and tenants at the earliest possible opportunity. As things stand, the marketing materials do not have to detail the energy efficiency of a property at that early stage. I firmly believe that providing prospective tenants and buyers with information on energy when they are first considering renting or buying would make the efficiency of buildings a much greater part of their overall consideration.

The measure was, in fact, recommended by the Department for Communities and Local Government consultation on EPCs, which was launched in March 2010. The consultation argued that requiring EPC rating on adverts would ensure that prospective tenants and purchasers of domestic and non-domestic properties are provided with details of the EPC rating at the earliest possible stage. It would enable prospective tenants and purchasers to focus their search on properties above a certain band or rating, if they wished. It would allow landlords and vendors of properties with high levels of energy efficiency to highlight that feature in their advertisement. It would improve awareness of energy efficiency and the contributions that buildings can make to a decrease in carbon emissions, and it would improve compliance with the current requirements.

The summary of responses to that consultation records that the proposal was supported by 94% of the 140 respondents, which is pretty strong support. Despite that overwhelming support for the measure, the proposal was abandoned by the DCLG under the coalition Government, as it was deemed to be gold-plating that would not be pursued. I argue strongly that the proposed new clause is not about gold-plating. It is merely about bringing forward EU regulations so that they dovetail more neatly with the implementation of the green deal. I hope the Minister will concede that point.

Subsection (3) of new clause 31 would ensure that all written particulars for marketing a property for sale or rent would include a valid EPC. At the moment estate agents can provide details of a property that do not give any information on the energy efficiency of a building if the EPC has been commissioned but not delivered, or if the property is for rent. As I said earlier, including an EPC in a property’s written particulars means that the energy efficiency will become a key determinant in a decision on which home to rent or buy.

Finally, subsection (4) of new clause 31 would ensure that EPCs remain up to date by setting a realistic and workable validity period for the information provided in an EPC. As the EPC is to become a key tool in communicating energy efficiency in general and the green deal in particular, we should ensure that it is always relevant. An EPC with a lifespan of more than a year risks being out of date by the time it is being considered, to the detriment both of the property owner or letter and the property buyer or renter. Informed decisions cannot be made on inadequate information. The current validity period of 10 years is far too long in the new climate of energy efficiency improvements that the Government want to create. Nevertheless—this is important—the shorter validity period that the new clause envisages does not mean necessarily that the EPC must be replaced each year, which would be onerous, because a new EPC would be needed only if a property were to go on the market and if the EPC at the time was more than a year old.

I remind members of the Committee that the information contained in an EPC, particularly the all-important recommendation section, is time-sensitive, as technologies change rapidly. It should therefore be updated regularly. Even more rapidly changing are the costs of energy efficiency measures and the cost of energy itself, which clearly affect the payback period of a measure. The Government’s advice websites or telephone numbers on the EPC might also change regularly. The purpose of an EPC is to inform a tenant or purchaser about the costs of running a home and of improving it, so it is absolutely essential that such information is accurate and up to date.

A shorter validity period means that EPCs would be genuinely useful and not just a regulatory burden. There is a real risk that out-of-date or irrelevant information on EPCs might act as a barrier to households taking up the green deal, so I ask the Minister and the Committee to support new clause 31 as well as amendment 132 that would amend the current regulations.

Luciana Berger (Labour, Liverpool, Wavertree)

I wish to speak to new clause 38, which shares many of the sentiments expressed by the hon. Member for Brighton, Pavilion about amendment 132 and new clause 31. Its aim is to ensure that up-to-date EPC information is available before sale or rent of a property. At present, an EPC is not always made available in advance of the purchase or tenancy agreement of a property and, under current regulations, it is an offence to disclose information derived from an EPC about a building to someone who is not connected legitimately to the decision to purchase or rent the property. That can prevent consumers from comparing homes of similar design in similar areas on the basis of energy efficiency and further prevent energy performance companies from contacting home owners to offer them deals regarding the improvement of their homes. Under current requirements, EPCs are legally valid for 10 years, which inherently does not ensure the accurate measure of the present state of a property.

The Government envisage that moving home will be a key trigger point for the green deal take-up, so the EPC has a crucial role to play in encouraging energy efficiency. It signals to the potential owners or tenants that their energy bills will be lower and it could be an influencing factor in the decision to buy, adding value to a property. However, as procedure currently stands, many people do not see the EPC until they are in the property. I know from experience of buying a new build in Liverpool last year that I did not see the EPC until I had moved into the property.

The new clause would inform the private rented sector tenants of matters to avoid their renting hard-to-heat properties. Communicating energy efficiency to prospective buyers and tenants is therefore an important part of kick-starting the green deal, improving awareness and encouraging energy efficiency behaviour change. If the EPC is to provide accurate information to the tenant or home buyer about the cost of heating the home and the potential for improving it, such information must be up to date and relevant. Making EPCs more visible in the marketing of properties is also important when communicating to potential buyers or renters, and could enable tenants and purchasers to focus their home search around the energy efficiency rating. That would also provide an incentive to landlords and sellers to improve their properties.

The Business Council for Sustainable Energy put forward the recommendation in its submission in response to the call for evidence seeking views on how to improve the energy performance of buildings in support of the green deal, issued by the Department of Energy and Climate Change and the Department for Communities and Local Government in December 2010, that legislation should include strong enforcement

“to ensure prospective tenants/owners have access to up-to-date EPCs.”

Julian Todd, the chief technical officer of ScraperWiki Ltd, highlights in written evidence submitted to the Committee that

“it is an offence to disclose information derived from an Energy Performance Certificate…to someone who is not legitimately connected to the decision to purchase that building.”

As I have said, that prevents comparisons from being made between the performances of houses that are of a similar design in the same area, and means that properties with high energy efficiency might not command the price differential that they deserve.

The Minister clarified in a previous sitting that, in light of the proposal, the Government propose to

“look again at the validity period of EPCs because the present period of 10 years is clearly not fit for purpose.”––[Official Report, Energy Public Bill Committee, 14 June 2011; c. 220.]

Although he contended that a one-year period might be “slightly onerous”, he intimated that the Government are minded to move closer to that rather than to keep the 10-year status quo, and that they will be looking to move to a “much more progressive regime” this autumn. We are keen to receive information on the direction that the Government plan to take in regulating EPC lifespans and we hope that their work will be coupled with the promotion of their EPC register, which was announced in the previous sitting.

To conclude, we agree with the Minister’s view that the current lifespan of EPCs prevents accurate evaluation of a property’s under-performance. More frequent EPC evaluations would bring us closer to ensuring that certificates accurately inform consumers. However, the accuracy of evaluations and frequency of assessments are relevant only if EPCs are readily accessible to all relevant parties before sale or rent, so the proposal seeks to ensure an increased availability of EPC data. I hope that the Minister will support its aim.

Graham Jones (Labour, Hyndburn)

I echo the comments made by the hon. Member for Brighton, Pavilion and those in the very good speech made by my hon. Friend the Member for Liverpool, Wavertree. My hon. Friend reiterated some excellent points that were made in previous discussions, from which I shall draw out the key matters.

We often think about newspaper advertising for properties, but online advertising will be far bigger than that. It is online advertising that I want the Minister to address, because in future its scale will dwarf that of any printed advertising, or even that of high street displays in letting agents. It is clearly the future. Current evidence suggests that online advertising for sales and rentals is way ahead of any other type.

The Minister sent me a letter, in which he states:

“In relation to Energy Performance Certificates…everybody will be able to access the data contained in EPCs that is held on the EPC Register.”

I appreciate that he is taking this good step forward. He mentions the right of access and safeguards, of course. I urge him to take on board the comments of the previous two speakers and the value of online advertising. As my hon. Friend the Member for Liverpool, Wavertree said, we have an opportunity to push green deal and consumer choice, and to allow people to choose energy-efficient properties. The Minister’s letter stated:

“Some organisations, such as Green Deal providers, local authorities, research organisations and”—

the important bit—

“others with an interest in promoting energy efficiency will be allowed to access the data in bulk”.

They will not be limited in searches. Will others with an interest in promoting energy efficiency include vertical internet search engines, which make up the bulk of internet advertising? They must account for 99.9% of online advertising and that is where the market is. If, as the hon. Member for Brighton, Pavilion said, consumers are given choice, will the Minister allow access to the database at a commercial rate, so that we can push the green deal and energy efficiency?

Gregory Barker (Conservative, Bexhill and Battle)

The amendments provide that when a property or the lease of a property is to be sold, or a property is to be let under a tenancy or licence agreement, the seller, prospective landlord or licensor, or their agent, must provide an EPC free of charge to the prospective buyer, tenant or licensee. It is worth remembering that EPCs, and specifically their 10-year lifespans, were introduced under the previous Government—in 2007, I believe. The hon. Member for Liverpool, Wavertree is absolutely right that this will be an opportunity to improve the original EPC concept. We fully sympathise with the points raised by the hon. Member for Brighton, Pavilion and others, and I fully appreciate the good sense that underlines them.

I also want to be clear that any marketing materials must contain details of the building’s energy efficiency.

Tom Greatrex (Labour, Rutherglen and Hamilton West)

Before the Minister moves on to the marketing of property, he has mentioned the opportunity to improve EPCs, and I wonder whether he has had any discussions with his counterpart Ministers in Scotland on EPCs. I am sure he is aware that the methodology of EPCs in Scotland is slightly different from that in England and Wales, and there have been concerns about whether Scottish assessors are able to produce whole-house surveys that fully address the energy efficiency of a property. In the context of his comments about improving EPCs, is that something that he has discussed? If he has not, will his officials be able to take that up?

Gregory Barker (Conservative, Bexhill and Battle)

I have not personally had any discussions with Scottish Ministers on that issue, but my officials are fully engaged and have a good working relationship with the Scottish Executive. I hope to be in Edinburgh before the end of the month, speaking on a range of green issues, and I hope to have the opportunity to meet Ministers from the Scottish Administration. If the hon. Gentleman believes it to be helpful, the matter is certainly something that I will raise with them.

Obviously, the specific requirement in the amendment is that the validity of an EPC would be reduced from the current period of 10 years to one year and that the person providing the EPC must not have reasonable grounds to believe that the information that it contains is no longer accurate. Otherwise, the landlord or seller of a building shall be liable for a penalty charge for failing to produce an EPC, even if it can be demonstrated that the duty to obtain such a document does not apply to them.

While I am sympathetic towards the intent behind the amendment, the Government do not support it at this point. That is not because we do not support the intention, but because it is already a statutory requirement that an EPC is made available free of charge at the earliest opportunity to a prospective buyer or tenant. We intend laying regulations to come into force in the autumn that will strengthen that requirement and require the seller or landlord, or their agent, to attach a copy of the EPC to all written particulars about any building that is being offered for sale or rent.

I hope that I can assure the hon. Member for Hyndburn that his points about the internet are well made and understood and that from July 2013 it will be a requirement that all property adverts, including those on the internet, carry an EPC rating. As part of the implementation of the recast of the energy performance of buildings directive, we will also be introducing a requirement that details of a property’s energy efficiency rating are included in marketing material. It would not be appropriate, therefore, to take powers in primary legislation to introduce that requirement when there is already scope to do so through secondary legislation.

As I said at the beginning, the system that we inherited from the previous Government means that EPCs are currently valid for 10 years. I fully agree with the hon. Member for Brighton, Pavilion that that is not fit for purpose, particularly in the context of the green deal and what we hope will be a step change in the dynamism of the interventions, technologies and costs associated with retrofitting homes. As a result, we will be consulting on that issue in the autumn as part of a wider consultation on the recast of the energy performance of buildings directive. Obviously, I cannot prejudge the consultation, but I think the hon. Lady will appreciate our sympathy for her wider case and the common sense that underpins it. The consultation will be a good opportunity properly and comprehensively to assess the likely costs and benefits of a shorter validity period for energy performance certificates and to gauge the level of support for changing it. Although I do not wish to prejudge the outcome of the consultation by amending the validity period now, I think there is momentum and a clear sense of direction behind the agenda and on what we need to do in the autumn.

We will make some changes to the content and format of energy performance certificates before the green deal is rolled out. In future, if improvement works are funded through the green deal, there will be an obligation to produce an updated energy performance certificate to capture the impact of those works on the energy efficiency of the property. One change will be to ensure that the certificate covers information about any green deal finance that has been taken out to improve the property, including the total amount borrowed, the repayments and when the loan is due to expire.

Although there will not be such an obligation if a householder or a landlord does not use green deal finance, it would be logical for them to obtain an updated EPC that reflected the benefit of that work. That would be likely to improve the marketability of the property and to make it more desirable to prospective buyers or tenants, but it is not necessary to introduce a statutory obligation to cover such circumstances.

Finally, on balance, it is not right to remove the current defence available to sellers or landlords, under which they are not liable for a penalty charge for failing to obtain an energy performance certificate if they demonstrate that the duty to do so does not apply to them. Such a situation may occur in limited circumstances—for example, where it can be demonstrated that an estate agent has contractually agreed to take on that responsibility, as it would not be appropriate for the Government to interfere with the business agreement between a seller or a landlord and their agent. With those reassurances, I hope that the hon. Lady and I are largely on the same page and that, although more detail has to be decided, she will withdraw her amendment.

Caroline Lucas (Green, Brighton, Pavilion)

I thank the Minister for his comments. It is reassuring to know that we are going in the same direction, although, as ever, I want to get there a bit faster. In the light of what he has said, I beg to ask leave to withdraw the amendment.

David Crausby (Labour, Bolton North East)

Is it the intention of those who have tabled new clauses 31 and 38 to press them to a vote at the appropriate time?

Luciana Berger (Labour, Liverpool, Wavertree)

No.

Caroline Lucas (Green, Brighton, Pavilion)

No.

Clause 71 - Smart meters

Huw Irranca-Davies (Labour, Ogmore)

I beg to move amendment 168, in clause 71, page 54, line 15, at end insert—

‘(3A) In subsection (3)(g) after “consumers”, insert “(including adherence to an independent Code of Practice for Installation)”.’.

David Crausby (Labour, Bolton North East)

With this it will be convenient to discuss the following:

New clause 36—Smart metering strategy—

‘(1) The Secretary of State must, following consultation with energy consumers and other interested parties, prepare and publish a strategy to assist suppliers to deliver the intended benefits of smart meters to consumers, including in particular low income and vulnerable consumers. In preparing the strategy the Secretary of State must set out how the smart meter rollout will—

(a) deliver to consumers and taxpayers the benefits identified in the Government’s Impact Assessment;

(b) contribute to the carbon targets specified in the Climate Change Act 2008;

(c) contribute to the elimination of fuel poverty as specified in the Warm Homes and Energy Conservation Act 2000; and

(d) contribute to wider Government policy goals in particular, digital access, healthy living and water affordability.’.

New clause 37—Smart meter rollout—annual report—

‘(1) It is the duty of the Secretary of State to report to Parliament or an appropriate parliamentary committee on the progress of smart meter rollout every year starting from six months after the coming into force of the Act. The report should cover progress on the delivery of smart meters to domestic and micro-businesses, including—

(a) progress against the smart metering impact assessments;

(b) the number of smart meters installed in the United Kingdom including any national or regional trend;

(c) the estimated benefits to consumers, taxpayers and industry of the smart meter rollout, with particular reference to low income and vulnerable consumers;

(d) estimated effects on the levels of fuel poverty;

(e) the estimated energy and carbon reduction from the smart meter rollout;

(f) the degree to which interoperability of smart meters has been achieved;

(g) customer satisfaction indicators, including levels of complaint; and

(h) security of smart meters and smart grids including in relation to privacy and commercial confidentiality.’.

Huw Irranca-Davies (Labour, Ogmore)

Amendment 168 in effect tries, in the nicest possible way, to bind the hands of the Minister to produce a code of practice. Over the past few months, there has been considerable discussion among consumer groups and others about having a code of practice, and the Minister has been sympathetic towards putting one in place.

The two new clauses relate to a smart metering strategy. This is not directly related, but the scale of the roll-out of smart meters reminds me of the scale of the digital roll-out and the amount of planning and preparation involved. A considerable amount of effort went into a strategy to ensure that that worked effectively and that different consumer groups had proper preparation, including the vulnerable and elderly. We are asking for a strategy.

New clause 37 asks for an annual report on the smart meter roll-out. We know that that is time-limited and will happen quite rapidly over a short period of years. We are asking for an annual report to Parliament, in which we would like the Minister to deal with a number of issues, such as progress on the smart meter, an impact assessment, the number of smart meters installed and national and regional trends, as detailed in new clause 37.

As the Minister will be aware, smart metering is already a fact of life. Many companies have already decided to go in early and pre-emptively to install their own smart meters. I confess that I am one of the early adopters; I do not know whether the Minister is as well.

Gregory Barker (Conservative, Bexhill and Battle)

Which company?

Huw Irranca-Davies (Labour, Ogmore)

I am not going to say which one. I already have a smart meter, and it is very good; it has changed our behaviour. We have a typical house, with two adults and three children. We never quite know where the children are in the house and what they are up to at any moment, particularly with electricity.

Gregory Barker (Conservative, Bexhill and Battle)

You should.

Huw Irranca-Davies (Labour, Ogmore)

The Minister says from a sedentary position that I should. Well, now we do, thanks to the smart meter. We can see where energy demand is escalating and see the blips and traffic light systems going on to warn us that we are consuming more than we should. A shout then goes down the corridor: “What on earth are you playing at? Who has the wi-fi and the Wii on?” I am sure that that is familiar to families up and down the land.

There are already many different types and standards of smart meters out there, and it is entirely laudable that many of the larger energy companies have decided to launch their own initiatives. However, there are also fears about that path too, particularly when the most recent estimate indicates that something like 170,000 smart meters have already been installed in Britain. I do not have the up-to-date figures, but I am sure that the Minister can give them to us.

British Gas, which is owned by Centrica, has one of the most ambitious programmes. It is reported to be installing up to 1,000 smart meters a day, with the target of 2 million to be installed by the end of 2012. Before the Government have a firm grip on the smart meter roll-out, we will see 2 million from British Gas. Also, E.ON has said that it is likely to have 1 million meters installed by March 2014, and 100,000 meters by the end of this year. Significant numbers of smart meters will have been installed before the official start date of the Government roll-out. As I said, while it is great to have some technology on the market and have some feedback from it, there are dangers with it, which I will come to.

The Energy Retail Association has, commendably, already developed a code of practice for the installation of smart meters, but it is voluntary. One of the key concerns regarding the code is that it does not exclude sales activity during installation, when the supplier is in customers’ homes. Widespread problems with doorstep selling practices have already been acknowledged, including, regrettably, from energy companies. We want to protect consumers against the risk of some suppliers, or individual operators for suppliers that have been told not to, going for the hard sell when inside people’s homes. That is why we need a mandatory code of practice.

There is precedent to validate consumers’ concerns. The 2008 Ofgem probe into the energy retail market found that more than 40% of consumers switched to a worse deal as a result of high-pressure doorstep selling. We have seen prices rising over the last winter and currently, and one way that the Secretary of State recommends people to avoid that is to switch suppliers. However, we know that slightly less than half of all consumers switch to a worse deal as a result of high-pressure doorstep selling. The study that was carried out by Consumer Focus in May 2009 on supplier sales practice found that 34% of consumers described their experience of doorstep sales as “intimidating” and 68% ranked their customer experience as the lowest score possible.

Ofgem launched a spring package of measures to deal with what it terms early movers on the roll-out. The document covers issues of interoperability, which I will come to, remote disconnection and leaving stranded assets—leaving behind a redundant, inoperable smart meter when a consumer switches suppliers—and customers’ ability to switch supplier. The document also covers marketing, as I have just mentioned, but states that

“Ofgem is not persuaded that there are urgent issues that need addressing. Furthermore, Ofgem already has powers under existing consumer protection legislation and through the marketing licence condition to tackle certain forms of behaviour should it arise.”

Not only do we know that elements of marketing mis-selling are going on in a different area of energy, but it is clear from customer feedback that Ofgem is not applying whatever powers it has to deal with them. The document continues:

“In particular, the marketing licence condition now requires suppliers to take all reasonable steps to ensure that their marketing activity in respect of new domestic supply contracts is conducted in a fair, transparent, appropriate and professional manner…At this stage, Ofgem does not propose to introduce any new requirements to deal with sales and marketing as part of the Spring Package.”

I am not persuaded by Ofgem’s argument, because the feedback from consumer organisations and individual consumers shows consistently that they are worried about doorstep and high-pressure selling. We still need to address things such as the sale of tariffs at the point of installation, the marketing of products and clarifying the difference between good, sensible advice and marketing.

I now turn away from the code of practice, but I hope that the Minister is sympathetic and sees the need for it. He may well say that the Government will bring one forward subsequently, but amendment 168 proposes that he commit to doing so in the Bill. I realise that I am tying the Minister’s hands, but I think that I am tying them to something that he intends to do anyway. In new clauses 36 and 37 we are trying to develop a robust approach to the smart meter roll-out and to ensure transparency and accountability throughout. I recognise that the Minister has been working hard with his officials to get a grip on where we are heading with the roll-out of smart meters, because it is essential that the roll-out provides real benefits to consumers.

I want to voice our concerns and explain why we need a strategy and a duty to report to Parliament. The impact assessment that DECC produced for the roll-out estimates that the cost is likely to be about £10 billion, although I am sure that the Minister will give me an updated figure if that has changed. The consumer benefits of about £4.6 billion that are indentified in the impact assessment are expected to come from customers being able to use up-to-date information on their gas and electricity consumption to reduce their energy use and to save money on their energy bills.

The impact assessment estimates that the roll-out will cost approximately £10 billion, but it is worth stressing that the net benefit for Britain plc should be positive at £15.8 billion, which includes consumer benefits from reduced consumption. If that does not happen; if something goes wrong with the roll-out; and if, with the best will and the best intentions, it does not all go as planned, the business case that this is predicated on—the cost analysis—might be considerably weakened, and customers might end up worse off. I will explain why. First, DECC estimates that customers will reduce their energy consumption by on average 0.3% to 0.4% a year or an estimated £23 a year for a dual fuel customer by 2020. It is expected that costs will be passed on to consumers across the whole customer base, so if costs spiral, consumers will foot the bill.

The benefits of smart meters are intended to derive from reductions in energy use. It is not just smart meters, but smart consumers. The Minister will know, because we are at the vanguard of this, that there are other parts of the world where they have tried versions of smart meters, but not to the extent we are talking about rolling out right across the country. We do not know exactly what savings there will be. While there is good primary evidence to suggest that there is an immediate response from consumers as they learn to understand the technology, to use it and to reduce their demand, we have no similar longitudinal studies to show that that is sustained and that households do not simply slip backwards as they become used to the idea of paying a little bit more. Yes, they have the traffic lights system but they get used to it and they do not work quite as hard to manage their energy down and deal with carbon reductions.

The full effect on bills and carbon reduction is slightly open to debate, especially after that initial period. Will the Minister explain how we will persuade, cajole or motivate people so that they not only take the initiative seriously at the start but continue with it long term? That is to do with changing hearts and minds. It is not simply having a technological device in the home. Perhaps I could point him towards one of the developments that we used quite extensively and successfully at DEFRA during my term as a Minister. It was known within the civil service as the four Es model. He might not be familiar with it at DECC, although I should be surprised because DECC grew out of the old DEFRA family.

That model aims to combine factors of encouraging, motivating and enabling people to make easy decisions to make the change possible. It not only explains to people why they should do it, it makes it easy for them to do so. It involves engaging people and gaining their support for policies and leading by example. Leading by example should also apply to Government buildings, both central and local, agencies and so on. That approach takes some resource to make it happen. I should like to hear something about the resources to persuade people of the benefits of smart meters, both in carbon reduction and price savings.

The American Council for an Energy-Efficient Economy reviewed 36 different metering programmes internationally and concluded:

“To realize potential feedback-induced savings, advanced meters”—

its terminology for smart meters—

“must be used in conjunction with in-home…displays and well-designed programs that successfully inform, engage, empower, and motivate people.”

That needs to be part of the strategy. We should not just let the technology run, but persuade people to engage with it. The review continues:

“Customer engagement with smart metering will have a significant impact on the overall costs of the programme and the consumer’s opportunity to benefit. In places such as the Netherlands and California where there has been a consumer backlash against smart metering as a result of health concerns and privacy issues, this has resulted in a considerable increase in costs.”

I should like to hear the Minister’s thoughts on the hearts and minds aspect, the engaging and motivating and putting the Government’s argument out there. Then there is the impact on low-income households. The Government’s impact assessment has been criticised in some quarters for its lack of focus on the impacts on low-income and vulnerable customers. I am sure that the Minister and his team will have been working to respond to those criticisms. DECC has stated that it will review the impact of roll-out on different consumer groups, including vulnerable customers, in 2014. As I have said, it is estimated that by that time 4 million meters will have been installed, a significant number of which are likely to be in low-income or vulnerable households. Has there been a thorough assessment of the impact of the roll-out on low-income households? Where will the costs lie, initially and in the long term?

We have had great debate in a different context about prepayment meters. What we want to avoid is another cost being added on for low-income households because they joined up with the Minister in his drive to get smart meters out there, and to save energy and drive carbon down. We do not want those households penalised for that. Perhaps the Minister’s assessment would be useful.

The Government’s impact assessment highlights the potential additional costs from an accelerated early roll-out, but the early roll-out also carries the potential of missing cost savings. I would therefore be interested in what discussions the Minister has had to revisit an earlier one that the hon. Member for Brighton, Pavilion and I engaged in with the Minister of State, the hon. Member for Bexhill and Battle, on the issue of water metering.

At what point will there be synchronicity, as to display functions and so on, between smart meters that engage with energy and electricity, and those for water? I suggest we need a strategy, even it is not immediate or in the early stages, to deal with the issue and explain how, when we have compatible technologies and display functions, they can be included in the roll-out. The smart meters will have a lifespan and will need to be refurbished or renewed at certain points. It seems that there will be an opportunity to do that if our thinking caps are on.

It is essential that the programme, with the coherence strategy, should be designed and monitored with a view to the impacts on energy and carbon reduction; the benefits for and impacts on consumers—especially those on low incomes, and vulnerable customers; the effect on fuel poverty levels; the contribution to wider policy goals in Government—that is where the strategy really plays in; the resolution of interoperability issues between devices and different energy companies and retailers; and, of course, security concerns.

I want to make a few comments on interoperability and the ability to switch. Switching has been a live issue in the past few weeks. At some point we shall be talking about switching with meters in place, provided in one way or another by a particular energy company. Of course, technology could be incompatible between the meters of different energy companies.

If customers must change their meter to change supplier, it will not only be harder to switch, but pretty inconvenient, and unnecessarily costly. The meter costs would surely be passed on to the consumer somehow. In its spring package, which I quoted earlier, Ofgem said:

“In these very early stages of rollout we recognise that the meter may need to revert to dumb mode on change of supplier”—

“dumb mode” meaning that it is not two-way intelligent; it is purely a reading, in effect.

It says:

“At this early stage, ahead of obligations relating to mandated rollout”—

which the clauses in question relate to—

“and full technical and commercial interoperability being introduced, smart prepayment presents a particular challenge as these meters cannot be used in dumb prepayment mode. Without a communications link there is no ready way to top up the meter as there will no longer be any physical device…In order to encourage suppliers to find a solution to this issue and to protect consumers in the meantime we are proposing that suppliers should not be allowed to install smart meters for use in prepayment mode unless they could be used in prepayment mode by an incoming supplier.

I should welcome the Minister’s response to those observations.

Full interoperability is not expected to be in place until at least 2014, when the data communications company is operational. In the meantime, if a customer wishes to switch supplier, their smart meter will only operate in dumb mode after they switch. They will not be able to switch from a smart deal to another smart deal, without having their meter changed. I speak from experience, having made one change myself.

Luciana Berger (Labour, Liverpool, Wavertree)

Forgive me if I make points that my hon. Friend wishes to mention later. Does he share my concerns that some of the current smart meter roll-out uses technology that cannot be accessed across the UK? I refer to General Packet Radio Service, which cannot be used in some homes if they have basements or are in certain areas. There are also concerns that that technology might become obsolete. If every household that could access GPRS had a smart meter with that technology there would be issues about the capacity of the system.

Huw Irranca-Davies (Labour, Ogmore)

My hon. Friend makes a good point, of which I know the Minister is aware and concerned about. It is not just the technology of the device, it is the platform on which it rests. We are waiting to see that resolved. It again argues the case strongly for a strategy and a report. If we, with the Minister’s wise team of officials, devise this in the correct way, we will be able, on the basis of the amendments, to hear each year how that is going. Alternatively, we could hear each year that there have been problems, because the Minister with his wise counsel has selected an innovative platform that seemed to be the bee’s knees but has not quite lived up to it. We know that happens in Government. I am not pointing the finger at the coalition; we know that happens. However, with something like this which is on the scale of digital roll-out, to come back and report to Parliament on annual basis on how that strategy is performing is necessary as well as desirable.

With regard to tariff complexity, a key benefit of the smart meter programme comes from consumers reducing their energy consumption and taking advantage of tariffs that would reduce their consumption, particularly at peak times. That requires smart consumers as well; I have made that point repeatedly. It is no good just having the device there if one is not going to use the information to one’s advantage. Smart meters offer the potential for a new range of tariffs, for example, multiple rate time of use tariffs, so that they can help reduce demand at peak times and lower the cost for consumers. From a personal perspective, that is what we are already doing in our house. The wonderful device we have flashes when there is peak demand or when that is anticipated. It flashes to warn against putting on the kettle or other devices, and to wait for another time.

Truly smart meters, with their two-way communication, mean that one can save money as well as help the Minister to manage his carbon reduction targets. Ofgem’s response was,

“Ofgem is aware of the wider concerns about tariff complexity and the importance of consumers being able to exercise effective choice. As part of the Probe remedies the marketing licence condition was strengthened to require suppliers to provide a written estimate of the annual charges based on the consumer’s annual energy use. Where suppliers are making claims about the savings to be gained from a time-of-use tariff we would expect this to be based on the consumer’s consumption pattern in different periods.”

Again, the strategy for Parliament would be extremely useful in putting forward the Minister’s joined-up thinking, as the years go by with the roll-out, of how tariff systems would work, in favour of consumers. The systems should not confuse them with complexity, but enable them to pick simply, under the E of enabling, easy choices of how to reduce bills and carbon take.

I have already mentioned remote disconnection. Concerns have also been raised about load limiting, restricting the amount of electricity and gas used by a household when low on credit. There is a worry of remote disconnection that could arise from that. We cannot have a situation where smart meters, rather than enable the consumer, allow disconnection, without notice or discussion, because there is intelligent monitoring of a household. That would be the worst sort of use, so I look forward to hearing the Minister’s response and whether he sees that those considerations will form part of his strategy. We also need robust safeguards to prevent remote disconnection or customers being switched from debit to pay as you go without their consent.

In conclusion, I will refer to Consumer Focus’s three key asks. First, it requests new protections to safeguard customers in a smart world as soon as possible, including measures related to smart meters, as I have mentioned, as well as switching, sales and marketing, and data protection—I will not go into that issue in detail, but the Minister will know that there are worries over effective encryption and decryption, not only within the home, but when that information leaves the home and is communicated down two-way lines to suppliers. Consumer Focus also asks for protections relating to remote functionality and for vulnerable and low-income consumers.

Secondly, it asks for a strategy to be put in place, as we are asking now, to deliver the consumer benefits of smart metering. That should include governance of the scheme, its reporting, and a national engagement plan, which I have referred to. If the Minister does not like the previous Government’s four Es, by all means, rebrand it, but we need a strategy that will engage and motivate people, and not simply leave it up to them or companies to drive it forward. As part of that second point about a strategy, Consumer Focus also suggests that the Government should report back annually to Parliament on the costs and benefits achieved for consumers and Britain plc, as proposed by one of our new clauses.

Finally, Consumer Focus recommends that extra help must be provided for low-income and vulnerable consumers, because all consumers should be able to access the benefits of smart metering, especially when all customers will pay for it. That suggestion is absolutely right, and it is one of the points that we were seized with during the digital roll-out. We have to focus precisely on people who might have the most difficulty making sense and use of a new technology within their homes, or on people who might be able to make sense of it if they had a little support. That does not always have to be from the Government; it could come from within their community, which fits ideally into the big society.

Therefore, our three asks are for a code of practice, the reporting function to Parliament, and that a strategy is put in place. I think that the Minister would be sympathetic to all those suggestions—but perhaps not. However, if he is sympathetic, in the cordial spirit of my speaking to the new clauses and amendments, I hope that he will accept them on to the face of the Bill.

David Crausby (Labour, Bolton North East)

Order. I bring it to the Committee’s attention that the same rules apply here as in the House. It is not in order for Ministers or Members to pass between the sight line of the Chair and whoever has the floor. I would appreciate your future co-operation.

Alan Whitehead (Labour, Southampton, Test)

Some while ago, Spike Milligan had a product called “Snibbo”, which he regularly advertised on his television programme. If someone put it on their dog, it would cure its fleas. People could lubricate their rusty bicycle chain with it. It was a suitable spread for toast on a cold winter evening, and broken vases could be glued back together with it. I mention that, because it appears to be the way that smart meters have been discussed recently. It is said that they are the all-in solution to the question of how we use our electricity and gas most effectively, how we measure it, and how we develop the role of smart grids, which use the relevant information. Altogether, they will revolutionise how our energy is used, supplied, transported and decreased, in terms of the amount that goes out. All that is true. That is what smart meters can do. However, as my hon. Friend the Member for Ogmore said, we have moved to the roll-out of smart meters and recognise that they are not Snibbo. They are devices that can do a good job, but have several difficulties in their operational process, and their roll-out could end us up in a bad place. We must bear in mind the ability of our grid to operate in the best possible way if the roll-out is botched, if the results of the roll-out are far less optimal than expected or if, indeed, the public decide over time that the smart meters are not of universal benefit, but are some sort of universal demon in their houses and should be resisted.

As my hon. Friend mentioned, a couple of Californian counties held a moratorium on the roll-out of smart meters on the grounds that they were a public health hazard and an intrusion into people’s houses. There was a substantial campaign by citizens’ groups and stickers were put on people’s front doors saying, “Smart meters not required here. Do not install a smart meter in my property. Go away.”

David Crausby (Labour, Bolton North East)

Order. We are discussing amendment 168, and what the hon. Gentleman is saying is probably more attributable to a stand part debate.

Alan Whitehead (Labour, Southampton, Test)

I thank you for your advice, Mr Crausby. I will shortly be coming to my arguments in favour of new clauses 36 and 37.

In this country, big brother watch is already under way in denouncing smart meters. Indeed, Mrs Doretta Cocks of the weekly bin collection campaign stated recently that,

“First, we had a spy in the bin and now we’re going to have a spy in the home.”

That is how some of the debate on smart meters is beginning to shape up in certain parts of our country, and which has been the case abroad. It is imperative that smart meters are rolled-out in the most efficient, effective and speedy way, and I am completely sold on the idea that they will indeed revolutionise how our energy is supplied and works. Among other things, they will make a substantial contribution to the battle against global warming and how we can manage our electricity in a much smarter way overall.

Ian Lavery (Labour, Wansbeck)

My hon. Friend has successfully talked me out of wanting to install a smart mater. What would happen if I, like many others, refuse to install such meters?

Alan Whitehead (Labour, Southampton, Test)

That is precisely the issue to which I am alluding. Several people might not want a smart meter installed in their home for either actual or perceived views about the security of the data that might be supplied through the meter, and the extent to which it would be possible remotely to undertake actions that the householder might not want undertaken. In rolling-out the smart meters, it is essential that such issues are properly addressed and that a strategy is in place that enables them to be dealt with.

We want a strategy to enable us to be sure that people are not undertaking some disruption in order to have a dumb meter in their homes rather than a smart meter, which perhaps would need to be ripped out and replaced after a few years. Indeed, we can already see that the early roll-out of smart meters by some utilities is clearly designed to capture the market for interoperability. Whether that will prove to be the case over time remains to be seen.

We need to have a clear strategy about what can be delivered on consumer benefits. We need to know how to answer all the questions relating to the privacy, commercial confidentiality and security of smart meters, in terms of how they perform a national function, as far as that smart use of energy information is concerned, so that they do not end up being only as good as mobile phone coverage. All those issues are part and parcel of a successful roll-out of smart meters, such that they work in the best possible way for this country.

It is common sense that we should have not only a strategy to address that when roll-out takes place, but post-legislative scrutiny of the roll-out in action, as well as an annual report to address the degree of success or to flash up warning signs, just like the smart meter flashes up a warning sign when my hon. Friend the Member for Ogmore should not put his kettle on. We should have warning signs if the roll-out is being pursued in a way that is inimical to its ultimate success.

The measures in new clauses 36 and 37 should be an integral part of a smart meter roll-out, so I hope that the Minister will welcome them. They would underline and underpin what would be an ambitious and hopefully successful programme of smart meter roll-out, which has to be carried out in the full knowledge that it will not be without problems that will need to be addressed.

Charles Hendry (Conservative, Wealden)

It is a huge pleasure to serve under your chairmanship, Mr Crausby, and to make my first speech in this Committee after almost two weeks. I hope that I shall prove that I am not here just for decoration. I am the living embodiment of the squeezed middle, about which we have heard so much today.

I am grateful to the hon. Member for Ogmore for the way in which he has taken us through these issues, and I am grateful to the hon. Member for Southampton, Test for expressing his concerns. We have had a good discussion about some of the general challenges of smart metering. I want to respond to those and, specifically, to the issues that have been raised.

Ian Lavery (Labour, Wansbeck)

I have a basic question, which I have just asked my hon. Friend the Member for Southampton, Test: what are the consequences if an individual does not want a smart meter?

Charles Hendry (Conservative, Wealden)

As now, there is no compulsion on people to have smart meters. I hope that the process will be such a success that people will say, “I have seen what it has done for the hon. Member for Ogmore, and I want that in my house.” We should be doing this because people want to buy into it. A great deal of our effort is to ensure that there is consumer satisfaction so that we get demand for this to be rolled out more quickly, rather than resistance. We are very much alive to that point.

I thought that we got a fascinating insight into the home of the shadow Minister and life in Ogmore—the children running wild with no idea of where they are, and more gadgets than one finds in a branch of Currys, by the sound of it. When the lights are on and all the family are home, they can probably be seen from Mars.

The hon. Gentleman rightly recognised that the Government have got a grip of this issue. We have put a great deal of effort into ensuring that we can move forward more quickly, and the way of doing that is to get early agreement on the key stages that have to be sorted out. I am worried that the longer we talk about intra-operability and what the key criteria and functionality should be, the more the companies will hold back from putting in place smart metering in the early part of the phase.

I am encouraged that companies such as E.ON are joining Centrica by saying that they want to see a big roll-out of the smart metering programme, and that they have committed to putting in place a million over the next few years. They can do that only because we are saying that they will have clarity by early next year about what the functionality of smart meters should be. They are aware that there is a risk that if we set a functionality that the current smart meters do not address, they would have to be removed at some point. We want to give the companies clarity as soon as we can—to some extent this addresses the issue raised by the hon. Member for Liverpool, Wavertree—on what the functions should be, and we will then know that the companies are there for the longer term. Consumers can then switch when they want to, and they will not need the smart meter to be taken out or to go back into dumb mode. That is the key to enabling the process to go forward at the speed to which we aspire.

Huw Irranca-Davies (Labour, Ogmore)

I assure the Minister that he is in no way arm candy on the Front Bench. He is a sterling performer, and he is doing well on this group of amendments.

Although there are advantages to some of the companies going out early, and not least so that the Minister is able to see how particular technologies work, will he assure the Committee that standards will not be determined by the early innovators? That process will be a good learning experience, but will his mind be set by what best meets the criteria he wants for the consumer and the criteria that will drive down carbon emissions and bills?

Charles Hendry (Conservative, Wealden)

I do not think I have ever been called arm candy—on the sexy MP website I came just below the Speaker’s dog—but I am grateful for the shadow Minister’s kind comments—[ Interruption. ] It is rude to laugh at one’s own jokes, but I have just realised what the Speaker’s dog looks like.

The hon. Gentleman raises a critical point. We will not be doing this on the basis of what business tells us is commercially convenient. We will be putting in place a regime that works for the longer term and that will, therefore, pass the test of time. We do not wish simply to rule out things that the companies are doing—we can learn a huge amount from the work that is happening now—but we have to get smart meters right.

The hon. Gentleman also referred to the point that we have to ensure that smart meters are future proofed. New things will come along—for example water metering can be tied into this—so we should not make decisions now that will close down future options.

On the connectivity mechanisms to which the hon. Member for Liverpool, Wavertree referred, we want to ensure that a wide range of technologies is used so that all parts of the country are covered and we do not close down options that might be more useful or better in some parts of the country. We do not want our decisions to require unnecessary, significant investment in the telecoms infrastructure. The decisions we are making now will make this right for the longer term.

We can also learn from what has been done in other places. Sweden, Ontario and Italy have each had a full roll-out. Holland has had a sizeable roll-out during which it has experienced significant problems. We should learn as much from what people have got right as we do from what they have got wrong.

The hon. Member for Ogmore is completely right to say that smart meters do not bring about change themselves. People have to buy into them and be active participants in the process if they are going to achieve these benefits. If they simply choose to keep to their existing consumption patterns, they will not derive the benefit of switching to better tariffs, so the consumer engagement process will be critical. The impact assessment states that £100 million will be spent on the consumer engagement programme, a lot of which will come from industry. Having seen the way in which Centrica, E.ON and some of the smaller companies are taking this forward, it is encouraging that they are emphasising how consumers can get the best out of their smart metering investment.

The other thing we can look to is how technology can deal with some of the problems. Through smart metering and the development of smart grids over time, it will be possible for people to say, “When the price of electricity drops below a certain variable tariff, charge up my immersion heater; and when it goes above a certain level, switch off my fridge and freezer.” The smart meter will be able to make those decisions. Rather than us all wanting our hot water at the same time and wanting our immersion heaters on when we come home from work, we will be able to spread those things that can be spread in the most sensible way.

Ian Lavery (Labour, Wansbeck)

On tariffs and price sensitivity, does the Minister agree with reports that at times of peak demand the price of electricity could be up to nine times higher than during off-peak periods? That would adversely affect people with ill health who are not able to change their lifestyle pattern. Such people need electricity at certain times, so will the Minister please give that consideration?

Charles Hendry (Conservative, Wealden)

The hon. Gentleman raises an important point, which is easily resolved. There will be competition between the tariffs, and there will be no requirement for people to go on to those that involve that sort of penal charge at times of high demand. Companies will offer tariffs, and people who are out all day might say that, as none of them is back until after 6 pm, they do not mind buying into a tariff that requires them to buy electricity at times of peak use. That would be one of a range of tariff options that people could choose. Any problems of affordability and fuel poverty—we will come on to them under later clauses—that might arise from how tariffs are set can certainly be avoided. That is undoubtedly a live concern, but it will be completely resolved by how the tariffs are structured.

Huw Irranca-Davies (Labour, Ogmore)

Has the Minister given any thought to whether any consumers will simply be unable to avail themselves of better tariffs—for example because of continuing medical or other needs? In the water industry, it is usual to devise social tariffs to avoid the problem of vulnerable consumers being penalised by their inability to switch to more attractive tariffs. Will he apply such thinking to tariffs for smart meters?

Charles Hendry (Conservative, Wealden)

There is every reason why tariffs should work in that way. In addition, we and Ofgem are carrying out work to improve liquidity so that more companies offer their services and act as a broker. The Co-op is coming in and other high street retailers are looking to do so as well. They will be able to offer a range of tariffs in response to such circumstances. Specialist niche providers, whom we have seen and given extra support to this week, can also offer specialist tariffs. All such issues can be resolved in that way.

The final issue about fuel poverty relates to prepayment meters, which the hon. Member for Ogmore raised. One of the most encouraging things about the position is that in Northern Ireland, where about half the homes have smart meters, people on prepayment meters are on a better tariff than those who are not. There are challenges to do with prepayment meters, but they can bring very real benefits.

You might have thought that I had already done so, Mr Crausby, but I turn now to new clauses 36 and 37 and amendment 168, the purpose of which was set out by the hon. Member for Ogmore. When similar proposals to the new clauses were debated in another place, the Government explained the approach that we have followed, including extensive consultation to ensure that our plans for the roll-out of smart meters will achieve the benefits sought for in the programme. We explained our view that new requirements would be counter-productive, and we also stated our commitment to transparency about progress and levels of benefit.

The Government are clear that we are accountable for the successful delivery of the programme, and because of that we have brought more of the programme work that was being done by Ofgem into DECC. The benefits of the programme are set out in the impact assessment, and there is a difference of perhaps more than £7 billion between the costs and the ensuing benefits. However, a provision in primary legislation to consult on and to publish a new strategy is not required, and that would cut across what the Government have already done. There has sometimes been a tendency to over-consult in the development of energy policy. At a time when we are engaging constructively with the industry, consumer groups and trade unions, it would be a mistake to require a further period of consultation, as that would only delay the time when installers can have certainty.

Yesterday, I had an extremely useful meeting with the union Unite, which included a discussion about smart metering. It is concerned that until there is clarity in the interim phase, people involved in installing meters might be laid off because companies might scale back the roll-out. If we were to announce now that the Bill will not come into force for some weeks and that there will then be a further period of consultation, all we would do would be to roll back the date when people could start to install with clarity and certainty. As a consequence, the time period about which Unite is understandably concerned would grow, and more people who can be actively involved in this process could lose their jobs.

Huw Irranca-Davies (Labour, Ogmore)

Perhaps I may suggest a way forward. I appreciate the Minister’s concerns that we would inadvertently put a hiatus into the process, which would be the last thing that we would want. When we looked at the same issue with respect to avoiding a pause in progress with the digital action plan, that was exactly what we did. Rather than going for a complete consultation and a strategy, we brought together the excellent work that had already been done, as well as examining some areas that may not have been covered before. That was pulled together into an action plan that was published and then discussed within Parliament. May I suggest that to the Minister as an alternative? If he were willing to do that, it could cover the issues to which new clause 36 relates about carbon targets and the elimination of fuel poverty, as well as wider governmental goals.

Charles Hendry (Conservative, Wealden)

I hope that I can persuade the hon. Gentleman that that is not necessary. We have had an immensely lengthy consultation. We have published one of the longest documents that I have ever seen. We consulted on it and then gave our feedback on the documentation. There has been positive engagement from industry, consumer groups and the unions on how that process is being moved forward. We are aware of all the areas in which there are remaining doubts for the consumer groups, the unions and the industry itself. We are now working on getting consensus on those areas. The sort of consultation that he is talking about—even the non-consultation consultation—cannot add to the work that has happened.

I will take the hon. Gentleman through that a bit further. In March, we published a detailed set of decisions and plans for further work. That represents our strategy to achieve the full range of benefits, and it followed a full and thorough consultation with consumer groups, industry and other parties. We published our prospectus in July last year. To re-consult on that now, or to go further in the way for which he is calling, would only slow down the process. Everything that we have been trying to do is to give people early clarity about what will be necessary.

The plans that were published in March set out the work that is now under way as part of the foundation stage of the programme. That includes developing and implementing a consumer engagement strategy. The development of a code of practice on installation will ensure that energy suppliers provide information to consumers to enable them to benefit from their smart meters. That code of practice will be binding. It will be a licence condition, and it will not be something that they can opt in or out of.

There will be an absolute requirement for those installing smart meters to adhere to that code of practice, which was initially being taken forward by industry and consumer groups. I specifically asked for the trade unions to be involved in that process so that it would be as comprehensive as possible. To suggest that there needs to be a separate independent code of practice, which, by definition, suggests that the one that has been done by consensus between the different groups is somehow inadequate, would make it more difficult to take things forward.

Huw Irranca-Davies (Labour, Ogmore)

On a point of clarification, is the Minister referring to the voluntary code of practice that is currently in place?

Charles Hendry (Conservative, Wealden)

At the moment, it is in development as a voluntary code of practice. We have made it clear to the industry that that will be a licence condition. There will be a need to sign up to the code of practice as it is consolidated and finalised, and the major companies are clear that they want to do this. If there are new suppliers and new entrants into the market that want to cut corners, this is our way of ensuring that they still adhere to that code of practice. We are ensuring that the code of practice is fully robust and something that delivers what the hon. Gentleman wants to achieve.

Huw Irranca-Davies (Labour, Ogmore)

I think that it will. I suspect that the Minister has devised a different approach through licences to make things mandatory that avoids the heavy duty of regulation—the one in, one out. In that case, why will he decline our proposals, because they give legs to what he is already intent on doing through a different way?

Charles Hendry (Conservative, Wealden)

Because this was already happening, because we are already well through the process, and because of the word “independent” in amendment 168, which I find particular queer. We are getting agreement and consensus from industry, consumer groups, trade unions and others on what the code of practice should be. We had very useful discussions with Unite yesterday about how to protect consumers from being told “Your wiring isn’t up to scratch; you’ve got to spend thousands of pounds with my mate round the corner to get it put right,” and how to protect people from being taken advantage of at the point of sale.

That is all being done through our existing code of practice and by consensus. To suggest that there is a need for something independent, which I assume would mean independent of industry and suppliers, would remove something valuable and important from the equation.

Huw Irranca-Davies (Labour, Ogmore)

May I try to help the Minister? I would be happy—I would be willing to withdraw the amendment on this basis—if he or I could return with an amendment that removed the word “independent” and added a form of words about including adherence to a code of practice for installation as part of the licence condition. That is exactly what the Minister says, but such an approach would make things as clear as day in primary legislation.

Charles Hendry (Conservative, Wealden)

I will certainly write to the hon. Gentleman and other members of the Committee to explain exactly how the code of practice on which we are working will be taken forward. I hope that that will persuade him, but there will be time for further informal discussions before Report, if he feels that that would appropriate.

By going through the detail of the process, I hope that I can persuade the hon. Gentleman that what he is talking about is already going to happen. The industry already understands that there will be a binding code of practice to which it will have to adhere. I therefore hope that we can encourage the hon. Gentleman to withdraw the amendment.

I want to touch on the proposed annual report. There will be some requirement for an annual report, but I am concerned about setting out a requirement in the Bill as the hon. Gentleman proposes. That approach would give us no leeway for adaption. In addition, we want the roll-out to be finished well before the end of the decade, but new clause 37 would require the detailed work in question to be done for time immemorial at an annual cost of hundreds of thousands of pounds, even when the roll-out is complete. The only way round that obligation would be to remove it through a further Act of Parliament. The new clause would impose a significant obligation and would provide more detail than would be absolutely necessary.

Huw Irranca-Davies (Labour, Ogmore)

In the spirit of trying to assist the Minister, I would be more than happy for he or I to return with a new clause with slightly different wording and including a sunset provision that could be reviewed once a year in a statutory instrument Committee.

Charles Hendry (Conservative, Wealden)

It is intended that we shall require reporting to Parliament. Much of the information will be provided through the process of parliamentary questions and everything else. The list in the new clause is very prescriptive, but it is probably not exhaustive, so there would therefore be a need to amend it.

We believe that it is better that anything of this kind should be dealt with by secondary legislation and, more importantly, should be able to evolve over time to reflect what people believe is needed. The Government would in any case want to be doing much of the work in question, but flexibility would be better to enable us to take things forward in the best way.

I think that a dramatic change to the new clause’s wording would be necessary to make it acceptable to me. I urge the hon. Gentleman not to press it to a Division and perhaps to reflect on the position before Report. I believe that we have the powers to make an annual energy statement to Parliament that will undoubtedly deal with smart metering. There are other occasions on which we report to the House. There are many ways in which we can do so without binding us to a bureaucratic measure in legislation for time immemorial.

I hope that the hon. Gentleman will be prepared to withdraw the amendment.

The rest of the debate is in Hansard.