Baroness Maddock
Baroness Maddock
I shall speak also to Amendments 71 to 75, 77 to 79 and 84, and the comments I make will also be pertinent to Amendments 81 to 83, which are in the name of the noble Lord, Lord Best; they also have my name to them. When I saw this Bill, I was delighted to see that the private rented sector was to be included. As time has gone on, I am not quite so delighted with how far we have got on the private rented sector. What I aimed to do in Committee and reiterate here is to have greater certainty about what sort of regulation we are going to have and when it might come in, and to bring the timetable forward.
The amendments bring forward to 2020 the Government’s measures for local authorities to issue notices to landlords requiring relevant energy efficiency improvements, and make it a duty rather than a power. They remove its conditionality on the outcome of the review in Clause 36. Landlords receiving a notice from a local authority will be required to improve that property at least to a minimum energy efficiency level of EPC band E, and this level will be increased before 2020. The maximum penalty for non-compliance is increased to £10,000 per tenancy, and local authorities are given the option to carry out the improvements themselves and then impose a charge to recover the costs. From 2016, a minimum energy efficiency standard is introduced whereby it becomes an offence to let or market a domestic private rented property which falls below EPC band E—that means those in F and G—until it is improved to band E, and the minimum standard must be raised again before 2020. A fine of £10,000 can be imposed for marketing or letting a property which does not meet the minimum standard.
There has been a lot of discussion about this. Some landlords, the British Property Federation and the RLA have produced briefings that claim that lots of properties would be taken off the market. Given the situation in the housing sector at the moment, I think that is highly unlikely. The latest edition of Landlord & Buy-to-Let Magazine states:
“Landlords are faced with excellent levels of tenant demand, strong pricing power … and improving buy-to-let mortgage conditions and are looking towards 2011 with confidence”,
so I think that is one thing that can be knocked on its head.
It is important to look at the details surrounding this sector. According to the Government’s figures, properties rented from a landlord or a letting agency are most likely to be the worst insulated, and 42 per cent of tenants in the coldest rented homes are unable to afford to heat them properly and are defined as being in fuel poverty. New research by the Energy Saving Trust reported today shows that the average cost of improving the coldest rented homes is £2,535 and that 30 per cent could be improved for less than £900 through rather cheaper measures such as loft and cavity wall insulation. Only 5 per cent would cost more than £7,500. A poll by Friends of the Earth found that tenants renting from a landlord or through a letting agency faced the worst during the freezing snowy weather this winter, with half saying that they were uncomfortably cold in their home and a third turning off their heating because they were concerned that they could not pay the bill.
There are 754,000 F and G-rated—that is, below E —private rented properties in Britain. They could all be improved for less than £2 million. The average cost would be about £2,500. The annual fuel bill reduction would be something like £370 million and the average fuel bill reduction could be a little under £500.
The annual report by the Chief Medical Officer, Sir Liam Donaldson, for 2009, which was published in March last year, showed that people living in poorly heated housing live in great danger. Old, badly insulated properties offer significantly less protection against the risk of cold than more modern buildings. The annual cost to the NHS of treating winter-related disease due to cold in private housing is £859 million, although that is all private housing, not just the private rented sector.
This issue has been around for a long time. There is an issue about when and when not to regulate but, as I said in Committee, we are looking at the worst of rented properties. Most would not cost a lot to bring up to a proper level. A large percentage of people living in those properties are in fuel poverty, and this is one case when I really think we need to bring in some sort of regulation. We have been talking about trying to improve them for years, but nothing has happened.
My final point is that many people living in these properties are being paid for by taxpayers, who are paying huge amounts of housing benefit. Given where we are at the moment, I do not think we can go on doing that much longer. All the time I have been in Parliament, I have been trying to make sure that we have fewer people living in cold homes in the winter and fewer excess winter deaths. Even if the Minister cannot do anything today, I hope that he will promise that by the end of the passage of the Bill we will have more certainty that we are really going to do something about the private rented sector. I beg to move.
Lord Best
My Lords, Amendments 81, 82 and 83, which stand in my name and were aired in Committee, seek to address the problem that the Green Deal may make very modest inroads into the problems of poor standards of insulation in the private rented sector. The Government’s impact statement for the Bill recognises this problem and there was agreement in Committee on the difficulties of reaching those of the 1.2 million private landlords who own substandard properties.
In anticipation of continuing problems of getting landlords to take action, the Bill proposes giving enforcement powers to local authorities and giving tenants the right to trigger the necessary action. However, the Bill’s measures kick in, as we have discussed in relation to earlier amendments, only after a review has been concluded and the Secretary of State is satisfied that the measures will not deter lettings in the future.
My amendments cut to the chase, making sure that if there is only limited take-up of the Green Deal and if all other ways of securing action by private landlords were to fail, by 2016 it would no longer be legal to let properties with the very worst energy performance. Making the position clear would mean that all landlords and, very importantly, all managing agents—they look after some 60 per cent of private rented properties—know that they have five years to get the substandard premises up to the very modest E rating with 10 years to move them up to the D level.
Perhaps I may advance three reasons why these amendments, very carefully brought together by the Association for the Conservation of Energy and Friends of the Earth with considerable support from Members in another place, would help the Bill’s objectives in this tricky area of the private rented sector. First, setting a minimum standard as a legal requirement for letting greatly increases the chances of success in getting the works done to the more than 740,000 offending properties. The take-up of Warm Front and the CERT scheme has been poor in the PRS, and the misery of cold homes with attendant wasteful carbon emissions seems unlikely to end without the sanctions which a legal requirement for letting would bring.
As well as fixing the ongoing problems of fuel poverty for some 150,000 PRS tenants, the amendments would reduce problems of fuel debt. Citizens Advice tells me that it had more than 100,000 inquiries last year, which was up 33 per cent on the previous year, from people with fuel debts. A minimum energy efficiency standard of band E would save on average £488 for an average outlay of only £2,535, which would be a very fair rate of return. At the same time, according to the Energy Saving Trust’s research for Friends of the Earth, which the noble Baroness, Lady Maddock, has mentioned, these measures would save 1.87 million tonnes of climate-changing carbon dioxide each year, which Friends of the Earth calculates as being equivalent to taking 800,000 cars off the road. I guess that the Minister shares the widespread view that achieving a minimum standard will require sanctions at a later date. These amendments give that process the necessary teeth without the delays and uncertainties inherent in the proposed review and its aftermath.
Secondly, landlords and their agents are well used to complying with statutory requirements. The simplest comparison here is the duty to obtain a gas safety certificate. Obtaining an energy performance certificate with a rating of E or above is just as straightforward and, since few landlords would deliberately flout the law, can be expected very quickly to become a normal part of the letting process. I emphasise my point that managing agents are important in this regard. Few agents wish to bother their landlords with suggestions for extra spending or give themselves more work. But virtually all agents, as responsible corporate entities that are much easier to reach than individual landlords, will make sure action is taken if it is a legal requirement.
As the Bill is drafted, no action will be required of the landlord or the tenant until such time as the review has been concluded, powers have been granted to local authorities, and local authorities have taken decisions to act and given the requisite notice, et cetera. The reality is that this leisurely timescale, which stretches past the next general election with no certainty of its outcome, means that all those who are not minded to take these matters seriously will simply sit on their hands.
Thirdly, the proposed arrangements, assuming the necessary powers are granted in 2014 or 2015 to local authorities and tenants, rely on either or both of those parties taking the necessary action. Local authorities may already have the power to act against landlords who let the very coldest homes because these properties are likely to fail the test set out in the housing health and safety rating system. Yet despite these existing powers, local authorities, which have a lot of other priorities to handle, are not exercising them. Recalcitrant landlords can be fairly confident that few local authorities will chase after them if and when extra powers are granted to those local authorities.
Meanwhile, the fallback of expecting tenants to take matters into their own hands seems even less likely to achieve results. A very high proportion of tenants stay little more than a year in their rented property while, with the loss of security of tenure since 1988, all will recognise the high risk of not seeing their tenancy renewed or even of receiving a couple of months’ notice to quit if the landlord sees them as acting against his or her interests. How much better would be the legal protection given by these amendments to the tenant, and how much simpler, cheaper and more effective for local authorities, if they need only to ask for the necessary certificate in the knowledge that if it is not available the landlord is not permitted to let the property.
I suggest that in achieving what the Government wish—a minimum standard, even if it is at a low level in the next five years, with clarity and certainty for landlords and tenants, and ease of administration for local authorities—these amendments, which are so strongly supported by the wide membership of the Association for the Conservation of Energy and Friends of the Earth, do the job to good effect at less cost to the public purse.
I should add that Amendment 82 provides for exemptions for meeting the minimum standards, while Amendment 83 gives local authorities the powers to do the works themselves if landlords fail to take action or face fines. I am sure that these consequential amendments could be improved by the Minister’s department.
Perhaps I may say a few words about the exemptions from the legal requirement in Amendment 81 to give reassurance to landlords who are anxious about meeting a statutory minimum level of energy performance. It would be sensible for local authorities to have discretion to exempt properties in several circumstances; namely, listed buildings and properties in conservation areas, and national parks where there are special planning requirements affecting the interior or the exterior of the properties.
In relation to the debate on excluding properties where the tenant wishes to refuse consent for the Green Deal, an exception might be made here for regulated tenancies where a tenant does not wish to be disturbed. There are 100,000 regulated tenancies out of more than 3 million private sector tenancies. These tenancies have been in place since at least 1988. Unlike shorthold tenancies used in the rest of the PRS where the average length of stay is 14 months, a regulated tenancy has been going for 22 years or more. Because the occupiers have security of tenure, they are unlikely to move. Although these tenants would be well advised to accept the upgrading to their properties necessary to meet the minimum energy performance standards by 2016, I can see the case for respecting their right to veto any works to their home if they cannot face the upset.
I hope that the Minister, who has made so many excellent changes to the Bill so far, will see the sense of these amendments and take them away with a promise perhaps to bring back something similar at Third Reading.
Baroness Smith of Basildon
My Lords, the Minister will be aware of the strength of feeling on this issue from the debates we have had in Committee and from the two powerful speeches we have had this evening.
I speak not only to my Amendment 70, but also to the amendments in the group. They seek to achieve the same ends but by slightly different means. Their ambition is the same: to improve substantially the quality of the private rented sector in terms of energy efficiency. There is broad agreement on the aim; the differences are about how we best achieve that.
We should address the real concerns of the impact on those people who live in homes that are not energy efficient. In Committee we looked at the wider impact of cold homes. We spoke of the impact on those with homes rated in bands F and G. It is worth noting again, as mentioned by the noble Baroness, Lady Maddock, that the Chief Medical Officer has estimated that the annual cost to the NHS of winter-related illnesses is more than £850 million. It is huge; it is absolutely massive. That is not just across the private rented sector; but some of the worst homes, some of the least energy-efficient homes, are in the private rented sector.
I want to say something about the impact that has on the individual. None of us in your Lordships’ House tonight lives in a private rented home that is rated band F or band G. Neither would we want to. If we did, we should be paying an extra 50 per cent in fuel bills to heat our homes to the same level as a band E rated property. If those properties rated F and G were brought up to band E standard, the difference would be between £500 and £800 for the bill payers. It can make a massive difference.
The energy scale goes from band A to band G. Band G is the worst for private rented homes. If we raise that standard to band E, it would take about 150,000 private rented households out of fuel poverty. That is 150,000 families with children and older people—25 per cent of all private rented households—who are currently in fuel poverty. Forty per cent of F and G rated properties can meet the standard for less than £1,500 per property. The average cost is about £270 per property. Sixty per cent of F or G rated private rented properties could meet this standard for less than £5,000. The amounts we are talking about, which would make a massive difference, are not great. I believe we can do this. Landlords with poor-performing property should be given help and advice about how to meet the standard and there should be a substantial increase to the landlords’ energy saving allowance.
I do not think that the wider public know what we are talking about when we talk about F and G rated property being brought up to E standard. It becomes a jargon. I asked Friends of the Earth and ACE to give me some case studies of what it means to people. What is the difference? What is the impact on people living in these properties? These people gave Friends of the Earth permission to publish their stories on condition that they only gave their names and the general location of where they lived. Susan from Abergavenny said:
“My 11 year-old daughter and I are currently moving out of a rented house. The house is freezing cold, with no draught proofing and draughty sash windows with huge visible gaps in the window frames. During the recent cold weather, ice formed on the inside of the window each morning. On Christmas Day, I was able to write ‘Happy Christmas Ellie!’ on it. Despite asking my landlady to help on this issue, she said it was our concern to keep the house warm.
We spend enormous amounts on heating but are never warm”.
This is repeated over and over again. Kristie from Pinner lives in a one-bedroom flat on her own. She says that her heating bills are 12 per cent of her monthly income. She says:
“I have told my landlord about this and asked for a better heating system, but he said it’s too expensive”.
Jennifer from Nottingham says:
“This winter has been unbearable in the house, no matter how long we put the heating on for the house remains freezing. I visited my doctor at home over Christmas with a cough that I’ve had for over 3 months now. He said that the house has probably given me a lung sensitivity and I am now on an inhaler to try to help it”.
These are real people suffering day in and day out. Environmental health officers, GPs and a midwife all tell the same story.
There are some glimmers of hope. Jenny from Norwich tells us:
“As an elderly landlady with a single small property rented out, I put my tenant’s warmth and health as high as my own. Two years ago they had an up-to-date boiler installed and this year, during other renovations, the attic insulation was increased to current standards and the gas fire replaced. If, as someone living on a smallish pension, I can afford to do this, then so can more regular landlords”.
I shall not continue with these stories, but I am sure noble Lords would find them as emotive and as heart-breaking as I do.
It seems that there are two or three key issues before us today with the amendments. One is the regulations to improve energy efficiency in the private rented sector. We had lengthy debates on this in Committee. The general view was that we needed action on this as soon as possible. I have no objection to any review being undertaken of energy efficiency in the private rented sector, but there is no justification to use this as a delay for bringing in regulations.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland)
My Lords, the noble Baroness has told some shocking tales. Funnily enough, I do feel that I stayed in one of those properties in my younger days. It was not at all comfortable, and I have a feeling that one of my sons, who is a student, is staying in such a property at the moment. It is a terrible tale and the whole idea of the Green Deal is to remove this from the equation. But let us stand back for a moment and work out what the Green Deal is. It is about giving people the opportunity to drive energy-efficiency endeavours into their homes, and to reduce the cost of electricity and thus to have all the ongoing effects that that may have in their lives. However, the Green Deal is not a prescriptive document, one that determines that “You, you and you should have this, this and this”, but rather it is to encourage and provide the facilities by which people can take advantage of situations.
Of course, there are also some very good landlords. There is some terrible accommodation, terrible houses and very bad landlords, but there are also some very good ones. So we have to look at this. However, we must start from the standpoint that we are committed, as a Government, to ensuring that the Green Deal works at all levels, and we are committed, as a Government, to ensuring that this drives hard into the private rented sector. But as I have said on a number of occasions, this is a market-driven endeavour where we want to see natural buy-in by all forms of property owners, including landlords, and we expect them to improve their properties to an acceptable standard. We would all love to wave a magic wand and say that the minimum standard should be band E, but the standard of what? We have inherited an energy performance certificate which was designed for people buying and selling houses, not for those relevant to the Green Deal. So until we have redesigned the energy performance certificate to make it fit for purpose within the Green Deal rather than for buying and selling houses tied into the now abandoned HIPs, which as I have told the House on many occasions we are working extremely hard to do, it would be wrong to be prescriptive about that element.
We are starting from the standpoint, which has been excellently portrayed by the noble Lord, Lord Best, of the 1.2 million properties that fit into the category of the private rented sector. The noble Baroness, Lady Smith, rightly pointed out that 150,000 of them are in bands F and G. One would hope that landlords are listening to what the noble Baroness and my noble friend Lady Maddock are saying and will feel compelled to raise these houses up to an acceptable EPC level of band E and above. We want also to ensure that local authorities buy into this, along with all other housing sectors. Further, we have been briefed by ACE and Friends of the Earth, and we are very receptive to their briefings. But we are at an early stage in the passage of the Bill and we are starting to shape it. One of the fundamental timescales that we have established is a review in 2013. If landlords in the private rented sector do not adopt decent standards by 2013, we will be able to establish where the pressure points and the weaknesses lie.
We believe, with the encouragement that the Green Deal gives to property owners, that they will take it up, when the new EPC is produced, to level E and beyond, and this Government are fundamentally committed, as the sponsor of this Green Deal, to ensure that they do. It would be ridiculous for us to think that we have achieved things if we have not driven hard to get the public rented sector out of the F and G bands. There is a lot of work going on to get to this position. We do not want to get to this position until we have thoroughly gone through the process of redesigning the EPC and setting a framework that people can attach themselves to. We have given people the opportunity to use market forces and their best endeavours and best practices to achieve a minimum standard. If we find that they have not taken that up, of course we will come down like a ton of bricks, because it will show that what we have set out to achieve has not succeeded.
Throughout all these debates, which have been extremely well enunciated, and have found great favour with us, we have listened. We are all, after all, singing from the same hymn sheet, in particular on Amendments 69, 70, 76, 84, 89, and 94 to 99, which really deal with the materiality. It would be ridiculous if this did not find favour with us in terms of a form of words. I accept in principle the intention of this. I have listened to what noble Lords have said in Grand Committee, I will warmly consider this element of the amendments, and we will take the view of tabling this as a government amendment as the Bill carries on with its passage. I hope that that will find favour with noble Lords, and will demonstrate that, on the one hand, we have listened and that we all understand the problem that we all face, and, on the other hand, that we understand that, in the timeframe available and with the concept of the Green Deal, we must make an evaluation. Once we have persuaded the market to accept an opportunity, if it does not take it up we must evaluate it in a very short timeframe, which will be the end of 2013. If the market does not respond to that, we will then bring into action a set of standards, which we will help it to maintain. With that, I hope that this finds favour with the noble Lord, Lord Best, and the noble Baronesses, Lady Maddock and Lady Smith, who made excellent speeches, and that they will not press their amendments.
Baroness Maddock
My Lords, perhaps I should say that my glass is half-full at the end of that. I obviously think that this is a really important issue, or I would not have gone on at such length in Committee and here on Report. I take issue with my noble friend. As far as I remember, the energy performance certificates were not there because of what we are doing on buying and selling houses. It was a European piece of legislation, and it got thrown in with the HIPs because it was the best way of dealing with it. At the time, I thought it should be separate, and spoke on that issue. We need to look at it carefully, because the EPCs are part of what we are required to do in signing up to our responsibilities in Europe for reducing carbon emissions.
I will withdraw my amendment, but I look forward to what the Minister has promised. As I say, I feel my glass half-full at the moment. Maybe he will be able to top it up at some point. I beg leave to withdraw the amendment.
Lord Marland
“Domestic minimum standard regulationsPower to make domestic minimum standard regulations
(1) The Secretary of State shall make regulations for the purpose of securing that a landlord of a domestic PR property which falls below a minimum standard of energy efficiency (as demonstrated by the energy performance certificate) as is provided for by the regulations shall not let or market the property until such time as the landlord can demonstrate that the property meets the minimum standard for a domestic PR property.
(2) Regulations under this section are referred to in this Chapter as “domestic minimum standard regulations”.
(3) For the purposes of domestic minimum standard regulations—
“energy performance certificate” has the meaning given by the Energy Performance Regulations;
“landlord” and “local authority” have the meaning given by the regulations; and
“minimum energy efficiency standard” means Band E or above expressed in accordance with Regulation 11(1)(a) of the Energy Performance Regulations or above (or any higher level set in accordance with subsection (5)).
(4) The Secretary of State may by order amend the definition of “energy performance certificate” in subsection (3).
(5) The Secretary of State shall, no later than 31 December 2019, amend the regulations to raise the minimum energy efficiency standard.
(6) Domestic minimum standard regulations shall come into force no later than 1 January 2016.”
The Deputy Speaker (Lord Faulkner of Worcester)
The noble Lord can degroup his amendment if he wishes, but he has already spoken to it in the previous group.
Lord Marland
Lord Marland
Lord Marland
(a) an order under section 35(1)(a)(iii), or”
“(5) The Secretary of State must obtain the consent of the Welsh Ministers before making provision under this Chapter amending or revoking—
(a) provision included in an instrument made under a Measure or Act of the National Assembly for Wales;(b) any other subordinate legislation made by the Welsh Ministers (or the National Assembly for Wales established under the Government of Wales Act 1998).(6) Subsection (5) does not apply to the extent that the Secretary of State is making incidental or consequential provision.
(7) The Secretary of State must consult the Welsh Ministers before making—
(a) domestic energy efficiency regulations, or(b) tenants’ energy efficiency improvements regulations,which apply in relation to domestic PR properties situated in Wales.(8) Subsection (7) does not apply to the extent that consent has been obtained under subsection (5).”
“Local carbon budgets
For the purposes of ensuring local authorities assist in meeting the United Kingdom’s carbon budgets under section 4(1) of the Climate Change Act 2008 (carbon budgets), the Secretary of State must report to Parliament on proposals for introducing local carbon budgets by December 2011.”
Baroness Smith of Basildon
My Lords, this amendment deals with an issue that we discussed in Committee. Most noble Lords in the Chamber now were in Committee, so to the relief of the House I will not repeat all the comments made. We are very supportive of the issue of local carbon budgets and keen to see progress. We have deliberately worded the amendment in a way that gives the Minister some flexibility to report back to the House and to Parliament on this issue.
However, if we are really to make a difference in reducing our carbon emissions, we need to engage locally and work with local government. If we look across the board at where the support lies, Greg Barker has given his support as has the Federation of Small Businesses, which e-mailed many noble Lords today to say that it supports local carbon budgets and wants to work with local authorities and the community to reduce emissions. The trade unions, the workforce and the Audit Commission all see enormous value in having local carbon budgets so that local authorities and communities can play their role not just in their own estates and properties, but in their wider communities, whether we are talking about transport or domestic properties. Actions can be taken and advice and support can be given by local authorities working with the Government and working with their local communities to ensure that we reach the kind of targets and reduce our emissions in line with targets that the Government have set. The Climate Change Act 2008 set targets for the Government. Those targets can best be met if we work with local authorities and local communities.
I hope that the Minister can update us on the action that can be taken and I hope at some stage that he can assure us that there will be a report back to this House and the other place to show how the Government can work with local authorities to ensure that we have local carbon budgets really making a difference and settling this issue.
Lord Judd
My Lords, I support my noble friend. This is a crucial amendment and I hope that the Minister can respond. We are all agreed that the Bill is about meeting a challenge that is overwhelming and on which literally our future survival depends. We therefore cannot have the luxury of simply talking about principles and objectives without having the means to deliver them.
Some 80 per cent of the emissions in this country originate in local communities—in our homes, workplaces, travel and the rest. Therefore, it is crucial, as my noble friend said, that if we are to deliver the results and not just spell out hopes, we must work effectively with local authorities. The only point that I would make in addition to her real commitment is to say that it is my view—I speak for myself but I hope my noble friend will agree—that if this is going to be meaningful there will have to be very specific objectives spelt out to the local authorities about what is expected of them.
We have a national aggregate target, which we then disaggregate into what is required locally. Each local authority should be in no doubt whatever about what is expected of that local authority to meet the national target and local authorities should be expected to give convincing evidence that progress is being made. I am fairly confident—in fact I am very confident—that the Minister agrees with the spirit of what I am saying. I hope that he can not only respond to my noble friend’s amendment but give reassurance that this will not just be another chapter in the world of aspirations and good intentions but will actually spell out a sea change in terms of having the levers there to get results.
Lord Reay
I strongly oppose these amendments. At Second Reading, I declared that I was against introducing local carbon budgets into the Bill, although unfortunately I was not able to be present in Committee when the issue was debated on amendments brought forward by the noble Lord, Lord Judd, the noble Baroness, Lady Smith of Basildon, and my noble friend Lord Deben. The ultimate purpose of these amendments is, as the noble Lord, Lord Judd, has explained, to oblige local authorities to do more to see that carbon emissions are reduced in their areas and, in effect, to coerce them into making a greater contribution towards achieving the Government’s renewable energy targets. However, in Committee, it was represented as being an opportunity rather than an obligation for local authorities, and one that they were longing to be given—“unanimously” at one point, said the noble Baroness, Lady Smith of Basildon. I refer to col. GC 231 of Hansard of 26 January 2011.
No doubt there are keen protagonists of the Government’s renewable energy policy in positions of authority in local government who would welcome such an imposition. However, it surely stretches incredulity to refer to a general—let alone a unanimous—call from local authorities to be given such an obligation. Indeed, if local authorities reflect, as they might be expected to, the wishes of their electorates, I would anticipate a very minor interest in the subject; and, from some who are aware of some of the likely effects of introducing carbon budgets, a most violent opposition.
Legally established local carbon budgets would be likely to have the same sort of effect as regional renewable energy targets have had, and still have today, although they are due to be abolished under the Localism Bill. These have had one most malign effect: they are used by developers, some local authorities and also some planning inspectors to justify the most abominable decisions to permit gigantic wind farms in entirely inappropriate rural locations. It is developers, anxious to drink deep at the well of subsidies before the well dries up—as it has started to do throughout Europe—who would latch on to local carbon budgets and use them as another weapon in their hands in their tireless and far too successful efforts to use the financial advantage that subsidies give them to buy their way to victory in our planning system, as they appeal against every decision that goes against them and so triumph over the wishes of anguished but financially outbid local communities.
I appreciate that behind this amendment, and indeed behind this Bill as a whole, lies a belief that we must strive to meet carbon emission reduction targets for which we have assumed legal obligations. This is not the occasion to argue in detail for alternatives to that policy. However, I believe the cost that we have assumed for the purpose of meeting those targets is far too high and that we should be looking for ways to reduce the cost rather than meet the targets.
One of the greatest of those costs is of course that to the poor electricity consumer, whose bills are programmed to ratchet up each year into the indefinite future to pay for the ever-rising renewable energy subsidies. The current cost, according to Ofgem, is around £1.5 billion a year but is due to rise to some £5 billion or £6 billion by 2020—a miserable prospect for all those in fuel poverty, whose plight has been vividly described by others in this debate such as my noble friend Lady Maddock and the noble Baroness, Lady Smith of Basildon. Another of those costs is the destruction of our beautiful landscapes, which are famous and loved throughout the world, which our planning system has, to date, largely preserved and which the present Government seem so nonchalantly to ignore. Because the acceptance of these amendments would confirm how little we care about that threat, I hope that my noble friend the Minister will reject both of these amendments.
Lord Dixon-Smith
My Lords, if Essex man dare to stand up against Essex girl—I admire the noble Baroness for overcoming her present difficulties—I am afraid that I am going to oppose this amendment. The real problem with local carbon budgets is that local authorities, which presumably would have to administer them, have no power to influence so much of what goes on in their own areas.
The noble Baroness who proposed this amendment comes from a very urban area of Essex but I come from a rather more rural area. Not the least of the problems that would have to be included in local carbon budgets is that of what you do about agriculture. There is nothing we can do about this but agriculture is one of the highest carbon emitters in the country, so that is a difficulty. We have no control over our population’s motoring habits or the way people organise their lives, such as where they do their shopping. I have a lot of friends who go to do theirs 10 miles away, not because it is difficult—nowadays, it is very easy—but because it is cheaper for them to do so. There are so many factors that cross local authority boundaries, which mean that the local authorities would have no power to control what is actually going on in their districts.
You could, of course, get around all those factors by raising a huge number of exceptions so that you would not consider this, that or the other factor. However, once that starts to be done it destroys the whole purpose of the exercise. While the principle of controlling emissions in all ways is good, it seems to me that the principle that you can begin to administer that locally is simply erroneous because the powers do not exist to make that possible. I am sorry to quarrel with my noble Essex friend, if I may call her that, but I am afraid that we have to face that brutal reality. I hope that we will not inflict this duty onto local authorities. They have enough difficulties with the problems that they already face. Adding this burden onto them, which they could not fulfil anyway, seems not to be a reasonable thing to do.
Baroness Maddock
My Lords, the noble Lord, Lord Whitty, put down Amendment 153 and I added my name to it, but he is not in his place. I spoke to this amendment at some length in Committee so I will not repeat what I said then.
I do not have the cynical view of local government that is being expressed by the two previous speakers. My experience over the years of local government is that it has been very effective in trying to deal with poorly insulated properties in its areas under the Home Energy Conservation Act, which is now going to be removed. I know that my noble friend the Minister is keen for local authorities to be involved in what is going on, but I also support the fact that we do not necessarily give new duties to local authorities. We have a Localism Bill coming that includes a power of general competence. However, it is clear to me that, in spite of all that, local authorities have a major role to play in this.
As I said, I know that the Minister agrees with that. I hope that he can set out some of the roles that he sees for local authorities as the Green Deal is rolled out, and give us some idea about what sort of rewards they might get. I do not mean rewards from the public purse; it is not necessarily from there that they will get rewards for being involved with this. I know that he understands what I am talking about.
I hope that, if not tonight then at some point, he will be able to set this out in a little more detail to reassure us—including local authorities, many of which are asking to be involved. Some of them are actually asking for carbon budgets, which Amendment 100 mentions. I have had a letter, as I am sure have other noble Lords, from a group of local authorities that want to have local carbon budgets. The situation is not anything like as clear-cut as the two previous speakers said.
I hope that my noble friend can go at least some way towards setting out how he sees local authorities being involved. Maybe this is something else where, when the Bill gets to another place, we can be more specific on how local authorities have been involved. Their record on doing things such as rolling out energy efficiency street by street is fantastic. People in local communities trust their local authority more than they trust the people who provide their utilities, so we need to take full account of that. I know that my noble friend understands that, and I look forward to what he has to say.
Lord Teverson
My Lords, I agree with my noble friend Lady Maddock about the involvement of local authorities. I know from conversations with the Minister and other Ministers that this is very much in the Government’s mind. I welcome the fact that, as I hope they will, local authorities will be integrated into the process.
I want to talk about carbon budgets. Reducing carbon, as we talked about with regard to the Climate Change Act, is fundamental, but I just do not think that local carbon budgets are the right instrument to do that. There is huge pressure on local government finance at the moment, so I would agree that because of that—I declare that I am a member of a local authority—local authorities are starting to concentrate on activities where they have statutory obligations. Where they do not, they are having to consider rather more. If there were a more perfect way of doing this, I would like to see some statutory obligation generally in terms of climate change in a broader sense. However, I fundamentally believe that it should then be left to local authorities to decide how they implement and deliver that, and that they should have the powers to do so.
I spent a huge amount of time in this House two or three years ago on the Climate Change Bill. We spent a huge amount of time working out how national budgets could work. We looked at all the difficulties regarding air transportation, imports and exports and—maybe more esoterically, but importantly—whether carbon consumption was more important than carbon production. We looked at the transfers of budgets between years and at all the other sorts of mechanisms that there are. We considered what happens in terms of the EU ETS, transfers of that in or out and how it worked. We gave particular thought to air and shipping.
If you bring that down to local authorities—many parts of the country still have not one tier of local authority but two, so you have to add them up and they will not come to the national budget anyway—you have the issues of transportation, such as motorways being major emitters. The easiest way to mitigate those would be to stop industry coming into your local authority and get it to go the other side of your local authority boundary. If you took this seriously, you would have all sorts of weird incentives whose outcomes would be perverse.
Lord Lea of Crondall
I have thought about this point for some time. Is it not a fact that one of the possible anomalies in the whole discussion going back to the Climate Change Bill is that carbon budgeting and financial budgeting in the traditional sense do not correspond? That has to be done at some point or the whole thing will get out of sync. Does the noble Lord agree that you need a clear analysis of how carbon budgeting corresponds with financial budgeting at national level before you discuss it at other levels?
Lord Teverson
I would probably agree with the noble Lord on that matter. However, I do not want to prolong this discussion as we want to get through the Bill. Although it is vital that we reduce carbon emissions and local authorities need to play a key part in that, that objective should be a statutory obligation on them which is outside this Bill. They should have a much greater connection with the Climate Change Committee which should have a local authority aspect. It would be great if local authorities wanted to engage in a modified form of carbon budgeting.
Lord Judd
I would appreciate it if the noble Lord would clarify something for me. If he is in favour of achieving national carbon reduction objectives, how will that be achieved unless everybody who has a role to play knows what role is expected of them and what they must do to play their part in reaching the total? Unless you disaggregate the overall total, how on earth are you going to get that result?
Lord Teverson
We do not do that at national carbon level, do we? If we were to do that, we would disaggregate by industry, but the previous Government and the present Government have not gone down that route. If we took that a step further, we would come to individual personal carbon budgets. There are arguments for and against that. I do not think that you need to disaggregate everything completely as all the relevant levers are not in place and splitting it all down does not mean to say that everything would necessarily add up because all sorts of areas, including motorways and EU ETS major emitters—even proponents of carbon budgets agree on this—could not be effectively and practically included in those carbon budgets. That system of making the detail add up to the total would not work under this scheme anyway. I am not saying that the question was invalid but if we really wanted to go down that route we would have to go down the industrial sectorial route as well or separate out consumers, the manufacturing sector and the services sector. Such an approach gets too involved in the mass of detail as opposed to inventing the policy instruments that we need. We need to involve local government in the Green Deal. I would much prefer it to have a statutory obligation but I think that carbon budgets are the wrong way to do it.
As regards wind farms, in Cornwall they are fantastic. Tourists like them and the majority of people are not against them. They are beautiful objects to behold on the horizon and may there be more of them.
Lord Marland
My Lords, you have heard differing views on the future of carbon budgets, including those of the noble Baroness, Lady Smith of Basildon, the noble Lord, Lord Judd, and my noble friend Lady Maddock. My noble friend Lord Teverson, as usual, clearly told us his views; and we heard those of the noble Lords, Lord Dixon-Smith and Lord Reay, who would be opposed to carbon budgets. It has been an excellent debate and we have heard views from all sides—all of which are respected.
Throughout the passage of the Bill, this has been a subject on which I have taken those views on board. We should try to find a way through in a spirit of co-operation. The Localism Bill, which is about a spirit of partnership, is going through Parliament at the moment. We have imposed upon local authorities a 10 per cent carbon reduction target through the DCLG, and they will have to set their own examples.
During the passage of the Bill, we have given great consideration to these issues, and we have determined that the best way forward is co-operation. I hope that next week we will be able to sign a memorandum of understanding with the local government group, to build upon the Nottingham declaration. The memorandum will set out a timetable for progress on reducing carbon emissions that we hope all local authorities will buy into.
At this point, I offer my thanks to the right reverend Prelate the Bishop of Liverpool, who has set up a meeting with me and the chief executive of Liverpool City Council to discuss how we can get the Green Deal through to Liverpool and together reduce carbon emissions, and use Liverpool almost as a test case.
I have taken on board the valuable comments of noble Lords. I have taken on board the fact that it will not be acceptable to impose provisions on local authorities. Indeed, the Department for Energy and Climate Change cannot impose our will on local authorities, but we can impose a way forward and an understanding between us all that this has got to be right for the country, as the noble Lord, Lord Judd, said. It has to be right for future generations and it has to be right that we use less electricity and less energy than we are using now, to conserve the future.
I hope that given those comments and the impending memorandum of understanding—which I cannot reveal too much about now because, as you know, I am a very junior person—the noble Baroness, Lady Smith, will appreciate what we are doing. I hope that that finds favour with her and with the noble Baroness, Lady Maddock, and that they will not press their amendments.
Baroness Smith of Basildon
I am grateful to the noble Lord, because on two occasions today he has provided your Lordships’ House with information on the memorandum. He cannot make the announcement, but I think that he has stolen the thunder of whichever Minister will do so. The noble Lord’s response on the memorandum that he and his colleagues intend to bring forward addresses exactly the kind of issue we are looking at, whereby local communities and local authorities will have an opportunity to play their role in achieving carbon reductions across the country. I look forward to the further information, and I hope that there will be a statement to the House at a later date. I beg leave to withdraw the amendment.
Lord Marland
“( ) In subsection (1) (power by order to impose an obligation to achieve a carbon emissions reduction target) for “the Authority” substitute “the Administrator”.
( ) After subsection (2) insert—
“(2A) In this section “the Administrator” means—
(a) the Authority; or(b) if the order so provides, the Secretary of State or a specified body other than the Authority.”( ) In subsection (3) for “the Authority” substitute “the Administrator”.
( ) In subsection (4) for “the Authority” substitute “(subject to any directions given under subsection (9B)) the Administrator”.”
Lord Marland
My Lords, we come to yet another huge group of amendments that the Government have tabled, which recognise the points made in debates in Committee and at Second Reading.
These amendments serve to clarify the powers currently set out in Clause 67. They pertain to the Secretary of State’s ability to transfer from “the Authority” to himself or another body the administrative powers and responsibilities for the energy company obligation. The authority is defined as the Gas and Electricity Markets Authority, the functions of which are presently carried out by Ofgem. The Government are currently reviewing the role of their various delivery bodies, including Ofgem, and it would be helpful to have powers already available that would enable us promptly to take account of the results of that review, thus ensuring certainty for those being regulated by the ECO.
In tabling this amendment, we are in no way prejudging the outcome of the review. This series of amendments refines the policy objective contained in Clause 67 by enabling the Secretary of State to transfer directly to another body, or to him, the functions currently performed by the authority. The refinement will preclude the need to make two sets of orders—one establishing the ECO and another moving some or all of the authority’s functions to another body or to the Secretary of State. The process for doing so has been streamlined. I beg to move.
Lord Grantchester
I thank the Minister for his explanation of what is indeed an extensive list of amendments that address issues touched on in Committee. The amendments are necessary to ensure that future recommendations of the Government’s delivery review can be implemented without unnecessary delay and without causing unnecessary uncertainty to those energy companies caught by the future energy company obligations. It is possible that the Government’s delivery review may conclude that administrative responsibilities for the ECO should be transferred to a body other than the authority, which is currently Ofgem. This series of amendments enables any future ECO to be administered by “the Administrator”. The amendments make the authority the default administrator but give the Secretary of State a power to transfer the administrative functions away from the authority and place them on another body, or to transfer the functions to himself. We are content with these amendments.
Lord Marland
“( ) in paragraph (d) for “the Authority” substitute “the Administrator”;”
( ) for “the Authority” substitute “the Administrator”;( ) ”
“( ) in paragraph (f) for “the Authority” substitute “the Administrator”;”
“( ) In subsection (6) for “the Authority” substitute “the Administrator”.
( ) After subsection (7) insert—
“(7A) The order may—
(a) make provision for any specified requirement contained in it to be treated as a relevant requirement for the purposes of this Part; or(b) if it provides for the Administrator to be a person other than the Authority, make provision for and in connection with enabling the Administrator to enforce any requirement imposed by the order.(7B) Provision made by virtue of paragraph (b) of subsection (7A) may, in particular, include provision corresponding to or applying (with or without modifications) any of sections 28 to 30F and section 38.”
( ) In subsection (8) omit paragraph (b).”
“(12B) If an order under this section provides for the Administrator to be a body other than the Authority, the Secretary of State may make payments to the body of such amounts as the Secretary of State considers appropriate.”
“( ) The reference in subsection (12A) of section 33BC of the Gas Act 1986 to paragraph (c) of subsection (5) of that section includes a reference to paragraph (c) of subsection (5) of that section before its substitution by subsection (2) of this section.”
Lord Marland
“( ) In subsection (1) (power by order to impose an obligation to achieve a carbon emissions reduction target) for “the Authority” substitute “the Administrator”.
( ) After subsection (2) insert—
“(2A) In this section “the Administrator” means—
(a) the Authority; or(b) if the order so provides, the Secretary of State or a specified body other than the Authority.”( ) In subsection (3) for “the Authority” substitute “the Administrator”.
( ) In subsection (4) for “the Authority” substitute “(subject to any directions given under subsection (9B)) the Administrator”.”
Lord Marland
“( ) in paragraph (d) for “the Authority” substitute “the Administrator”;”
( ) for “the Authority” substitute “the Administrator”;( ) ”
“( ) in paragraph (f) for “the Authority” substitute “the Administrator”;”
“( ) In subsection (6) for “the Authority” substitute “the Administrator”.
( ) After subsection (7) insert—
“(7A) The order may—
(a) make provision for any specified requirement contained in it to be treated as a relevant requirement for the purposes of this Part; or(b) if it provides for the Administrator to be a person other than the Authority, make provision for and in connection with enabling the Administrator to enforce any requirement imposed by the order.(7B) Provision made by virtue of paragraph (b) of subsection (7A) may, in particular, include provision corresponding to or applying (with or without modifications) any of sections 25 to 28.”
( ) In subsection (8) omit paragraph (b).”
“(12B) If an order under this section provides for the Administrator to be a body other than the Authority, the Secretary of State may make payments to the body of such amounts as the Secretary of State considers appropriate.”
“( ) The reference in subsection (12A) of section 41A of the Electricity Act 1989 to paragraph (c) of subsection (5) of that section includes a reference to paragraph (c) of subsection (5) of that section before its substitution by subsection (2) of this section.”
Lord Marland
“( ) “the Administrator” means—(i) the Authority; or(ii) if the order so provides, the Secretary of State or a specified body other than the Authority;”
Lord Marland
“( ) “the Administrator” means—(i) the Authority; or(ii) if the order so provides, the Secretary of State or a specified body other than the Authority;”
Lord Marland
Lord Marland
( ) any body other than the Authority that is for the time being the Administrator in relation to a carbon emissions reduction order or a home-heating cost reduction order”
Lord Marland
Lord Marland
“12 (1) Section 103 (overall carbon emissions reduction targets) is amended as follows.
(2) In subsection (1)—
(a) in the words before paragraph (a) for “by the Authority of its functions” substitute “of the functions of the Administrator”;(b) in paragraph (b) omit “generators,”.(3) In subsection (2)—
(a) in the words before paragraph (a) for “the Authority to apportion the target” substitute “the target to be apportioned”(b) in paragraph (b) omit “electricity generators,”.(4) In subsection (3) for “The Authority” substitute “The Administrator”.
(5) In subsection (4) omit “electricity generators,”.”
Lord Grantchester
“( ) in subsection (3)(g) after “consumers” insert “(including adherence to and independent Code of Practice for Installation).”
Lord Grantchester
With the permission of my noble friend Lord Whitty, I shall move his amendment. I pay tribute to him for his clear leadership on consumer interests. He has laid out in his amendment a very clear way forward regarding smart meters. I could not do justice to the exposition that he would have made far more adeptly than me. However, there is an important element that we should debate tonight and on which we should question the Minister on the way forward.
As we all know, there is considerable anxiety and resistance from consumers, arising by and large from misunderstandings over the operation of smart meters. However, smart meters offer the opportunity to reduce inaccurate bills to consumers, as well as to lower their costs. We had a full debate in Committee and wish to build on the positive discussions and proposals being considered with the Energy Retail Association and Energy UK, especially with regard to the code of practice. I know the Minister is also keen to bring in the benefits of smart meters in a constructive manner. He spoke in Committee of his dialogue with the energy companies, without saying exactly what he would do on this matter. This amendment would allow him to construct a good way forward. I beg to move.
Baroness Northover
My Lords, Amendment 157 draws attention to the need to ensure that the smart meter installation visit promotes consumer confidence and protects customers. We have already proposed to require suppliers to develop a code of practice governing the installation process and to ensure that the installation is not used for unwelcome sales activities.
Since the prospectus was published, suppliers have made good progress in drafting a code, with input from consumer groups and others. The smart metering programme has made it clear that the code will not be voluntary. We will shortly set out our detailed decisions in this area as part of the government response to the consultation. We have all the necessary powers to put the code in place, backed up by a licence obligation, under Section 88(3)(g) of the Energy Act 2008 as it now stands.
Amendment 158 in this group would require the Government to consult on a strategy to deliver the intended benefits of smart meters to consumers and to report on progress. Therefore, I assure your Lordships that the Government are clear that they are accountable for the successful delivery of the programme and its benefits. Indeed, this recognition was behind our recent decision that DECC would take direct responsibility for the next phase of the programme. We made this clear in announcing that decision in December, and it includes accountability for ensuring delivery of benefits.
However, provision in primary legislation is not required. Indeed, this provision would cut across the things that the Government are already doing to achieve the intent behind these amendments. The Government are already consulting on our strategy to achieve the benefits sought for the programme. As many of your Lordships will know, the Government published a prospectus in the summer last year containing a wide range of proposals for consultation. These proposals covered the policy design for the implementation of smart metering, including a wide range of proposals for the technical, commercial and regulatory arrangements required to deliver the benefits.
This has already been a very full and detailed consultation, with several hundred pages of published consultation documents. The prospectus was supported by two full impact assessments setting out clearly the benefits that we seek. We will shortly publish the conclusions of this process, which will confirm the Government’s strategy and plans. It would therefore be unnecessary to reconsult on this strategy and it would cast doubt on our conclusions to do so.
It is important to say that there will need to be further work to develop the benefits management arrangements and, crucially, the consumer engagement strategy. If necessary, we will bring forward proposals for changed or additional measures using the Secretary of State’s powers. It is also important that we have strong programme management arrangements, and that the measurement and reporting of benefits is robust and rigorous. We will set out how this will be taken forward. All these matters will be specifically addressed as the programme is taken forward by the Government.
I hope that the noble Lord will be able to assure his noble friend that much of what he is seeking is already in train and that his amendments would cut across that. I am sure that that is not what his noble friend intended. On that basis, I hope that the noble Lord will be willing to withdraw the amendment.
Lord Grantchester
I thank the Minister for her fulsome acknowledgement and exposition of where we are with smart meters and of everything that is going on within her department with regard to the industry. I shall certainly reassure my noble friend and he will enjoy the most fulsome remarks that she has just expounded. With that, I beg leave to withdraw the amendment.
Lord Teverson
“Energy tariffs
(1) After consultation with electricity and gas retail sellers and consumer groups, the Secretary of State shall introduce regulations that make it mandatory for electricity and gas through pipeline supply companies supplying to domestic properties to configure their tariffs so that the initial units of energy supplied are at a lower cost to the consumer than the remaining units.
(2) The number of units in the initial tranche shall reflect the basic energy requirement of a household.
(3) The new tariff scheme shall be revenue neutral to consumers and energy supply companies as a whole.”
Lord Teverson
My Lords, earlier I forgot to confess that I am an Essex person. As I live in Cornwall, and have done for some time, I am often referred to as “Mr Treverson”; I am actually Teverson, which is a Danish or Anglian name, so perhaps I could join the Essex fraternity from at least three of the Benches—I suppose, that is something. However, that is not what I want to discuss now, although this affects Cornwall as much as it does Essex, as they both have very diverse populations.
I thank my noble friend Lord Cathcart for his work on reverse block tariffs. We intend to change around this perverse incentive to consume more energy by moving around energy pricing and energy tariffs, so that you are effectively penalised, or at least you are not financially advantaged, if you consume more rather than less. However, I confess that it has been very difficult to put this amendment together, in Grand Committee and in its amended form here, so that it precisely defines what is needed. If your Lordships were absolutely convinced by my arguments and decided, even if I withdrew it, to vote on it after all, I would really question your sanity as regards making the amendment work. The spirit is good, but the practicalities are difficult.
I welcome the very positive reaction from the Government and the Minister in this area. I am convinced that to get this right will take longer. I am also convinced that its rightful place would be in the energy market reform area, on which I know the Government intend to bring forward further legislation. I would be very content if the Minister were able to give me some comfort that it would be better positioned within that legislative framework. Having tried to describe how this should work, I do not underestimate that it will probably take most of the good public servants of DECC at least two years to work out how this should work. It is an important and worthy goal and I hope that my noble friend will be able to give me some comfort in that direction. I beg to move.
Earl Cathcart
My Lords, I apologise to the House because in my enthusiasm to speak to Amendment 6, I forgot to declare my interest which is as a landlord in the private rental sector. I do not think my interest influenced what I said on that amendment.
I shall not repeat the arguments that I made at Second Reading or in Committee, but it is generally accepted that three things make up fuel poverty: household income, energy prices and energy efficiency. This Bill will deal with energy efficiency and this amendment asks the Minister to review energy prices. I am also grateful to my noble friend for saying in Committee that the Government will carry out a full-scale review of fuel poverty and its implications. I know that a review into the way in which energy companies charge will not be popular with everyone, not least the energy companies, but the way in which they currently charge is a win-win situation for them. What manufacturing company in the real world would not like to charge a huge price for the first number of units sold so that they can recover their fixed costs and then a lower price for subsequent units so that they can recover their variable costs, thus guaranteeing themselves a profit?
The amendment moved by my noble friend Lord Teverson suggests that the energy companies, together with consumer groups, should be involved in the review. I hope that they will examine whether there is a better way of coming up with a pricing tariff. The amendment also says that a new tariff scheme will be revenue neutral for energy companies, so it is not intended that they will lose revenue. It will be revenue neutral to them.
If we want to do something about poverty—fuel poverty in particular—we must look at all the options and a review on setting tariffs is a welcome start. Energy prices will continue to increase. There are already 6.5 million households in fuel poverty. A quarter of households live in fuel poverty, 50 per cent being pensioners. That is not something to be proud of. The least we can do is review how energy is charged for.
Lord Davies of Oldham
I am confused as I was not sure whether the noble Lord, Lord Teverson, was moving or withdrawing his amendment. When I made my contribution last time on the general lines on which the noble Lord spoke today, I must say that I had every sympathy with the main principles on which his amendment is based, but the Bill is not the place in which to locate this issue, important though it is. We heard not just from the noble Lord, Lord Teverson and the noble Earl, Lord Cathcart, last time, but we had the benefit of the contribution from the noble Lord, Lord Oxburgh, who talked about energy prices from a historical perspective and explained how they had established themselves on a basis that is indefensible in terms of what we are seeking to achieve. I refer particularly to the fact that the old standing charge necessitated the heavy impost of the early units.
We are aware of the fact that we need a revision of the issue. The noble Lord, Lord Teverson, should be congratulated on articulating the case forcefully in Committee and for again today identifying why he still advocates the main principles. I do not think—and I think he was coming to the same conclusion—that it quite fits within the framework of the Bill. That is why last time I said that the amendment should be withdrawn and the Minister seemed to think that I had done his job for him. I had not done that then, and I have not done so this evening. I look forward to the Minister’s response.
Lord Marland
My Lords, I have a declaration to make. I am not an Essex person which seems to be the thing to declare before speaking in this debate.
The noble Lord, Lord Teverson, as the noble Lord, Lord Davies, suggested, was considering withdrawing his amendment. My department has been made available to him for discussing and working through this problem which we take seriously. We have made it available to my noble friend Lord Cathcart. The noble Lord, Lord Davies, is right that this is probably not the right Bill for this tariff but the department will be happy to work with the noble Lord and reach a conclusion. As he rightly says, it will take several months, but I invite my noble friend to either withdraw or do whatever he was going to do with his excellent amendment.
Lord Teverson
I thank the Minister. I have only two alternatives: to test the opinion of the House or withdraw the amendment. I have come across no other option in the Companion. I am happy to take the advice of both Front Benches in anticipation that we will revisit the issue in the next Energy Bill on market reform that comes to the House. I beg leave to withdraw the amendment.
Lord Marland
( ) In section 81(2) of the Utilities Act 2000 (standard conditions of gas licences), after “Part 1” (as inserted by section 20(8) of this Act) insert “or section 72”.”
“Accidental petroleum releases: verification of financial costs
After section 3 of the Petroleum Act 1998 (licences to search and bore for and get petroleum) insert—
“3A Accidental petroleum releases: verification of financial costs
(1) At the time of applying for a licence under section 3, the applicant must provide the Secretary of State with information showing that the applicant has sufficient funds to compensate any damage caused, or loss suffered, as a result of petroleum being accidentally released during the operation of that licence.
(2) The Secretary of State must make regulations, in particular, to provide for the type of financial and supporting information to be provided under subsection (1).
(3) Before issuing a licence under section 3, the Secretary of State must be satisfied that—
(a) the applicant has provided a complete and accurate record of information required by this Act and any regulations made under this Act; and(b) on reviewing that information, has sufficient funds to compensate for any damage caused, or loss suffered, as a result of petroleum being accidentally released during the operation of the licence.(4) In this section “sufficient funds” includes any insurance able to be claimed by the licensee in the circumstances outlined in subsection (1).”
Baroness Smith of Basildon
My Lords, I raised a similar amendment to this in Committee as a probing amendment to try to clarify financial liability for oil spills off the UK coast. Looking back, I am not sure that I am any clearer on the financial responsibility, but my amendments then got a fair amount of support in Committee. It was understood that there has to be an arrangement whereby, should there be an accidental spill by those seeking oil off our coast, the responsibility for cleaning it up does not fall on local authorities. We were seeking clarification. We did not get that then and it would be helpful if the Minister could provide it now. As the Minister may recall, I drew comparisons with the requirements on the nuclear industry, which has to provide all costs of clean-up after its operations, with that of the oil industry of accidental oil releases into the environment.
A couple of issues were raised in Committee which I think were entirely reasonable, and I have incorporated provision for funding into our new amendment. I hope that the Minister can take this away to look at it. We have included a definition of sufficient funds and taken out detailed provision about certification, because that could go into regulations. I will be grateful to hear the Minister's comments.
Lord Marland
This is a very complicated issue for someone who is not in the insurance world; but for someone who is, it is quite simple. It may be best in this instance if I commit in writing the exact layering of this requirement. Suffice it to say that the oil industry is a very mature industry. Substantial insurance requirements are placed on it. As I mentioned extensively in Committee, it has a mutual pool which offers additional protection to its balance sheets, and those that it makes in the open market. As someone with an insurance background, I would be happy to explain that in greater detail in writing to the noble Baroness. I hope that she finds that an adequate response to enable her to withdraw her amendment.
Baroness Smith of Basildon
I am grateful to the noble Lord. I think that he understands why I raised this issue. It is in large part due to public concern. He and I debated in this Chamber the Deepwater Horizon oil spill. It was in research for that debate that I discovered concern about not knowing what the full implications would be if there were an oil spill off our shores. I am grateful for his comments and his commitment to come back to me in writing.
It would also be helpful if he would come back to me on the issues that I raised about comparisons with the nuclear industry. I have never really understood why the nuclear industry is treated differently from the oil industry. He may be able in his response to assure me that it is not treated differently. The nuclear industry, particularly under this Government, now has to find all the costs of remediation and disposal of waste. As I understand it, that is not the same for the oil industry. Can the Minister tell me that he is entirely satisfied that, in any event, for any oil spill, the liability will not fall on local authorities, and that insurance is in place to deal with the matter? I look forward to receiving that information in his correspondence on the matter, which I can perhaps discuss with him further, and beg leave to withdraw my amendment.
Baroness Northover
“Special administration under the Energy Act 2004Amendment of section 166 of the Energy Act 2004
(1) Section 166 of the Energy Act 2004 (indemnities) is amended as follows.
(2) After subsection (3) insert—
“(3A) As soon as practicable after agreeing to indemnify persons under this section, the Secretary of State must lay a statement of the agreement before Parliament.”
(3) After subsection (6) insert—
“(6A) Where a sum has been paid out by the Secretary of State in consequence of an indemnity agreed to under this section, the Secretary of State must lay a statement relating to that sum before Parliament—
(a) as soon as practicable after the end of the financial year in which that sum is paid out; and(b) (except where subsection (4) does not apply in the case of the sum) as soon as practicable after the end of each subsequent relevant financial year.(6B) In relation to a sum paid out in consequence of an indemnity, a financial year is a relevant financial year for the purposes of subsection (6A) unless—
(a) before the beginning of that year, the whole of that sum has been repaid to the Secretary of State under subsection (4); and(b) the company in question is not at any time during that year subject to liability to pay interest on amounts that became due under that subsection in respect of that sum.Special administration under this Chapter”
Baroness Northover
This is a minor and technical amendment to ensure consistency of statutory reporting to Parliament under the Energy Act 2004 and the Bill with public expenditure rules. The amendment to ensure consistency will apply both to the special administration regime for electricity transmission and distribution companies and gas transporters created by the Energy Act 2004, and to the provisions for a special administration regime for energy supply companies under the provisions in this Bill. I beg to move.
Lord Jenkin of Roding
My Lords, I of course accept the amendment that the Government have moved, but I return to the issue that I raised in Grand Committee about the uncertainty created by the third of the three tests of whether a company can be put into administration, which is that the company is likely to be unable to pay its debts. Under the original Act, that was a decision to be taken by the company. Under this Bill, it is a decision that will be taken by the Secretary of State. Despite what my noble friend said in reply to that debate in Grand Committee, it seems to me that this still leaves a substantial area of uncertainty for the industry. My noble friend said at the time that there would be consultation with the company and its directors. What I would like to suggest and, indeed, if we were going to reach this clause next Tuesday—we have made such haste this afternoon and evening that in a sense I have been a little bit caught short—I would have tabled an amendment to say that it should be done only with the consent of the company. That would make the case. I wonder whether my noble friend can say something about this now or whether this is a point I could raise again at Third Reading.
Baroness Northover
I thank my noble friend for that comment. I think the best way to take this forward is by consultation. If he would like to discuss the details with officials, we could see what, if anything, needs to be addressed.
Lord Marland
“( ) In section 33(1) of the Utilities Act 2000 (standard conditions of licenses under Part 1 of the Electricity Act 1989), after “72” (as inserted by section 73(6) of this Act) insert “or 92,”,”
164: Clause 92, page 72, line 34, at end insert—
“( ) Sections 4AA to 4B of the Gas Act 1986 (principal objective and general duties) apply in relation to the powers of the Secretary of State under this section with respect to holders of gas licences as they apply in relation to functions of the Secretary of State under Part 1 of that Act.
( ) Sections 3A to 3D of the Electricity Act 1989 (principal objective and general duties) apply in relation to the powers of the Secretary of State under this section with respect to holders of electricity licences as they apply in relation to functions of the Secretary of State under Part 1 of that Act.”
165: Clause 92, page 72, line 35, leave out from “section” to end of line 37 and insert“—
(a) references to a gas licence are to a licence for the purposes of section 5 of the Gas Act 1986 (prohibition on unlicensed activities relating to gas), and
(b) references to an electricity licence are to a licence for the purposes of section 4 of the Electricity Act 1989 (prohibition on unlicensed activities relating to electricity)”
Lord Teverson
“Geothermal power
(1) The Secretary of State shall have the authority, after a period of consultation with industry, geological experts, the devolved administrations, local authorities, energy producers and other interested parties, to put into place for the United Kingdom a licensing system and regulations for the exploitation of heat from deep geothermal sources for both the direct use of that heat and for the generation of electricity.
(2) The licenses shall relate to—
(a) individual geographically delineated areas on land;(b) the heat held by rocks greater than one kilometre below the surface.(3) Licenses shall give exclusive exploration and production rights for the purpose of energy production from geothermal sources, both direct heat and electricity generation, to the licensee, for that area, and for a specific period of time.
(4) The Secretary of State shall have the authority to lay down regulations for the method of allocation of licenses to those organisations wishing to explore or exploit those resources (or both).
(5) Any organisation already undertaking exploration or exploitation from geothermal sources within the United Kingdom, in that they have already undertaken, at the time the licensing regime comes into force, boring for the purpose of exploiting geothermal heat to below one kilometre, shall be entitled to hold the first license awarded for that license area; and any licence fee or other consideration for that license area as a part of the licensing regime will then be determined by arbitration under rules determined by the Secretary of State reflecting the fees or other consideration paid for the licenses deemed to have similar potential.
(6) The holding of a licence for the exploration or exploitation of deep geothermal heat (or both) shall not convey any automatic rights in terms of planning permissions for surface development, or given any rights in terms of surface access.”
Lord Teverson
My Lords, this amendment is slightly different from the one I put down in Committee as it affects geothermal energy. I thank many sides of the House for supporting that. The change that I have made to this amendment is that I have not included time constraints, not because they are not important, they are, but because when I had to submit this amendment in time for Report, it was not clear from the industry or from the department whether it is possible to implement geothermal licensing through secondary legislation or whether it requires primary legislation. Since that time, the industry, I and a Member of the other House met the other Minister, my honourable friend Greg Barker, to go through this. I welcome the fact that a working party has been set up, which probably met for the first time today, to start finding a way forward to make this move. The industry’s advice is that licensing probably requires primary legislation rather than empowerment through this Bill to allow secondary legislation by the Minister. That has rather stymied my wish to press this matter forward strongly and makes the situation rather difficult.
Baroness Maddock
My Lords, I support my noble friend. Some years ago in Southampton we had a geothermal bore which contributed—it is not as hot as we would like—to the district heating scheme. It has been very successful. During the Recess I was in New Zealand. A great part of its energy mix is from geothermal. I suggest that noble Lords look at how it has been dealt with there as a good example of how to use geothermal energy.
Lord Dixon-Smith
I hesitate to speak at this hour, but since we are considering geothermal power, perhaps I may introduce a thought about indirect geothermal power. Such power is waste heat from power stations, which consume enormous amounts of raw energy and turn out enormous amounts of waste heat. Generally speaking, it is completely unused. It is an enormous financial handicap and an enormous energy inefficiency which our whole electricity generating industry has to bear and which, as customers, we all pay for.
While I am all in favour of looking for all geothermal sources of energy, we have these indirect geothermal sources of energy already available to us on the surface but we do nothing about them. It is legitimate to raise the subject in this rather indirect way even at this hour of the night. The same applies to nuclear power stations. One can argue that nuclear power is an indirect form of solar power. That is exactly what it is—solar power is nuclear power but happens to be 95 million miles away, and we enjoy it enormously as a result. If it was much closer, we would not. But we have these other sources of energy, which are indirectly the same source of energy as the noble Lord, Lord Teverson, was talking about. If we are looking at one of them as something that we should use, we really should look at the other.
Lord Judd
My Lords, I want very warmly to support the noble Lord on this issue. It has always intrigued me that we have never given the priority that we should have done to developments in this sphere. It is good to see it happening. He referred to the north-east. Perhaps I may say as a Member of Court of Newcastle University that one of the things that is very important about these developments is that universities such as Newcastle—I do not see Newcastle in any provision—are dying to make a contribution in the development of this new potential and, in the context of Newcastle, have already played a significant part in what is happening in the north-east. Therefore, there is a background of scientific and applied scientific interest, which sets it off on a very good course.
Lord Davies of Oldham
My Lords, I rise briefly to say that I appreciate the fact that the noble Lord, Lord Teverson, is presenting a very important argument, which we discussed intensively and fully in Committee. I have no doubt that we would have had a much more intensive debate this evening were it not for the lateness of the hour. That does not mean to say that those of us who have kept our speeches short, as I intend to do, do not have enormous respect for the arguments that the noble Lord, Lord Teverson, has put forward, but we did have a full debate in Committee and I am very grateful that he drew our attention to the matter again this evening.
Lord Marland
My Lords, I concur with the noble Lord, Lord Davies of Oldham. We had intensive debates in Committee and at Second Reading on this subject. My views are well known on the subject. That is why our department facilitated discussions with the Minister of State, Greg Barker, who is discussing this with the Environment Agency in the next few days. I think he had a meeting with him today, but I do not want to get diaries out of kilter to see how we can take the matter forward. He knows, as well as I do, that we are very interested in the subject and are committed to offering every possible opportunity for those who are interested in the subject, in taking the matter forward and in hoping to bring this provision into reality in what is a very difficult area. I think the noble Lord was thinking of withdrawing his amendment because of the meetings he has had. With that, I hope he will formally withdraw his amendment.
Perhaps I may take the opportunity of thanking noble Lords for staying up, particularly the noble Baroness, Lady Smith of Basildon, who is still recovering from her ghastly operation, who, with great cheerfulness, has maintained an excellent presence here tonight, and I thank all noble Lords for their contributions so far and for helping in what has been a very harmonious evening.
Lord Teverson
My Lords, I thank the Minister for his reply and his continued interest, which is genuinely recognised and welcomed by the industry. I agree absolutely with my noble friend Lord Dixon-Smith about the amount of energy, and heat particularly, that we waste, whether welling up from the ground in many ways or from industrial applications. Perhaps I may be forgiven for saying that one of the reasons is that we do not have a culture of district heating in this country. We look at each dwelling as an individual area. That is one of the things that has to change in terms of being able to utilise that energy. I thank him for reminding me of that.
I am well satisfied that the Government are taking this agenda forward seriously. This particular amendment is no longer appropriate. I have pleasure in begging leave to withdraw my amendment.