Mark Tami
Main Page: Mark Tami (Labour - Alyn and Deeside)
Mr Michael Meacher (Oldham West and Royton) (Lab)
We have listened to a distinctly Panglossian rosy glow of a statement from the Secretary of State. I think that we can all support the green deal’s ostensible objectives, but there are profound problems with the mechanisms and financing necessary to deliver on the rhetoric. The Bill’s biggest flaw is the failure to address adequately the central issue in energy policy, which is to establish a target for the most efficient way of meeting the nation’s energy requirement over the next 20 years or so, and then to put in place secure and effective mechanisms to ensure that those targets are met. I think that the Bill is the wrong way around: it makes assumptions about the level of energy supply in future decades, and then proposes mechanisms, albeit—as I shall show—rather uncertain and dubious ones, to green that supply.
The Government’s draft overarching national policy statement blandly states, as a sort of unchallengeable datum, that a doubling, or even tripling, of generation will be required by 2050. That clearly puts the cart before the horse, however. If, instead of planning for X terawatts of extra power over the next two to three decades, it was practicable to reduce the figure by, say, 40%—I think that is practicable—it would make much more sense to set that reduced level of energy production as the central target, and then to implement measures to ensure that it is met in as green and cost-effective a way as possible. That is all the more the case given that energy saving is more cost effective, which is a mantra that spokesmen, including the Minister, of all three main parties have repeatedly asserted.
Why, then, are the Government still refusing to undertake a proper cost-benefit assessment of energy demand? Obviously one can see that the big six operators and power generators will be anxious about anything that might impact on their future profits, but I think that the Government, who are far too committed to accommodating the private sector, need to put the national interest first.
Then there is the question of whether the measures in the Bill will deliver what the Government purport to be aiming at. The fundamental issue, on which the whole green deal hinges, is what the interest rates will be. When that was put by me and other hon. Members to the Secretary of State, he gave a studiously vague answer—a discourse, but not an answer. However, without a low interest rate, households will be paying a full, unsubsidised rate for measures such as cavity-wall or loft insulation, which were previously available at no cost or little cost under successive supplier obligations. Without a low interest rate, households will be worse off than they are now. I do not wish to be over-critical, because this should be a reasonably non-partisan debate, but it is irresponsible for Ministers to present such a major Bill to the House and yet remain silent on the intended rate of interest, when the success or otherwise of the entire Bill—certainly the green deal part of it—hinges on that point.
WWF has done a lot of research on the issue and reports that the cost of borrowing for the green deal is likely to be around 8% to 10% over the 25-year debt. Do Ministers agree? If that is the likely interest rate, the effect of the Bill is likely to be fairly minimal without much greater financial support being offered. Market research by the so-called Great British Refurb campaign found last September that even if the interest rate were no more than 6%, only 7% of households—one in 14—would be likely to take up the green deal offer. That is all the more significant when, as we all agree, we recall that the people who need help most in energy saving are those in fuel-poor and vulnerable households, who unfortunately live in the most poorly insulated and energy-wasteful houses.
Given the Government’s savage cuts to the Warm Front programme over the next two years and its discontinuance in 2013, it is perfectly clear that they are not going to lift a finger to help with repayment charges for fuel-poor households, so I ask this question. Realistically, within the parameters of the Bill, is there any reason why energy suppliers should not be required to meet green deal repayments on behalf of fuel-poor households? After all, as we know, such companies regularly report vast profits arising from adventitious rises in fuel prices. However, such a requirement would help them, because they would be able to spread the capital costs over the full length of the green deal finance arrangements and thereby be able to install far more packages in a much shorter time than under the carbon emissions reduction target.
Mark Tami (Alyn and Deeside) (Lab)
Does my right hon. Friend agree that our experience of how the big companies have treated the fuel poor—with pre-payment meters, for example—does not really set a good example or give any hope for how they would look to the future?
Mr Meacher
The point about pre-payment meters is important, because, again, it is the poorest households—the most fuel-poor and vulnerable households—that are so often forced to use pre-payment meters. Their experience under the Bill would be questionable if it were left to private companies to decide how to deal with the issue. Again, that is an area where the Government need to step in and offer support.
A minimum energy efficiency standard is clearly needed in the private rented sector—a point that several hon. Members have made. There is little or no incentive for landlords to do very much to improve their properties, because it is their tenants who pay the fuel bills, not them. What is needed, therefore, is an energy efficiency baseline to prevent properties with an energy performance certificate rating of F or G, or whatever the Government choose, from being re-let or marketed for rent after a reasonable period—say, five years—in which the necessary energy-efficiency measures can be installed.
Lastly—and briefly—it is regrettable that the Home Energy Conservation Act 1995, or HECA, which was a Lib Dem private Member’s Bill, is being repealed rather than extended and toughened, because it delivered more savings in domestic fuel than the entire first phase of the energy efficiency commitment.
Dr Whitehead
I thank the Minister for that clarification.
When we are talking about energy efficiency in homes, we need to understand just how big the task ahead of us is. The SAP—standard assessment procedure—rating of UK homes went up considerably under the last Labour Government. To be precise, the average SAP rating, which measures the energy efficiency of homes, went up by 11 points between 1996 and 2010—from an average of 42 up to 53. Over the last five years, the SAP rate increase went up one a half times as fast as in the previous five years and the five years before that. That shows how measures such as Warm Front and CERT—carbon emissions reduction target—which are going to disappear when the green deal comes in, were having some success in ensuring that homes were more energy-efficient.
In order to get anywhere near the sort of targets that hon. Members have suggested that the Government should consider introducing in an amendment to align energy efficiency with climate change targets—which I hope will happen in Committee—we need to move the SAP ratings much further up over the next few years, perhaps to 70 or more on average at band C by the end of the decade. That means making progress getting on for twice as fast as we have over the last few years. That is the sort of ambition that the Bill needs to encompass. My concern—hon. Members have already mentioned a number of concerns—is that it remains unclear whether that ambition can be achieved under the current mechanism, despite the claims for the efficacy of the green deal.
Mark Tami
Other Members have mentioned the problem of poorer homes, and private landlords are a particular problem, because they have no vested interest in doing anything about them. I am sure we have all had people coming to our surgeries with horrific stories about windows that do not fit, damp all over the place and so forth—yet the landlord often does not care at all.
Dr Whitehead
Indeed. I welcome what I understand to be a change of heart by the Government about the extent to which compulsion can be used to get landlords to improve their properties. Sanctions on landlords with F and G-rated properties have been mentioned; we could argue about when those sanctions might be introduced, but compulsion to prevent landlords from letting properties below certain minimum energy standards is right. The standards are well below the sort of average rating that we have talked about this afternoon, but they are nevertheless minimum standards. If that is indeed a change of heart reflected in this part of the Bill, I welcome it.
I am sure that the detailed provisions affecting landlords can be sorted out effectively in Committee—but first we have to find the landlords. It was not a good sign that when this Bill was being discussed, another Department helpfully removed the idea of having a landlords register as the responsibility of local government. Without that, it will be more difficult to find the landlords who should carry out these arrangements. I trust that the Minister will have a word with his counterpart in the Department for Communities and Local Government and perhaps think again about that particularly destructive act.
The problem of finance has been mentioned. It is essential to making the green deal work. It is not just a matter of suggesting that the market will sort the finances out one way or another and that competitive interest rates will be charged. We can be fairly clear about how finance for the green deal as it stands, without changes, will turn out, because that is how the market works in respect of the sort of return that can be expected at different interest rates. The rate may well be around 9%, or perhaps a bit less. If we look at what can be got under the golden rule with finance at 9%, we find that it turns out to be very little in terms of improvements for properties to which the green deal and the golden rule apply. Loft cavity wall insulation and draft-proofing are probably the only things that work out at that sort of level. With interest rates at 7%, we get draft-proofing, some glazing, some internal wall insulation. With interest rates at 5%, we may get loft cavity wall insulation, glazing and a condensing boiler. If the green deal comes in at 9%, hardly any of the properties that need that sort of level of serious work—glazing, condensing boilers, perhaps microgeneration—will be touched by the mechanism. We must have a better mechanism for making the green deal work.
The energy company obligation exists as a back-up for fuel poverty and hard-to-treat properties. Hon. Members might have noticed that with interest rates at about 5% or so, solid wall insulation, which is present in about 7 million homes up and down the country, will not be touched. The ECO programme might touch it and might have a substantial hand in dealing with those in fuel poverty. Perhaps they should have their green deal underwritten by the ECO so that they can join in the benefits that other people get.
If we are thinking about how the ECO might underwrite the green deal, it is important to understand whether the ECO will exist to any great extent as a financial mechanism. What greatly concerns me—I hope the Committee will be able to look at the problem in much greater detail—is that as matters stand, DECC has signed up to a Treasury-based cap on levy-based arrangements. Under the present financial arrangements—for the spending round up to 2015—DECC has signed up to a cap on renewable obligations, feed-in tariffs and warm homes discount. That cap is set at £11.8 billion over the whole period, but there is also an annual cap.
The Treasury says that any new initiatives that come in the form of a levy must be financed within that cap. If the Department wished to undertake an ECO programme and it proved to be a levy as defined by the Office for National Statistics, it would have to be found under the present cap. That means either that the Government will have to go slow on renewable obligations and reduce the amount of renewable energy, or that the ECO will prove to be so small as to make it impossible to produce the sort of mechanism that many people hoped for—one for adding value to the green deal, getting on with the hard-to-treat properties, dealing with people in fuel poverty and homes off the grid that need extra assistance to make the green deal work, and so forth.
Unless we get the mechanisms right and have the right finance in the system—and, I would suggest, among other things, unless the ECO works properly—the green deal will not work. I am the last person who would want to see the green deal fall. Because a great deal of work has to be done to make our country as energy-efficient as possible, the green deal has to work. The task of making it work properly is the task of the Committee. I hope the Government will be generous in taking on board those ideas, which will make the green deal work as well as it can to bring our energy efficiency targets as close to realisation as possible.