Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 620-629)

DR EION LEES AND DR NICK EYRE

TUESDAY 4 DECEMBER 2001

Richard Burden

  620. Staying on the theme really of how domestic consumers will see the economics of energy efficiency in so far as it affects them, energy-efficient appliances like that and indeed a number of others are more expensive in the short term, at the point of sale, than the alternative. Do you think that the at-the-point-of-sale price is a disincentive? If it is, is there anything we could do about that end of things?
  (Dr Lees) Let me answer that in two parts. The first part is, you are correct, on average the cost of buying an A-rated fridge freezer, which is the most energy-efficient one, over a C or an E-rated one, is more expensive. However, what our research shows is that the spread across the A is far greater than that average difference. In other words, if you shop around you will find you can buy the most energy-efficient one that fits your price and your budget, the facilities that you require for it (and quite often, particularly, I am sad to say, the German A-rated fridges are the most expensive because they have the most features). So yes, there is an additional cost, but it is nothing compared to the variation in prices. So I would maintain that you could always find the A-rated fridge that is economic to use.

  621. I am sure that is right, but do you think people see that? It is chicken and egg, is it not? You are talking about there being a step change in attitude, are you not?
  (Dr Lees) Yes.

  622. If that change in attitudes is not yet there, the assumption that people will shop around is a problem, is it not?
  (Dr Lees) But we hope that we have made it easier for them by two things: one, of course, is the energy label which clearly differentiates them, but I think equally important, because people see labels on some things and not on other things, we have introduced this "energy efficiency recommended", so when you go into Currys and Comet now you will see the little triangle which says "This is an energy-efficient device, amongst the most energy-efficient in its class. If you buy this you're going to help the environment and you're going to save a few bob yourself."

  623. Can I ask you one other thing about minimum energy efficiency standards. Again assuming we are not yet at that step change of public attitudes, if setting those standards leads to the prices of appliances rising, could that provide a disincentive to consumers actually to buy new appliances and therefore it could be a bit self-defeating?
  (Dr Lees) Again I think the price rises are probably going to be not lost in noise, but they are going to be small. If your question is does that have a major impact on low-income households, I am not sure it is such a major impact, because a lot of very low-income households actually buy a lot of their appliances in the second-hand market. What we have been trying to do with the energy suppliers is to create a scheme which has now delivered over 200,000 energy efficient fridges and fridge freezers to low-income households; they buy that in for £25 in the case of a fridge, £50 in the case of a fridge freezer, which is a real bargain, and for the first time in their life they actually have fridges and freezers which work, which keep their medicines at the right temperature, keep their food at the right temperature and so on, and since the average fridge we took away used over £30 a year, they get their money back inside a year because the running costs are so low. So there are many ways to tackle this. I am personally not too concerned. I think there is such a spread in price that you can shop around and buy the most energy efficient. It may have less features than a high German A-rated one, but it will be energy rated A.
  (Dr Eyre) We would see the role of minimum standards as eliminating the worst products from the market. That has, of course, already been done with fridges and freezers without us seeing a major price rise in any of those, in order to promote the best, significantly above minimum standards over other techniques such as the promotions that Eoin has mentioned were needed. I think we would also suggest that it might be helpful if the Government could look at using reduced rate VAT in the way that it has already done for insulation and heating controls in this area, not on a very large number, just to promote the very best. The cost of that to the Treasury I think would be of the order of £10 million a year. We think the benefits could be substantial.

Sir Robert Smith

  624. People think they are paying less tax, even if the product costs more. One concern that has come to light is that the current energy efficiency schemes aimed at domestic users concentrate on the cheapest and easiest improvements. If you look at guidance leaflets it is always a nice square box with a clear roof and plenty of ventilation in the loft, and they are all neatly spaced joists where you just have to roll out the insulation and you have achieved a great improvement, whereas a lot of people in the fuel-poor houses will live in older houses with attic conversions, and if they live in the part of Scotland I live in they will be in houses which do not necessarily have eave ventilation as described in the nice leaflet that comes with it. Would that be a fair point to make?
  (Dr Lees) Given that most of the fuel-poor houses have their insulation done by professionals, I am not sure it is a problem, because some of them done under the Warm Deal or Warm Front Deal would be done by energy professionals, so there is not a problem. I think there might be a problem particularly in older houses which either do not have an accessible loft or have solid walls. I agree those are a problem, and we need to tackle them. I do not think we are tackling them to the extent we think would be necessary to solve the fuel problem at the moment.

  625. Those must need serious investment to get round the problem?
  (Dr Lees) Indeed.

Chairman

  626. On the question of zero emissions in new buildings and things of that nature, putting in the necessary incentives that have been identified in the Energy Efficiency Strategy, have you made any calculations as to how much these savings would cost the Treasury, or have you decided to let the Treasury worry about that?
  (Dr Lees) Sorry, the building regs would not cost the Treasury anything.

  627. You would have to forego in the form of tax credits, reduced VAT and stamp duty rebates, the sorts of things that have been suggested in the Energy Efficiency Strategy.
  (Dr Lees) Sorry, I was at cross purposes. Yes, we have made estimates of that in some considerable detail for exempting boilers which are A rated. In fact we have done them all, but we would think the A rated is the most sensible for that, and we are planning to do further work on that. We are about to launch a series of studies looking at fiscal incentives such as using maybe tax allowances or it could be lower council tax, whatever. Yes, we would like to do a study on that, but we did not realise all these things might be possible a few years ago.

  628. What sort of timescale are you talking about? The reason why I am asking you is that we are now into what might be called the pre-budget period, and it is a question of if you do not get it out by the end of January, then you will not get it into next year.
  (Dr Lees) We have the boiler one under way.

  629. One last point is that we have had several pieces of home energy legislation—for example, the 1995 Act—where there is a responsibility on local authorities. Do you keep a weather eye (if that is the right way of putting it) on the performance of local authorities? They are getting ever more ambitious, but some of them are still lagging behind. How do you think we can kick them into action, because it could prejudice the successor schemes, could it not?
  (Dr Lees) Absolutely. We have lots of individual examples around the whole of the UK, which are excellent, of local authorities taking leads and making a major difference. Equally, in terms of local authorities, for instance, we have now supported some 304, some 76 per cent of local authorities with a housing responsibility, actually to do practical energy efficiency activities on the ground. That is much better than I ever thought we would get, but we have done it for six years now, and I do not think we are ever going to get that other 24 per cent, I think we have reached about equal in those, so we are stuck there. It is a problem. How might we go forward in the future? One of the things we are establishing at the moment is a whole energy efficiency database—because one of the problems with the Home Energy Conservation Act is the reporting which is highly variable in its quality and accuracy—through the government programmes, through the energy supplier programmes, through our contacts with the cavity wall insulators, the boiler installers, etcetera. What we want to do is crack progress, hopefully by ward code, postal code, so we can try to identify those local authorities which are actually making a difference, where things are happening and where they are not, and then there are a variety of things we can do after that.

  Chairman: Naming and shaming. I think that has covered all of our concerns this morning. As always, if we have anything else that we would like to raise with you, we will be in touch. If you think, on reflection, there is anything you would like to amplify, then we would be more than happy to receive the information from you. Thank you very much for coming in this morning.





 
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