Select Committee on Trade and Industry Minutes of Evidence



Examination of Witnesses (Questions 140-159)

MR BRIAN WILSON, MP, RT HON MICHAEL MEACHER, MP, MR ROB POTTER AND MR JEREMY EPPEL

THURSDAY 23 MAY 2002

  140. The point is that the higher the figure, the more people are going to benefit from it.
  (Mr Meacher) Of course.

  141. The point I was making was that at around 55 or so it is still rather modest as far as the ambitions are concerned and I just wanted to register the point that we have evidence which suggested that perhaps a greater degree of ambition on the part of Government might not be a bad thing here.
  (Mr Meacher) The average SAP ratings of the housing stock in general are relatively low, much lower for example than Sweden which has much colder winters and much more-self-contained and warmer dwellings. That is undoubtedly true. It does not just apply to the fuel poor, although in general they live in the draughtiest least well-insulated dwellings.

Mr Djanogly

  142. I was speaking to a builder quite recently and he told me that the main difference between this country and other countries is that the building regulations here work in such a way that homes are meant to last 1,000 years, whereas on the continent the regulations are such that homes are built to last for 30 or 40 or 50 years. The point is that whatever the figures are, in this country there is a presumption that homes are meant to last and that is being put in place at the expense of things like proper insulation which is concentrated on in other countries where you have homes which are built for shorter periods of time but which are made to work better. Would you like to comment on that?
  (Mr Meacher) The only building I am aware of which has lasted 1,000 years in the UK is Westminster Hall or Westminster Abbey. I am being facetious. I take your general point. I am rather surprised to hear that houses are constructed for a shorter lifetime abroad. I should be very surprised it that were the case. The building regulations I would have expected in countries like Sweden are actually tighter and more stringent and the lifespan of most buildings is actually in general longer abroad than it is here. One of our great problems is that far too many of our dwellings, not just 1960s dwellings, become below the level of adequate for human habitation within 40 or 50 years. A hundred-year lifespan is unusual in this country, or at least unusual in a building which has proper conditions for satisfactory human living.
  (Mr Potter) Most of our Victorian housing stock was built with a speculative life of 30 years for renting purposes and most of it now is inhabited by the middle classes who love those houses dearly and will never let them perish but in energy efficiency terms they are awful and cannot ever be made good.
  (Mr Meacher) You do raise an important point of SAP ratings and we have touched on building regulations. They are an issue which will certainly be covered in the domestic energy efficiency strategy which we are proposing to publish and the Energy White Paper which we are preparing for the end of the year, both for the fuel poor and for others. These are going to be looked at systematically.

  Chairman: That is very helpful. I think what you are really saying is that further attention will be paid to this issue and we appreciate that. We look forward to it.

Richard Burden

  143. I should like to move on to the issue of targeting. I am not going to ask you for statistical answers on this. I think everyone acknowledges that targeting different groups accurately is really difficult. There is still the problem that you have people who are fuel poor who do not get assistance and they end up with schemes which may well help those who are not in fuel poverty. A target group which is often talked about, which the current schemes are not reaching, is those who just come above the benefit level, but are actually then too poor to make the financial contribution necessary for insulation or home improvement and so on. Some people have said that things like the Home Energy Efficiency Scheme (HEES) and the Energy Efficiency Commitment (EEC) not only do not address that, but can make it worse by making what amount to unreasonable financial demands on people in those categories. How would you respond to that?
  (Mr Meacher) Wherever you draw the line there will always be someone on the wrong side of it. With any income related benefits there will always be people who are deserving or who regard themselves as deserving but are just excluded. Having said that, I do think the targeting is pretty good. The Home Energy Efficiency Scheme is concentrated on those householders who are fuel poor, whose income is dependent on benefit. I take your point of course that there will be people—and this is true—who would be entitled to HEES if they claimed a benefit but for whatever reason have failed to do so. That is a problem. There is the Energy Efficiency Commitment which is again concentrated on the poorest. Fifty per cent of the benefits have to go to those on lower incomes. The priority low income groups gain about 15.50 a year compared to the average which is 11. They are reasonably well concentrated but I agree that there will always be some people at the margin who are excluded. There are very badly disabled people living in households where the householder then believes they should be entitled to the benefit of HEES but because it is aimed at householders and the householder does not qualify, they cannot get benefit, although they can get benefit under the Energy Saving Trust Helpline or from the Energy Efficiency Advice Centres. There are other sources of assisting these people. It is not possible to have a system which is totally foolproof against the exclusion of others, but even if excluded there are other ways by which they can be helped.

  144. I accept your point that you cannot design a scheme which is foolproof. Maybe one of the tricks is to design schemes which either mesh together or are sufficiently flexible that when problems come to light that were not necessarily anticipated or were not assessed properly or accurately at the time the scheme was designed it is sufficiently flexible to cope with that. Do you feel that either HEES or EEC is sufficiently flexible?
  (Mr Meacher) They are quite precise. This is not a scheme where the criteria for eligibility are loose. It would be impossible to run a scheme on that basis. They are very clear and the criteria are perfectly sharp and precise, but they have to be. What I am saying is that I think the number of people who are excluded on those definitions is really small to tiny and even for them, I repeat, there are other ways by which they can be assisted. You do raise in particular the question of people having to make their own contribution. The grant maxima for the Home Energy Efficiency Scheme were raised in the early part of this year to 1,500 for those below 60 and 2,500 for those above 60. The only reason they would be asked to make a contribution would be if the requirements of the house were so great that the total cost exceeded 2,500. Two and a half thousand pounds is sufficient for the installation of cavity wall insulation and a gas central heating system. If more were still required, then they would be asked to make a contribution. It is not a condition of the scheme that anyone should make a contribution at all.
  (Mr Eppel) On the issue of fuel poor or potential fuel poor who do not necessarily fall within the scope of one of the two main schemes the Minister has mentioned, this is one of a number of issues that the new Fuel Poverty Advisory Group is looking at and will be advising the Government on. It is exactly for that sort of reason, to make sure we can identify whether there are any gaps in programmes or ways in which their co-ordination or coverage could be improved, that we have this group. You have already heard from its Chairman, Peter Lehmann at an earlier stage.
  (Mr Meacher) The real problem is those with solid walls, which are hard to heat and those without loft space, those outside the gas network. Those are problem areas and indeed we set up the Fuel Poverty Advisory Group precisely to advise us how those gaps in provision should most cost effectively and best be met.

  145. Do we know—you may have given us some information already—when the Advisory Group may be coming forward with proposals for changes?
  (Mr Eppel) They are going to report annually. They have had two meetings already. They meet about every two months. They have some work to do, because they have quite a programme of areas they are interested in before they put anything firmly to Government. So it will be a little while yet, but they are already showing that they have quite a valuable contribution to make.
  (Mr Potter) We are going to place on the DTI and DEFRA websites a record of the discussions at their meetings. The first two have been drafted and will be cleared with the Chairman when he gets back from his cycling holiday in France so that people can see what the Group have been talking about. We shall not necessarily be publishing papers or the actual detail of discussion because that might inhibit that discussion, but we shall regularly be putting out information about what the group has been discussing.

Chairman

  146. We did take evidence from them and they were a pretty formidable lot. You may well have made a rod for your own backs by appointing some of these people.
  (Mr Meacher) We think it is really going to assist us. It is a high quality advisory group and we think they will come up with very useful suggestions which we will take very seriously. May I make one further point to Mr Burden on the Warm Zones initiative which is different from HEES which is dependent on referral from other sources in order to find those who may be fuel poor? In the case of Warm Zones, this is an attempt over a three-year period and five pilots to find everyone who is fuel poor in those areas. That is another related initiative to get round this problem of people being excluded.

Richard Burden

  147. May I ask you one specific thing? You may not have the answer immediately to hand but perhaps you can let us know and just move on to a couple of more general points. On the specifics, have you had any problems or are you aware of any problems in terms of HEES with landlord co-operation? Let me give you an example on that? The actual tenant qualifies under all the criteria of HEES, but the landlord is then the one who gets in the way of that person getting the grant. Why? Maybe because they do not want to commit themselves to having another tenant of that category in the future. That could effectively get in the way of the tenant ever getting assistance. Has that problem come up?
  (Mr Meacher) Yes, I am aware of this problem. If you ask about problems with HEES I would say instantly and hold my hand up: shortage of gas engineers for installation. We are trying to deal with that. EAGA and Transco have taken on 400 and there are training programmes and there is a national shortage which is sizeable given the way the scheme is taking off and the level of demand which is growing all the time. On the particular problem you raise, again one of the requirements, which are perfectly reasonable requirements, is that as a result of this improvement in the quality of the housing there shall be no rent increase for a period of time. The landlord has to agree that and the problem is that some landlords, for whatever perverse or other reason, are not willing to do so. On that basis the work cannot proceed. I do not know how we get round this. If we give way on that and the necessary improvements are made and then there is a significant increase in rent, for which the landlord has provided no funding whatsoever, that is unfair. So we are caught there. We cannot force the landlord to agree to this. On the other hand I think it would be wrong to allow him to impose a rent increase for which he has made no contribution.

  148. I would agree with that but it may be worthwhile just working out what the extent of that problem is because if people are being stopped who would otherwise benefit because of landlord non co-operation, albeit unreasonable non co-operation, that could be a quite significant problem for the scheme.
  (Mr Meacher) I am sure we could give you a rough indication of the numbers. I do not think it is large, but it is not negligible either.

  149. There are those who say that a number of schemes, EEC being one, actually would be ultimately a lot more effective if you targeted principally the condition of properties rather than the individuals. How would you respond to that?
  (Mr Meacher) The EEC does target properties; it does very specifically target properties. What it is saying to the electricity and gas suppliers is that in order to meet their energy efficiency obligation, which is 62 terawatt hours, they are incentivised to provide improvements for customers. It is very specifically targeted on properties.

  150. The basis of it is providing a service to all kinds of customers. Would it not in general terms be better to focus attention on raising the condition of properties and making that the target, albeit, in doing so, perhaps helping individuals and families who are not strictly fuel poor? The impact of that might ultimately be greater than focusing on targeting particular sorts of individuals.
  (Mr Meacher) I hope we are agreed that it is targeted on properties. I think what you are saying is that it could be more targeted on the properties of low income groups. At least I thought that was what you were saying. The fact is that already 50 per cent of the energy benefits and 60 per cent of the programme costs of the Energy Efficiency Commitment are focused on low income consumers. We estimate the average benefit to a consumer to be about 11 a year by 2005 and in the case of low income consumers it is about 15.50. It is oriented to give disproportionate benefit to low income groups. One could of course take that further. We think on balance that is about right.

  151. In terms of the different schemes which exist, do you think there is too much overlap? It is a problem for an individual family, individual tenant, individual householder, trying to find their way round the schemes. Maybe the existence of a number of schemes might do what we earlier said they might do: if one does not work another one may kick in and work. Can the overlap not lead to duplication, lead to inefficiency? At the end of the day if you brought things together in a more unified whole, you might actually achieve this.
  (Mr Meacher) They all have interrelated objectives and I must say my mind boggles at the idea of having a single monolithic scheme which is designed to deal with this problem. There are many angles, many dimensions to this issue because it is the relationship between income and property that we are talking about. The Home Energy Efficiency Scheme is specifically focused on those who are receiving income-related benefits. It is specifically aimed at poor people. The Energy Efficiency Commitment is geared to assist to a greater degree than average those on low incomes but not wholly so. There is the upgrading of local authority stock to decent standards and much of that is going to benefit people on low incomes. If we did concentrate entirely on low incomes I am sure your next question would be: what about the ten per cent of people who are in not much better accommodation and get nothing? The key to this is local engagement and partnership between different schemes.

  152. I do not think it was anyone arguing for one scheme, it was more things meshing together. NEA have said that there is an element of "ad hocery" about the whole thing, that actually if things do not link together into a national strategy, they can end up cutting across each other, duplicating each other and so on. Do you think that is a problem? Can anything be done about that?
  (Mr Meacher) I generally do not believe it is. It certainly has not been raised with me that we are falling over each other in our determination to help this particular group and its over-concentration on a limited number of households and others being excluded. That has not been raised with me is all I can say. The Fuel Poverty Advisory Group or indeed EAGA or Transco, may perhaps come up with a different view. It has not been raised so far and it is not obvious when you look at the structuring of the scheme why that should happen.

  153. In paragraph 29 of your memorandum you mention a survey of energy companies. Actually I am going to break my own rules here and ask you for statistics. Any idea when that may be available?
  (Mr Meacher) It reads, "The DTI has recently introduced a survey of energy companies aimed at identifying the impact of such schemes in tackling fuel poverty".
  (Mr Potter) We have started a monitoring survey of company initiatives, but we have not yet received returns from all the companies. We shall be doing some analysis of that and that analysis will appear in the annual report which should be out around the turn of the year.

Mr Djanogly

  154. In 1999 the Government did their review of HEES and came up with a whole list of problems and tried to address that in 2000. One of those was that only 17 per cent of HEES grants were going to the most needy and 40 per cent were going to the non fuel poor households. Are you able to give us an update on how that has changed following the 2000 changes?
  (Mr Meacher) The review was indeed designed to concentrate more on those in real fuel poverty and the criteria which now apply must mean there has been quite a turnround compared with those figures you quote. I cannot give you immediately what the latest figures are. We shall have to drop you a note on that. It is very different from that picture now. The very fact that it is concentrated exclusively on those on income related benefits whilst the energy efficiency commitment does include, for example, those on working families' tax credits, those on disabled persons' tax credits as well. That is not the case with HEES and it is very exclusively concentrated. I accept that there will be some who are eligible for HEES who are not in the fuel poor definition but that will be a very tiny number.[2]

  155. When you give me the figures I should be grateful if they could be done on a disposable and total income basis.
  (Mr Meacher) We can give them on the two bases I am referring to. You keep referring to different alternatives. We shall give it on all the available data we have, yes.

Sir Robert Smith

  156. The vast majority of the written evidence has suggested to us that improving Britain's housing stock is the most rational and sustainable approach to tackling fuel poverty, yet probably much of the success to date has come from improved benefits and reducing prices of fuel. We are wondering what sort of accurate up-to-date information about the state of the housing stock you have at the moment.
  (Mr Meacher) You are right that the improvement in the situation of fuel poverty has to quite a large degree resulted from the fall in fuel prices. Our best evidence at 2000 is that there were four million fuel poor households in the UK, but perhaps 2.8 million in England. There have been some income improvements, notably winter fuel payments for pensioners since then and that may have reduced to below 2.5 million fuel poor households in England by now and the number of vulnerable households may be no more than two million. You are right that half of the 1.5 million reduction in fuel poverty 1996-2000 was due to falling fuel prices. It has been quite dramatic. Electricity was at its cheapest in real terms since 1970, gas cheaper in real terms than at any year between 1970 and 1999. That is quite dramatic. That is not a bad thing, it is a thoroughly good thing, but it does mean that the impact therefore in terms of improving the housing stock has been limited. HEES was launched in June 2000, with a budget of 600 million for the period to 2004, with a target to assist 800,000 households by that date. We are on track to achieve that. Three hundred and fifty thousand households have been assisted and the rate of installation of central heating systems which started slowly, I recognise, has now trebled. By December 2001 3,500 new central heating systems were installed each month in households over 60. We are beginning to concentrate more on that side now.

  157. The question was more about the size of the problem. Do you have up-to-date information on the state of the housing stock which is having to be tackled?
  (Mr Potter) We do not know with any certainty. The base data is the 1996 English House Condition Survey. There was a small follow-up survey in 1998 but the last comprehensive survey was 1996. Effectively the reductions in fuel poverty since then have been based on income and fuel price modelling against that 1996 base line. What that means, as the Minister has said, is that new HEES has been going for a couple of years, local authority housing expenditure has ramped up quite a bit, but we do not have a statistical measure yet of the impact of that. The figures the Minister has given arguably overstate the degree of fuel poverty since it does not effectively allow for energy efficiency improvement in the housing stock. That will come from the 2001 House Condition Survey.

  158. Do you have some kind of global figure of the cost it would take to raise the stock to a sufficient level of energy efficiency to lift the average household currently in fuel poverty out of it? Do you have any idea?
  (Mr Meacher) Do you mean the cost of improving the quality of housing stock for the fuel poor or nationally across the country.

  159. For the fuel poor, although I suppose the two figures would be handy.
  (Mr Meacher) I do not think we do. One of the problems is extending access for those who currently live outside the gas network and one rule of thumb is that bringing 100,000 such households within the gas network might cost 50 million. It is quite an expensive way of doing it.
  (Mr Potter) The other element is that for any given household what it would cost to make them non fuel poor can be as little as loft insulation or cavity fill and for others it is may be an awful lot more than that.

 


2   Note by witness: The Government will be carrying out a comprehensive review of the Home Energy Efficiency Scheme (now marketed as the Warm Front Team) during the current financial year. This will include consideration of those eligible for assistance under the Warm Front programme, which is also to be considered by the Fuel Poverty Advisory Group. Back

 
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