Select Committee on Trade and Industry Sixth Report


The problem

18. Energy efficiency levels of homes are measured with the Standard Assessment Procedure (SAP). The rating runs from 1 (least efficient) to 100 and is designed to reflect the energy efficiency of the dwelling irrespective of its size, location and characteristics or the behaviour of its occupants by measuring the cost of heating per unit of floor area, calculating the rate of heat loss and the cost of supplying the lost heat. The procedure looks at the heating system, the thermal properties of the building fabric, the level of insulation and ventilation, the price of the particular fuel used and any solar gain.

19. The energy efficiency of Britain's housing stock is monitored in house condition surveys. Almost all the figures on which the assumptions in the UK Fuel Poverty Strategy and this Report are based come from the 1996 English and Scottish House Condition Surveys; in the future, information for England will be assembled annually. Much of the UK's housing is old and would be difficult or impossible to bring up to the standards which are required of new build properties. Much is also of a lower standard than that found in continental Europe.[31] The fact that, as Michael Meacher acknowledged, "in general, [the fuel poor] live in the draughtiest least well-insulated dwellings"[32] just makes matters worse.

20. Improving the energy efficiency of homes, primarily through better insulation and heating, has been tackled through programmes such as the Government's Home Energy Efficiency Schemes and the Energy Efficiency Standards of Performance which impose obligations and targets on energy companies. EESoPs promoted the efficient use of gas and electricity and focussed on disadvantaged customers though a requirement that they be eligible for benefits, whereas EEC is "an obligation on licensed gas and electricity suppliers to encourage or assist domestic customers to take up energy efficiency measures"[33] and is available only to those customers in receipt of certain benefits. HEES is the Government's main programme for private sector households and is designed to assist those most vulnerable to cold-related ill health, particularly the elderly, those with children and the disabled or chronically sick. Access to the scheme is also via receipt of a qualifying income or disability related benefit and the works carried out relate to the standard of the property, with homes which are already energy efficient having less work done than those which are in need of more assistance. Homes are improved by an average of around 19 SAP points to an energy rating of SAP 60, although many are improved to over SAP 80.[34]

21. Energy Action Scotland told us: "Our problem is not the housing stock of the future, it is the housing stock we have now".[35] All our witnesses agreed that the only long term sustainable response to fuel poverty is to tackle the United Kingdom's legacy of poor housing. Nor is this problem restricted to local authority stock or property constructed at specific times, but it affects to some extent almost all UK domestic buildings other than those built in the last couple of decades.

Private rented sector

22. The problem is complicated by the fact that "most of [the individual households in fuel poverty] are in the private sector".[36] That is to say that the housing is owned by people who are likely to enjoy higher than average incomes but inhabited by people who clearly do not. As Michael Meacher explained, the problem was that one of the requirements of energy efficiency improvements under HEES was that there should be no rent increase as a result of the improvements for a period of time, but the landlord has to agree to this before the energy efficiency measures can be installed:


    "...some landlords, for whatever perverse or other reason, are not willing to [agree to the impovements]. 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."[37]

We agree that it would be unfair for the landlord to profit by energy efficiency improvements to which he has not contributed, and that forcing landlords to agree to improvements (which may require them to let the accommodation only to tenants who also satisfy the eligibility requirements) is on the face of it taking a sledgehammer to crack a nut. Although there is a possibility that landlords might 'bus in' eligible tenants to dilapidated properties in order to have them improved at public expense, only to replace them with higher income, and therefore higher paying, tenants, it is a risk against which defences can be constructed. Government should consider whether mechanisms such as requiring a simple undertaking by both landlord and tenant to renew the tenancy in the improved property for, say a further 12 months, with only standard market rent rises in that time, would ensure that the improvements offered sufficient benefits to those for whom they are intended.

23. It is perhaps also important to remind ourselves that any and all improvements to the energy efficiency of Britain's housing stock, whether baronial pile or council flat, contribute to environmental aims to limit wasteful use of energy, and that energy efficiency as such is therefore a key component of the Government's overall energy policy.[38] In addition, a general improvement in housing stock will reduce the chances of future occupants falling into fuel poverty should their financial circumstances change.

Social housing

24. New decency standards have recently been introduced in respect of socially provided housing. NEA told us that by 2010 all local authority properties will have to conform to a Decency Standard which includes a thermal comfort element:

This is all the more worrying in view of the response made by Peter Lehmann in his role as Chairman of the Fuel Poverty Advisory Group to a question about whether the Group would have flexibility in how and when it could feed advice into Government:

    "We have done it already. Even before the first meeting of the Group the Government was close to putting out its final version of guidance to local authorities on what constitutes a decent home. We were rather worried about that, so we intervened directly via DETR with DTLR and secured some very important changes to the document."[40]

Hard to heat homes

25. Most energy efficiency schemes concentrate on comparatively easy and cheap techniques like insulation of roof space and cavity walls and on installation of (ideally mains gas) central heating. This is simply not possible in some homes because of building techniques. In others, the provision of more sophisticated heating systems simply increases the amount of energy used and can actually worsen the degree of fuel poverty experienced by their inhabitants. Technological advances, for example those aimed at improving properties with solid walls, might appear to offer limited benefit to relatively few inhabitants at high financial and other cost, but if they prove the only option for those sorts of properties then the nettle must be grasped.

Current schemes

Eligibility criteria

26. We were told that the definitions within EEC of fuel poor or disadvantaged customers are less flexible than those which applied under EESoP, making it harder for the power companies to target and identify those they can assist.[41] Although it is inevitable that a more flexible definition would lead to some non-fuel poor being assisted out of funds which would therefore not be available to assist someone who was in fuel poverty, it is possible that the very existence of more flexible rules could increase the amount of funding available from energy supply companies. For example, the Electricity Association said:

    "We think that we as an industry would be able to spend another £75 million a year if there were a more inclusive approach and also if certain really rather odd things did not happen, such as targeting those in receipt of benefit but excluding those who are eligible for benefit who are not claiming. We would look for greater flexibility and greater inclusivity in order to be able to meet those targets and to say we will meet them. Yes, they can be met, if these sorts of things are done."[42]

27. Even more significantly, many of the problems associated with reaching the fuel poor in the private rented sector and of 'churn' could be alleviated if a more flexible approach were adopted, concentrating where there is any doubt over eligibility on the condition of the property rather than that of the current occupant. Indeed, for homes in social occupancy, there is a strong argument for making the property and not the occupant the only focus for deciding eligibility. New-build social housing is required to be of a higher standard of thermal efficiency than similar properties built by speculative builders for the private sector and for good reason: in the long run this is more cost-effective as well as less environmentally damaging. If this principle were to be used for property refurbishment, similar long term cost-efficiency gains might be expected. In this context, we note with some concern the Government's initial opposition to some of the proposals put forward by the European Commission for stricter regulations on the energy efficiency of buildings (principally, the proposals on the energy efficiency of older boilers), and the timidity of the Commission in limiting the higher standards in relation to domestic buildings to new build, not also major refurbishment.[43] The Government's approach to the proposals seems to be limited to the potential for carbon-saving, but a broader approach might also reap some benefits in terms of reducing fuel poverty and the misery associated with it.


28. Although the Electricity Association told us in written evidence that industry-led initiatives have had "a quantifiable effect, with significant savings in fuel bills and/or improvements in comfort levels",[44] neither they nor anyone else could tell us how many households had been assisted out of fuel poverty as a result of the initiatives.[45] The industry initiatives are not helped by the targeting and eligibility criteria. It is difficult to get away from the sense that industry-led schemes understandably concentrate on the low hanging fruit of households in marginal fuel poverty rather than making any real difference to those in the least energy-efficient housing or who have the lowest incomes.

29. We were interested to hear about some of the more innovative schemes being introduced by energy companies, for example TXU's product StayWarm, which sells electricity and gas on a fixed rate subscription basis. TXU says this means both that the householder can heat their home adequately without fear of enormous bills, but also that the supplier has an incentive "to promote energy efficiency rather than usage".[46] It is still too early to be sure whether the scheme, launched two years ago, has been able to square the circle of enabling—in this case older—householders to heat their homes to a comfortable temperature while neither squandering fuel nor entailing spiralling costs which must ultimately be passed on to the consumer. We note, however, that TXU has already modified the scheme, presumably because it was proving to be too generous. Another approach has been employed by British Gas in its Warm-a-Life programme, whereby the company sought out particular types of vulnerable household by targeting lone pensioner households and flats for the elderly as well as houses in deprived areas, and which combined the installation of energy efficiency measures with a discount on the fuel bill and a benefits check.[47]

30. We consider that industry-led initiatives can contribute to lifting households out of fuel poverty. However, it is clear that they are not sufficient in themselves to have a major impact; and that the proliferation of schemes leads to confusion and inefficiency. We are also concerned by the lack of progress in making detailed assessments of their comparative strengths and weaknesses, and in spreading best practice. We look to Ofgem to carry this work forward as a priority.

31. A target of a 30 per cent improvement in domestic energy efficiency was adopted by the then Government before 1997 although there was apparently little indication as to how this target was to be achieved. This experience should not, however, discredit the use of structured and achievable targets as a means of concentrating minds across Government on an issue of this importance.

A flexible approach

Warm Zones

32. Warm Zones represents an attempt to deal with some of the weaknesses of the existing Government and industry-led schemes. This approach concentrates the resources of the energy supply companies, local authorities and government agencies on areas of high deprivation. The identification of possible beneficiaries relies heavily on door-to-door visits. Each Warm Zone has a slightly different approach to both the target for fuel poverty reduction and the means to deliver it. In this way, it will be possible to compare the effectiveness of different methods. The aim is to provide a joined-up, holistic delivery mechanism.[48] Most of those who have submitted memoranda to us have expressed high hopes that this approach will produce a more effective and coherent response to the problems of fuel poverty. Warm Zones are a relatively new idea and the five pilots[49] are ongoing, so results have yet to be analysed; but preliminary indications suggest that, in areas of concentrated deprivation, they deliver the most effective, sustainable solution yet to the mix of social, economic and physical problems that fuel poverty implies.[50] However, they require a heavy and lengthy commitment of people and resources so are neither a cheap, nor a quick, fix. To benefit fully from this method, the Government will need to commit significant funding over a decade or more not only to expanding holistic projects of this type, but to deciding where such projects should be established. Significant benefits could arise from creating a demand for a skilled workforce in certain deprived areas, but methods will also need to be developed to address those areas which cannot provide a ready workforce, or where employment levels are already high and there is therefore a shortage of both skilled workers and people available for training.[51]

Data Protection

33. It is frustrating to reflect that between the multiplicity of Government departments and agencies with an interest in this area and the power supply companies, there is almost certainly a good base of 'statistically probable' information about the location of those people most likely to be living in or near fuel poverty but that effective use is not being made of it. Consideration should be given to methods whereby information about individuals at higher risk of fuel poverty (for example those recently discharged from hospital) could be referred on to the energy companies.[52] Such methods would need to have regard not only to the requirements of the new Data Protection legislation but also to the sensibilities of individuals and it might well be necessary for the organisation receiving the information to be (and be perceived to be) entirely separate from both Government and power supplier.

How to pay for it?

34. At present, it is not clear how quickly the Government is progressing towards meeting its target, nor whether the means it is using to do so are the most effective and economical. We are also concerned that some uncontrollable but likely developments — such as rising fuel prices — could halt progress entirely, or even result in the number of fuel poor households increasing. We therefore believe that more attention should be focussed on the area which would help solve the problem once and for all: improving the energy efficiency of homes. At present, the funding of schemes to do this comes from both the public and the private sector, but we note the fears that in the private sector regulations relating to competition may be inhibiting the efforts against fuel poverty. Examples of this effect are the regulations on cross-subsidy relating to extension of the gas network or those requiring companies to charge individual PPM customers the full administrative cost relating to that payment method.[53] We agree with Energywatch when they say:

    "we cannot say on the one hand, 'Let's take people out of fuel poverty who cannot [afford] to pay for their fuel' and, on the other hand, say, 'Never in any circumstances should there be any cross-subsidy'... we have to decide what is our prime objective. I think an element of cross-subsidy is perfectly justified."[54]

31   Qq 141 and 142 Back

32   Q 141 Back

33   UKFPS para 3.4 Back

34   UKFPS, para 4.52 Back

35   Q 102 Back

36   Q 134 (DTI) Back

37   Q 147 Back

38   Second Report, paras 148-160 Back

39   App 15, NEA ev 2.6.1 Back

40   Q 106 Back

41   Q 51 Back

42   Q 42 Back

43   Draft Directive on the energy performance of buildings (COM(01) 226) of 11 May 2001. For a summary of the proposal and the Government's views on it, see Twelfth Report of the European Scrutiny Committee, HC 152-xii of Session 2001-02 (16 January 2002), paragraph 6; and Fourteenth Report of the European Scrutiny Committee, HC 152-xiv of Session 2001-02 (23 January 2002), paragraph 8. Back

44   App 5, para 12 Back

45   Qq 47-50, 76-84, 86, 90, 153, 196-8, 243, 246, 248 Back

46   App 18, para 12 Back

47   Qq 45, 46 and 50.  Back

48   Qq 249-51 Back

49   In Northumberland, Stockton-on-Tees, Hull, Sandwell and Newham Back

50   Q 258, FP5, FP10, FP13 Back

51   Qq 74 and 252-7 Back

52   Qq 42-44. Back

53   Qq 169, 175 and 13; App 8, Energywatch, para 2.3 Back

54   Q 5 Back

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