Economy, Energy and Tourism Committee

Meeting date: Wednesday, February 2, 2011

Official Report 527KB pdf

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Energy Bill

As it has gone 11 o’clock, colleagues, I will begin the fourth meeting in 2011 of the Economy, Energy and Tourism Committee. There are two items on this morning’s agenda. Later, we will take evidence from the Cabinet Secretary for Finance and Sustainable Growth on the fundamental review of the enterprise agencies, but first we will continue our evidence taking on the legislative consent memorandum to the Energy Bill, which is United Kingdom Parliament legislation. I am pleased to welcome to the meeting Alex Neil, the Minister for Housing and Communities, and to ask him to introduce his team and make some opening remarks.

Thank you very much, convener. I am joined by Colin Imrie, Steven Scott, Archie Stoddart and Norman Macleod. Norman is the lawyer, Archie is the fuel poverty expert, Colin is the policy expert, and Steven is from the building regulations branch of the Scottish Government.

I thank the committee for allowing me to make some introductory remarks. As members will know, the UK Energy Bill was introduced and had its first reading in the House of Lords on 8 December 2010; its second reading was on 22 December and it is now at committee stage. I assure members that the Scottish Government is working closely with UK Government officials on the bill’s content and has negotiated a number of changes to ensure that Scottish circumstances are taken into consideration and, indeed, are written on the face of the bill. In addition, I sit on the green deal ministerial oversight group.

As many of the bill’s provisions are reserved to the UK Parliament, we will be principally concerned today with the provisions that fall within the devolved competence of this Parliament, particularly the legislative consent motion that is required to allow the UK Parliament to legislate on these matters. The committee should rest assured that the LCM is not a blank cheque that will allow the UK Government to implement the green deal in a manner that disadvantages Scotland. Right at the beginning of the process, I agreed with Chris Huhne that we would be actively involved at every stage of policy development, and we will ensure that Scotland’s requirements are recognised and are properly taken into account.

I want to give a very broad overview of the provisions and the Scottish Government’s view of them. First, the green deal and the new energy company obligation provide the opportunity for significant investment in sustainable energy measures: we must ensure that as much as possible of that investment comes to Scotland. As many of the finer points of the initiatives will be outlined in secondary legislation following passage of the Energy Bill, we do not yet have answers to specific questions about targets and how, for example, they will work in rural areas. The committee should rest assured, however, that as the legislation is developed we will continue to work closely with the UK Government at political and official level to ensure that any such targets are designed and delivered to recognise issues that are specific to Scotland. Stakeholder input and the committee’s views will be extremely valuable to us as we present to the Department of Energy and Climate Change what Scotland wants from the initiatives.

The key is to ensure that Scottish ministers are able to influence delivery in respect of key devolved aspects of the policy, including those that will affect the private rented sector. The Scottish Government is committed to ensuring that all Scottish building owners and tenants have full access to UK energy efficiency programmes, including the green deal. We note the UK Government’s proposals to introduce new powers to regulate private landlords to ensure that private tenants can access energy efficiency improvements to their homes through the green deal; however, such regulation will not be in place in England until 2015 at the earliest. Under sections 63 and 64 of the Climate Change (Scotland) Act 2009, Scottish ministers already have their own powers to make regulation on energy efficiency across all tenures, including the private rented sector. The new powers that will be offered through the LCM would not alter or weaken our existing regulation-making powers but will expand the options that are open to us. As a result, we will consider the UK Government’s proposals within the context of our own powers and the needs of the people of Scotland, and we will, by the end of March, make a statement on our position with regard to the use of our regulation-making powers under the 2009 act.

The proposal to deliver the green deal by building on the current energy performance certificate assessment system is not a barrier to implementation in Scotland. The bill will enable delivery of that intention and the Scottish Government will continue to work with Whitehall to ensure that subsequent framework regulations that implement the green deal recognise and accommodate differences in process in Scotland.

I can confirm that there is scope to look at improving the information that is presented in, for example, the energy report that the energy performance certificate process produces. However, until the requirements of a green deal assessment are set out in more detail, any additional measures cannot be specifically determined.

I realise that the repeal of the Home Energy Conservation Act 1995 and the replacement of the act with guidance is an area of particular concern to some people who have given evidence to the committee. I understand the worry that lower priority will be placed on improving the energy performance of housing if there is no longer a statutory duty to do so. However, we have already considered that and have consulted stakeholders through the energy efficiency action plan. Most respondents said that they do not want the Home Energy Conservation Act 1995 to remain as a distinct duty on local councils and that they support moves to address energy efficiency in housing through local housing strategies.

Some people called for HECA to be retained in Scotland and for us to go further by bringing in tougher legislation with mandatory targets being set centrally. It was widely agreed, however, that HECA has significant shortcomings and has not realised its potential. HECA’s target-setting requirements are relatively crude and unsophisticated and do not align with the Climate Change (Scotland) Act 2009. We are therefore proposing the repeal of HECA because we consider that it is no longer fit for purpose in the 21st century.

Since 2007, we have been developing a new strategic approach to improving the energy efficiency of Scotland’s housing that integrates other related strategies, takes account of the specific Scottish context, and reduces the burden of reporting that lies with local councils, all within the context of our energy efficiency action plan. I am confident that the outcome of that approach will be a reduction in the energy that is wasted in ticking boxes and filling in Government forms. We can now channel that energy into practical and co-ordinated action to increase the energy efficiency of housing in Scotland.

In closing, convener, I assure the committee that the detail of the LCM is not sparse on purpose. As I have said, much of the detail of the devolved provisions still under development in London and Edinburgh, particularly in London, and we will be introducing through secondary legislation the detailed orders for implementation of the provisions in the Energy Bill if and when it successfully completes the parliamentary process. The Scottish Government will continue to work closely with the Secretary of State for Energy and Climate Change and his officials as the bill progresses to ensure that the interests of Scotland are fully represented at the primary and secondary legislation stages. We have officials based in DECC who are actively and daily involved with the legislation, in addition to the joint working that is being undertaken by officials who are based in Scotland.

I thank the committee for giving me the opportunity to update it.

Thank you for those introductory remarks.

I will start with one of the issues that concerned us about the legislative consent memorandum. There seems to be a lack of detail about the implications of the proposals in the UK Energy Bill for existing Scottish legislation and ministerial powers. Could you expand a bit on what analysis the Scottish Government has undertaken of the provisions of the UK Energy Bill and what impact they will have on the situation in Scotland?

As it is drafted, the bill is a bit of a framework bill. A lot of the detail will come in the secondary legislation. Until we see that detail and have our negotiations, and the secondary legislation is consulted on and drafted, much of the detail will not be clear.

We already undertake modelling of the impact of the policies that we implement and of existing carbon emissions reduction target policies. On current policy provision, we have estimated that by 2020 the housing sector in Scotland will have made a reduction of 36 per cent in CO2 emissions, as our contribution to the overall 2020 targets.

We are not in a position to update that modelling to cover the impact of the ECO and the green deal because the UK Government has not yet given us the detail of what will be involved. Once we get that detail, we will extend our modelling beyond the current period and look at the impact of the new policies as they are implemented practically. I will be happy to share that information with the committee at each stage.

You made reference to chapter 3 of part 1 of the bill, which deals with the private rented sector. Some of the evidence that we have received expresses concern that the chapter is not necessary, because of provisions of the Climate Change (Scotland) Act 2009 that are already in place, and that having the private rented sector dealt with in two separate pieces of legislation, rather than one, might lead to confusion. To what extent are the provisions in chapter 3 necessary for the Scottish Government to make changes? Cannot that be done using the existing legislative framework?

In our view, chapter 3 provides us with an additional tool. The private rented sector is governed by three different sets of legislation. The first is housing legislation. As you know, the Parliament is considering the Private Rented Housing (Scotland) Bill, which passed stage 1 last week. Although the bill does not cover energy, we have particular forms of regulation that are specific to the private rented sector in Scotland. We also have building standards, which apply to all sectors in Scotland, irrespective of tenure, and we have the 2009 act, which contains the powers that we think are necessary to deliver in the private rented sector in Scotland.

It is important to understand—I have discussed the matter in detail with Chris Huhne—that the private rented sector in Scotland has a different profile from the private rented sector south of the border in two major respects. First, it is much smaller. In Scotland, the private rented sector represents about 8 per cent of total households, compared with more than 16 per cent of total households in England. Secondly, it is a much more structured industry in England; in Scotland it is still much more of a cottage industry.

We have set the pace, in that before Christmas I announced that the boiler scrappage scheme would be extended to the private rented sector in Scotland. There was rapid and substantial take-up of the scheme after we announced it. I have also charged the private rented sector strategy group—which reports to me and is made up of representatives of the private rented sector, tenants, consumer groups and other interested stakeholders such as the Convention of Scottish Local Authorities—to produce an overall development strategy for the private rented sector by the summer of this year. I expect it to include any additional measures that the group thinks we need to take to ensure that we can deliver our energy targets in the private rented sector.

For the sake of simplicity, will you indicate to the committee what additional tools in the toolkit the provisions in chapter 3 will give to the Scottish Government that it does not already have, or for which it could not legislate in Scotland?

Chapter 3 will give us a specific power to regulate the private rented sector. We believe that, in effect, we already have that power under the 2009 act. If we did not, we could take it easily under private rented sector legislation. It is probably too late to do so in the Private Rented Housing (Scotland) Bill, but all parties probably envisage there being another housing bill after the election, irrespective of who wins it. The Energy Bill may be a bit more powerful in certain circumstances than our legislation, but we see it as in no way undermining our legislation. Rather, we see it as another way of achieving the objective that we set in the 2009 act.

It appears that the ECO does not take account of the fact that the weather in Scotland is more severe than that in England and that, therefore, the cost of fuel bills is higher. Energy Action Scotland, in particular, has asked that ECO payments be calculated in relation to the amount of energy that is used. Would you care to comment on that point?

I agree absolutely with Energy Action Scotland’s point. I have already made the point to Chris Huhne that the secondary legislation that follows the bill must recognise the peculiarities of the situation in Scotland. First, it must recognise the level of fuel poverty in Scotland and the fact that that has a rurality dimension.

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Secondly, we have a high percentage of hard-to-heat homes—especially pre-1919 homes—in Scotland. Thirdly, as a consequence of those two issues, we have higher fuel bills. We also have lower incomes, so the fuel bills are, on average, a much higher proportion of people’s incomes in Scotland than they are south of the border. I have exchanged letters with Chris Huhne—which I am happy to make available to the committee—in which I have made it absolutely clear that it is a prerequisite for our supporting any secondary legislation that Scotland’s issues, including the hard-to-heat properties, the fuel poverty issue and the energy bill issue, are properly addressed in the secondary legislation from London and within our Parliament.

We are talking about potentially £10,000 to £15,000 per household, which is quite a lot of money in circumstances in which there are lower pay and higher energy bills. With the reduction in the budget for the warm deal likely to kick in at around £350 million out of the fuel poverty budget in the next three years, do you think that the passing of the Energy Bill could lead to the unintended consequence of a reduction in the number of properties that are treated?

The warm deal is the English programme and the coalition Government has cut the warm deal budget by 69 per cent. We have had to cut our budget because of the cut in our overall budget, but our cut has been less than one third of that. Next year, the Scottish Government will still spend something in the order of £50 million on fuel poverty and energy-saving measures.

The answer to your question must also be placed in the context of our having our own programmes, which we will continue with—the energy company obligation and the green deal. The ECO is, in effect, a replacement for the carbon emissions reduction target and, at the moment, we estimate the value of the CERT programme to Scotland as being roughly £100 million a year. We expect—especially if we get the secondary legislation right on the hard-to-heat homes and the related matters that we have just discussed—to get a much higher figure for Scotland under the ECO.

I will make two other points that I think are relevant. Neither the Scottish Government nor the previous Scottish Executive was ever involved in the discussions on the CERT programme and how it was designed. To be fair to the coalition Government—and to Chris Huhne in particular—we have been involved from day one in the discussions with it, and we have been heavily involved. We have two people working full time for us in the Department of Energy and Climate Change, one of whom is working exclusively on the ECO while the other is working on the green deal. We reckon that, through the replacement of the CERT programme with the ECO, we will end up substantially better off than we were under the CERT programme.

Thanks very much. That has covered that area.

I welcome Alex Neil to the committee. I want to follow up the convener’s final question, which related to whether there are any additional benefits in chapter 3 of part 1 of the Energy Bill that are not in section 64 of the Climate Change (Scotland) Act 2009. Your answer was that the bill might give us a power to regulate the private rented sector, although we probably have that power anyway. My reading of the 2009 act is that it definitely confers on Scottish ministers the power to regulate the private rented sector. That being the case, what on earth is additional about the Energy Bill?

I ask Norman Macleod to explain the legal niceties.

I am sure that, as a politician, you will then add a political take on them.

There are significant areas of overlap. However, the main distinction is in the powers relating to the private rented sector, which are contained in two separate provisions that will do two things. One will enable local authorities to serve notices on properties requiring certain works to be done, and the other will enable tenants to make reasonable requests for landlords to carry out certain works. Both of those provisions will operate in the context of the overarching green deal finance package. I understand that the provisions are to be viewed in that context and that that is why they are in the UK bill. Our provisions mirror the provisions in England and Wales.

So, those elements are not in the 2009 act. In your view, the local authority’s power to serve a notice is new and is not implicit in that act.

The 2009 act requires owners in some circumstances to do assessments and to carry out steps that those assessments identify. I do not dispute that the powers are broad. Chapter 3 of part 1 of the bill specifically enables us to confer powers and duties on local authorities to serve notices that require steps to be taken and it also deals with tenants. The tenants provision marks a distinction. I have not discussed with anyone the context in which such powers would be used in a similar way, so I cannot talk about that.

The important point is that the powers in the bill underline rather than undermine the 2009 act’s powers.

Is it your view that the powers in the bill provide a formal shape, without which—I presume—the 2009 act’s provisions would not operate?

The important point is that the powers in the bill are part of a package that relates to the green deal. Green deal finance is a key element of the private sector housing provisions and we must be able to tie into that. The purpose of the English and Welsh provisions is to enable people to build on the back of that. To mirror those provisions and to tie the general green deal legislation together, we will have additional powers to those in the 2009 act. If we do not have those additional powers, a discrepancy will exist between the powers that are available north and south of the border.

As a non-lawyer, I am struck that, although chapter 3 of part 1 of the bill contains a couple of new points, it rehashes at great length provisions that are on the statute book in Scotland. The minister said that he had been involved in the bill from the beginning, but it struck me that the bill’s drafters had not read the Scottish 2009 act.

I could not possibly comment on whether the drafters had read the 2009 act. We are not hung up on the issue. The provisions are another minor string to the Scottish Government’s bow, but the 2009 act that the Parliament passed will remain the major piece of legislation that governs matters.

That is helpful.

You mentioned the repeal of HECA. It is clear from your opening statement that you are aware of the view that was expressed last week by, among others, Elizabeth Leighton from Scottish Environment LINK that if HECA is repealed, it should be replaced with a duty on local authorities to have a target for reducing emissions from the private housing sector and to report on progress on that. You said that you do not wish to create such a duty. What will be the consequences of that for the work that local authorities currently do?

It is always useful to remind ourselves that HECA, which is 16 years old, placed a duty on local authorities to set targets—that was about it. I have checked how many local authorities set targets under HECA. Of the 32 local authorities, nine set targets and 23 did not set targets—they did not achieve targets, rather. That suggests that HECA is not particularly effective.

In recent years, the previous Scottish Executive and the current Government have placed importance on each local authority’s local housing strategy and the guidance that is issued on that strategy. It is clear that such strategies and guidance are the driving force to determine levels of investment in housing in each local authority area.

On top of that, we have the Scottish housing quality standard, which every local authority and every housing association must achieve by 2015, on which they will spend an additional £1.5 billion over the next three years alone. Overall, the standard has been achieved in pretty well 40 per cent of cases, which means that it still has to be achieved in 60 per cent of cases between now and 2015. The average standard assessment procedure rating resulting from that investment is in excess of 7, so the Scottish housing quality standard is proving to be a much more effective weapon in achieving our desired objectives than HECA ever was.

Furthermore, as I will outline in the next few days, the view of the Scottish Government is that after we have achieved the Scottish housing quality standard for 2015, we should aim for a Scottish housing quality standard for 2020 that reflects the enhanced energy efficiency requirements. In any case, as you know, further changes will be made to building standards for new housing in 2013 and again in 2016. We believe that that total package of measures is far more effective than HECA, which, quite frankly, did not deliver.

Will you clarify the first part of that answer? Did you say that 23 local authorities did not set targets or that 23 local authorities did not achieve targets?

I am sorry. Let me get my wording absolutely right: nine local authorities achieved the agreed target and 23 did not achieve it.

So, they were all working to targets and some did better than others. I presume that that would be true of guidance, too.

Nine out of 32 does not represent a very good record.

Through the local housing strategies, there is much closer monitoring. Especially now that we have reinstated the subsidy for council housing, we have a very positive dialogue with councils about energy efficiency standards. The Scottish housing quality standard, which was set by the previous Scottish Executive for 2015, is clearly driving up SAP rates far more quickly and effectively than anyone expected. The average SAP rate on the houses that have been completed for the quality standard is 7.2.

I come back to HECA and the issue of targets. I have a particular interest in the situation in Aberdeen. Later today, SCARF will conclude its schools calendar competition for schools in the north-east of Scotland, here at the Scottish Parliament. That agency and the good work that has been done in Aberdeen over many years have their origins in HECA, because the targets and the enabling work that came from it allowed progress to be made.

As another witness at last week’s meeting said, there is a real concern that if a statutory duty is not put on councils, councils that find themselves struggling to fund the meeting of their statutory duties—I suspect that Aberdeen City Council is a classic example of such a council—will not do things that are no longer statutory duties, so will repealing HECA and not replacing it simply lead to the removal of the requirement on councils to do something about energy efficiency?

As we have seen with HECA, the existence of a statutory duty did not result in outcomes.

It did in Aberdeen and some other places.

With all due respect, I recognise the importance of Aberdeen to the world economy, but we cannot decide policy for the whole of Scotland on the basis of what happens in one local authority area. We must look at Scotland across the piece: across the piece, HECA did not deliver. The local housing strategies, along with the guidance and the Scottish housing quality standard, are delivering far in excess of what HECA ever delivered. A superior system is now in place.

I thought that it was quite interesting that Norrie Kerr did not share some of the other witnesses’ enthusiasm for HECA and, of course, he is the director of Energy Action Scotland and a prominent member of the Scottish fuel poverty forum. I share his point of view.

Funding is available locally, as well. Just before Christmas, I announced an additional £1 million for local authorities to expand the energy efficiency programmes in their areas.

The fact is that what we now have in place in the local housing strategies, the guidance, the housing quality standard, the new building regulations and the new housing programme is getting results. The first time I opened a new housing development as a minister was in Dumfries. I remember that the lady who was the tenant in that house had moved from a two-bedroom old flat to a four-bedroom new house and her energy bills had gone down from £40 a week to £36 a month because of the standard of insulation in the new housing. That is getting results. With all due respect, HECA did not get results in Scotland. I recognise that it has had an impact in Aberdeen, but its replacement will do far more for Aberdeen and the rest of Scotland than HECA would.

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I am glad that you quoted Norrie Kerr, because last week he did not say that we can scrap HECA and do nothing; he said that if we scrap HECA we should consider amending the legislation to set a tougher quality standard for housing. Do you agree with what he said last week?

As I have just said, we have set a tough quality standard for 2015 and we will set a tougher one for 2020. We do not need to keep HECA to do that—that is the point. More than two thirds of those who responded to our consultation on the energy efficiency action plan did not think that HECA was important in promoting energy efficiency. That came from a lot of people who are professionally involved in the sector.

My questions are on the green deal and fuel poverty. The minister will have looked at the evidence that the committee has taken. We have heard a lot of concern about the onus being on individuals to apply for the green deal. We have been told that energy companies and advice centres that promote the CERT programme are struggling to get people to take up grants, but there are concerns that fewer people will apply for the green deal. Friends of the Earth raised the possibility that the finance schemes that are made available through the green deal might be manipulated by unscrupulous developers, as has been the case with the feed-in tariff. That is the background to my questions.

Are you concerned that fewer people will apply for the green deal than apply for existing grants?

The existing grants that we deliver will continue. As you know, our main programme is the energy assistance package, but we also have the home insulation programme and a range of other programmes, to which I have referred, that involve local authorities and other bodies. The important element in the energy assistance package is the independent advice that is provided by the energy advice centres, which are part of the Energy Saving Trust. When people contact the programme, they get advice on which tariffs to switch to, which suppliers provide those tariffs and what benefits are available. People tend to equate the programme with just the central heating element. That is stage 4, but a lot goes before that, and that will continue. The independent advice role of the programme will be to give consumers independent advice, with no axe to grind, about the green deal, the ECO and everything else. We will continue to fund that work.

We must be clear about the distinction between the ECO—which in effect replaces the CERT programme and the community energy saving programme—and the green deal. The green deal is not a replacement programme; it is an entirely new programme that has never been tried before. I am not saying that if we had control of all those issues in the devolved Parliament we would necessarily have done things in the same way, but that is the reality that we are faced with. I want to ensure that Scottish consumers, and particularly tenants, get a fair share or more than a fair share of the money that is available under the green deal.

The system is not perfect, and there is clearly potential for some people to try and manipulate it, but it will be regulated. If there are any such problems, the regulators will be able to deal with them.

The added value of the green deal is that it is a completely new programme. Although it is private money, it is new money that is not available at the moment. The green deal is separate from the ECO, which replaces the CERT money. As I have said, I think that we will end up with a far better deal under the ECO than we have had under the CERT programme.

You speak about the green deal being monitored. Will that be independent monitoring?

Yes—there will be an independent certification and accreditation framework for green deal advisers and installers. Overall responsibility for monitoring all aspects of the programmes lies with the Office of the Gas and Electricity Markets. Consumer Focus Scotland and the Scottish fuel poverty forum also monitor such things, and we monitor them to ensure that they are working well. Furthermore, we work closely with local authorities, the Energy Saving Trust, Energy Action Scotland and all the other stakeholders to ensure that, if there are any problems or if anybody is trying to manipulate things unfairly, those issues are dealt with quickly and robustly.

I will be a bit parochial for a moment. The Greener Kirkcaldy initiative has a shopfront on the High Street where it promotes green initiatives and healthy eating. Like other groups, the initiative lives year to year. I would not like the green deal to replace proactive groups such as Greener Kirkcaldy, which have brought huge benefits, particularly in areas where there is fuel poverty. I would like to hear your view on that point.

When it comes to retaining such initiatives and supporting families who are in fuel poverty, will ministers keep responsibility for dealing with fuel poverty? There is a worry that responsibility could be shifted on to the companies involved. There is quite a concern about whether that might happen.

It absolutely will not happen. I made it absolutely clear to Chris Huhne and his officials that we will maintain our Scotland-wide network of independent advisers and energy advice centres, which are run by the EST. Those centres are completely independent of the energy companies and of Government. They have no axe to grind for anybody other than the consumer and the people who seek their advice.

I take your general point about the need to adopt three-year spending across wide ranges of Government. Whoever forms the new Scottish Government after 5 May will undertake a comprehensive spending review for the three-year period from 2012, and I presume that they will adopt a three-year spending profile for fuel poverty and energy efficiency programmes.

The green deal will be very important for the Scottish economy. It is estimated that the green deal—new money and a new programme—will, together with other aspects of the bill, generate up to 100,000 new jobs across the UK. They are very welcome jobs, and Scotland should get something like 9,000 to 10,000 of them. We are in discussion with the companies—with one company in particular—about the need to expand training programmes to ensure that people who are currently unemployed or underemployed can benefit from the job opportunities. We want to match the job opportunities to places where there are higher levels of unemployment.

We heard in evidence last week that the full impact of the recession will be felt by young people. Those of us who were around during the collapse of the mining industry spoke about lost generations. That might be a cliché, but we do not want it to happen again in any way.

It has been suggested that we should be looking to create new jobs for young people in this area, with energy efficiency offering a way to get people back into work. Have you and your officials discussed that?

Not only have we discussed it, but I will be announcing some initiatives along those lines within the next few weeks.

My natural tendency is to look not at the planned development of things but at the known unknowns and the unknown unknowns that might come out and bite us, notably, of course, the price of gas, oil and other fuel. I do not notice much in the way of provision for worst-case scenarios in the bill, even though we went through such a scenario in 2008 when the price of oil went up to nearly $150 a barrel and we might be heading into another should the conflagration in Tunisia go through Egypt and into Saudi Arabia. Is there a fail-safe structure in any of this to cope with such a situation?

Even the UK Government is limited in its influence over worldwide oil prices. After all, with the difficulties in Egypt over the past few days, we have seen the price of a barrel of oil go over $100. That is good news for the Treasury, but not such good news for the rest of us. Irrespective of that policy, the fact is that no single Government—not even the United States Government—has any direct control over the international price of oil.

There is no doubt that in Scotland the level of fuel poverty has increased. Fuel poverty—under our definition, a household in fuel poverty is one that spends more than 10 per cent of its disposable income on energy costs—is influenced by three main factors, the first of which is the condition of the house. If the house is warm and centrally heated, and has good insulation and so on, that is good news. That is why the previous Scottish Executive and the present Scottish Government have invested heavily in programmes to improve the condition of existing houses in particular. New houses, after all, have to meet the new standards.

The second factor is the price of energy, over which we have no direct control—although I should point out that the UK Government can exercise power in that regard through Ofgem and that, as we know, a review is on-going.

The third factor is income levels, in which respect I have to say that I am very worried indeed about the impact of some of the benefit cuts that have been announced. Although I share the objective of getting people off welfare and into work, how you go about doing that is important. I have made clear to Lord Freud, Iain Duncan Smith and others my concerns about the potential impact of, in particular, some of the housing benefit changes that have been announced.

My answer to your question, therefore, is that although we are living within a very tight, defined and fixed budget, not only are we talking constantly to our colleagues in DECC but we have submitted evidence to the Treasury and the Department for Work and Pensions on the issue of fuel poverty and the need to influence, where we can, prices downwards and incomes upwards.

Another issue, though, is type of heating. I am a veteran of the storage blocks that we had back in the 1970s. It seems that, to a great extent, the power provision that we are expecting from renewables will be electricity. Of course, we have required heating over and above our requirement for well-insulated houses. What proportion of homes are currently heated by electricity, and is that situation likely to alter?

At the moment, 85 per cent of houses have some form of central heating, which means that 15 per cent of homes do not have any.

I do not have to hand the exact figures, but the vast majority of central heating systems that are installed under stage 4 of the energy assistance package tend to be gas systems. I also do not have to hand a breakdown of the 85 per cent that I mentioned—indeed, I do not even know whether that information is collected centrally—but we will check it out and come back to you with some figures.

It seems to me that, as we take more power from the North Sea, it will come in the form of electricity.

Indeed.

The question then is whether we put that power into hydrogen systems or whatever to be burned, or whether we think about reviving forms of electric central heating.

11:45

Gas central heating is not an option in some remote rural areas and islands, so we have been very flexible about the type of fuel and systems that are used for the central heating element of the energy assistance package. We must recognise that a lot of people in some of the coldest and dampest parts of Scotland have access to the national grid but not to a gas supply that would provide for central heating. We have therefore been flexible.

At the same time, straightforward electric central heating can be very expensive. We are doing everything that we possibly can in our own programmes to ensure that in every case the central heating system installed is relevant and appropriate to the particular design, location and type of house of the individual who applies for it. We are talking about pensioners—particularly older pensioners over 75—and families with children under five or disabled children under 16. As you saw from my announcement yesterday, we have now extended the programme to cover people who are terminally ill.

I have one final point. In Germany, they are experimenting with something called the ZuhauseKraftwerk—the power station in your own house—which is promoted by Volkswagen and a company called LiftBlick in Hamburg. It consists of a Golf engine that heats two houses, generates power and can be googled with another 200,000 of its type to produce base-load power. The experiment started just last year, but it is worth exploring. It is 90 per cent efficient.

Our indigenous Scottish technology sector is doing exciting things as well. For example, I strongly suggest that the committee pay a visit to the eco-home that is sponsored by South Lanarkshire College and Dawn Homes. They believe that they can develop the house to the point at which the owner would not have to pay any energy costs because it would make a net contribution to the national grid and actually generate income.

Work is also being done in Glasgow with the Glasgow Housing Association eco-house, while Stewart Milne has a development that is based in Oxford but which applies across the country. There are many examples of new technologies. Whether from a housing or enterprise perspective, the Government’s policy is to encourage as many of the technologies as possible and for them to be developed downstream in Scotland.

I will follow up on the issue of electric heating systems before I bring in Gavin Brown. Where are we in relation to the permitted development rights for air-source heat pumps? The issue seems to be dragging on and on.

I ask Archie Stoddart to bring us up to date on that.

We fund air-source heat pumps under the energy assistance package when they fit in with the grant level. With our planning colleagues, we are developing approaches to some of the work around that—for example on noise testing, which adds to the cost. Rather than speak for my planning colleagues, perhaps I can come back to the committee with a note.

That would be helpful. The committee has been pressing for permitted development rights to be approved for microgeneration, including air-source heat pumps, since we published our energy report a year and a half ago—and more. It seems to be taking for ever to get that through the Government system.

I will feed that back.

We will get you an update—we will give it to the clerks, who can circulate it to the committee.

I have just a couple of brief questions. I realise that you have answered a number of questions on HECA so far. In your view, are there any disadvantages or downsides to its repeal?

Not particularly. I know that a lot of the people who want to keep HECA are arguing not for its retention as such but for much tougher annual targets to be placed on local authorities. Frankly, I do not think that that is a realistic proposition not only given local authorities’ present financial position but for a number of other reasons.

We have to distinguish between the arguments on whether to keep or repeal HECA. HECA is now so ineffectual that we are comfortable with the repeal, but some of the people who have given evidence to the committee have not stopped at that debate. They are arguing not just for the retention of HECA but for HECA-plus—and it is a big plus. We do not agree with that plus, and we do not think that it is the right way to proceed.

To go back to the private rented sector, on which I appreciate you have answered a number of detailed questions, does chapter 3 of the bill impinge at all on section 64 of the Climate Change (Scotland) Act 2009?

It depends how you define “impinge”. There is clearly a relationship in the sense that they broadly cover the same area, but chapter 3 does not in any way undermine the operation of any aspect of the 2009 act.

You said earlier that the Scottish Government would not necessarily have considered or fully progressed some of the proposals. What would you have done? What did the Scottish Government suggest that was ruled out during the current process and dialogue?

Nothing was suggested and ruled out. I was simply saying that the green deal was very much a creation of the coalition in London, and that if we had total devolved responsibility for all those matters in Scotland we may have done things slightly differently.

We are where we are. The green deal and the ECO—which may be a big improvement on the CERT programme—could be a big plus for Scotland, provided that the secondary legislation is drafted appropriately. I believe that Chris Huhne has given me an undertaking that the legislation will be appropriate, particularly in relation to hard-to-heat housing and fuel poverty in Scotland.

We have been pretty well satisfied with the outcome in relation to anything that we have asked for to date. The position can always change, but I do not anticipate that it will, because Chris Huhne is keen to accommodate the wishes not only of the Scottish Government, but of the Scottish Parliament. We hope that when we get the committee’s report, it will strengthen our negotiating position with London on the secondary legislation.

I will pick up on some of the issues that the Subordinate Legislation Committee raised in its report, which I am sure you have seen. The first point relates to the use of the affirmative procedure under clauses 53 and 56 of the bill. The Subordinate Legislation Committee suggests that, given the timescale for such regulations being put in place, rather than using just the affirmative procedure, some form of super-affirmative procedure should be used. Is there any reason why the Government could not agree to the use of a super-affirmative procedure in that respect?

It is fair to say that we broadly accept the Subordinate Legislation Committee’s points. The question for the Parliament is whether it would want a super-affirmative procedure. There are two important principles. First, the procedure should be affirmative, because that gives the Parliament a much greater say and more flexibility to change the position if it is not happy with what the Government brings forward. As you know, if we brought forward a negative resolution it would be very difficult to change any regulations other than by voting them down. Secondly, stakeholders and the committee must be consulted before any such resolution is brought to the Parliament.

I would not go to the barricades about whether the procedure should be super-affirmative or affirmative, but I believe—having sat twice where you are sitting, as convener of this committee—that those are the two fundamental principles. We must get the right balance between Government and Parliament by using the affirmative procedure and ensuring that the committee has the power—which it does—to ensure that the Government consults widely and properly and takes into consideration the views of stakeholders before it brings forward any Scottish statutory instrument.

Thank you for that. The second issue that the Subordinate Legislation Committee raised relates to clauses 52(1) and (2). It seeks clarification of what sanctions are available other than a civil penalty imposed by a local authority.

As you will know, we responded in detail to the Subordinate Legislation Committee’s points. We said that the provisions are framed to allow flexibility around the sanctions that might be imposed, given that it will be some time before any regulations come in—the earliest date is 1 April 2015. It is not intended that the power to impose sanctions would include the power to create a criminal offence. The lack of an express provision to that effect reflects that intention.

So you have no specific examples of the sanctions that might be included, other than civil penalties.

We would certainly not be in favour of criminal penalties. However, given that the regulations are four years down the road, we would certainly welcome and give due consideration to the committee’s views on the matter.

Similarly, in relation to clauses 55, 58 and 71, we seek clarification on sanctions that might be available, given that the offences concerned are not criminal offences.

Again, we have said that the provisions are framed to allow flexibility around the sanctions that might be imposed, given that it will be four years before the regulations come in. There is time for further consideration, because the detail does not have to be decided finally today. However, we would be against criminal sanctions.

I have a final question, which is on fuel poverty. Concern was expressed in evidence that, under the green deal and other provisions, responsibility for fuel poverty might be passed on to energy companies. Can you clarify that your view is that that responsibility remains firmly with Scottish ministers?

Absolutely. As I said earlier, our firm intention is to maintain our own programmes. Of course, once we have seen the shape of the secondary legislation, we may need to adjust some of our programmes to take account of the detailed implementation of the green deal and the ECO. However, it is our firm intention to retain the energy assistance package, our insulation programme and the other activity that we are involved in with local authorities and others. Certainly, there will be no privatisation in Scotland of fuel poverty programmes.

Thank you for that clarification. That concludes this evidence session. I thank the minister and his team for coming along this morning.

11:58 Meeting suspended.

12:02 On resuming—