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Item 3 is on the United Kingdom Energy Bill legislative consent memorandum. I remind members that we are scrutinising not the bill but the legislative consent memorandum, which deals with parts of the bill that refer specifically to devolved areas. Members should ensure that questions are focused on those areas and not on the wider issues in the bill, which are for the UK Parliament to scrutinise.
I am a policy and strategy manager with the Scottish Federation of Housing Associations, which welcomes this opportunity to be consulted.
I am a senior policy officer with WWF Scotland, but I am here today on behalf of Scottish Environment LINK.
I am the director of Energy Action Scotland. Like our colleagues, we have concerns. We worry that the energy company obligation will continue to be funded through regressive taxation on fuel bills, which could have an impact on Scottish consumers. We worry about whether the green deal will truly apply to all areas, including rural areas, given the current difficulty in the Highlands and Islands in accessing measures.
Thank you for those opening remarks.
I touched on the private rented sector. In informal talks with civil servants, I have been assured that the powers in the UK bill will be purely discretionary. However, we want to be sure that we make the best use of the powers that are at our hand. If the powers in the 2009 act are broader, more encompassing and more ambitious, we should move ahead with them rather than use the powers in the UK bill, which—to be frank—are not as good, probably take a cumbersome approach to regulating the private rented sector and do not look as comprehensively at the whole sector.
I hope that, in striving to address climate change, the green deal will not cause fuel poverty. That is key. To pick up on Norrie Kerr’s points, I hope that the energy company obligation will allow us in Scotland to address poor energy efficiency in properties that are more difficult and expensive to treat—there is a difficulty with the carbon emissions reduction target programme in that regard.
At this point, the UK bill will enable Scottish ministers to act if they so wish. Elizabeth Leighton makes a very good point. We already have powers, which we should be looking to and working through, rather than seeing the UK bill as a hindrance. We already have policies in place, on which we should continue to focus.
I would like to supplement my previous answer. We have all referred to the repeal of HECA, which I think is a backward step. Although there are definitely problems with HECA, it has led to local authorities prioritising energy efficiency in the private housing sector. That will be lost. The Scottish Government is suggesting that it should merely be put into guidance that authorities are to report through their local housing strategies. That is quite different from the duty that is contained in HECA. I think that what is proposed represents a diminution of our powers.
I challenge you on that. You say that it represents a diminution of the powers, but the Scottish Parliament and the Scottish Government still have the power to introduce whatever legislative proposals they want to introduce in this area. Is it really a diminution of the powers to remove from the statute book a piece of legislation that might be past its sell-by date?
It is a fair point that the Scottish Parliament and the Scottish Government could choose to introduce something else, but removing a legislative provision without giving a commitment to replace it with a duty or power that is equally strong is a backward step. An opportunity still exists to improve on HECA.
You say that the UK bill should impose a duty on Scottish ministers in an area of devolved responsibility instead of removing the existing legislation, which would give Scottish ministers and the Scottish Parliament the freedom to do what they think is appropriate in that area.
I would welcome the Parliament taking up that opportunity but, at the moment, the proposal is to replace HECA with something weaker, so I would rather see HECA stay in place until a stronger alternative is proposed.
I have just one final point before I open up the questioning to other members. Some of the written evidence that we have received suggests that HECA has not been particularly effective in driving forward energy efficiency in Scotland.
Yes, but in the “Conserve and Save” consultation on the energy efficiency action plan, although people recognised the deficiencies of HECA—on which I am completely in agreement—the majority of respondents said that 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.
Good morning. In recent weeks, the committee has had a visit from the UK Secretary of State for Energy and Climate Change. He extolled the virtues of the green deal, which he said would be delivered fairly. To address Norman Kerr’s point, the energy secretary suggested that people in hard-to-treat, hard-to-heat houses would get fair access to the money. Can we hold out hope that that will happen?
No, I do not think that we can.
I imagine that the green deal will work and will be effective where the measures that are required to make a property significantly more energy efficient are relatively cheap and where the occupier has a reasonable level of income so that they can continue to pay for them. However, the green deal cannot be fair, as it cannot be applied across all sectors of society, all areas of Britain or all types of housing. For instance, I cannot see how the green deal would work for someone on a relatively low income living in an off-gas area of Scotland in a stone-built property. It is a key requirement for other measures, such as the energy company obligation, feed-in tariffs and the renewable heat incentive, to be targeted at individuals and areas to ensure a level playing field.
We are equally concerned that the green deal will not live up to its ambition, simply because not enough money will be stacked behind it to provide adequate subsidies or support for more expensive properties. Let us not forget that for several years we have been living with the odds stacked against us and with UK programmes short changing us. It is essential to get it right this time, so that we make up for past underinvestment.
Setting aside for a moment our experience of the way in which schemes such as the CERT programme have worked, does the engagement of tenants and owners through energy performance certificates provide a way to trigger the help that they require, however it is delivered? We can argue about delivery mechanisms in a minute, but can energy performance certificates play a bigger part in people’s entitlement and access to what is required?
I certainly see the certificate as something that could highlight the measures that could become available. However, it is about the interpretation of the certificate, who produces it in the first place and their qualifications and understanding of the measures. Someone should be able to walk you through what is needed for your home and give you independent advice on what might be available.
I am very conscious of the issue when I see examples in the Highlands and Islands. Energy performance certificates are something that we can influence directly, so what can we do to improve them? Are we suggesting that the people who make the assessment in the first place should be of a higher standard? Are we talking about things that can be fed in to give people more security in the knowledge that they can demand particular solutions to their problems?
The way that EPCs are structured just now means that the people who deliver them are trained to a very high standard to survey properties. I would say that, because my organisation works in partnership with the Building Research Establishment to offer training to those who deliver EPCs. However, what they are not trained to do is pick up the EPC and give a great deal of interpretation and further advice on the appropriateness of individual measures. We need to look at the standards. We are told that down south the green deal assessment will be done by domestic energy assessors. There is no such thing as a DEA in Scotland. Scottish ministers will need to ensure that another set of suitable qualifications is applicable in Scotland. We need to have a view on the skills and training that people will need, over and above the skills that they already have. Their work might start to involve arranging finance or putting forward different proposals for financial packages. The regulation of assessors just now is fairly loose. We have a fairly big job to do in considering how we further regulate our assessors so that they are able to deliver impartial and fair advice to householders.
That is very helpful.
On EPCs and how they work, the “Conserve and Save” consultation showed that people support the use of EPCs as an important communication tool. The A to G rating works for people. You asked how EPCs could be improved. First, there could be a requirement to include them in all marketing materials for a property, so if a property is marketed for sale or rent, the A to G band rating is right there, along with the particulars.
That is helpful; thank you very much.
I will start with a question on fuel poverty. Does the panel agree with the Scottish fuel poverty forum that the Scottish Government should not pass responsibility for fuel poverty to the energy companies?
As I sit on the fuel poverty forum, I agree with that statement.
I thought that you might.
We are in danger of privatising fuel poverty. We are looking at absolving ourselves from our responsibilities. Scottish ministers should endeavour to eradicate fuel poverty as far as is reasonably practicable. Passing that responsibility on to others is not an option. We can certainly include others in helping us to eradicate fuel poverty, as we do through the CERT programme. The energy assistance package, the home insulation scheme and the universal home insulation scheme rely heavily on funding from the Great Britain CERT programme. We rely on input from the fuel companies but I do not think that we can pass responsibility to them completely.
I guessed that you would agree with the forum’s statement. I am really concerned about the situation and I agree with what you said. What do the other panel members think?
I agree that it is a concern. As I said in my opening remarks, I do not want funding that is meant to reduce carbon emissions to keep people in fuel poverty. Housing associations are faced with a difficulty—we do not want to raise rents in the current climate to pay for improved energy efficiency.
Scottish Environment LINK in no way sees its work on the reduction of carbon emissions as taking precedence over fuel poverty goals. They are twin goals that have to be reached in tandem. That is why we have called for a high energy efficiency standard that will future proof homes against fuel poverty.
You have covered the issue broadly, but I have a specific question. We know that local authorities’ budgets are tight at the moment and that they are looking to make cuts. If the 1995 act is repealed, will they be able to lower their commitment to energy efficiency?
There is definitely a risk of that happening. Every local authority is looking at where it can cut costs and jobs. If energy efficiency is no longer seen as something that they must do or they do not see it as a local priority, that investment will be put at risk. That is a shame, because local authorities such as Aberdeen City Council and East Ayrshire Council have made it a priority in the past and because of that they have developed in-house expertise. We know from experience that if a local authority is switched on to the issues, it knows exactly where to make investments, which makes them cost-effective. We want to maintain that expertise in local authorities, rather than diminish it.
The Scottish housing quality standard, which will give homes an energy efficiency rating by 2015, provides us with an opportunity. All homes should achieve a standard assessment procedure score of 55 or a national home energy rating of 5 by 2015. We have the opportunity to consider whether the legislation that establishes the standard should be amended to raise the level of energy efficiency that we seek.
As you know, there is in my constituency the greener Kirkcaldy initiative, which is doing an amazing job. I am sure that the same is true of projects in Ayrshire and other areas that have been mentioned. We would like those projects to be kept going, because we want in no way to step back from the progress that we have made. That is another issue of concern.
Like Norman Kerr, I think that there is potential in the Scottish housing quality standard. I know that the Scottish Government is considering moving beyond that standard in the future and to having a standard for housing associations and council housing that is focused on energy efficiency and meeting the targets that the Climate Change (Scotland) Act 2009 sets. The SFHA and its members have talked to the Scottish Government about participating in a working group on that. Through that, there is potential to set targets and to monitor progress on increasing energy efficiency.
We heard from the previous panel about the impact of the recession on young people and how we could utilise that resource to look at energy. Are we doing enough training and skills development to enable us to progress measures such as retrofits?
I am not sure that we are, at the moment. I see it as an area of great potential and as a win-win: we could address fuel poverty, energy efficiency and carbon emissions at the same time as we put in place training for real jobs and develop more jobs and training for young people. Our members are keen to participate in that process. There is potential both in energy efficiency, through improved insulation of housing, and in renewable energy and renewable heat. Housing associations are potentially well placed, as organisations with experience of project management. In the past, housing associations have innovated and led on new energy technologies, and because they have groupings of stock—houses together—it is perhaps easier for them to set up, for example, a district heating scheme or a scheme using photovoltaics or solar water energy.
Scottish Gas is in the process of opening three skills academies to retrain people. That is important because, as we move away from the traditional insulation measures the question will be what to do with the workforce. We need to look at how we retrain them—at how we can enable, for example, a plumber to fit a solar water heater or an electrician to fit photovoltaic panels on a roof. Retraining is small scale just now and we need to grow it, but I do not see many signs of huge growth. We must do that—before we encourage young people to come into modern apprenticeships or move into new technology areas—by developing actual skills and qualifications for the particular things that we need to do.
Where is Scottish Gas setting up the skills academies?
I believe that there is one in Oban and one in Dumfries, and I think that there is one in Edinburgh, but you would need to confirm that with Scottish Gas. However, it has said that it wants to take the work into the community so that it can provide local employment, initiatives and support. That is to be welcomed.
I can add to that. We have made estimates in reports of something like 10,000 jobs every year up to 2020 if housing does its part to contribute to our 42 per cent target. That figure is just from the direct jobs and does not include the indirect ones down the supply chain. It is a huge win, if we can grasp it, but it will require strong direction and leadership from Government to say, “Yes, we’re going for the target. Yes, there’s the finance and yes, we are also going to provide a backstop through regulation.” We need that direction to ensure that there is enough motivation and a strong incentive for the measures to be taken up because, if we do that, industry will follow the lead. The progress has been far too stop-go up until now.
I have a brief question about money. One thing that focuses the minds and attentions of politicians is the cost of something—not so much the value, but the cost. I am interested in the overall picture. What is the estimated cost to Scotland in budget shortfall in both private and public moneys if the UK bill is passed?
A lot of the detail has still to be worked out. We know that the driver for the energy company obligation will continue to be money that is collected through their bills. Currently, every consumer in Scotland pays around £88 a year in their bill for CERT, CESP, the European Union trading scheme, feed-in tariffs and a variety of other things that are all gathered through the bill and redistributed. There is nothing in the UK legislation that says that any particular part of that money is ring fenced, so Scotland does not need to get its 9 or 11 per cent of the total UK budget. The fear with the energy company obligation is that there continues to be no talk of ring fencing any of the budget. We could do very well and get more than our percentage, or we could do very badly.
I concur with what Norrie Kerr said, which backs up our call to ensure that the energy company obligation is set up such that we are not disadvantaged. Energy companies are resistant to targets, but there should be negotiations to ensure that account is taken of our more severe climate, because the scoring in the current programmes disadvantages us, and to ensure that consideration is given to giving powers to the Scottish Government to co-ordinate eco-activity in Scotland, so that delivery is more efficient and effective.
It is key that the arrangements do not disadvantage Scotland. Scotland is a more rural country, with more properties that are off the gas network, and we have longer, colder winters and more non-traditional or difficult-to-treat properties. Account should be taken of those issues. CESP was a welcome addition in the attempt to address the expensive-to-treat properties and to take account of the fact that individuals and communities are fuel poor, instead of just focusing on carbon reduction. Whatever comes from the Energy Bill, we hope that that work is continued and issues such as expensive-to-treat properties and fuel poverty are covered by the new legislation.
The Scottish budget reduced last year and this year and is expected to reduce in coming years. The Scottish Government has less money and the bill might have a negative effect on other funds that come to the Scottish Parliament and the Scottish Government that will be in place post-election. That is concerning, particularly in relation to the points that you made about our rural economy and the number of off-grid houses.
I whole-heartedly agree. Aside from the green deal and the energy company obligation, the warm home discount programme will be funded as part of the supplier obligation, which will ramp up during the next few years until £350 million per year is being spent on discounts and other measures.
Elizabeth Leighton rightly highlighted that there is a good deal of expertise in some Scottish local authorities. She mentioned Aberdeen in that regard, which was probably the first place in Scotland to take on board the challenge of better energy efficiency some 25 years ago. For the past 15 years that has been based on HECA, which provides a statutory duty. We know that Aberdeen City Council and other councils are now talking about doing in the future only what statute requires of them. Will the repeal of HECA inevitably mean that there will no longer be a statutory requirement and that some of the expertise and the commitment that councils have given over the years will automatically be lost, given what we know about councils’ approach to future funding commitments?
I am happy to start on that; there are a number of points to make. When HECA was agreed with local authorities, each local authority was able to set its own target. The indicative target in England was 30 per cent, but some local authorities in Scotland went for 12 per cent. It was an indicative target and was about reporting. There is nothing in the legislation about what would happen to a local authority that did not achieve what it set out to achieve. So, the act had a number of flaws. Elizabeth Leighton alluded earlier to the fact that we all recognise that it was flawed.
We can certainly consider alternatives to HECA, because the reporting requirements alone are enough to drive local authority housing energy officers crazy. However, if we have in place what is suggested, it is only guidance that local authorities should report on their performance on emissions reduction in the housing sector through their local housing strategies or the single outcome agreements. There is nothing to say that local authorities must do that. Particularly for single outcome agreements, authorities determine their own priorities. That is quite different from having a statutory duty.
I would like to amplify what Elizabeth Leighton has said. I am not an expert on HECA—obviously, it is a local authority duty. However, in the current economic climate of public spending cuts, I am, like anyone else, concerned that if a body such as a local authority does not have to do a particular thing, or has a choice about where it spends its money, there is a danger that the money will be concentrated only on statutory duties. That is a real concern, because rising fuel prices, fuel poverty and climate change are huge issues.
Does the current housing legislation going forward offer any opportunities to address those issues, or is its scope and focus elsewhere?
Are you referring to the Private Rented Housing (Scotland) Bill that is going through Parliament now?
Yes.
The bill focuses on tenants, so there are some opportunities for providing tenants with information on the energy efficiency of their property. Such information would put tenants in the position of being able to negotiate on the price. The Consumer Focus survey has some information relating to that: apparently, only about 6 per cent of respondents had used that information.
For a number of years, Energy Action Scotland has said that the private rented sector should be regulated, and that is still our view. We can give a lot of encouragement, and we have been giving a lot of encouragement, but there remain particular parts of the private rented sector that should not be renting out houses. The sector needs to be regulated, and a minimum standard of energy efficiency should be required in homes before they can be let.
Am I right in saying that that is covered by section 3 of the UK Energy Bill, where there is a conflict with the Climate Change (Scotland) Act 2009?
I believe so.
I hope that there would not be conflict and that the Scottish Parliament would be able to make it clear that the Scottish climate change provisions take precedence and are more encompassing.
I have to say that I read section 3 of the Energy Bill for the first time when Chris Huhne was here the other week and I was at a loss to understand why such detailed legislation was being brought forward in a devolved area. I do not know whether you have had any explanation from UK ministers or Scottish ministers as to why that might be the case.
The only explanation I had was that it offers consistency across the country and provides a discretionary power to the Scottish Government, if it chooses to take it up. I agree that it is untidy at best, and confusing in terms of knowing what the Scottish Government’s intention is. Will it use the powers in the Climate Change (Scotland) Act 2009 or the discretionary powers in the bill?
Perhaps we will pursue that next week.
The repayment will be through the electricity bill. DECC is quite clear about applying what it calls the golden rule: that the savings made by the measures should offset the energy bill. Therefore, if the measure costs £100 and is repaid over 10 years, someone should see a reduction of £10 a year in their bill. There should be a netting off. We do not believe that that will be the case.
Thanks very much.
I have some real questions about how it will work with housing association homes. The impression I get from reading information on the green deal is that consumers will lead. They will decide, for example, that they want a new, more efficient gas boiler. That does not fit well with the idea of a housing association being responsible for and managing its own property. For example, if a housing association intended to replace boilers, it would probably decide to replace a large number at the same time and to the same specification. It might even decide to look at a district heating scheme, as one of our members, Ore Valley Housing Association in Cardenden in Fife, did when it was time for it to replace its gas boilers. It thought that, in the long term, a district heating scheme would offer better value for money for its tenants and would be better for the environment. There is a potential clash between the green deal being led by the consumer or occupant and wider responsibilities, not to mention the project and stock management skills that housing associations and councils have.
My understanding is that the house owner—which might be a local authority or a housing association—must give consent for the work to be undertaken. We may not be able to enforce that rigidly—some people may slip through the net. That comes back to the issue of who makes an assessment of the house. If the house is a local authority or housing association house, should their first question be about consent to undertake the work? It is stated that, in the private rented sector, consent should not be withheld unduly. With a house that is not owned by the occupant, there must be some sign-off process, whereby the home owner, whether that is the local authority or the housing association, agrees to the work.
I have a quick comment on the green deal. To go back to first principles, we in WWF have argued for a pay-as-you-save scheme for a long time. To the extent that that is how the green deal is talked about, it is a good thing. If the golden rule will apply, if the safety nets are put in place and if there is adequate investment in eco-measures for fuel-poor households, it sounds like quite a good thing, but we are talking about the risks and whether the numbers stack up.
I fully take your point that the principle of a pay-as-you-save scheme is good. My question is really about social housing. Is there a risk that we will end up with something that is less likely than the current scheme to deliver the improvements that we want?
That will be a concern until we get more detail.
Would it be fair to summarise your responses as saying that it might happen, but it might not, depending on the follow-up in secondary legislation?
I would say so.
Elizabeth Leighton mentioned concerns about the bill compromising the Climate Change (Scotland) Act 2009. You made specific reference to section 64, which has been covered. Are there any other parts of the act that you think the bill might compromise?
Not specifically in terms of legislative confusion, as there is with regulation of the private rented sector. At the beginning of the meeting, I raised questions about whether all the provisions will make it possible for us to meet our 42 per cent target for 2020. Do they make it easier or harder? That is why I looked at HECA, at ensuring that regulation of the private rented sector does not confuse things, at improving EPCs and at ensuring that we maximise our devolved powers on energy performance certificates so that they improve our energy efficiency.
Norman Kerr, you have expressed concerns about the idea of a flat-rate eco-subsidy and you highlighted the £120 difference between the west of Scotland and the west of England. Is there a way of structuring an eco-subsidy that is not a flat rate, that creates fair distribution but does not become unduly bureaucratic and complex? Are we missing a more straightforward solution?
The warm home discount that gives the rebate is not part of the green deal or energy company obligation; it will sit separately. It is akin to the winter fuel payment and it could be restructured to take into account location within the country. We believe that the warm home discount could be banded; three or four bands across the UK could take into account the difference in heating costs and make a percentage increase in the discount accordingly. The south coast of England could be band 1, and bands 2, 3 and 4 could be used to apply a greater percentage for people who stay in the Highlands and Islands or off the gas grid. That would be a fairer way of providing the subsidy to those people who need it most.
It strikes me that, when renewables gets into its stride, power is going to be supplied largely by electricity. On the other hand, heating at the moment is predominantly provided through oil and gas. We are heading towards peak oil, which already seems to be hitting. The $100 barrel was supposed to come in the 2030s but it will be here next week. In those circumstances, what do we do to ensure that the ordinary forces of supply and demand within the various power modes do not automatically bear down on those who are least able to pay?
I will attempt to answer the first part of your question, which I think is important. Renewable electricity will be extremely important in the future, particularly as fuel prices rise. As I said earlier, I see potential for housing associations, as well as councils, to play a role in that. There are already examples of councils and housing associations developing renewable electricity or combined heat and power schemes. In fact, we at the SFHA have been talking to members about the possibility of setting up a scheme, which the Scottish Government is also interested in, to fund renewables through loans, the joint European support for sustainable investment in city areas—JESSICA—fund or the European Investment Bank, and to repay those costs through the feed-in tariff.
That is why we have called for the green deal package to take a whole-house approach and to look to the future, to having a national home energy rating of 8—a very good energy efficiency standard—by 2020 and beyond that, to 2050, to giving home owners an idea of the changes that their particular house will need over time. That will allow home owners to look at the range of measures that are available when they make decisions.
I have nothing to add to that.
There is one final point that you may wish to comment on. Given the issues that have been raised in the written evidence that we have received and the evidence today, do you think that the Scottish Government’s legislative consent memorandum is a little too sparse and should provide a little more detail about what it sees as being the implications of the legislation for Scotland?
Yes.
Yes.
Yes.
Sorry for the leading question! [Laughter.]