My Lords, we have touched on this. The ECO is central to the Government’s strategy for delivering on their fuel poverty targets. We have had a lengthy debate on the context in which they will do so, and the targets and strategies that they will adopt. Clearly, their main attack on fuel poverty will be through the measures they bring to improve the energy efficiency of the homes of the fuel poor. The ECO is intended to be the main weapon for them to do this.
I have had some exchanges with the noble Baroness about how we are going on the ECO at the moment. I have received information from various sources that there are serious problems. This follows quite a good year—the last year of the old scheme, if I may put it that way—when a significant increase was recorded by the climate change committee in many types of interventions, including cavity wall insulation, solid wall treatments and loft insulation. All those schemes have now come to an end. They are all being replaced by the ECO, which in aggregate terms is less than the aggregate of the others—although the Minister pointed out that you also have to take into account the warm homes discount. That is on the other side of the equation—the income side—whereas in aggregate under the ECO, the number of schemes that will be delivered, and the aggregate cost and resources devoted to the schemes, will be less than under the pre-existing three schemes.
That would be a problem in itself, but it will be a greater problem if the way in which the ECO is being delivered is inefficient. Several sources appear to suggest that there is a serious problem with measures being brought forward under the ECO. On the climate change committee’s figures, the number of cavity wall insulation interventions declined by 60% in the first few months of the ECO regime. That is a serious teething problem. It may be a teething problem but it needs to be addressed seriously. The new structure under the various regulations introducing the ECO seems to create a problem for the cost of each individual measure as well.
I am probably not the only noble Lord who has received a letter from Scottish and Southern on this point. The supply companies have to buy from the market the interventions that they require to make up their ECO contribution. They have said, and this is quite startling, that the cost of some of those interventions under the ECO provisions is more than twice than under the old schemes. That reflects the volume but it also reflects the new system.
Scottish and Southern claims that the average cost at which it is buying cavity wall insulation, solid wall insulation and loft insulation has more than doubled under the new regime. That is also reflected in the views expressed by the insulation industry and the installers. They say that because the volume of work has gone down substantially, they can no longer send their workforce to an area where they can do four or five jobs in two or three days. They now have to go to an area where they can do only one job and then move on to the other side of the country, or the region, and carry out the other jobs. Therefore, the average cost to them is increasing. That is reflected in the prices they are offering through the brokerage system, which is
therefore affecting the charge that Scottish and Southern and other electricity suppliers pay in the ECO context.
That is not a good situation. It is also having a knock-on effect in that those firms are also laying off workers. My own union, the GMB, which is the main organiser of insulation and installation workers, has seen significant layoffs already and sees more in the pipeline as the old schemes end. I have asked the Minister to give me some details about how the department sees the situation, but that is how it is seen from the point of view of the energy suppliers, the industry and the workers within the industry. If this goes on, the effectiveness of the ECO intervention is going to be substantially less than the equivalent level of resources that were provided under the pre-existing schemes.
Part of the problem, according to both the suppliers and the installation industry, is that the period over which the ECO is supposed to be operating is relatively short. Under present provisions, it runs to only 2015. That can be extended but at the moment there is certainty only over it existing until 2015. My amendments are an attempt to address this issue by, first, extending the period of the ECO in principle to 2019, giving time for this to be smoothed over; and secondly, providing for a review of how the ECO is operating. I am suggesting that we should put that in statute. If the Government are not prepared to put it in statute, they should make a commitment, in view of these assertions, that they need to look within the next six to 12 months at how the ECO is really working out.
The last stages of the old scheme are now going through their finishing stages. Everything that is starts from now on will, therefore, be under the ECO provision. Unless ECO rapidly builds to the same volume—and I hope at the same or better price—it will not deliver as great an impact on energy efficiency of homes, and thus on fuel poverty, as the previous system, even pound for pound and intervention by intervention. I want a review, which should be in the context of the ECO system lasting for a longer period because, theoretically, it is simpler than the multiple systems we had before. We need to know, however, what is really going on and whether the system and the market that has been established are operating properly. If they are, in the sense that real costs are being charged, what is wrong? Are the volume, incentives, or relations down the supply chain not right, or is there a basic flaw in the system itself? The sooner we have the answer, the sooner we can put the ECO system on a better basis, and one in which the industry, suppliers and consumers can have confidence. I beg to move.