National Assembly for Wales

Prynhawn da. Welcome to the meeting of the Equality and Social Justice Committee, where we are going to be continuing our inquiry into fuel poverty. I would like to welcome Members and members of the public. We have had apologies from Altaf Hussain, and I welcome Tom Giffard, substituting for him today. The meeting is being broadcast live on Senedd.tv, and there is simultaneous translation from Welsh to English. Are there any declarations of interest from Members? I'll take that as a 'no'. If I drop out of the meeting for any reason, then Sarah Murphy will take over the chair while I endeavour to rejoin.

This is the second day we've dealt with fuel poverty and the Warm Homes programme. A very warm welcome to Sophie Howe, our future generations commissioner, and Dr Donal Brown from the New Economics Foundation.

So, I'd like to just start off by asking you about your excellent summary of your report, 'Homes Fit for the Future', and just wondered if you could just highlight the biggest challenges in terms of your top-level findings. Sophie, do you want to go first?

Yes. Diolch, Chair. Essentially, what our report was trying to do was to find solutions to meeting the challenge of funding the huge bill, really, for ensuring the energy efficiency of our homes, but also to outline what the potential benefits of that could be. So, our report found that, over the next 10 years, there needs to be around £14.75 billion-worth of investment in order to bring homes up to standard. The breakdown there is £5.5 billion for social homes, £4.8 billion for homes in fuel poverty, and £4.4 billion for owner-occupier homes.

As soon as you write a report, it is out of date, and, with the current climate and everything that's going on, obviously the position is changing rapidly. When we wrote the report, we think that there was around about 12 per cent of people living in fuel poverty. We don't have the most up-to-date figures because that seems to be changing on an almost daily basis at the moment, but estimations are of—. Well, you know all these figures, around the doubling of energy costs and so on. So, now, actually addressing this is more imperative than ever.

On the particular benefits, even before the huge cost-of-living crisis and the crisis that we're in at the moment, we think that if there was a long-term plan for investment in addressing fuel poverty in homes and energy efficiency in homes, there is a potential to create about 26,500 new jobs in Wales over the next decade. The report suggests that it could generate around £19.32 billion-worth of gross domestic product to the economy, and about £3.5 billion in tax. We think that it could generate £8.3 billion in energy savings, and £4.4 billion in health and environmental savings. So, although the figure of £14.75 billion seems like a huge amount of money, when you actually offset that against the potential cost savings, the investment in this area, particularly in terms of how that links back to the national well-being goals—so, the positive impacts on health, on the economy, on reducing our carbon emissions, on creating more cohesive communities and so on, and addressing inequality—there are very few policy areas that almost, not like that I like box-ticking, but sort of tick all of those boxes, which is why we're saying there should be a long-term plan for investment in this.

I'm going to pass over to Donal, if that's okay, to talk more specifically about the proposals in the report, particularly around the establishment of a Welsh energy services company, unless you've got more detailed questions about that later on.

I'm sure we have, but, Donal, do you want to just—? I mean, we're talking very large numbers, obviously, and the Government, to date, in the draft budget for next year, has allocated £100 million up until 2024-25 to continue delivering Warm Homes, Nest, and any successor schemes. So, is that going to be sufficient in light of the perfect storm we now face, but equally, if we invest more at this stage, are we going to be able to spend that money wisely?

Thanks. Yes, I think we did some analysis that it's not quite to the level we've asked for; it's a welcome increase. Just to echo the point Sophie made, I think the real critical thing here is having a long-term strategy, not only to send a signal to consumers, but also to industry to actually start to invest in the supply chain that we need to deliver this. I think the other thing we emphasised in the report is we need a multitenure focus. So, thinking about fuel poverty, which exists across the tenure mix, a big emphasis is already on social housing in Wales and that's welcomed, and hopefully what comes out of the optimised retrofit programme is a longer term, 10-year programme of investment, and I think the idea is to try and decarbonise as well as reduce the energy demand of social housing first. But, really, just to emphasise, I think a plan is needed across tenures, so also the private rented sector. I'm doing a piece of work with the Chartered Institute of Housing Cymru at the moment on how you tackle the private rented sector. It has some of the highest ratios of fuel poverty of any sector, and that's only likely to get worse. It tends to be the worst housing stock in terms of quality and energy efficiency, but also the owner-occupiers; there are many people in the owner-occupied homes living in fuel poverty, and I think each programme will need to be, to a degree, tailored to each of those tenures and think about the specific needs of those tenures.

So, I think funding is always welcome. I think that the key challenge is sustaining that funding over a number of years and actually building momentum with a programme, and showing and demonstrating the successes. I think Wales is quite well regarded across the rest of the UK around your fuel poverty programmes, in comparison to England particularly. So, I would talk up what you've done, and build on the strengths and build on what you've done, rather than, necessarily, completely throw the baby out with the bath water, even though there are flaws in the current programme.

I hope that answers your question. It's hard. That spending wisely point is relevant, but I do think that comes from a long-term view, and actually not necessarily rushing, but taking a long-term view on addressing the challenge. That would be my response.

Thank you for that. That's very helpful. I'll just move on now to my colleague Sarah Murphy.

Thank you very much and thank you for being here to speak with us today. I'd just like to have a chat about—. The report says the interconnected challenges of the decarbonisation of homes and tackling fuel poverty should be reflected across the new programme for government, so it's all about linking up that policy on skills and finance, foundational economy and health. We have heard evidence already, for example, that says that there has been a drift from the programme's core purpose of tackling fuel poverty, for example, towards installing boilers. Also, it kind of drifted again from that whole-house approach when there were other things that may have been able to have been done. So, to what extent do you think, really, that all of the different policy areas and that link-up has been reflected in the programme for government, and what's your view, I suppose, on it possibly drifting from it being ultimately about tackling fuel poverty? Can I come to you first, Sophie?

Yes, thanks. I think that's a really fair reflection. Perhaps if I can start with the strategic points around how it should be considered across Government, if we look at some of the implications of living in fuel poverty, there was a report looking at the case for investing in improving the quality of homes, which found that 18 per cent of Welsh homes represented an unacceptable risk to health, and that accounted for or led to 10 per cent of excess deaths, and between a 30 and 50 per cent increase in respiratory conditions, and so on. So, outside of, strictly, the fuel poverty agenda and the impact that that has on people's pockets in terms of poverty, it's having a direct impact on people's health as well. So, if we're looking at things holistically, one of the things that I've recommended in my future generations report is that there should be a renewed focus around prevention and that there should be some consideration of how we're shifting money from some portfolios. This is not popular, but, actually, health makes up 50 per cent of the overall Welsh Government budget, and yet it's quite likely that, by investing in the quality of people's homes, we would be doing a better service to people's health than perhaps just patching them up when they're ill. So, I think we need to look at that holistically.

I think the whole point around the long-term investment plan, picking up on your point, Sarah, and also going a bit back to Jenny's point, is that, in order to reap the benefits of investing in this area, beyond just taking people out of fuel poverty, you need to have that long-term plan, because we need to get the skills pipeline up and running if we're going to have the 26,500 jobs filled by people in Wales who need good-quality jobs. We need to have join-up with the whole foundational economy approach, which is really positive in Government, but I'm not always convinced, in terms of the way that procurement policy is happening and foundational economy policy is happening, that those two things are actually joining up as well. So, there are issues there in terms of that strategic join-up. I know Donal has got more expertise in terms of what happened in terms of the fitting of boilers and how that was seen as perhaps a short-term fix. And I think that, however, is indicative—. Again, I do reflect on what Donal says around Wales probably being ahead of the game in terms of a long-term plan here, but when you keep having unplanned, almost, drops of cash—cash into this area is always welcome—you don't necessarily then—. If you have cash that has to be spent quickly, a quick solution like boilers might be the answer, but might not actually be the most effective thing to do in the long term. I don't know if Donal wants to come in at that point, particularly around the issues around boilers versus other measures.

Just to echo what Sophie was saying, for a long time, a brand new condensing boiler really was a good thing in terms of reducing people's bills. It often meant they could actually increase the temperature in their home and would have those health benefits as well. We are moving out of a world where gas is a cheap way of heating your home, and, in the next four, five, six, seven, eight years, I don't think that price situation is really going away. The thing about a boiler is there's a well-understood supply chain—there are many boiler fitters out there and many boiler companies willing to sell boilers as part of Government energy efficiency programmes. So, you had, to an extent, a degree of regulatory capture there, where it's an easy, not particularly invasive solution. 'Do you want a free boiler?' A lot of people say 'yes' to that.

The alternatives that we need to do are—we can't shy away from—a bit harder, a bit more invasive. We're talking about going and potentially insulating the inside of people's homes. Okay, loft insulation isn't that bad, but there are lots of other things we're going to need to do to actually make homes warmer, and a lot of those measures, whilst being more invasive, are more long term and they're going to bring bills down indefinitely. So, I think there is a low-hanging-fruit issue here that boilers were a relatively easy solution, quick to install, and that's why they became dominant in some of these programmes. And I do think, unfortunately, that is going to have to become increasingly a thing of the past. We are going to have to move to low-carbon heating solutions, we're going to have to focus on whole-house retrofit and these more deep and invasive solutions. And I think the way through that is through an approach that really brings communities with you, and I think that's why Nest—. I'm not an expert on Nest and Arbed, but they are well understood to be quite good in that area, at actually bringing communities with them and taking an area-based approach, working with community organisations, working with local authorities. You compare that to the shower that was the green homes grant in recent times, which was really maladministered because it was very top down. So, I do think, building on what's been done, but, yes, definitely, those more invasive measures—. Boilers really—you know, maybe we'll come on to the decarb question—increasingly are more expensive now than heat pumps to run, with the way that gas and electricity prices are going. So, yes, it is unfortunate. We're coming out of easy street and into the harder-to-deal-with stuff, but we have to do it. So, it's something we have to face, I think, as a country.

Thank you, both, very much. Thank you, Chair.

Okay. Thank you. Over to Jane Dodds.

Diolch yn fawr iawn. Good afternoon, commissioner and good evening, Donal. Thank you for joining us. Diolch yn fawr iawn.

Diolch, Jane. Our view is that, increasingly, those programmes will have to come together. The evidence seems to suggest that those people who are living in poor-quality homes are disproportionately those people who are living in poverty in other aspects as well. So, I think we are going to need to be bringing those things together. At the moment, in terms of the investment in this year's, or this coming year's, budget, we think that there are some challenges there in terms of the financial commitment, so our report suggested that we probably needed—and this was prior to the current crisis—around £732 million by 2030, so that's £73 million a year. What we're seeing in this year's budget is about £30 million. So, there's quite a gap there in terms of that daily increasing challenge of people living in fuel poverty. Of course, if you invest in improving the quality of homes across the board, you are going to be taking people out of fuel poverty, but we've got quite a bit of catching up to do, albeit, in some ways, Wales is doing better. I'll pass on to Donal in terms of any more detail.

Am I muted? No, there's the mute. Yes, just to echo Sophie's points, really, I think the way that these agendas converge certainly is through insulation programmes and that is a win-win always for both the climate and for people's energy affordability, certainly. I think increasingly taking a more holistic view on homes and, with a long-term policy plan, looking at homes in a more long-term way, thinking about when wider renovations are going to be made and when is a good time to do certain measures over the lifecycle of a home and at what junctures is it good to do that—you know, when changing tenancy—so, tailoring policy much more to how people live their lives. That long-term view can, hopefully, enable that, probably with a suite of offerings for people in different circumstances as well.

On the knotty one, which is the decarbonisation of heat, in my view, heat pumps, by and large, will be the big route to decarbonising heat in the United Kingdom, with some exceptions of some biomass systems, some heat networks in the more densely populated areas. Right now, heat pumps are expensive in Britain; they are a lot more expensive than a gas boiler. Those prices are coming down, and, as I mentioned previously, they are increasingly going to be cheaper to run, particularly if we think about new tariffs coming on the market—smart tariffs and stuff, so you can run your heat pump when the wind turbines are blowing and get it at a cheaper price. All of that is on the way, but you can't get away from the fact that, right now, they are more expensive in a capital investment sense. And that is going to require more funding. The expectation is that, over time, as the market grows in Britain, as it has done in Norway, Sweden and Finland—very cold countries, where these technologies work very well—. You've seen the cost curve come down; you've seen more heating engineers and more plumbers familiar with the technologies, they're stocked in greater numbers and you start to see those prices come down. So, I don't think that's a kind of—. Yes, I think that that is a problem that we will have to address, but, hopefully, over time and with the right Government policies, we will start to see costs come down. And if we are subsidising those systems, we should be subsidising them for the poorest first. So, you know, grants and things like that for decarbonised heat, probably at scale, is increasingly where we need to start achieving that.

So, yes, it's not easy, but it's achievable. And we've looked at some of those costs in this report, and we think we've got a realistic assessment of what might happen to those costs over time as well, if you look at the full report. So, yes, ultimately it requires more Government investment; that's hard to get away from. But we talk about a lot of those benefits, so, I think, particularly on jobs, particularly on the economy, that you can argue these things do pay for themselves in the end. So, yes, but it does require more money, for sure.

Can I just follow that up? Is it too ambitious to have one Welsh Government programme that both tackles fuel poverty and also has decarbonisation as a thread running through it? I might have simplified that, but do you feel that's too ambitious, that that would be too complex? Do you think it should be targeted at something specific? I'm just really interested as a 'yes' or 'no'.

I think you could almost put it another way; it would be pretty incoherent if they didn't have one element within each, right. So, they would have to at least factor in the fact that there are these other policy objectives around decarbonisation, so that you're not pulling in different directions. Whether or not they should be under one programme with one branding, I think that's an open question and one that I probably wouldn't want to speculate on now. I think the simpler the message and the more familiar the long-term programme that people—. A household name—whether it's Nest or Arbed, which I believe are quite well known now—I would see risks in getting rid of all of that and starting again with something new that people aren't aware of; I'd probably rather want to see it evolve and maintain some of that familiarity that has built up over time.

Yes, whether or not, as you say, if it's too much to—. They have different dimensions, these objectives, and, certainly, on the decarb side, you might want to look at certain people who are maybe not in fuel poverty, who might be early adopters, for example, who may be able to front some of the cost themselves as well, if you had some part grant, a bit like the clean heat grants that have been proposed by UK Government, although they're tiny, the actual cash amount.

So, yes, it's a hard one to answer directly. I just think you cannot have that level of incoherence where you're still putting in lots and lots of brand-new gas boilers in 2022 when we've got a climate emergency. Those boilers are going to last for 15 years, so, you know, you're starting to think—. You know, we have to get off gas in a big way, unfortunately, in Britain. Sorry, that's a bit of a—[Interruption.] Yes, sorry?

Thank you very much. I'll come back to you, Chair, if I may. We've got a lot to get through, I'm aware.

Okay. Can I just ask about the numbers before we move on? And I'll come back to Jane in a minute. So, Sophie Howe has said, at the moment, the Welsh Government has allocated £30 million a year, and your estimates are £730 million a year. So, what are we going to be able to achieve if the Welsh Government continues to only allocate £30 million a year? Where would we need to start at this stage and what should we be spending it on?

Just for clarification, there, Chair, sorry. It was £732 million over a 10-year period, so £73 million a year versus £30 million.

Thank you. All right.

We're calling for about a doubling in funding.

A doubling, okay. So, are there any other ways in which we could raise the money, if the Welsh Government has got other priorities, which, obviously, they do have? So, how are we going to square this circle, if we've only got half the budget that you guys think we need?

I think that's where some of the proposals—. Well, certainly in terms of the retrofitting of homes, that's where some of the proposals around a Welsh energy services company come in, using bonds. And Donal is definitely the expert on this, so I'm going to pass it over to him to explain that.

Sure, yes. At the time—I think things have moved on—we were talking about potentially using some shared prosperity fund grant money for that. I believe that has been devolved in such a way that it's not within the powers of Welsh Government to spend. Sorry, we wrote this report a couple of years ago—a year and and a half ago now. I think that debate has moved on, so maybe that particular source of funding isn't as available as you thought. Yes. I mean, just the first point of your question, how do we get the most impacts, one of the big things we emphasise—and National Energy Action, who will come after us will also say this—is to target the worst first.

So, 'fuel poverty' is a blanket term, and people in fuel poverty are very poor, don't get me wrong, and it's a very difficult situation, but there are also people in extreme fuel poverty, who are spending even more of their income, who live in the worst possible housing. So, one of the things we argue is for some really targeted support for them as soon as possible and really focus on that targeting, both in terms of people's means, but also in terms of the quality of the housing, going after rogue landlords and people who are not meeting their obligations around things like minimum energy efficiency standards. So, it's just kind of getting rid of—. It's resolving the very worst affected people.

The model we looked at for the WESCo—it's a bit of a technical proposal, but it was basically focused on the social housing sector, which does still have a degree of fuel poverty. The housing is a bit better, on average, in social housing, but, obviously, there are still problems, and we still need a lot of investment, particularly as social housing is seen as it's going to be the vanguard of the decarb agenda.

So, the idea there was to use a blend of funding, so, use some Government grants and the continuation of something like the housing quality standard funding, and blend that with some potentially low-cost debt financing. The challenge that a lot of the housing associations face is they're already quite indebted, so for them to take lots more debt onto their balance sheet can actually cause quite a lot of problems.

So, we were presented with this wicked problem of, 'We can't take on debt, Government's not willing to fund more, so what do we do?' So, the idea is we create a third body that is potentially owned and underwritten by Welsh Government and also by the housing associations and the local authorities who still own stock. And that could actually, if it was sufficiently large—and we were speaking to Tai Calon housing association about this—it could actually raise its own bonds in bond markets; issue, basically, green bonds. If it was underwritten by Government, it could raise that finance very cheaply, akin to a Government bond, so 1 per cent or 2 per cent interest. And using that, with a combination of that and grant funding and something called energy performance contracting—where you basically guarantee energy savings; it's been trialled in social housing around Europe—you could fill some of the funding gap for social housing in that way, and there is precedent for it.

It's a bit complex to explain verbally, but we had some quite good feedback workshopping that with some of the housing association finance directors and people who were in the meeting. So, it's an idea that we put out there, potentially addressing that gap. Sorry, I probably rambled, went a bit long. 

That's very helpful. That's probably as far as we need to go. Jane, back to you.

Diolch. So, we've done quite a bit of work, really, highlighting where the skills gaps are—a separate piece of work that we did with the New Economics Foundation, both highlighting the gaps in particular areas, not just housing retrofit, but across potential jobs in the green economy, but also then looking at the current gaps, inequality gaps, so the differences in terms of male and female entering into those different industries and, largely, the absence of black, Asian, minority ethnic people and disabled people. And so, a bit like the point that we were making in terms of how do you join up the fuel poverty agenda with the decarbonisation agenda and so on, really, a strategic policy intent needs to be looking at how do we have a long-term plan for investment in tackling fuel poverty and energy inefficiency, because that enables us to develop a skills pipeline, and, in developing that skills pipeline, we also need to target those furthest from the labour market and those who are currently underrepresented in those sectors. So, there are lots of pieces of the jigsaw that need to join up on this.

On the one hand, the fact that the skills plan is in development is, I suppose, promising, because I'm hoping that, therefore, those parts of the jigsaw—that's what they're working on, bringing those together. My team have been quite involved in working with the skills department in Welsh Government, making connections between the net zero plan, the work that's going on in housing and, increasingly, reminding them back to the race equality action plan, the gender review and so on. So, we're hopeful that the plan will be quite a joined-up plan, but I'm yet to see it. You might recall from the evidence that I gave to this committee in my annual scrutiny a couple of weeks ago that I have launched a section 20 review into the Welsh Government—more looking at the machinery of Government, but actually looking at it through the lens of skills, and these are the exact issues that we're trying to get to. Not so much the policy context, but that will give us an indication of how fit the Government machinery is to be delivering all of that joined-up approach that I'm talking about.

It's an opportunity, really, that we definitely cannot miss, with 26,500 jobs potentially in Wales and, at a UK level, the estimations are around about 300,000 more skilled workers are required. The Heat Pump Association estimates that 12,500 installers will be needed by 2025 to install the 300,000 heat pumps, and that's a massive challenge. So, going back to what Donal was saying, we can't really continue to just have the Warm Homes programme installing boilers, and if we're going to be looking at installing heat pumps, we need to have the skills in order to install the heat pumps, and if we're going to do that, we needed to have been really ahead of the game in doing that in terms of getting that skills pipeline up and running. And if you speak to people, my stepdad is one of them, who's got a heat pump, and he cannot for the life of him get anyone out to fix it when it goes wrong, and that is one of the challenges that we are going to face when everything has to go towards the installation of heat pumps rather than your traditional boilers, which is why we keep going back to saying that this long-term plan is so important to get all of those ducks in a row.

Thank you. Can we move on to Sioned now? Sioned Williams.

From my office, we haven't done specific work looking back on that, but, Donal, I don't know if you've got any insights on that.

I can't give you a forensic analysis, sadly, of exactly how targets have or have not been addressed. I believe that Wales is generally held up as a place—. Around the early 2010s, Wales was the poster child of fuel of poverty, I think even in western Europe at that time, and I think there have been great strides, and I do think part of that is down to the approach that's been taken since devolution. However, yes, going back to the point around boilers, I think going back to the point around exactly how households have been targeted, from reading the audit report, I think, maybe there's room for improvement there. As you say, maybe certain people getting boilers that, potentially, were not in fuel poverty, and that, clearly, is not what we're here for.

But I would just encourage to try and build on what's there and build on the strengths of the programme, rather than completely scrap it all together and lose a lot of that tacit knowledge that must exist in Welsh Government and the local authorities who've been involved in delivering it. So, sorry, I can't give you a forensic assessment of exactly where it succeeded and failed, I just think it's worth focusing on the positives as well as the failings, I suppose.

Yes, I—

Sorry, go on, Donal.

No, it hasn't eliminated fuel poverty, and obviously we are now in a situation where the price of gas, the price of energy, is at record levels, and in terms of what percentage of the population is in fuel poverty, arguably we're going to be probably where we were 10 years ago right now. So, on that basis you could argue, yes, it's failed. The challenges, obviously, may be moving away from these piecemeal interventions and new boilers, which might improve things a little bit, to something more holistic and, unfortunately, probably a bit more expensive as well. So, yes, I think that's correct, but I do think that increasingly the decarbonisation agenda and the fact that we've got to get away from fossil gas are linked to this, and the sooner we can start to move away from finite resources that are increasingly reliant on ropey regimes, the more the better, in my view. I know that not a lot of UK gas comes directly from Russia, but prices are linked to all of these volatile situations, and the sooner we can run our homes on home-grown renewable electricity, for me, that's the end goal. Sorry to not answer your question more directly.

Yes, I was just going to say that, obviously, the former committee has looked at this issue and has raised concerns about the Warm Homes programme not delivering at scale and pace, and the pandemic and the soaring price of fuel and so on have exacerbated that. National Energy Action suggests that there are six areas that need to be focused on if we're going to get this right in the future, and very much linked to the things Donal and I have said so far—so, scale, and the long-term plan, targeting and eligibility, accessibility, delivery mechanisms, and monitoring and reporting. It would seem if we had a focus on those areas—. I think that the NEA are right that those are the things that we really need to focus on to make sure that the next iteration addresses some of the challenges from before. But I don't think that we can underestimate the scale of that challenge because, yet again, we now find ourselves trying to resolve a long-term problem whilst in the middle of a real peak of a crisis of it, and that's always very difficult, and the risk there is that we chuck short-term money at a problem and miss the kind of wider, longer term objectives of it. I think if there's one thing that the committee could keep an eye on, it's that: how do we respond to the short-term real pressures on households whilst not storing up problems for the future, as we've seen in terms of quickly installing gas boilers, but actually, gas boilers are not the long-term answer at all?

Okay. We've got the NEA coming in later this afternoon, so we'll pick up with them on that. Can I bring in Ken Skates at this point?

Thanks, Chair. Just to ask a couple of questions, technical questions, about energy performance certificates, if I may, and also environmental levies, and how they may need to change in your view, given the Department for Business, Energy and Industrial Strategy report's findings that EPC certificates, which of course are used as part of the Warm Homes eligibility assessment, are based on the cost of energy rather than the amount of energy used. Now, basing it on the cost of energy certainly doesn't dissuade people from using cheaper fossil fuels; you could argue that it encourages people to use those cheaper fossil fuels. So, how do you think the EPCs and/or environmental levies need to change?

Donal's the technical man on this.

I'll take the second half of the question first. On the environmental levies, I've been part of various campaigns, but I suppose a growing voice of people who think that—. I mean, the trouble is that this is a UK Government decision, but we essentially place all of the costs of our energy transition into electricity bills, and they are disproportionately paid by people on the lowest incomes, relative to their income. Essentially these are taxes. It's not a very progressive form of taxation, so I would argue, particularly with—. It was one of the things I actually argued in a blog in The Conversation recently that, potentially, a short-term measure is to move some of these levies into general taxation. They would still need to be protected, because we still need those policies, but to potentially alleviate that kind of—. About 20 per cent of the electricity bill is environmental levies and suchlike. So, that would be one. That is not something, I don't think, that Welsh Government can act upon, unfortunately, but I do think it is something for the future. One could argue, actually, with the price of renewables now, that those levies—. If we are going to be subsidising or offering things like guarantees for solar power, actually, that's not going to be adding to bills at all because it's now the cheapest form of energy.

On the EPCs, yes, there is a technical discussion in the industry about exactly how EPCs should be designed. They have various flaws, particularly around the assumption of the carbon content of grid electricity, as you say, the fact that they are based on a fairly crude assessment of what a house does, and actually, often, you can get an EPC done for about £70. Thinking that's supposed to be a proper survey of every room in the house and the energy performance of the house, you can guesstimate that's probably not going to be particularly reflective of what the house actually uses. So, there is this move towards more real-time monitoring tools, particularly with smart meters; they think this could be increasingly possible. So, yes, there is a technical discussion there, as you say, potentially around moving towards kilowatt hours-based, per metre squared-type metrics. I would support that. I don't think that's what EPCs were really designed for. They were meant to be a label on the fridge, 'This house is efficient, this house isn't.' They were never really designed to be this in-depth tool for us to understand the energy demand of our homes. And there are tools out there that we can use to do that, but, yes, it would require a big change in Government policy to replace EPCs with something more accurate, but that would also have a fairly significant cost for it to be rolled out. So, yes, there are live technical debates about that one, and I'm probably not the No. 1 guy to ask about that, but there are competing camps about what the right course of action is.

The widespread use of smart meters, as you say, could be very helpful as one part of change to EPC processes. That's really interesting. Sorry, Dr Brown, can I just ask one question you may know the answer to? I certainly don't. Are you aware of discussions at UK Government level at all regarding absorbing the levies within general taxation? It would be a tiny, tiny amount within general taxation, but, as you say, it would really help lift the weight off the least affluent people in society. 

I'll be honest: it's a debate that is fairly live and is being had by a lot of people. I wouldn't go as far as to say that BEIS are actively considering—. I've not heard anyone from BEIS, for example—. I've sat through quite a lot of Government consultations on policies, for example, around the new minimum energy efficiency standards for private landlords at EPC C. Usually, when you sit through those kind of things, you expect the policy to be announced in six or seven months' time and it hasn't on that occasion. I've not been invited to any consultation on environmental levies, so I'm not aware that that is—. I think it's probably in consideration, but it's—. Yes, it's quite a big piece of primary legislation that affects a lot of areas, because it's not—. Each one is its own policy area. It would be good, I think—. As you say, it would be really good fairly quick fix to shift that burden away from electricity bill payers, but, no, I'm not aware of any kind of forefront proposals to do that.

On the EPCs, the idea is to combine smart meter data with the standard assessment procedure model behind EPCs, and come up with a dynamic ongoing assessment of actually what the house uses and have that in a digital form somewhere. But I don't know whether that—

That's really helpful. Thank you. And maybe, as a committee, we can make inquiries with BEIS regarding any considerations that they're having in terms of absorbing the cost within general taxation.

Can I move on to ask about the current programme and how it reflects the needs of fuel-poor rural households, and whether there's any specific support that should be provided to meet the challenges of rural fuel poverty? This might be for the future generations commissioner. 

Perhaps if I just come in with some of the headline challenges, and I don't know if Donal wants to add anything in terms of specific interventions or best practice that he might know of from elsewhere. We've recently been looking at each of the public services boards as they are doing their well-being assessments at the moment, so we haven't had them all in as yet. But, fuel poverty, of the ones we've had in, particularly ones from rural communities—so, Carmarthenshire, Powys, Conwy, Denbighshire, Vale of Glamorgan; we've had those in so far—fuel poverty is coming out very clearly there as an issue, and some specific inequality angles as well. In Carmarthenshire, the engagement work that they did with Gypsy/Traveller communities, for example, specifically identified fuel poverty as a challenge for them. We know that, obviously, more households in rural communities are reliant on oil, and there is a 50 per cent increase in the price there. So, there is a disproportionate impact there on those rural communities. That would suggest that there possibly needs to be some targeted intervention around those rural communities. I don't know what that might look like. I suppose there could be targeted interventions through the existing programmes, but I'll ask Donal to come in in terms of whether there's anything specific that he's aware of that could help.

You're absolutely right. I think the point is the need for a targeted programme. If we think about it logically, those isolated places are harder to identify, harder to approach, and it's probably more expensive to put the measures in, so they are more expensive customers. They have a higher cost of acquisition, and so, all other things being equal, if you are delivering a fuel poverty programme, often those people get left behind, versus the people in the towns and cities where it's relatively cheaper. That's particularly true of the ECO policy in England, where it's a very market-based sort of approach, where you go after the low-hanging fruit, and that tends to leave rural, expensive people out in the cold, if you excuse the pun. I think there needs to be an explicit focus on this to really consider what the issues are, probably better data on who these rural fuel poor people are, the types of housing they're in, the types of measures and interventions that are needed to actually bring them out of fuel poverty, and then an engagement strategy that can deal with their relative isolation, particularly if people are not very digitally literate—older people or whatever. It just needs a special focus, I think, a special bit of attention. So, yes, I'd just agree with Sophie there.

Thank you. And is there any sort of estimate you might have, or even a guesstimate, regarding the levels of funding that would be required to bring those inefficient off-grid households to efficient standards whilst also obviously reducing reliance on fossil fuels?

I could give you a rough cost per home.

That would be great.

Okay. If you're on an oil boiler and you're in a three or four-bed house, and you're replacing that with a heat pump, you're probably talking between £10,000 to £14,000 for the heat pump. For a net-zero retrofit on a house like that, with internal wall insulation and insulation for the floors and roof, plus a low-carbon heating system, you're probably talking north of £25,000 to £30,000 for a detached house, for example. It depends on the measures. An internal solid wall could be anywhere from about £5,000 to £10,000 for all the walls. They are harder to treat, particularly detached homes, particularly stone, solid-wall properties. Often, the conventional insulation products, the ones that don't breathe, don't really work for those types of walls, so you need to use breathable insulation and natural materials and they tend to cost a bit more. And often, particularly if it's a heritage building, you've got higgledy-piggledy walls and funny lintels and lots of detailing, so you need quite skilled tradespeople to do that kind of work. You can't get away from them; they often are harder to treat in a real sense, and cost more, and so often they fall out of conventional Government programmes, because the money is not there to actually get them where they need to be.

There are some really specialist skills requirements as well, particularly when you have grade I and grade II* listed buildings; they become incredibly tough to retrofit and to work on. But that's another line of questions for other experts, I guess, within the heritage sector.

There's an organisation called the Sustainable Traditional Buildings Alliance, STBA, and they have got loads of stuff on how to do retrofit to heritage buildings. They've got a whole rubric to do it. They're very good. 

I should seek advice from them for my house as well, then. Thank you. Thanks very much. Back to you, Chair.

Moving on to Tom Giffard.

Thanks, Chair, and good afternoon, everyone. Thanks for coming along today. I just wanted to ask, really, what concerns, if any, you've got, about the impact that a gap between the end of the Arbed scheme and the next programme coming in will have. Obviously, the Arbed scheme was an area-based approach. Looking ahead to the next scheme, what are the advantages, I guess, of an area-based approach, and what partners do you think should be involved in the delivery of that future programme?

Perhaps if I just pick up on some of the broad points around the potential challenges through the gap, if you like. I guess this is all about how you maintain that long-term plan and confidence out there in terms of businesses investing in the right skills, knowing that there will be work coming. That's part of the issue here. I think Donal's referenced that, actually, Wales had been pretty good around this and has had the Nest and Arbed programmes in place for a long time. So, that has enabled, subject to some of the issues and concerns that we have spoken about already, businesses to invest in their skills pipeline, upskill their workforce and have a kind of long-term plan themselves. Where you have a gap, obviously that potentially creates an issue there. I think we would like to see that minimised.

That said, we are in a different space now, really, as compared to when Arbed and Nest and so on were first established. This issue is massively at the top of the political priorities for Governments across the UK, and indeed, I imagine, the rest of the world, given what's going on in Russia. There's a level of people working in this world thinking that actually this is an area that is going to only increase in terms of its prioritisation, rather than decrease. I don't know if Donal has got more specific views there, and on the people who should be involved in that.

I think from a Welsh perspective, certainly, we need to be working through very closely with the work that's been going on in terms of foundational economy and really plotting out who are the Welsh organisations out there who are doing this work, could increase the scale and pace at which they do this work, what sort of help do they need to do that, who are the very small enterprises who could be having assistance to do more of this work, and so on. And that's why the kind of join-up across Government departments and policies is really important on this.

I'll just come in on that, just to echo. I'm not saying I know this, because I'm not sure how long the hiatus has been, but that risk, as Sophie was alluding to, is that stop-start Government policy is the bane of any nascent industry. I think certainly in England, that's been extremely the case in the retrofit space. We've had so many failed Government policies and policies that have been scrapped halfway through that anyone investing in the supply chain and their apprentices is sick to the back teeth of it, and has probably decided to find another line of work because of how erratic the environment is. So, that is the risk.

I think there's a risk in the supply chain; there's also a risk from consumer visibility that there was this thing that existed that they were familiar with, it became a household name, and then it's gone away. That leads to a perception that there is inconsistency in Government policy, and they can't rely on making plans around this, or they're planning to upgrade some part of the house, and all of a sudden, the support has gone. So, I just think that it's that consistency and long-term view and the risk of that falling away.

In terms of the partnerships, local government obviously has a huge role. Some of the big private sector organisations are really important as well, some of the big manufacturers, and getting them onside. But also, really, community organisations. I chair the board of a charity called RetrofitWorks, who mostly operate in England. They are a community-interest company who basically have a co-operative structure where the installers are members, and so are local community organisations. The idea is using those community networks to build trust in a specific place—whether that's sports clubs, whether that's faith organisations, whether it's any particular grouping—and using those conversations as a way in to speak to people about this agenda, particularly thinking about minority groups and how you access them and build trust. I think that kind of community strategy is going to be important here, because obviously we're going into people's houses and mucking around with them, so you need to build the trusted relationships through those existing channels. I think that is an area that could be strengthened in future programmes, thinking about the community networks and how you engage with people. That is what I would advocate in this instance.

That's brilliant. Thanks. Back to you, Chair.

Thanks very much. Jane Dodds, would you like to come in, please?

I can't predict, but it's looking increasingly like this is going to spiral more and more people into fuel poverty. Even though, from a UK perspective, we're not as reliant on Russia for supplies as other countries, it does have a knock-on consequence. Sadly, it seems to be a bit of a perfect storm forming here around cuts to universal credit, around the lag or the issues that people have experienced as a result of the pandemic, increases in inflation and now this crisis, plus the need to decarbonise, which can be, obviously, a positive thing in terms of reducing people's energy bills, but could potentially require homes to be investing themselves as well, and landlords and so on. So, again, back to the point that I was raising, we've found ourselves dealing with what is a long-term issue, whilst we're now in a middle of a crisis. When you act in a crisis, you don't always get the right long-term solutions, and that's the thing we need to guard against. I don't know if Donal's got any further views on that.

As you say, it's hard to look into the crystal ball of what's going to happen to global energy geopolitics, but it's not looking good. It could be that Russia is completely frozen out of the European gas market for many years. Europe in general imports about 40 per cent of its gas from Russia, and as Sophie was saying, although we don't actually buy much directly, gas prices are set in a similar way to oil prices, and so we face those knock-on price impacts even though most of our imported gas comes from Norway. So, yes, I think it's bleak. The situation around the cost of gas, which we've become so reliant on because we had lots of cheap gas for so long, has made us quite uniquely vulnerable in that way to these issues. It's not going away, I think, sadly, this issue, and I can't see energy prices coming down again, certainly not from a gas side. I think the more renewables we bring onto the grid will increasingly weather that storm a little bit, although we will probably be using gas to back up our renewables for some time. So, yes, it's an issue that's not going way. I think it's increasingly going to be salient with the general public. I used to be unable to talk about what I did in the pub with my friends. That's really changing now; people are really aware of this right across the board. I think there's a unique political opportunity, actually, to do stuff about this and have a mandate to do something about it that maybe wasn't there a year ago or two years ago. I think bravery in politics now is what's needed to address this and call it out.

Thank you for your assessment. Are we able to extend the session for five minutes? Because we are almost out of time at the moment, and we've got, I think, three or four extra questions. So, if we could be brief, and Sophie and Donal can spare the time, Jane, do you want to just pick up on the question you were going to ask?

Chair, I wonder if we could skip that one. It's a very detailed question.

Fine. Okay. Sioned.

Well, in terms of the households that need to be targeted, we know that poor energy performance disproportionately affects poorer households and disproportionately affects families with young children and older people. And in terms of the longer term associated health costs of those families and those individuals living in poverty, it would seem to me that that would be an appropriate place to start if we're looking at the longer term and wider implications. 

We know that, really, we need to be combining all of the different policy agendas. So, whilst—. So, the £150, for example, that the Welsh Government have committed in terms of the cost-of-living crisis, that's good and that will help to alleviate some things, but, actually, we probably do need to be making sure that we are putting in place this long-term investment plan to both decarbonise—. And this is why we can't look at things in isolation. We need to be decarbonising, which will have a longer term positive impact on taking people out of fuel poverty. So, there are some real challenges there and I think probably some missed opportunities as well. In our report, we were calling for £1 billion-worth of investment from the shared prosperity fund in a real Wales-wide approach to the decarbonisation of homes, which, therefore, would have a knock-on positive consequence to taking people out of fuel poverty. Instead, what we've seen is quite a number of more piecemeal approaches, say, going through different regions and local authorities, whereas you could have had a joint approach between Welsh Government, the UK Government and social landlords and private landlords that could have really upped our game in terms of the extent to which we were able to do that long-term investment.

So, I'm not going to say that any of this is easy, because the demands, post pandemic, for health, for all of these other issues, are absolutely huge. What I am saying is that the Government do have obligations under the future generations Act to demonstrate how they're doing the things that best meet the well-being objectives that they've set, which prevent problems from occurring or getting worse, which are long term and which are integrated. And I would say that this is a prime policy area and the things that we're proposing in our report absolutely tick all of those boxes. So, it comes down to some brave decision making. If you wanted to be really out there, you could say, 'Top-slice the NHS budget and invest some of that money into this area.' However, I doubt that that would be politically palatable. But, if we're actually looking at the data around where people's health is improved and what the key factors in health are, there's a lot of strong evidence to suggest that investing in improving the quality of people's homes actually has much bigger, longer term benefits.

Okay, thanks. Sarah Murphy, would you like to come in, because there's a specific issue we need to cover?

Yes, which, Donal, you did touch on earlier on and it is about how private sector landlords should be encouraged to tackle fuel poverty among their tenants. So, for example, National Energy Action have said that private landlords should be able to access some of the funding available and Energy Saving Trust have said that there needs to be a targeted outreach to landlords from central and local government. So, just to get your views, briefly, on what you think should be done. Commissioner.

If it's okay, Sarah, I'll pass that over to Donal, who's more expert.

Okay.

Diolch. Yes, I think that's right, Sarah. There's an old adage, 'carrots, sticks and tambourines', and I think we need all three. So, I think we need to be hitting landlords with a future regulatory stick that you can't let your property if it's below an EPC C, probably, although I think the current Government plans may be a slightly strange version of that, but, broadly, that is on the table at Westminster level. I think you do also need, potentially, some sources of funding, even if that's just lines of credit that don't affect landlords' existing credit arrangements, so low-cost loans and things like that, potentially, or a system of grants, if there are elements that need—. What you don't want is landlords putting up rents after doing a retrofit, for example.

But, as you say, also some targeted outreach, which is the sort of tambourine part. So, actually, working with landlords, many of them are accidental landlords, not the sort of bogeyman. There are bogeymen, but there are also people who just aren't particularly professional and aren't keeping up to speed with what their obligations are. And I think the lack of targeted support for landlords is an issue, because they face unique challenges. Obviously, a lot of local authorities have registers of landlords, and the houses in multiple occupation registers, so, potentially, they are a good route in to doing that, because, you know, they already have obligations. So, yes, I do think that's a real issue. But, yes, ultimately, there has to be regulation, I think, but not regulation alone.

Thank you very much, and thank you, Chair.

Okay. Thank you very much, both Sophie Howe and Donal Brown—a really interesting session. I think we've covered a lot of ground. We'll send you both a transcript of your evidence, and, obviously, we encourage you to let us know if we've misheard what you were saying, so that we have a true, accurate record of your evidence, which has been extremely useful. So, thank you very much indeed, both of you, for your contributions.

And we'll now move on and take a short break in order to enable the next witnesses to be introduced. So, if you could come back at a quarter to on the dot—. If you could come back just before quarter to, so we try and catch up on the time factors. So, a short break and then we'll see you shortly.

Welcome back to the Equality and Social Justice Committee meeting, where we're looking at fuel poverty and the Warm Homes programme. I'm delighted to welcome Ben Saltmarsh and Jack Wilkinson-Dix; Ben Saltmarsh from NEA and Jack Wilkinson-Dix from the Energy Saving Trust. Both of you are experts in this field, so you're very welcome indeed. Sarah Murphy is going to start off the questions. Sarah.

Thank you, Chair.  Thank you, both, for being here today. This is a very vital and timely inquiry that we're conducting, and, again, thank you very much for submitting the evidence that you have. I'm going to start with a very broad question: what is your assessment of the extent to which the current Warm Homes programme has contributed to actually tackling fuel poverty in Wales? If I can come to you first, Ben. 

Yes, that's absolutely fine. Thank you, Sarah. It's an absolutely critical time, as you say, not least, obviously, with soaring energy prices right now as well, and perhaps we can touch on that a little later. But, as you say, in relation to the question that you've just asked, I understand that, since its launch, the Warm Homes programme has invested something like £394 million into improving the energy efficiency of something like 67,100 homes in Wales, and, yes, that should make those homes less likely to be in fuel poverty. I think, for its recent beneficiaries, that should, hopefully, make the current crisis easier to bear than it might otherwise have been as well. Public Health Wales estimate, as you may well know, that, for every £1 you spend investing in making a vulnerable person's home warmer, then you would see a resulting £4 in health benefit. So, that £394 million could well see significant savings to the NHS in Wales too, which is something to be praised.

However, I think, perhaps in three areas, it's important to note that, whilst very welcome, in terms of scale, targeting and the measures of the current programme, there are mixed views and some concern. So, in terms of the scale, I think it's widely acknowledged now that the current schemes have not been sufficient to address the scale of fuel poverty in Wales by 2018 estimates, let alone 2022 estimates. I think the Minister for Environment, Energy and Rural Affairs in 2019, as part of the Climate Change, Environment and Rural Affairs Committee's inquiry into fuel poverty, at that time said that if those 2018 estimates were to be believed, then the funding of the Warm Homes programme would need to be more than doubled, and the future generations commissioner has also just called on the Welsh Government to do the same, as well as for additional funding from UK Government. So, it's quite clear that the likely scale of fuel poverty now will require much larger numbers of households to be lifted out of fuel poverty every year than has hitherto been the case.

I think, in terms of targeting, there are mixed views on its impact on reducing fuel poverty and some serious questions have been raised too as to how effective those schemes have been in targeting those in fuel poverty and in greatest need of support. I think the Climate Change, Environment and Rural Affairs Committee—which I might just stop saying and just say CCERA, if that's okay, after this point—noted in 2019 that it would be very hard to be precise about the impact. For Arbed it's very unclear, not least because the annual reports simply don't state whether you were in fuel poverty before or after the intervention, and, for Nest, while it does so, I think the majority of those who've received measures in most recent years have not been in fuel poverty: 57 per cent, I think, in 2018-19; something like 63 per cent, 64 per cent, in 2019-20; and just under 50 per cent in 2020-21. So, that's obviously very important to note too.

And so too, I think, in terms of measures, the vast majority of measures, as you may have heard elsewhere, that have been installed, especially under Nest, but, I think, more broadly too, have been replacement boilers and central heating systems. That, while welcome for households, has been to the detriment of really meaningful fabric upgrades that would make a permanent solution to lower bills, and many long-term benefits. And, I think, we were concerned by the scheme manager's response in 2019 too that those measures—fabric upgrades—were seen as additional and secondary. So, I think I would probably highlight those things in starting.

Thank you so much. That's a brilliant, comprehensive, quick answer to get us—[Inaudible.] Thank you. Jack, can I come to you next, please?

Yes, of course. Just to pick up on something Ben said there that I think is really important, the scale of the challenge that we're facing now is really unprecedented. You have to go back 50 years before we see price rises that are of the same magnitude, and there are lots of factors that suggest that this could be worse than the crises we saw back in the 1970s. So, the issue around scale is really important, and we need to think, when it comes to the future of the next programme, about what the funding package is like to help address that challenge.

So, before I answer some of the questions around delivery, I think it's just important for me to just spell out what the Energy Saving Trust's role is within the different programmes of the Warm Homes programme. So, we are subcontracted by British Gas to deliver the advice portion of Nest, and so that includes things like marketing, signposting to other services, benefit entitlement checks, and that first eligibility confirmation. Anyone who's then successful is then passed on to British Gas, who deliver the measures and stay in contact with households from that point onwards. And then, as for Arbed, we were involved in the delivery organisation, but we didn't deliver any measures ourselves. So, I'm more than happy to try and answer some of the delivery questions, but I might have to come back in writing with some of those details, because I don't personally work on delivery.

So, anyway, back to your point, I think that both schemes have helped thousands of households improve their energy efficiency and lower their bills. There are lots of challenges because of, perhaps, the way that the scheme was designed: the caps, the level of caps, the ability for people to access support more than once have meant that more heating systems have been installed than energy efficiency measures, perhaps. But I think that both schemes have delivered against what the programmes were designed for.

Thank you. Thank you, both, so much. I'm going to pass back to the Chair now, as my colleagues are going to drill down into what you said. Thank you.

Thanks. We'll move across to Jane Dodds.

Good afternoon to you both.

Ben first. Thank you.

We're, unlike the Energy Saving Trust, not involved in the direct delivery of the programme, so we can only really reflect on the publicly available information that we're aware of from the likes of the annual reports and others' recent analysis, for example, like the Audit Wales recent report into the Warm Homes programme, too. I think it's probably fair to say that the annual reports of both Nest and Arbed seem only to highlight high-level outputs, if you like, and, as I said earlier, in terms of the impact that's Arbed's having, even at a high level, that was unclear as to its impact on reducing fuel poverty. And whilst Nest does, obviously, the majority of those that have been supported in recent years haven't been in fuel poverty.

I think CCERA highlighted some serious concerns over a lack of a robust monitoring and evaluation framework, without which it said it was impossible to be able to measure the scale of the impact, which is absolutely crucial and fundamental given that this is, obviously, the Welsh Government's key delivery mechanism to tackle fuel poverty in Wales. And, ultimately, what we're really talking about here, as Jack was saying, is that this is an unprecedented issue right now, and we're talking about, we would estimate, come April, something like an estimated 280,000 homes to be in fuel poverty as the price cap goes up by 54 per cent. I know we're very familiar with those figures at the moment, but it's easy to kind of become numb to them if you say them too often. But we really mustn't, because this is a huge, huge scale, and that's 100,000 further households since October, when the price cap rose last, and an 80 per cent increase on Welsh Government's 2018 estimates. As I've said elsewhere, and as some of you may know, what we're really talking about are fuel-poor households where home isn't really a home—it's not a place of rest or comfort; it's a place that you have to endure, bear and try to survive, or avoid, as long as possible; a place where, during the day, you go without energy entirely, or camp in one room because that's all you can afford to heat, and at night you put yourself and your children, or other members of your household, to bed against walls and underneath ceilings that are full of black mould. So, I think those outlets are very important, and it's surely very important to us, obviously, if you're in fuel poverty before or after the intervention, but it's very important too that we look to get much more robust monitoring and evaluation that would speak to some of the outcomes of those interventions also.

I think the only other thing, perhaps, that I'm able to highlight from what we're aware currently is that the Audit Wales report also highlighted significant concerns with Welsh Government's monitoring of contracting arrangements, including that they need to be tightened and more tightly managed. I think we mentioned in our evidence that we'd expect those issues to be addressed at any forthcoming, future iteration, but also that it's very important that formal arrangements are put in place for any redress or issues that might become apparent, so that they're remedied for households. But just by way of a couple of examples, just looking at the notes here, I think there are steep differences in the way the Welsh Government paid the two scheme managers for the same energy efficiency measures in pre-defined property types. There were contractual issues about scheme managers claiming full payment for when they only actually ended up fitting one or two light bulbs or aerators, and generally a lack of what should have been, in Audit Wales's words, readily available management information. So, whilst I'm not privy to what that information is, it seems like there are issues there that need to be reviewed.

Jack, if you'd like to come in—I think Jane's having difficulties.

Again, I'm not privy to a great deal more information than Ben is around some of those contracting points raised by Audit Wales. I think that the data that would be really useful at the moment would be to have updated fuel poverty estimates. I think that that's something that we're really lacking, and I think a really important point is that, while the percentage of people who are supported through Nest who are registered as fuel poor, as Ben said, is around 50 per cent, I think it's really important to point out that the vast majority of the other 50 per cent are people who are on low incomes, who are vulnerable, who are likely in sections of society that, especially after these price rises, will be at even more risk of being in fuel poverty. I think we have to be careful to not suggest that, because the other 50 per cent of people that were supported through the Warm Homes programme weren't technically in fuel poverty at that moment, they weren't deserving of support, especially now that prices are rising as fast as they are.

So, having updated fuel poverty estimates would be really beneficial. Hopefully, we see those before the end of the consultation on the Warm Homes programme, and something that I'll get a chance to talk about when we're talking about the future scheme is a greater degree of hand holding and in-home support and in-home advice. It would be really useful to see the findings of the in-home advice pilot and to better understand which groups in society are at risk of being vulnerable to being in fuel poverty. There is a lot of academic work out there that looks at certain circumstances that households might be in—whether they're a single-parent household, whether they are able to claim benefits, whether they're an asylum seeker, et cetera—which put households at greater risk of being in fuel poverty. We have wondered whether the future scheme could look at expanding the health conditions pilot and how that operates, and use that information about who is at risk and who is vulnerable to look at less prescriptive eligibility criteria.

Jane, were you planning or wanting to come back? No. Okay. I just want to press you, Mr Wilkinson-Dix, because you were the central co-ordination point for the Nest scheme, and half owners in the 50:50 joint venture in Arbed. So, I'm just struggling to understand why you weren't able to have a better handle on some of the anomalies that are highlighted by the auditor general's report.

Well, because, really, the central co-ordinator for the Nest scheme is British Gas as the managing agent, and I understand that you are planning to speak to British Gas and they'll be able to talk to you in greater detail about Nest. As for Arbed, I can get back to you in writing. I wasn't involved in Arbed myself, or in delivery in general, but I'm more than happy to come back with more detail, more written evidence. 

Thank you. That would be extremely useful, because I think it's important that we learn from the past. 

Of course. 

Okay. Sioned Williams, would you like to come in at this point? 

Thank you for raising that, Sioned. As you say, the Welsh Government's tackling fuel poverty plan has three non-statutory targets, all to be achieved by 2035. And then, as you rightly say, there are no interim objectives, no interim targets against which progress can be measured in-between now and then. And that was a key omission, in our view, but also in the view of many other respondents to the consultation at that time, including the End Fuel Poverty Coalition Cymru, of which the Energy Saving Trust are a part, and the cross-party group on fuel poverty and energy efficiency, and, I think something, if I remember correctly, that the Welsh Government noted in its consultation outcome report that respondents had made quite a compelling case for. I think, put simply, to answer your question, non-statutory targets that were 15 years away, that spanned three Senedd terms, with no interim milestones, are quite unlikely to drive the sustained and necessary actions that are required to tackle fuel poverty in Wales. And I think also it's worth highlighting, for sure, that interim targets are actually a statutory requirement under the Warm Homes and Energy Conservation Act 2000 as well. 

The Welsh Government, to its credit, has since committed to the fuel poverty advisory panel that's been set up as one of the actions under that tackling fuel poverty plan, and that it will look to include interim targets as a matter of urgency, and I think it's something it's due to consult on after the publication of those updated fuel poverty projections that Jack referred to earlier, which are due in the spring. And helping upgrade, obviously, the energy efficiency of fuel-poor homes, especially for those worst affected first, those on the lowest incomes living in the least efficient homes, is directly in the control of the Welsh Government and needs to be a clear priority. So, for that reason, we and the End Fuel Poverty Coalition at the time, suggested that it was imperative that Welsh Government commits to an interim target that's based on and bakes in improving the energy efficiency of fuel-poor homes by a certain set date. So, I think we suggested that it should at least match the requirement in England to reach EPC band C by 2030; if not, EPC band A by 2030, as recommended by the Wales decarbonising homes advisory group in the Jofeh report. We also, at the time, suggested that they could bring forward the target to eliminate severe fuel poverty for those who'd be needing to spend more than 20 per cent of their income in order to adequately heat their home earlier to 2028. So, essentially, what we're asking for there is to embed the very welcome worst-first and fabric-first overarching policy goals into the actions and the targets that Welsh Government have set.

Thank you. Could we move to Ken Skates now? 

Thank you, Chair. We've asked this same question to a number of people who have given evidence, and it concerns the current programme and whether it reflects the needs of rural households that are fuel poor. What's your view on this? And do you think there should be specific support made available to meet the challenges of those who live in rural areas and suffer from fuel poverty? 

Who would you like to come in first? 

It's to both, but perhaps Jack first. 

Yes, of course. I suppose the first thing to say is that the existing programme does, in a roundabout way, seek to offer more funding to rural households, in that you can access a higher funding cap if you're in a home that is at a lower EPC band, and if it's off gas. Because rural properties tend to be of lower efficiency and are more likely to be off gas, some rural households are able to benefit from those higher caps. Obviously, that is a bit of a roundabout way of supporting rural households with higher funding. Going forwards, I think it's entirely possible to set up a scheme that has extra funding for rural households, that recognises that they are more difficult to treat, often, that they are unique properties, in many cases solid wall and off gas. I think that when we talk about in-home advice and more bespoke advice, it's these kinds of properties that would be benefiting from that kind of in-home advice, potentially.

And then, just finally—I believe that this has been brought up in previous sessions—a lot of the costs related to rural households are not actually the measures that are being installed; it's the fact that supply chains aren't as strong in rural areas. There is a lack of skills in some rural areas. And so there is a bigger piece around boosting skills right across Wales that will help to bring down costs in rural areas.

Building on from that, and then linking back to the previous answer as well around interim targets, the other benefit, of course, is that that that will give confidence to those supply chains that this investment will be available year in, year out, as Jack has just highlighted there.

I think, Ken, in answer to your question, just to take a step back as well, we at NEA really firmly and strongly support that worst-first, whole-house approach that was the original intention of the Warm Homes programme, to look at heat and look at the fabric of those homes. I think, from the way the programme has evolved, it seems that it's perhaps increasingly falling short of its original whole-house intended approach, and that's to the detriment of improving the energy efficiency or the fabric of those beneficiaries' homes, particularly in terms of Nest, but I think to some extent in terms of Arbed also. It's very clear from the Audit Wales reporting that both have relied very heavily on boiler replacements and central heating installations.

In Nest, I think we're talking something like 94 per cent in one year and then 95 per cent in 2020-21 of all measures were for central heating boiler replacements, leaving about 5 per cent for standard installation, of which that standard installation is made up of loft insulation and then something like 0.1 per cent of draught proofing. So, we're really talking to the detriment of other very meaningful fabric upgrades, like cavity wall insulation or solid-wall insulation—those measures that I alluded to at the very beginning that provide those really long-term meaningful benefits and a permanent solution to lower bills, by reducing the amount we need to heat that home in the first place by reducing their demand and making them much warmer for less. That's not only to the detriment across the programme as a whole, but I think that's particularly to the detriment of rural, off-gas households, particularly off-gas solid-wall households.

We know already that Wales has the largest proportion of inefficient solid-wall properties, with higher numbers in rural areas. I think the highest estimated percentage of fuel poverty in 2018 by the Welsh Government's most recent estimates were in central and western areas—Gwynedd at 23 per cent, Ceredigion at 21 per cent. That's compared to a national average of 12 per cent—obviously, figures that may well be much higher now. And many rural households, of course, are not connected to the mains gas grid and rely, often, on more expensive fuels like oil and LPG, which are already seeing significant rises in prices, and they don't benefit from the same protections as gas and electricity.

Then, when you add to that those compounding challenges of needing to purchase that fuel upfront, when you have to pay a premium to be able to travel, you've got digital exclusion or connectivity issues, and often social or spatial isolation, I think that really highlights—and this will go back to something the Climate Change, Environment and Rural Affairs Committee found in 2019 too—that that meaningful, tailored provision, aimed specifically at addressing the distinct challenge in rural areas, is really much required. And I think when you again look back at the 2019-20 figures, something like 0.5 per cent of off-gas measures that were installed through Nest were for insulation, which would suggest that fewer than 10 off-gas households received solid-wall insulation—fewer than 10—despite there being 65,000 off-gas solid-wall properties in fuel poverty at that time. So, that's what I mean when we come back to the judgment of the fabric upgrades and the specific challenges for rural areas.

I think one way from our perspective to ensure that rural, solid-wall properties receive the attention that they deserve and require is to put a solid-wall minimum in going forward, a little like what's found in ECO, as well as increasing those cost caps—making them more generous, as Jack alluded to—so that we can take this very important multimeasure, fabric-first approach, which, as I say, will invariably mean increasing the cost caps that are available and having a bespoke programme of support aimed at rural areas too.

Thanks, both; really, really intriguing answers. I'm going to just move on to talk specifically about Nest and the eligibility criteria for support. Do you think that the use of these EPC ratings and means-tested benefits is the right approach? Do you think that perhaps the Nest scheme's eligibility criteria has limited its impact?

Would you like me to go first?

Yes, please.

I think that when the Nest scheme was first conceived more than 10 years ago, at that time, means-tested benefits were a useful and workable proxy for people being in fuel poverty. At that point, about 68 per cent, I believe, of people who were in fuel poverty were on means-tested benefits. In the intervening years, that situation has changed so that now, around 70 per cent of people who are in fuel poverty are not on any means-tested benefits.

Clearly, whilst still being a useful thing to consider as part of eligibility criteria, it's obviously not telling us the whole picture any more. There are lots of people who, if we just look at means-tested benefits, will end up slipping through the cracks. Something that we would like to see, and I've sort of alluded to it and mentioned it already in my answers—. One of the great successes of the Nest scheme has been the health conditions pilot, and that's now accounting for about 25 per cent of all people who are supported through Nest with measures. That has allowed a greater flexibility of eligibility, so people with health conditions are now able to access the scheme at a slightly lower threshold than they would otherwise be able to.

Taking that model and applying it to other household circumstances that could mean they're at risk of being in fuel poverty would be really beneficial. I think that in general, a slightly less prescriptive approach would be beneficial, looking at an income threshold, but perhaps looking at what the purchasing power of a given household is, so considering how many dependents they have, what the local housing costs are, having it not be that there's a line in the sand and below that point you're not supported, above that point you are. I think that would be really useful, to just be more aware of the nuances and complexities that individual households have.

Thanks, Jack. Anything to add, Ben?

I think we would echo that very welcome expansion of the Nest scheme eligibility criteria beyond those just in receipt of means-tested benefits to also target those on a relatively low income, either because they then have a health condition that was exacerbated by the cold—a physical or mental health condition—or they're over the age of 75. And as Jack said—I think I've just heard him say it there—that accounts for 25 per cent of all referrals, and I believe in previous evidence to this committee, Warm Wales, for example, suggested perhaps that that actually accounts for a far higher proportion of the numbers of households they go on to support to access it.

I know it's been a very, very welcome development, and in our minds, we really support the Warm Homes programme's intentions to support those that are worst affected first, so those on the lowest incomes, living in the least efficient homes. We're really pleased to see that principle made explicit in the tackling fuel poverty plan, and it's also something that's been echoed in the net zero Wales plan also. For us, the next programme must focus on lifting households out of fuel poverty, supporting the worst first, as I've just described, and should be designed to include low-income households that are living in or at risk of fuel poverty, irrespective of whether they're on means-tested benefits. So, including those that are, and that includes those in and out of work, but also that relative low income, is something that's been very welcome indeed. 

I think I would probably conclude there, other than to perhaps say—. Sorry. Perhaps as part of the 2018 estimates, it is worth noting that the majority of those in fuel poverty at the time were not in receipt of means-tested benefits; something like 69 per cent. So, perhaps it's done a complete flip from what Jack mentioned at the beginning—did you say, Jack, something like 68 per cent at the beginning were on means-tested benefits, and we've gone to the opposite now, where about 69 per cent aren't?

Thanks, Ben. I'm just going to ask a question of Jack, if that's okay, and it's just regarding referrals experiencing barriers to receiving support from Nest, or having difficulty engaging fully. Is it monitored? Is it being monitored? What's your assessment?

As I mentioned, once someone has passed the initial eligibility check through the advice centre, British Gas then walk that household through the remainder of the process, through installation and post install. I'm not aware of what the monitoring is there. I can look to find out and write back, I just don't have that to hand at the moment. We've looked at the previous session and the evidence that was given, and I think that one thing that is really important to point out in the success of the Nest scheme is this partnership working and these referral pathways. The fact that we do have these relationships, not just with local authorities and with debt advice, but also with third sector organisations like Warm Wales, has been really beneficial. It means that there is support available for households that need more hand holding. Nest was not designed and was not set up to offer that hand-holding support. Some of it is able to be provided through that partnership working, but when we're thinking about what the future programme should look like, having that actually form part of the delivery programme would be really beneficial, so that you can support people from start to finish, post install as well, so that they have advice on how to use their home and their new heating system as well.

Actually, Jack, any further information that you might be able to extract would be really helpful regarding monitoring. And also confirmation of whether there's been an evaluation at all of the Nest helpline, and if so, what the findings are. I don't expect you to have that information to hand, but that would be very helpful.

In terms of people's customer satisfaction of the Nest advice line, it ranks in the mid to high 90s and has done for at least the last five years. In the Nest annual report, which was compiled by British Gas, they've got a customer satisfaction of 99 per cent, I think. Of course, those are people that have gone through the entire process, so there's potential there that people that have fallen out of the scheme haven't been able to maintain that engagement throughout. With a scheme of this scale, that is unfortunately going to happen in some instances. People aren't going to get the support that they perhaps needed and that we would like to see them have. That's definitely something that we need to—all of us, not just EST, but in general—ensure, that the next programme supports those people who are most vulnerable with that kind of hold-holding support. 

Okay. Thanks, Jack. Thanks, Ben. Back to you, Chair.

Thank you. Tom Giffard.

Thanks, Chair. Can I just ask about Arbed, which, obviously, ended in November, and what concerns, if any, you have about the gap between that scheme ending and any new scheme coming into place?

I can go first on this. We have and have had some concerns there. We understand and we're aware that, obviously, as you say, Arbed closed in November, and prior to that, I think it experienced some significant delays and underdelivery issues, meaning that, I think, significantly fewer households were supported than perhaps intended. We do, however, champion the merits of an area-based programme, and perhaps that's something that we can come to. But in terms of the gap, off the top of my head, which is dangerous, I think the planned capital investment in the Warm Homes programme going forward in Welsh Government's draft budget was about £100 million up to 2024-25. I think that was set at something like £30 million in the first year, £35 million and then £35 million again. It's £27 million this current year, or the year to come, so that's grown by £3 million, and then indicatively I think something like £8 million the year after. Perhaps that would appear to suggest that we haven't lost Arbed's contribution in terms of funding into the Warm Homes programme going forward, given that it's now closed, but, as I say, instead it's grown slightly. If that's true, that's welcome. But, clearly, that's not a doubling of investment, as per the recommendation and acknowledgment that the previous Minister made, as well as the future generations commissioner.

Anything from you, Jack?

Just to say that, clearly, having a gap in provision and not having an area-based scheme for this period of time is not ideal, especially with prices rising as high as they have and are expected to. What I would really make clear is that Nest is still operating and will continue to operate until the new scheme comes on line. And so any household that is struggling to pay their bills can access support through Nest and they absolutely should do if they are struggling.

I agree with everything that Ben said there. I just hope that we spend this next period of time, just over a year between now and the beginning of the next programme, thinking about how an area-based scheme can best work alongside a demand-led approach and be part of the next Warm Homes programme. We've got lots of things that we could be doing to the scheme to make it deliver for even more people. I definitely think that we're not alone in thinking that an area-based approach is worth while continuing.

Okay, thanks. And thinking about that replacement scheme or that next scheme, you've talked a little bit about the area-based approach, but if you want to elaborate at all on the advantages of having an area-based approach—. But what I really wanted to understand was whether the cost of enabling works should be factored into the next maintenance programme, so things like rewiring, redecorating, maintenance. And, secondly, ultimately what we're looking to do with these sorts of things is to go into people's homes and fiddle around with them, so what partners should we be engaging in order to get households to engage to do that, because it might be a bit of an undertaking? So, whoever wants to answer those.

I'll give that a stab, Tom, if that's okay, and then if I forget—because I'm keen to try to answer each of those questions, I think. In terms of the area-based approach, we put in our evidence, as you'll see—and we can perhaps refer to the merits of continuing with an area-based approach alongside a demand-led scheme—things like economies of scale, so having local installers being able to work street by street, rather than just pepper-potting different properties and areas, meaning the money can go further. The neighbourhood impacts of actually visibly seeing your next-door neighbour or somebody across the street from you taking up an upgrade and then you being encouraged to be able to do the same, as well as, obviously, putting more money back into people's pockets locally and that having more local economic benefits—.

In addition to that, I think something that's been coming out of conversations of late also is that it may well also help encourage local authorities to be able to leverage in their own funding to make improvements to social housing alongside a national demand-led scheme. So, I think, perhaps in answer to your question about the variety of partners that we should be looking to work with, it's imperative—and I think that this builds on something that Jack was saying earlier—that all of those individuals and organisations work very closely together, so local authorities, registered social landlords, who will also, of course, have been working on their own Welsh housing quality standard and potentially optimised retrofit programmes too, alongside the third sector and others.

And then I think your other part of the question related to rewiring and enabling works, which is something that we and others have flagged also. So, yes, in answer to that, we do think they should be routinely funded; I think that's a view that's shared by others too and was part of their submissions to the previous inquiry in 2019. Like you said, as an example, that could mean rewiring, because if the changes to a home mean that you sometimes have to do that for safety reasons, otherwise that's going to be prohibitive, you're essentially saying, 'You could have this, but you can't because you can't afford to rewire your home, and you can't do it if we can't rewire your home, so you can't have it', so you're just left, then, between a rock and a hard place. That also could well include servicing and maintenance, redecorating and paint work, or even just help to be able to clear your loft or your room or something that would otherwise be prohibitive.

And I understand that you've already received some kind of anecdotal evidence about issues around communication and proactive follow-up, where people have not known the installation date until they've done some of that work even if they have been able to do it, and then have sat there with their two-bed property, for example, with one of those bedrooms piled up in the other bedroom and then found that the installation is not going to be until six months' time or something and then left not knowing whether they need to then move that all back in again and move it out again, or not. So, I think, obviously, that's worth reflecting on, but absolutely, yes, we think that those things should be routinely funded too.

And then, for myself, I echo everything Ben said there about area-based schemes, the economies of scale and being able to have greater buy-in from local communities. Something that we have wondered whether it could be a useful addition to a future scheme would be having some kind of tapered grant or low-interest or low-cost financing for households that are in a target area that might not otherwise be eligible for a scheme, so that you could do a full terrace of houses. It wouldn't be the odd one left out because they wouldn't be eligible for the scheme, typically. So, that's something that we think will be worth considering.

On enabling works, we also, in our evidence to the Climate Change, Environment and Rural Affairs Committee, called for enabling works to be funded. I think that's so important, that that's not the barrier to people accessing support. It would be an awful state of affairs if someone who needs to have enabling works done to their property, enabling works that actually would improve their energy efficiency and the comfort of their home, in many cases, are not able to have that work done and so can't participate in the Warm Homes programme. So, that's really important. We hope that that will form part of the new scheme, and that is the signalling that we've been getting.

And then who to work with—I won't go over the people who Ben mentioned, but I think there could be something worth while in looking at local area energy planning. So, this work is ongoing at the moment, and identifying areas that could benefit from an area-based approach, as part of these local area energy plans, could be really beneficial. And so that work involves not just local authorities but utilities and distribution network operators and things as well. I think making it all stitched more coherently together would be really beneficial.

And one last one from me on this: when drawing up that successor scheme, do you think immediate need should be the thing that trumps everything else? And if so, how do you identify the definition of immediate need—what does immediate need mean? And you've both talked up the advantages, I guess, of an area-based approach. Would an immediate-need approach clash with that, or how do you deliver that in a way that it doesn't?

If I take that one, Ben. So, on the immediate need point, I think that there's a distinction to be made in terms of addressing the immediate energy efficiency improvement need and addressing immediate need more in general. So, Nest in particular—that's what I can talk most to—as you know, isn't really designed to offer immediate energy efficiency improvements; it's a centralised scheme. It does support people with energy efficiency improvements, but it isn't able to do that at the moment that someone calls. But what it is able to do is to tackle one of the other three pillars of fuel poverty, which is income. So, while Nest does involve installing measures, offering free measures, it also is really crucially about those benefit-entitlement checks, income maximisation, debt advice, signalling tariff switching to people. It's all of that stuff that tackles people's income and maximises their income immediately, while energy efficiency measures and a plan for installing energy efficiency measures are put into place. So, I think that that is a model that does work. I mean, I absolutely take the point that was made in a previous session, that there is great benefit in giving people low-cost but high-impact measures like draught-proofing, like heavy curtains. But for that to work for every household that contacts Nest, we need to really strengthen that partnership working so that local practitioners can support those households. Because as it currently exists, Nest is not geared up to deliver those kinds of measures immediately.

And then, in terms of whether an area-based scheme clashes with addressing the immediate need, I suppose, as I've just been saying, there's the income maximisation, which can address the immediate need. I think that it would be hard to conceive of an area-based scheme that could address immediate need through installing energy efficiency measures, because you do have to have that buy-in from the community, and the very last thing we'd want is for people to feel that they're having measures forced on them and their community. You have to get the buy-in.

Ben, you wanted to come in.

Yes. I think, just to build on that, from our point of view at NEA, the future programme should be accessible to all those who are in need of its support. I think we built on that earlier—you should ensure that measures require no financial contributions from fuel-poor households, routinely fund the cost of enabling works, and it should be promoted and delivered alongside independent holistic advice and support. And some of that touches on the immediate need, and I'm pleased to hear, as Jack just said, and we'd support, obviously, the importance of the advice provision that sits alongside that. So, that can be anything from, as Jack said, income maximisation through to how to use your heating system and controls. Obviously, the way that we heat and power our homes going forward may look quite different, the way that we even buy energy or use energy may be quite different, so that's going to become increasingly important. I think, as Jack said earlier too, that might well mean that we need to have that hand-holding and support available before the intervention to long after that intervention work has been carried out, and so too debt advice as well—fuel debt advice in particular.

Because of the current crisis, I'm afraid that we have a debt mountain looming and that an awful lot of households will be in either deeper arrears or in arrears with their supply. If energy prices continue to rise, then you are essentially faced with a stark choice of either falling into debt and heating your home, or not heating your home and going without, neither of which are nice choices, to say the least. There are specific protections and support that are available within industry that you wouldn't necessarily always be aware of as a generalist debt adviser, for example, so licence conditions that suppliers have to follow to take into account a household's circumstances and their ability to pay, and so those things are very important when negotiation negotiating for the repayment arrangements and the like. So, that's very important too. There's also the immediate need of emergency relief, currently, and we're really pleased to see the likes of the winter fuel support scheme developments that have also just come to pass and there's the discretionary assistance fund that now also helps to top up oil and LPG for off-gas rural households and for Gypsy and Travellers as well. So, it's very important that the scheme and anybody working on it are aware of all of those things, and take the opportunity to maximise that. But I would also just conclude by saying that improving the energy efficiency and fabric of people's homes is an immediate need. We have to start doing this.

Thank you very much indeed, Tom. Can I pass on to Sioned Williams now?

Sure. That's a very important question. The minimum standard of energy efficiency currently for a private rented sector property in England and Wales is an EPC band E. The UK Government has consulted on raising that minimum to an EPC band C, I think, by 2028. It would be earlier for new tenancies, it was proposed, and then all existing tenancies, as well as new tenancies, by 2028, with landlords having to spend a minimum of a yet to be determined-type amount to reach that standard. Though that is something they've consulted on; it's not something they've actually responded yet to. But such a change in standards would be a very positive step in ensuring that the private rented sector and landlords are adequately tackling fuel poverty, but I think, as always, with things like this and regulation, regulation is only ever part of the picture, and it's only ever as good, in some ways, as the enforcement that then sits alongside that, and that sits with local authorities, and so it's very, very important that local authorities, obviously, have the capacity to be able to then do so.

It's proportionate, we feel, that landlords have an incentive in this space, as well, to upgrade their properties. Correct me if I'm wrong, but I believe that the current Nest programme would also, obviously, enable those in privately rented accommodation to be able to have those upgrades at no cost, and that is quite an incentive and would continue to be quite an incentive if that were the case going forward, whereas the stick to this, if you like, is also the housing health and safety rating system that's also enforced by local authorities if they're able to do so. If they identify that a property has what I think is known as excess cold, if it doesn't have thermal insulation and the heating system to be able to become economically heated at reasonable temperatures, then if that category 1 excess cold hazard is identified, they are then duty-bound to enforce it and put that right, and the landlord would be liable for the full cost of those works—no exemptions, no cost caps, they'd be liable for the full cost of those works.

So, it's important, I think, that all of this is joined up so you've got a carrot and stick, if you like, in order to be able to make the most of this, and that, of course, then landlords are aware, under the licensing schemes, of what other wider assistance is available and other organisations that can support those tenants and so on and so forth.

Yes, of course. So, as Ben was saying, the stick is these minimum energy efficiency standards. We don't know at the moment how stringent those will be, what the ratcheting up will be and what the cost caps are going to be to meet those. So, these are all really significant unanswered questions at the moment because that will determine how much of an incentive or a stick it is for landlords.

Just picking up on Ben's point around the enforcement of standards, I think that's going to be where that policy of minimum energy efficiency standards either succeeds or fails. We have minimum standards for other aspects of renting, and those are not enforced very well anywhere. In our written evidence to this committee, we understand that the UK BEIS department have funded three local authorities to enforce minimum energy efficiency standards with a dedicated team, which is really positive, but obviously that's only positive for those local authorities; elsewhere, the standards are likely to be not being enforced to the same extent or not being enforced equally. So, there's an enforcement point.

In terms of the incentive for landlords, obviously there will be the cost caps. Something that operates in Scotland, which, as I say, we helped to deliver but has been really effective, is the Scottish interest-free loans for the private rented sector. So, this is an interest-free loan of up to £38,500, and that's split between energy efficiency measures, renewable generation and storage, and this is available for landlords who are registered and have passed various checks, and it's interest free as long as the landlord has fewer than six properties, but six or more and it's charged at 3.5 per cent interest, and it also is not available for second homes or holiday homes, and tenants have to be in properties or soon to be in properties to access it. So, currently that kind of scheme is not being considered, as far as I'm aware, by Welsh Government, but that has proven effective in Scotland.

And then, just something that came up at the end of last year that we thought was very interesting, and we haven't heard a great deal about it, and, again, we mention this in our written evidence, was the climate change Minister's announcement in the Siambr around the private sector leasing scheme, where the minimum energy efficiency standard uplift, energy efficiency and climate change were all mentioned in reference to this scheme, as being a supportive argument in favour of that scheme. The policy documents that accompanied that announcement didn't mention those considerations. So, it's an interesting programme; it will be interesting to see to what extent that is taken forward, because you can imagine that that could form something of a backstop for landlords that were unable or unwilling to improve their homes up to a minimum energy efficiency standard.

Thank you very much. Okay, I just want to finish up with a few slightly technical questions, but really important in how we shape the future programme. Before I ask you how we are going to identify these worst-first homes, I wonder if I can just ask you about the extent to which the EPCs and/or the environmental levies on electricity have influenced both Nest and Arbed's focus on these gas boiler replacements, given some of the work that's been done on behalf of BEIS to have a completely different approach to EPC certificates. Are you able to give us your views on that, please?

Yes. Shall I take that one first, Ben?

Yes. I'm happy for you to go first.

So, there are well understood and often talked about issues with EPCs and I know that, as part of the new Welsh housing quality standards, some of those are being considered at the moment because EPC A as a target is a challenge; it's very, very hard and potentially impossible to get to an EPC A just using energy efficiency measures—you have to have some kind of renewable generation. Now, that's obviously not possible for all houses because they live under a tree or their house doesn't face south, or whatever. So, there are challenges there, in terms of whether the ambition is for energy efficiency or whether it's a more holistic measure that's looking at renewable generation as well. So, some of this will be addressed when SAP calculations, which underpin EPCs, are updated, and the likelihood is that they will transition away from considering renewable generation and put more of an emphasis on low-carbon heating. But this is in the future. This isn't an imminent change. So, there are certainly challenges in using EPCs alone there.

I think you mentioned the levies placed on electricity. So, that is a real challenge that is really holding back the installation of low-carbon electric heating in general. So, the levies on electricity account for around 20 per cent of the electricity bill that we all pay. If these were moved off of electricity—and our view is that they should be moved on to general taxation, because this is more progressive than moving them on to gas—you would immediately see the cost of heat pumps and electricity for heating come right down, which would make them cost competitive with gas in almost all circumstances.

Even without levies, with gas prices as high as they are and expected to stay high, possibly for the medium term, it's already the case that, in many instances, in real heat-pump use and real gas use heat pumps are cheaper than many gas boilers. So, the Regulatory Assistance Project has just published some data on this, looking at the impact of the April price rise and not even considering the October price increase that we might see. So, it would be very beneficial to move levies off of electricity. It's something that the UK Government are committed to. But even without that happening, we're already seeing heat pumps being much more competitive in terms of running costs compared to gas boilers.

Okay, that's good news, but how did we get the EPC rating so wrong? Was it because we were all obsessed by cleaning up the electricity generation scheme of coal-fired powers stations? How come we didn't already know that gas was also loading the world with carbon?

I think the issue is that the EPC is a reflection of cost. It's designed to give an indication of costs, and so, with the energy system, the energy architecture that we had, and particularly when EPCs were first formulated, it didn't make a great deal of sense, in most instances, to install a heat pump without other energy efficiency measures. And so the EPC reflects that, whereas the overall cost for a household, obviously, comes down if you're selling electricity back to the grid by having solar panels installed.

Okay. All right. Ben, do you want to come in on this point?

Yes, sure, thank you, Jenny. I think, just to say, I'm not a technical expert in this space, by any means, but I think it is important just to come back to something Jack said there and the purpose of the energy performance certificate in the first instance because, as Jack said there, they're designed to include and provide an indication of how much it will cost to heat and provide hot water and lighting to your property. And that can be very useful—that estimated cost to households rather than the amount that you would use in kilowatt hours, which would be far less understandable and, ultimately, it's a comparison tool. So, in order to compare, you have to make some standardised assumptions, and it does so around occupancy and a heating pattern as an example.

So, it doesn't actually include the amount you use, but if it did, there would be some significant pitfalls, particularly for fuel-poor households, because—and I think this is the same reason why we at National Energy Action also had some strong concerns with Welsh Government's draft proposals as to how it may measure the future success of the programme going forward, about a reduction in kilowatt hours rather than an improvement in the energy efficiency of that property—firstly, fuel-poor households often ration their energy use, as we've said earlier, and go without heating to the detriment of their health and well-being. So, if your ambition is to reduce their consumption further, the perverse outcome there is that you could be encouraging households to reduce their consumption even further still, and that would have even more devastating consequences for their health and well-being. But secondly, even if that were not true, you could also still see some very positive outcomes being deemed a failure because, when you improve the energy efficiency of fuel-poor households' homes you don't always necessarily—you will sometimes, for sure, but you don't always necessarily—see a reduction in their consumption. I may have been spending x amount today underheating my home, but you have now made it, thankfully, much warmer and efficient for me, and I may still go on to spend x amount again today, but I now am able to adequately heat it. If that were then deemed a failure because you haven't achieved a reduction in consumption, that seems also to be quite unintended, so that's very important.

So I think, Jenny, you're very right to highlight those environmental levies, as Jack mentioned, and we too would support those moving into taxation—the legacy environmental levies—because that's perhaps where some of this can be fixed. Our view is that those legacy environmental levies should be moved into general taxation, as I say. I think, for clarity, we're talking here about the renewables obligation and the feed-in tariff. They're two environmental levies that are now the legacy ones, they're no longer live. There are a couple of other levies on bills, which are the Warm Home discount and the energy company obligation, but they are social levies and sometimes they all get mixed in to the same umbrella. So, if we're talking here about those environmental legacy levies—that's hard for me to say—in terms of the renewables obligation and the feed-in tariff, then we absolutely would support those moving to general taxation, and certainly not onto gas, which would just be adding even further costs to gas, which is already very high, and would obviously be to the detriment of fuel-poor households that may have to remain on it for some time.

Okay, but ultimately we're trying to eliminate fuel poverty and meet our net-zero targets, so how are we going to identify these worst-first homes that we need to prioritise, obviously? And how are we going to have a system in the new Warm Homes programme that will enable us not to produce these perverse incentives to get everybody having new gas boilers? Those who benefited, that is. But clearly there's something wrong with a programme where 96 per cent, in the last year for which statistics are available, were gas boilers. Who wants to go first on this?

I'm happy to start, if that's okay, Jack. Yes, I think from our perspective here, the key word here, I guess, is 'aligned', isn't it? We believe we should have a fuel poverty focused programme that's there to support those on the lowest incomes living in the least efficient homes, that's spent on a fabric-first basis. So, you upgrade the energy efficiency of those homes before, or at least at the same time as, replacing their heating systems, when it's viable to do so with low-carbon heating technology. But you're not risking potentially increasing their costs even further if you haven't improved the fabric of those homes. That's then delivered with all of the awareness raising and advice that we spoke about earlier, and is underpinned by good-quality installations and redress and so forth.

But a fuel poverty focused programme that's focused on lifting households out of fuel poverty with that worst-first approach, supporting those on the lowest incomes living in the least efficient homes to make their homes much warmer for less, would help us progress towards our decarbonisation targets, and there is no pathway to net zero that doesn't involve going through the homes of fuel-poor households. And so in it lies a critical opportunity to improve the lives of those households as we decarbonise and upgrade the energy efficiency of our existing housing stock. I think we said in our submission that warm and safe homes are both at the heart of tackling fuel poverty and of a fair, affordable, just transition to net zero, and if we don't do the upgrades, and we don't do clean heat, we'll fail at both.

So, what we wouldn't, though, support is potentially having a decarbonisation programme on the one side, as I believe it may have been proposed elsewhere, focused on decarbonising all homes, housing for everybody, potentially including fuel-poor households, and then kind of have a separate programme that tries to provide some additional advice and support to fuel-poor households over here that is quite disconnected. Because even if that first programme, the programme that is decarbonisation focused, included fuel-poor households and required them to make no financial contributions, even if it then went on to help others, even if they made the more able to pay contributions themselves, it doesn't prioritise those who need it the most, who need this now. It doesn't prioritise fuel-poor households living in the least efficient homes where these are destroying their lives and their experience of home. So, any support for others can't come at the expense of fuel-poor households, so that's why those two things need to be aligned, as we say, and that's why we reflected on that in our evidence with those principles, as we suggested.

Okay. I'll come back to you in a moment, but I'll leave you with the question I'm going to come back to, which is: are you in favour of, therefore, two programmes, or can we have both objectives in the same one, single programme? Jack.

So, before I get into the decarbonisation versus fuel poverty question, which is really important, I think there's just a point to be made about the principle view, which we support, that we shouldn't be installing any more fossil fuel gas boilers, which then, quite quickly, runs up against the practical reality of having a programme that is, rightfully, trying to support fuel-poor and vulnerable households, often at times of crisis. So, often when people engage with the Warm Homes programme, it's at a period of acute crisis; their boiler has broken down, they can't afford to repair or replace it, they just want to have their home be warm again. At that point, it is probably not in that household's best interest to then think about a whole-house retrofit plan for their property, install multiple measures, install low-carbon heat. This all take time. We've already mentioned that there are significant shortages in skills and tradespeople.

So, while we absolutely support the principle that we shouldn't be installing any more gas boilers, the reality is that, for lots of households that are engaging with the Warm Homes programme now, and likely in the future, what's in their best interest would be probably repairing their boiler, if that's possible, or replacing it in circumstances when it can't be repaired, and then that triggering a process whereby they engage with an adviser who walks them through what the pathway to creating a net-zero house looks like for them. And this comes back to increasing the caps and allowing people to dip into the fund more than once. They then have a pathway whereby they have heat in their home to deal with the initial crisis, but they also know that they can reduce their fuel costs in the medium term by installing energy efficiency, and they know that they can install low-carbon heat afterwards. 

So, that's where the challenge is in terms of people's engagement at periods of crisis. As to whether decarbonisation and fuel poverty are actually in opposition, we don't think that they are at all. We think that, as Ben has mentioned, there's no pathway to net zero that doesn't involve improving the homes of people who are in fuel poverty. The two ambitions are aligned and, actually, the fact that we need to improve the energy efficiency and insulation of all properties, regardless of their heating system, means that, actually, they're very closely aligned. This means, though, that we have to have high standards for the measures that we install, we have to make sure that when we do install low-carbon heating that those systems are sized correctly, installed correctly, that people know how to use them.

And then something that Ben mentioned as well—and it comes back to the question I think you wanted to ask about whether there should be one or two programmes—from our perspective, there needs to be one point of entry. There should be, ideally, a one-stop-shop style approach where people engage with a service, and whether they are supported through the fuel-poverty wing or through a decarbonisation wing, it happens behind the scenes and they're not having to decide where their household fits, that it needs to be made as smooth as possible for households to engage with the service. So, no, we're not supportive of having two separate policies—[Inaudible.]  

Okay. I'll come back to you in a minute on something, but, Ben, one programme or two? 

I think it's difficult to know what we're comparing here. So, in our view, we need a fuel-poverty-focused programme, and, if you have one point of entry and then there's a programme that prioritises those who need this help now, and they can either stick their hand up or they get joined up through a demand-led programme, or they get joined up as part of an area-based one, then they can then access that much needed and vital support to upgrade the energy efficiency of their home on a fabric-first basis at no cost to themselves and so on and so forth, with all the advice and assistance that we spoke about earlier, then that sounds to me like a fuel-poverty-focused programme that would also be meeting our climate change need and urgency and targets, but the key thing here is the prioritisation. The risk is, if you end up with one programme that's entirely focused on decarbonisation that just provides some support to fuel-poor households, that, when you go through the point of entry you don't then have to pay towards it because you meet the eligibility criteria, you are not prioritised, and you will not necessarily get that support now or in the coming years and you could well be left behind, but we need to get these households out in front.

So, the key thing here is that, if the Warm Homes programme is to have another iteration, it is a fuel poverty-focused programme that is aligned with our decarbonisation ambitions, and that's why we talk about fabric first, because, obviously, if, then, it's not viable yet to install a low-carbon heating option in their property, then, as Jack said, you may well have to repair their boiler, which is something that's not even possible under the Nest scheme currently, I don't believe—it's just being replaced. 

In some instances, yes, you may have to replace that or make sure you don't leave them without any heating, and, for others, it may well be able to accommodate those heating systems now as well, alongside those upgrades, and done at the same time. But the key thing here is the prioritisation, ensuring that there's dedicated, tailored and targeted support available to those who need it most.

Neither of you has mentioned, instead of repairing or replacing somebody's boiler in the first instance where, you know, it has broken down and, clearly, people need a heating system—. Why not go straight to the quite efficient electric heaters, electric radiators, that are now quite widely available, which, obviously, don't need a lot of installation? You shove them on the wall and plug them in. Clearly, it means you've got to take out the gas radiators and change the cooker, if they've got gas cookers, but why isn't that considered an option, rather than continuing to install the gas systems that we know we're going to need to eliminate?

I suppose for some households that could be an option. I'm certainly not an expert in the efficiencies of direct electric heating, but, I think, given that the costs are different between gas and electricity, there is a risk that you could end up having a household paying more to heat their home using those kinds of electric heaters, but Ben may know more on this than me.

Okay. Okay, so, moving to the really important question, which is how do we develop the skilled workforce that we need for this really massive task (a) on insulating the fabric of people's homes and (b) on understanding and correctly installing the heat pumps of the future, as well as the solar panels—instead of roof tiles, solar panels in the appropriate south-facing households et cetera, how do you think we're going to do that? Is the optimised retrofit programme that is being undertaken in social housing going to deliver for us there, or do we need something in addition to that?

I think that the optimised retrofit programme will tell us some really useful things about the optimised retrofit pathways that certain households will need to take, and it's really beneficial that it's engaging with small and medium-sized enterprises and is looking to improve skills. We haven't seen a great deal of information about how that's progressing and what the impacts have been so far, and it'll be really interesting to see that. 

I think that, given the scale of the challenge, we need to be doing more. It would be brilliant to see retrofit courses being offered in all of the colleges around Wales, with people understanding that this is a well-paid, secure job that is helping to decarbonise and make homes across Wales better. I think that there's a real just lack of knowledge, let alone understanding, about what is needed and the jobs that are needed, and that this is a great opportunity.

Likewise, I think that we need to be thinking about how we reskill the existing workforce. We have a lot of gas boiler engineers in Wales who will end up, in all likelihood, not installing gas boilers by the end of their careers, and so we should be being honest and proactive, and thinking about what does reskilling and retraining look like.

Ben.

One thing that we could, perhaps, add to that, and it comes back to a question that I think Ken asked, about the conversation that we had around interim targets, is that it's also about the confidence that those supply chains and industry need. So, as we said, that is another benefit of having those interim targets, but it's also the benefit, we feel, of, actually, the Warm Homes programme going forward also being a statutory scheme as it is now, rather than one that may be entirely discretionary, like the optimised retrofit programme or the discretionary assistance fund that Welsh Government currently offer. 

The final question in Welsh Government's current consultation into the Warmer Homes programme asks whether you think the programme should be set out in regulations, or if it can simply be supported by scheme guidance. And I think, currently, the Home Energy Efficiency Schemes (Wales) Regulations 2011 set in place the arrangements for the current programme. And that will need to be amended for the future one, and I guess Welsh Government are perhaps wondering as to whether those regulations could be repealed in their entirety, with the next iteration, as we say, being delivered as an entirely discretionary Welsh Government-funded one.

But we strongly believe that it should be a statutory scheme that's set out in legislation. And, yes, that could be less prescriptive, so you could include—. More of the technical details, perhaps, relating to some of the measures that are available, could be stated in guidance issued by the Minister, which would allow for that greater flexibility, Chair, to include new technologies and low-carbon heat options as they become more viable. But Welsh Government should put that programme into legislation, because that would give the confidence to households that this will be available year-in and year-out over the next five to 10 years, or whatever the duration of that programme might be. It would give confidence to all of those national, regional and local organisations and partners like ourselves, the Energy Savings Trust, Citizens Advice, Warm Wales and others, who are all working on this programme to provide advice and support and signpost and help people through that, and to industry and the Welsh supply chain. So, I think perhaps that's something that's worth reflecting on in the context of that question too.

Okay. Thank you very much indeed. Jack, is there anything you wanted to add, or is—? I think we've pretty much covered this point. Is that right as far as you're concerned?

Nothing further to add. Just to clarify an earlier point I made, we agree that the priority should be on supporting fuel-poor households, and that, if there were a scheme that was also focused on decarbonisation, funding should be ring-fenced for supporting low-income vulnerable or fuel-poor households. I just wanted to make that point clear. 

Very good. Thank you very much, both of you, for your contributions. Jack, we'll write to you with some of the additional information that it would be really useful for us to have, and we will also be seeking to get some evidence from British Gas. We will send you a transcript of both your contributions, so please look at what you have said to make sure that we have captured it accurately, and let us know if there's anything that needs to be changed. Thank you very much for your time this afternoon. Thank you. 

Thank you, Chair, for your inquiry.

Thank you.

We have 10 items of papers of note. Is there anything anybody wants to raise in public session before we move into private session? I take that as a no. Nothing further to add on those papers. 

We will now move into private session and have the rest of the meeting in private.