Energy Bill [HL]

Amendments 13 to 16 all deal with the financial terms of Green Deal plans. However, before I address the amendments, let me put on record that the Consumer Credit Act applies to the Green Deal plans in full bar a few essential amendments in the Bill in Clauses 23 to 27. This provides a high starting point for consumer protection. Clause 5 gives the Secretary of State power through regulation to put additional protections into the Green Deal regime. Amendments 14 and 16 are closely related to the Consumer Credit Act. Amendment 14 seeks to apply one specific aspect of the CCA: the presentation of the terms of the plan. This means that Green Deal providers would need to set out the total credit payable, the amount of the regular payments, and the annual percentage rate—APR—calculated in accordance with the rules. However, it is not necessary to include the amendment, as the relevant legislation already applies in full to Green Deal arrangements for consumers. The purpose of Amendment 16 is to remove the ability to set out, in secondary regulations, how the fee for early repayment should be calculated. The effect of the amendment would be that no provisions about early repayment fees could be set out in regulations for Green Deal plans. Domestic Green Deals would be subject to an early repayment rule, which would be set out in the Consumer Credit Act. However, business Green Deal providers are not subject to any existing regulations on early repayment fees. This amendment would remove Government’s ability to set out regulations limiting the fees that can be charged. This means that the business Green Deal providers could be free to determine their own fees for early repayment of the Green Deal and could lead to inappropriately high fees being charged. For small businesses in particular, that could be a concern when signing up for the Green Deal. I therefore respectfully request that the noble Lord withdraw the amendment to allow us to put in place in secondary legislation the appropriate protections for businesses taking out Green Deal plans. Amendments 13 and 15 go further than the Consumer Credit Act in seeking to limit the range of repayment structures allowable under the Green Deal. Amendment 13 proposes a general power to regulate through a prescribed methodology so that Green Deal plans only offer repayment structures that are equitable to both initial and subsequent bill payers. Amendment 15 would specifically prohibit any form of variable interest rate. Clause 5 already provides sufficient powers to restrict the permissible terms of the plan in the framework regulations. As part of these conditions, we will seek to ensure that initial benefits for the improver do not turn into a burden for future bill payers. That could include specifying a particular methodology for assessing whether a proposed structure is equitable or prohibiting all structures save those that are specifically approved. We already accept the purpose of Amendment 13: to ensure there is power to regulate the terms of the Green Deal plan and give both initial and subsequent bill payers confidence that the likely savings will be greater than the cost. The noble Lord, Lord Whitty, doubts whether Amendment 15 is appropriate, but I will speak to it none the less. Amendment 15 is more specific, prohibiting in primary legislation any terms that vary the rate of interest. It may be that in order to protect consumer confidence, we decide in the framework regulation to authorise only fixed-rate deals. However, it is not straightforwardly obvious that this is the only equitable financial structure for customers. Some variable structures may be in consumers’ best interests. First, we wish to ensure the lowest finance cost for consumers—a concern of the noble Lord, Lord Dixon-Smith. That means ensuring that financial institutions want to invest in Green Deal. As several large pension schemes demand an index-linked payment structure, we wish to explore further whether it would be reasonable to allow Green Deal payments to vary with an appropriate index. We would not allow this if we believed it would compromise confidence, but we do not believe that we should rule this out in primary legislation. Secondly, it may be that a structure whereby the cost of finance rises as prices rise is fairer to the initial bill payer, since it would spread the real savings more evenly over the lifetime of the Green Deal. We intend to consult a range of stakeholders on permissible financial terms and will set them out further in framework regulations. As the Green Deal is a market-based mechanism, the Government are keen not to rule out options for finance providers unless necessary to ensure consumer protection. Equally it is not straightforward to ensure an equitable balance of payments between the initial and subsequent bill payers. I hope that this explains the situation and that on that basis the noble Lord will withdraw his amendment.