Session 2008/2009

Fifth Report

Public Accounts Committee

Report on Warm Homes:
Tackling Fuel Poverty

Together with the Minutes of Proceedings of the committee
relating to the report and the minutes of evidence

Ordered by The Public Accounts Committee to be printed 27 November 2008
Report: 18/08/09R (Public Accounts Committee)

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Membership of Powers

The Public Accounts Committee is a Standing Committee established in accordance with Standing Orders under Section 60(3) of the Northern Ireland Act 1998. It is the statutory function of the Public Accounts Committee to consider the accounts and reports of the Comptroller and Auditor General laid before the Assembly.

The Public Accounts Committee is appointed under Assembly Standing Order No. 51 of the Standing Orders for the Northern Ireland Assembly. It has the power to send for persons, papers and records and to report from time to time. Neither the Chairperson nor Deputy Chairperson of the Committee shall be a member of the same political party as the Minister of Finance and Personnel or of any junior minister appointed to the Department of Finance and Personnel.

The Committee has 11 members including a Chairperson and Deputy Chairperson and a quorum of 5.

The membership of the Committee since 9 May 2007 has been as follows:

Mr Paul Maskey*** (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Thomas Burns**
Mr Trevor Lunn
Mr Jonathan Craig
Mr Jim Wells*
Mr John Dallat
Mr Mitchel McLaughlin
Mr George Robinson****
Ms Dawn Purvis
Mr Jim Shannon*****

* Mr Mickey Brady replaced Mr Willie Clarke on 1 October 2007
* Mr Ian McCrea replaced Mr Mickey Brady on 21 January 2008
* Mr Jim Wells replaced Mr Ian McCrea on 26 May 2008
** Mr Thomas Burns replaced Mr Patsy McGlone on 4 March 2008
*** Mr Paul Maskey replaced Mr John O’Dowd on 20 May 2008
**** Mr George Robinson replaced Mr Simon Hamilton on 15 September 2008
***** Mr Jim Shannon replaced Mr David Hilditch on 15 September 2008

List of abbreviations used in the Report

List of Abbreviations used in the Report

The Warm Homes Scheme - the Scheme

The Department/DSD - Department for Social Development

NIE - Northern Ireland Electricity

NIHE - Northern Ireland Housing Executive

C&AG - Comptroller and Auditor General

OFMDFM - Office of the First Minister and deputy First Minister

DFP - Department of Finance and Personnel

NIAO - Northern Ireland Audit Office

GB - Great Britain

DARD - Department of Agriculture and Rural Development

Executive Summary

Introduction

1. Fuel poverty is the inability to heat a home to an acceptable level for reasons of cost. A household is in fuel poverty if, in order to maintain an acceptable level of temperature throughout the home, the occupants would have to spend more than 10% of their income on all household fuel use.

2. The Warm Homes Scheme (the Scheme), established by the Department in July 2001, provides a range of home insulation measures to vulnerable households in the owner occupied and private rented sectors. Warm Homes Plus, an extension of the Scheme, provides for new heating systems as well as insulation measures to qualifying householders aged over 60 years old.

3. The Scheme is seen as the primary tool for eliminating fuel poverty amongst vulnerable owner-occupiers and private rented households by 2010, a target set in the 2004 Fuel Poverty Strategy. However, without a significant revision to the Scheme and a concerted effort by departments, the energy companies, and the regulator, it is unlikely that this target will be met. The result is that many, including some of the most vulnerable in our society, will continue to experience fuel poverty and be left to make the choice between “heat or eat”.

The extent of fuel poverty in Northern Ireland

4. Northern Ireland has the highest levels of fuel poverty in the UK. The Northern Ireland House Condition Survey 2006 records 34% of households in fuel poverty, compared with 11.5% of households in England, 27.5% in Scotland and 20% in Wales. Recent increases in fuel prices have exacerbated the problem and drawn even more households into fuel poverty: the Department suggested that perhaps 40% of all households in Northern Ireland are now fuel poor.

5. The Department has no established means of identifying individual households in fuel poverty. The Department accepts that more needs to be done to measure the impact of the Scheme. This may require a fuel poverty indicator tool for Northern Ireland, similar to that developed by the Centre for Sustainable Energy and the University of Bristol in England.

6. The Committee recognises the positive contribution made by the Scheme. Warm Homes has provided important assistance to more than 60,000 vulnerable households to help improve home energy efficiency. Without Warm Homes, the Department estimates that 53% of households would now be in fuel poverty.

7. Nevertheless, given the rise in fuel poverty, achieving the Department’s target of eliminating fuel poverty in vulnerable households by 2010 now appears impossible. It is clear that the Scheme needs to be revised to deliver a clearer focus on the strategic objective of eliminating fuel poverty. Previous opportunities to evaluate the success of Warm Homes as a policy instrument and to implement changes as a result, were not taken. This is despite the existence of considerable guidance emphasising the importance of policy/programme evaluation.

8. Warm Homes has benefited from £11 million of funding from the energy efficiency levy raised by NIE. However, that contribution will reduce in 2009-10 and cease altogether in 2010-11. The Committee considers that the current funding situation illustrates the limitations of Warm Homes as a policy instrument. As an energy efficiency scheme, the Scheme can only address one of the causes of fuel poverty, even if unlimited resources are made available. Without tackling household incomes or fuel prices, Warm Homes cannot be wholly effective. The Committee considers that there is a need for a range of fuel poverty measures across government departments to which the energy companies should make their full contribution, and which should involve other stakeholders such as the regulator. In particular, there is a need to involve the oil industry in action to address fuel poverty.

Targeting Warm Homes’ measures to assist the fuel poor

9. Warm Homes is a popular scheme and is valued greatly by those it helps. However, the Scheme’s eligibility criteria mean that assistance is not always provided to those who need it most. Including non-means tested benefits amongst the eligibility criteria risks providing help to households which are not necessarily fuel poor. Conversely, the Scheme currently excludes those in work but receiving low pay, who are likely to be fuel poor. The Committee welcomes the Department’s proposed changes to the eligibility criteria to ensure that grants are better targeted.

10. The Committee expects the Department to consider a wide range of approaches to ensure the greatest possible access to the Scheme. The extension of benefit health checks to all applicants and targeting assistance to those on low incomes could help to concentrate support on those most in need. The Committee believes that the Department should explore the scope to work further with advice centres, the voluntary and community sector and other information outlets to assess benefit entitlement and promote benefit take up.

11. Warm Zones in England provides an excellent example of an innovative, area based approach to tackling fuel poverty. There is scope for the Department to learn from the outcomes of area based pilots in Northern Ireland and from the Warm Zones approach in Great Britain.

Energy efficiency measures

12. Warm Homes should provide effective measures to lift homes out of fuel poverty. However, grants are not directed towards the least energy efficient homes where the greatest impact can be achieved. The Committee welcomes the Department’s proposal to target assistance to homes that are less energy efficient in the revised scheme. The Department’s proposal to make heating systems available to all applicants, rather than solely to the over 65s as at present, is also a positive step.

13. The Committee is keen to ensure that the fuel poor in rural areas are not neglected. Almost half (43%) of households in rural areas are in fuel poverty. There is clearly scope to more closely match expenditure to need. The Committee welcomes the proposal to introduce a target within Warm Homes for grants provided to rural areas.

Management of the Warm Homes Scheme

14. The Committee considers that the Department failed in its responsibility to manage the Warm Homes Scheme effectively. The Department informed the Committee that it intended to retain overall responsibility for policy but transfer administration of the Scheme contract to the Northern Ireland Housing Executive (NIHE) from 1 April 2009.

15. The Committee is unconvinced by the use of ‘harmonised prices’, essentially setting contract prices at the average tender price. The Committee is alarmed at the escalating costs of heating systems over the period of the Scheme which had increased by some 60% to 80%, and were one-third higher than in a similar scheme in England (Warm Front). The Committee notes the Department’s explanation of the difference in costs between the two schemes, but in the absence of any obvious competitive tensions in the procurement process is concerned at the escalating costs the Warm Homes Scheme.

16. The Committee is disappointed at the Department’s view that long running failings to deliver installations to the required specification and within target times were regrettable, but not regarded as significant failures in performance. The Department informed the Committee that it had sought a collaborative approach to improve installations quality, but that it was caught in the middle between NIHE, its independent quality assessor, and Eaga. The Committee does not accept this excuse – it was the Department’s responsibility to manage the contract and it is ultimately accountable for the Scheme’s performance.

17. Target times for installations, which appear generous, were routinely missed – 2 out of 3 heating installations were not provided within the target time of 126 working days (effectively, 6 months) from referral. The Committee welcomed the reduction in the waiting list for heating systems from some 6,500 to the current level of 4,500 and the aim of reducing this to 2,200 by the end of the year.

18. The Department’s contract provision, which allows for some recovery of Eaga’s management fees where they exceed 15% of contract value, goes some way to demonstrating due diligence over public funds. However, the Committee is disappointed that the Department failed to obtain the annual accounts from Eaga to allow it to assess if recovery was appropriate. The Department has now confirmed it has obtained the independently audited accounts and assures the Committee that it has no entitlement to ‘clawback’.

Summary of Recommendations

The extent of fuel poverty in Northern Ireland

1. The Department’s review of the Warm Homes Scheme must focus on the strategic objective of eliminating fuel poverty amongst vulnerable households. In this respect the Committee recommends the development a fuel poverty indicator tool to identify households in fuel poverty and the collection of performance information to measure the Warm Homes Scheme’s impact. (See paragraph 11).

2. The principle of policy evaluation is now well established in the public sector. It is essential that Departments comply with the established guidance to ensure the full benefits of policies/programmes are realised. The Committee recommends that the Department of Finance and Personnel should have an oversight role in ensuring departmental compliance. (See paragraph 13).

3. The Committee recommends that the Department works closely with other departments, agencies, the regulator and energy companies (including serious consideration of whether the oil industry should be regulated) to address the causes of fuel poverty and alleviate its effects, particularly upon vulnerable households. (See paragraph 17).

Targeting Warm Homes’ measures to assist the fuel poor

4. The Committee welcomes the Department’s intention to review the eligibility criteria and how the Scheme can be better targeted. However, the Committee recommends that this is completed quickly and improvements implemented without delay. (See paragraph 20).

5. The Committee recommends that the Department explores the scope to work further with advice centres, the voluntary and community sector and other information outlets to assess benefit entitlement and promote benefit take up. (See paragraph 22).

6. The Committee recommends that the Department revisits the area based pilots in Northern Ireland and, together with the lessons emerging from the Warm Zones approach in Great Britain, develops action plans to tackle fuel poverty in conjunction with the local communities. (See paragraph 24).

Energy efficiency measures

7. Extending the availability of heating systems and setting a target household energy efficiency rating for homes assisted would help focus resources more effectively. The Committee considers it is important that this is done in such a way that does not disadvantage those most in need such as the elderly, households with young children and the rural fuel poor. (See paragraph 30).

Management of the Warm Homes Scheme

8. The Committee welcomes the Department’s assurance that proper contract administration can be achieved at no extra cost. However, the Committee recommends a more robust monitoring and evaluation regime than has so far been displayed. Irrespective of which body administers the contract, the Department must ensure that value for money is being achieved, and that the contract terms are being adhered to. (See paragraph 33).

9. The Committee recommends that the Department uses the re-tendering of the new scheme to take Central Procurement Directorate advice and satisfy itself that appropriate arrangements and procedures are in place to deliver value for money. The Committee looks forward to seeing a more robust management of the various costs of the Scheme throughout the new contract period, while maintaining appropriate specifications and standards of installations. (See paragraph 37).

10. The Committee recommends that, in tendering for the new Scheme, the Department ensures that works specifications, and wider best practice, are appropriately defined and understood by all concerned. Arrangements for dispute resolution and penalties for failure to comply with the requirements should be established. The Committee is adamant that public funds should not be paid for substandard work. (See paragraph 41).

11. The Committee recommends that the Department reviews the capacity of the Scheme to deliver to an acceptable timetable, from application to household survey to installation of the measures. The Department’s consultations and tendering on the new Scheme should inform this. (See paragraph 43).

12. The Committee recommends that clawback clauses can be advantageous. However, the Committee requires that where contract clauses provide for the clawback of public funds, these are monitored properly and appropriate action taken. Any lesser standard does not demonstrate the imperative of protecting public funds. (See paragraph 46).

Introduction

1. The Public Accounts Committee met on 23 October 2008 to consider the Comptroller and Auditor General’s (C&AG’s) report “Warm Homes: Tackling Fuel Poverty”.

2. The witnesses were:

Mr Alan Shannon, Accounting Officer, Department for Social Development (DSD).
Ms Heather Cousins, Director of Housing, DSD.
Mr Stephen Martin, Head of Housing Research and Legislation Branch, DSD.
Mr Richard Rogers, Managing Director, Eaga plc.
Ms Fiona Hamill, Deputy Treasury Officer of Accounts.
Mr Kieran Donnelly, Deputy Comptroller and Auditor General.

3. Fuel poverty is the inability to heat a home to an acceptable level for reasons of cost. A household is in fuel poverty if, in order to maintain an acceptable level of temperature throughout the home, the occupants would have to spend more than 10% of their income on all household fuel use. Fuel poverty is a function of three distinct features: household income; energy prices; and the energy efficiency of the home.

4. The Warm Homes Scheme (the Scheme), established by the Department in July 2001, provides a range of home insulation measures to vulnerable households in the owner occupied and private rented sectors. A vulnerable household is one where residents are on specific benefits: who have a disability; are over 60 years old; or who have children. Warm Homes Plus, an extension of Warm Homes, provides for new heating systems as well as insulation measures to qualifying householders aged over 60 years old.

5. The Scheme is seen as the primary tool for eliminating fuel poverty amongst vulnerable owner-occupiers and private rented households by 2010, a target set in the 2004 Fuel Poverty Strategy. By 31 March 2008, £109 million had been spent on the Scheme: £98 million of public money and £11 million from the NIE energy efficiency levy. Despite this, fuel poverty has increased from 27% of households in 2001 to 34% in 2006.

6. In taking evidence on the C&AG’s report, the Committee focused on four main issues. These were:

the extent of fuel poverty in Northern Ireland;
the targeting of Warm Homes’ measures to assist the fuel poor;
the impact on energy efficiency of Warm Homes’ measures; and
the management of the Warm Homes Scheme.

The extent of fuel poverty in Northern Ireland

7. Northern Ireland has the highest levels of fuel poverty in the UK. The Northern Ireland House Condition Survey 2006 records 34% of households (almost half of which are in rural areas) in fuel poverty, compared with 11.5% of households in England, 27.5% in Scotland and 20% in Wales. Recent increases in fuel prices and rising unemployment have exacerbated the problem and drawn even more households into fuel poverty. However, without more scientific information it is difficult to know how many households in Northern Ireland currently are in fuel poverty. The Department has suggested that perhaps 40% are fuel poor but even this figure could be an underestimate.

8. The Department has no established means to identify individual households in fuel poverty, relying instead upon the data provided periodically by the Northern Ireland House Condition Survey. The Department accepts that more needs to be done to measure the impact of the Scheme. This may require a fuel poverty indicator tool for Northern Ireland, similar to that developed by the Centre for Sustainable Energy and the University of Bristol in England.

9. The Committee recognises the positive contribution made by the Scheme. Warm Homes has provided important assistance to more than 60,000 vulnerable households to help improve home energy efficiency. The Department’s research indicates that the Scheme has delivered £250 million in direct and indirect benefits in its lifetime. This includes savings on household energy bills over the period of £50 million. An additional £4 million a year is being paid out in benefits as a result of the benefit entitlement check. Without Warm Homes, the Department estimates that 53% of households would now be in fuel poverty.

10. Nevertheless, given the rise in fuel poverty, achieving the Department’s target of eliminating fuel poverty in vulnerable households by 2010 now appears impossible. It is clear that the Scheme needs to be revised to deliver a clearer focus on the strategic objective of eliminating fuel poverty. The Committee welcomes the Department’s intention to use a revised Warm Homes Scheme to gather more information on energy efficiency and fuel poverty in individual households. This information should be used to measure directly the Scheme’s impact in eliminating fuel poverty.

Recommendation 1

11. The Department’s review of the Warm Homes Scheme must focus on the strategic objective of eliminating fuel poverty amongst vulnerable households. In this respect the Committee recommends the development of a fuel poverty indicator tool to identify households in fuel poverty and the collection of performance information to measure the Warm Homes Scheme’s impact .

12. The Committee is concerned that previous opportunities to evaluate the success of Warm Homes as a policy instrument and to implement changes as a result, were not taken. This is despite the existence of considerable guidance emphasising the importance of policy/programme evaluation contained within the ‘Northern Ireland Practical Guide to the Green Book’, produced by DFP, and guidance issued by the Office of the First Minister and deputy First Minister (OFMDFM). The Committee notes the Department’s view that the Scheme was on course to achieve its target in the early years and that the target was derailed by the steep rises in energy prices from 2006 onwards. However, the fact remains that many of the Scheme’s failings were self-evident and it should not have taken an NIAO report or Public Accounts Committee hearing to effect necessary and overdue changes. A number of important issues were identified by the Department’s internal review of Warm Homes in 2004, but not addressed subsequently.

Recommendation 2

13. The principle of policy evaluation is now well established in the public sector. It is essential that Departments comply with the established guidance to ensure that the full benefits of policies/programmes are realised. The Committee recommends that the Department of Finance and Personnel (DFP) should have an oversight role in ensuring departmental compliance.

14. Warm Homes has benefited from £11 million of funding from the energy efficiency levy raised by NIE. However, that contribution will reduce in 2009-10 and cease altogether in 2010-11. The Committee urges the Department to ensure that this does not adversely impact upon its efforts to tackle fuel poverty. There are a number of proposals to make good this loss: by introducing a customer contribution to the costs of household energy improvements; by securing other sources of third party funding; or by increasing the maximum grant to cover the rising costs of energy efficiency measures.

15. The Committee considers that the current funding situation illustrates the limitations of Warm Homes as a policy instrument. As an energy efficiency scheme, the Scheme can only address one of the causes of fuel poverty, even if unlimited resources are made available. Without tackling household incomes or fuel prices, Warm Homes cannot be wholly effective. Tackling fuel poverty requires a joined up approach. A range of approaches have been established since 2004, including widening the energy market, increasing household incomes through improved benefit uptake and reducing economic inactivity. However, it is clear that these have not, so far, been successful in reducing fuel poverty. The Committee considers that there is a need for a range of fuel poverty measures across government departments to which the energy companies should make their full contribution, and which should involve other stakeholders such as the regulator. In particular, there is a need to involve the oil industry in action to address fuel poverty. An estimated 70% of homes use oil, yet the oil industry is unregulated and makes no contribution to the energy efficiency levy.

16. Government must take a joined up approach to eliminating fuel poverty. There is already considerable machinery in place, in the shape of the Inter-Departmental Group, the Fuel Poverty Advisory Group and the Fuel Poverty Task Force. The challenge is to deliver real improvement. This will require a coordinated approach between the Department, the Department of Enterprise, Trade and Investment and the regulator. Similarly, concerted pressure must be brought to bear on energy companies to reduce their tariffs in response to recent falls in the cost of oil.

Recommendation 3

17. The Committee recommends that the Department works closely with other departments, agencies, the regulator and energy companies (including serious consideration of whether the oil industry should be regulated) to address the causes of fuel poverty and alleviate its effects, particularly upon vulnerable households.

Targeting Warm Homes’measures to assist the fuel poor

18. Warm Homes is a popular scheme and is valued greatly by those it helps. However, the Scheme’s eligibility criteria mean that assistance is not always provided to those who need it most. Including non-means tested benefits such as Disability Living Allowance and Attendance Allowance amongst the eligibility criteria risks providing help to households which are not necessarily fuel poor. Conversely, the Scheme currently excludes those in work but receiving low pay, who are likely to be fuel poor and as such, it is something of a blunt instrument in targeting fuel poverty.

19. The Department has stated some of the complexities and the downside of means testing, but it is not defensible that assistance is provided to some households that are not fuel poor while others in need - such as the working fuel poor - are excluded. The Committee recognises that other sources of assistance exist - the Department will contribute £1 million to the Fuel Poverty Partnership Fund in 2008-09 to help groups including the working fuel poor - but these are clearly not sufficient to meet the needs of all those falling outside Warm Homes’ criteria, who may represent as much as 35% of the fuel poor. The Committee welcomes the Department’s proposed changes to the eligibility criteria to ensure that grants are better targeted. Those receiving Disability Living Allowance or Attendance Allowance plus a means tested benefit will qualify for assistance and the highest level of Working Tax Credit will also be included as a passport benefit to the Scheme.

Recommendation 4

20. The Committee welcomes the Department’s intention to review the eligibility criteria and how the Scheme can be better targeted. However, the Committee recommends that this is completed quickly and improvements implemented without delay.

21. The Committee expects the Department to consider a wide range of approaches to ensure the greatest possible access to the Scheme. Current marketing is effective in generating enquiries, but the eligibility criteria exclude some fuel poor. The extension of benefit health checks to all applicants and targeting assistance to those on low incomes could help to concentrate support on those most in need. The Department must ensure that these and other initiatives such as A2B, a web-based Access to Benefits scheme, aimed at maximising benefit take up, will work in practice. To this end the Committee believes that the Department should explore the scope to work further with advice centres, the voluntary and community sector and other information outlets to assess benefit entitlement and promote benefit take up. The Committee is keen that the elderly should remain a priority group for help under Warm Homes.

Recommendation 5

22. The Committee recommends that the Department explores the scope to work further with advice centres, the voluntary and community sector and other information outlets to assess benefit entitlement and promote benefit take up.

23. Warm Zones in England provides an excellent example of an innovative, area based approach to tackling fuel poverty, which is similar to pilots originally carried out in Northern Ireland. The Department’s evaluation of the Beechmount pilot was a positive one. However, the Committee is concerned that the Department did not act on the lessons learned. There is scope for the Department to learn from the outcomes of area based pilots in Northern Ireland and from the Warm Zones approach in GB.

Recommendation 6

24. The Committee recommends that the Department revisits the area based pilots in Northern Ireland and, together with the lessons emerging from the Warm Zones approach in Great Britain, develops action plans to tackle fuel poverty in conjunction with the local communities.

Energy efficiency measures

25. Warm Homes should provide effective measures to lift homes out of fuel poverty. The Committee is concerned that grants are not directed towards the least energy efficient homes where the greatest impact can be achieved. About 16% of expenditure is made on homes with an energy efficiency rating of 65 or above, homes that are already relatively energy efficient. The Committee welcomes the Department’s proposal to target assistance to homes that are less energy efficient in the revised scheme, with the aim of raising household energy efficiency by 20 points or more.

26. Similarly, the Department’s proposal to make heating systems available to all applicants from 1 April 2009, rather than solely to the over 65s as at present, is a positive step. This is the single measure with the greatest potential impact on household fuel poverty, as well as long term health benefits for fuel poor families.

27. The Committee believes that the Department’s logic was flawed when measuring the impact of Warm Homes. Whilst acknowledging the value of relatively low impact measures such as energy efficient light bulbs and draught proofing to households, these cannot be equated with the energy efficiency benefits of providing full insulation and heating systems. The Committee is pleased to note that the Department’s proposals for the new Scheme will instead concentrate on providing heating and insulation.

28. The Committee is keen to ensure that the fuel poor in rural areas are not neglected. While the Department quoted recent figures from the Housing Executive showing that 35% of grant aid went to rural areas (broadly proportionate to the population), the Northern Ireland House Condition Survey 2006 findings show that almost half (43%) of households in rural areas are in fuel poverty. There is clearly scope to more closely match expenditure to need.

29. The recent joint Ministerial announcement by the Ministers for Social Development and Agriculture and Rural Development of an additional £400,000 to fund energy efficiency in rural households is welcome. The Committee also welcomes the Department’s recognition that more needs to be done to address rural fuel poverty and is encouraged by the Department’s new proposals to use additional funding to pilot renewable energy solutions to the problem of hard to treat homes in rural areas. If piloted successfully, renewable energy resources will be included in Warm Homes. The Committee welcomes the proposal to introduce a target within Warm Homes for grants provided to rural areas. Effective marketing will be essential. The Committee welcomes the Department’s proposed joint work with DARD to raise the profile of Warm Homes in rural areas.

Recommendation 7

30. Extending the availability of heating systems and setting a target household energy efficiency rating for homes assisted would help focus resources more effectively. The Committee considers it is important that this is done in such a way that does not disadvantage those most in need such as the elderly, households with young children and the rural fuel poor.

Management of the Warm Homes Scheme

31. The Committee considers that the Department failed in its responsibility to manage the Warm Homes Scheme effectively. In contracting with Eaga plc to manage the Scheme on its behalf, the Department’s approach has been too ‘hands off’ to ensure that costs were being controlled and that what was contracted for was actually being delivered.

32. The Department informed the Committee that it intends to retain overall responsibility for policy but transfer administration of the Scheme contract to the Northern Ireland Housing Executive from 1 April 2009. The Department also informed the Committee that this would be achieved at no additional administrative cost.

Recommendation 8

33. The Committee welcomes the Department’s assurance that proper contract administration can be achieved at no extra cost. However, the Committee recommends a more robust monitoring and evaluation regime than has so far been displayed. Irrespective of which body administers the contract, the Department must ensure that value for money is being achieved, and that the contract terms are being adhered to.

34. The Committee is unconvinced by the use of ‘harmonised prices’, essentially setting contract prices at the average tender price. The Department told the Committee that this was a pragmatic approach to dealing with 17 sub-contractors and their various tender prices – the harmonised prices brought consistency in pricing and simplified the processing of payments. The Committee was informed by the DFP that no other Department operated this type of contract. The Committee considers it unacceptable to use a contracting methodology that results in some contractors being paid more than their tender price.

35. Furthermore, the Committee is alarmed at the escalating costs of heating systems over the period of the Scheme which had increased by some 60% to 80%, and were one-third higher than in a similar scheme in England (Warm Front). The Department informed the Committee that while the retail price index had increased by 19% over the period of the Scheme, the heating installers’ index rose 34% over the same period. The Department suggested a number of reasons why the costs were greater, including a higher specification, smaller economies of scale and higher associated fees (for example, building control fees) compared with the Warm Front scheme in GB.

36. The Committee notes the Department’s explanation of the difference in costs between the two schemes, and in the absence of any obvious competitive tensions in the procurement process, is concerned at the escalating costs of Warm Homes. Indeed, evidence of the potential to reduce costs, without reducing the specification, was provided by the Department. It informed the Committee that in July 2008 it had secured a £1,000 reduction in the costs of oil heating installations and that over the course of the Scheme the management costs have reduced from 15% to 9%. However, the Department must continue to ensure that value for money is obtained for the substantial amount of public funds being spent on the Warm Homes Scheme. A key element in this is ensuring appropriate procurement arrangements are being followed.

Recommendation 9

37. The Committee recommends that the Department uses the re-tendering of the new scheme to take Central Procurement Directorate advice and satisfy itself that appropriate arrangements and procedures are in place to deliver value for money. The Committee looks forward to seeing a more robust management of the various costs of the Scheme throughout the new contract period, while maintaining appropriate specifications and standards of installations.

38. The Committee expects a publicly funded service such as Warm Homes to provide a quality product, fit for purpose and meeting agreed specifications. The Department informed the Committee that customer surveys reported high levels of customer satisfaction, and the Committee acknowledges that people are generally appreciative of the Scheme. However, the Committee heard of examples of unsightly installations. The Department viewed long running failings to deliver installations to the required specification (and within target times) as regrettable, but not as significant failures in performance. The Committee is disappointed at this.

39. The Committee is disappointed that even with year on year improvements in the percentage of installations meeting the Department’s quality standard, some 40% of heating systems still fail the independent quality assessment, and that some of the defects relate to the efficient working of the system or health and safety issues. Members welcome Eaga’s acceptance that unsightly installations were unacceptable, and that over the period of the Scheme it had removed subcontractors for poor workmanship and health and safety reasons. The Department informed the Committee that it had sought a collaborative approach to improve installation quality, but that it was somewhat caught in the middle between NIHE, its independent quality assessor, and Eaga.

40. The Committee does not accept this excuse – it was the Department’s responsibility to manage the contract and it is ultimately accountable for the Scheme’s performance. The Committee would have expected the Department to have acted more decisively to clarify the contract specification and quality standards, and to establish appropriate checks and balances to encourage compliance and penalise failures.

Recommendation 10

41. The Committee recommends that, in tendering for the new Scheme, the Department ensures that works specifications, and wider best practice, are appropriately defined and understood by all concerned. Arrangements for dispute resolution and penalties for failure to comply with the requirements should be established. The Committee is adamant that public funds should not be paid for substandard work.

42. The Committee is dismayed at the length of time taken to complete installations. Target times for installations, which appear generous, were routinely missed – 2 out of 3 heating installations were not provided within the target time of 126 working days (effectively, 6 months) from referral. The Department informed the Committee that it was monitoring performance against these targets, but that demand for the Scheme was high and resources were limited. It also stated that it had recently started to target the waiting list to ensure that those in greatest need receive assistance first, whereby applicants with no central heating, solid fuel or Economy 7 heating are treated as a priority. The Committee welcomes the reduction in the waiting list for heating systems from some 6,500 to the current level of 4,500 and the aim of reducing this to 2,200 by the end of 2008. The Committee also recognises that the Department is concerned to see that the elderly and households with children are seen as priorities within the vulnerable group.

Recommendation 11

43. The Committee recommends that the Department reviews the capacity of the Scheme to deliver to an acceptable timetable, from application to household survey to installation of the measures. The Department’s consultations and tendering on the new Scheme should inform this.

44. A key responsibility of an Accounting Officer is to show due diligence over public funds. The Committee considers that the Department’s contract provision, which allows for some recovery of Eaga’s management fees where they exceed 15% of contract value, goes some way to address this obligation. However, the Committee is disappointed that the Department failed to obtain the annual accounts from Eaga to allow it to assess if recovery was appropriate.

45. The Department informed the Committee that it believed, from its routine monitoring, there was no scope for ‘clawback’ of fees. Even though the Department has now confirmed it has obtained the independently audited accounts and assures us that it has no entitlement to ‘clawback’, the Committee considers that the Department’s approach on this matter typifies the rather lax approach to oversight and delivery of the Scheme contract and objectives.

Recommendation 12

46. The Committee recognises that clawback clauses can be advantageous. However, the Committee requires that where contract clauses provide for the clawback of public funds, these are monitored properly and appropriate action taken. Any lesser standard does not demonstrate the imperative of protecting public funds.

Appendix 1 Minutes of Proceedings of the Committee Relating to the Report

Thursday, 23 October 2008
Confex 2 & 3,
Stormont Hotel, Belfast

Present:
Mr Roy Beggs (Deputy Chairperson)
Mr Jonathan Craig
Mr John Dallat
Mr Trevor Lunn
Mr Mitchel McLaughlin
Ms Dawn Purvis
Mr George Robinson
Mr Jim Shannon
Mr Jim Wells

In Attendance:
Mr Jim Beatty (Assembly Clerk)
Ms Alison Ross (Assembly Clerk)
Mrs Gillian Lewis (Assistant Assembly Clerk)
Mr John Lunny (Clerical Supervisor)

Apologies:
Mr Paul Maskey (Chairperson)
Mr Thomas Burns

The meeting opened at 2.00pm in public session, the Deputy Chairperson in the Chair.

The Deputy Chairperson welcomed Mr Kieran Donnelly, Deputy Comptroller and Auditor General to the meeting, and Ms Fiona Hamill, Deputy Treasury Officer of Accounts (Deputy TOA) to her first Committee meeting.

2. Evidence on the NIAO Report ‘Warm Homes: Tackling Fuel Poverty’.

The Committee took oral evidence on the NIAO report ‘Warm Homes: Tackling Fuel Poverty’ from Mr Alan Shannon, Accounting Officer, Department for Social Development (DSD), Ms Heather Cousins, Director of Housing, DSD, Mr Stephen Martin, Head of Housing Research and Legislation, DSD, and Mr Richard Rogers, Managing Director, Eaga.

The witnesses answered a number of questions put by the Committee.

2.11pm Mr Wells joined the meeting.

Members requested that the witnesses and Deputy TOA should provide additional information to the Clerk on some issues raised as a result of the evidence session.

3.52pm The evidence session finished and the witnesses left the meeting

[EXTRACT]

Thursday, 27 November 2008
Room 144, Parliament Buildings

Present:
Mr Paul Maskey (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Jonathan Craig
Mr John Dallat
Mr Trevor Lunn
Mr Mitchel McLaughlin
Ms Dawn Purvis
Mr George Robinson
Mr Jim Shannon

In Attendance:
Ms Alison Ross (Assembly Clerk)
Mrs Gillian Lewis (Assistant Assembly Clerk)
Mr John Lunny (Clerical Supervisor)
Mr Darren Weir (Clerical Officer)

Apologies:
Mr Thomas Burns
Mr Jim Wells

The meeting opened at 2.02pm in public session.

2.04pm Mr Shannon joined the meeting.

2.05pm Mr Craig joined the meeting.
2.07pm Ms Purvis joined the meeting.

2.17pm The meeting went into closed session.

3.17pm Ms Purvis left the meeting.

5. Consideration of the Committee’s Draft Report on Warm Homes – Tackling Fuel Poverty.

Members considered the draft report paragraph by paragraph.

The Committee considered the main body of the report.

Paragraphs 1 – 10 read and agreed.

Paragraphs 11 and 12 read, amended and agreed.

Paragraphs 13 – 16 read and agreed.

Paragraph 17 read, amended and agreed.

Paragraphs 18 - 24 read and agreed.

Paragraph 25 read, amended and agreed.

Paragraph 26 read and agreed.

Paragraph 27 read, amended and agreed.

Paragraph 28 read and agreed.

Paragraphs 29 – 31 read, amended and agreed.

Paragraphs 32 and 33 read and agreed.

Paragraph 34 read, amended and agreed.

Paragraph 35 read and agreed.

Paragraph 36 read, amended and agreed.

Paragraph 37 read and agreed.

Paragraphs 38 and 39 read, amended and agreed.

Paragraphs 40 and 41 read and agreed.

Paragraph 42 read, amended and agreed.

Paragraph 43 read and agreed.

Paragraph 44 read, amended and agreed.

Paragraph 45 read and agreed.

Paragraph 46 read, amended and agreed.

The Committee considered the Executive Summary.

Paragraphs 1 – 14 read and agreed.

Paragraphs 15 and 16 read, amended and agreed.

Paragraph 17 read and agreed.

Paragraph 18 read, amended and agreed.

Agreed: Members ordered the report to be printed.

Agreed: Members agreed that the Chairperson’s letters requesting further information to the Accounting Officer, Department for Social Development, and the Deputy Treasury Officer of Accounts, Department of Finance and Personnel and their responses would be included in the Committee’s report.

Agreed: Members agreed that the report would be embargoed until 00.01am on Thursday, 8 January 2009, when the report would be published.

Agreed: Members agreed that they would not hold a press conference to launch the report.

[EXTRACT]

Appendix 2 Minutes of Evidence

23 October 2008

Members present for all or part of the proceedings:
Mr Roy Beggs (Deputy Chairperson)
Mr Jonathan Craig
Mr John Dallat
Mr Trevor Lunn
Mr Mitchel McLaughlin
Ms Dawn Purvis
Mr George Robinson
Mr Jim Shannon
Mr Jim Wells

Witnesses:
Ms Heather Cousins Department for Social Development
Mr Stephen Martin
Mr Alan Shannon
Mr Richard Rodgers Eaga plc

Also in attendance:
Mr Kieran Donnelly Deputy Comptroller and Auditor General
Ms Fiona Hamill Deputy Treasury Officer of Accounts

1. The Deputy Chairperson (Mr Beggs): We are here today to discuss the Comptroller and Auditor General’s report ‘Warm Homes: Tackling Fuel Poverty.’ Members will find a further briefing on the report in their packs, and included in that briefing are the key findings from the Housing Executive house condition survey 2006.

2. I would like to introduce the Deputy Treasury Officer of Accounts, Ms Fiona Hamill, who has joined the Committee for the first time. Fiona, you are very welcome.

3. Ms Fiona Hamill (Deputy Treasury Officer of Accounts): Thank you.

4. The Deputy Chairperson: Fiona has recently taken up her post, and this is her first meeting with the Committee. I also welcome the Deputy Comptroller and Auditor General, Mr Kieran Donnelly, who is assisting the Committee today.

5. Our witnesses today are Mr Alan Shannon, accounting officer for the Department for Social Development (DSD), Ms Heather Cousins, director of housing in DSD, Mr Stephen Martin, head of housing research and legislation in DSD, and Mr Richard Rodgers, who is the managing director of Eaga plc. I welcome all the witnesses; the Committee looks forward to hearing your evidence.

6. Mr Shannon, it is recorded in paragraph 1.3 and in figure 1 on page 8 of the report that a total of £109 million of public funding — £98 million from the Department and £11 million from an Northern Ireland Electricity (NIE) Energy efficiency levy — has been spent through the warm homes scheme. Despite that, the number of households that are in fuel poverty is increasing. How do you explain that? Is the scheme making any significant impact in tackling the problem of fuel poverty?

7. Mr Alan Shannon (Department for Social Development): Thank you for your welcome and for your introduction. I will not say that it is a pleasure to be before the Committee today. This is my third visit to the Committee this year, and I am becoming familiar with the process.

8. Before I answer your question, I will say a few words of general introduction on the warm homes scheme. The scheme is now seven years old, and it began life as a much more modest scheme with a much smaller budget. At that time, it was essentially designed as an energy-efficiency scheme, but as fuel poverty assumed a greater significance, the scheme has become much more important.

9. The scheme is an important mechanism for Ministers in tackling fuel poverty, but it is by no means the only mechanism. You can see that over the seven years of the scheme’s existence, the budget has increased significantly, and we have made several policy, management and technical innovations at various stages, based on evidence, pilot studies and practice from elsewhere. As I am sure the Committee will know, the scheme has been very popular, and, as the Audit Office has acknowledged, it has been successful. In very broad terms, as you said, we have invested about £100 million in the scheme.

10. It is difficult to assess precisely what the benefits have been, but we have had a go and have attempted to quantify them. We reckon that the investment has generated about £250 million of benefits, some of which accumulate and some of which recur each year. To break that down, we reckon that the savings on household energy bills over the period is about £50 million, £20 million of which has been made in the past year alone. Of course, that is a recurring benefit. Since we introduced the additional facility of a benefits check, we reckon that £4 million a year is now being paid out in benefits. We also reckon that £200 million worth of indirect benefits have accrued in the form of health, education, employment and the environment.

11. However, as was rightly pointed out, despite that work, the figure for the people in fuel poverty is not what we would like it to be. The latest estimate is that 34% of people live in fuel poverty. We believe that but for the scheme, that figure would be 53%. I do not want to labour the point — nor do I want to spend too long on this or on any other answer — but I will mention two interesting pieces of research, of which the Committee might not be aware. The first is by Dr Chris Morris from the Department, and it is entitled ‘Fuel Poverty, Climate and Mortality in Northern Ireland 1980-2006’. He found that cold-related deaths in Northern Ireland have fallen by 30% since the 1980s, with a particular dip from 2000 onwards. In his research, he cannot draw a clear connection between that drop in numbers and the warm homes scheme. Nonetheless, there is strong circumstantial evidence that the scheme is having some impact. Professor Christine Liddell of the University of Ulster has also carried out some research for the Department, and that will be published very soon. She reckons that the impact that the scheme has had on health over the seven years, in financial terms, has amounted to around £45 million.

12. That is our assessment of the scheme. It has been running for seven years, and, as I said, we have reviewed it several times. We were keen to review it again, so when the Audit Office decided to carry out its value-for-money study, we were receptive to the idea. The report has come at a good time, and I am pleased to tell the Committee that the Department has accepted most of the report’s recommendations — in fact, all of them, in principle. Earlier this week, the Department put out to consultation detailed proposals on a revised version of the scheme. I hope that that overview has been helpful.

13. The Deputy Chairperson: Thank you. Paragraph 5.6 of the report deals with Eaga plc’s subcontracting procedures. Are you content with those procedures and with the use of harmonised pricing? Do you think that they deliver value for money?

14. Ms Heather Cousins (Department for Social Development): The Department has taken a pragmatic approach to the use of harmonised prices. The number of subcontractors in the scheme is a factor. When dealing with a range of, for example, 17 subcontractors and their many different bids, a harmonised pricing scheme offers a way to ensure consistency in pricing. That is the current accepted practice in the rest of GB; for example, the warm front scheme also uses harmonised prices. At the time, we were content with that approach.

15. The Deputy Chairperson: What incentives exist to drive down prices or, for that matter, to drive up quality when using such a scheme?

16. Ms Cousins: We have worked extensively with Eaga plc over the past number of years and have succeeded in achieving a 23% reduction in prices and an increase in quality, as the Committee will be aware. It is regrettable that it has taken so long for the quality increases to come through, but we have seen quite dramatic increases in quality over the past three or four years.

17. The Deputy Chairperson: I will come back to that issue later.

18. Ms Hamill, what is the Department of Finance and Personnel’s (DFP) view on the use of harmonised prices, and how does that form of tendering comply with your Department’s tendering procedures?

19. Ms Hamill: The principle of setting a common price for a common service is reasonable in the context of best value for money. We expect Departments to ensure that there has been a full consideration of the other qualitative issues around that principle, such as timeliness, quality of delivery, etc, and that they have undertaken good research in the market. That is one approach — provided that those issues have been examined. However, I cannot answer as to the specific detail of the case.

20. The Deputy Chairperson: Are you saying that it is acceptable as long as it is kept within Treasury guidance?

21. Ms Hamill: That is the case if it has been properly evaluated and if it meets best practice. The guidance requires Departments to seek best value for money.

22. The Deputy Chairperson: Perhaps that needs to be examined.

23. Paragraph 5.21 states that the Department has twice extended the contract with Eaga plc. What assessment did your Department do to underpin those decisions? Did you take into account the Housing Executive’s assessment of the timeliness — or perhaps I should say lack of timeliness — and quality issues in reaching those decisions?

24. Mr A Shannon: Yes. The performance of Eaga plc was appraised on both occasions before the contract was extended. At the time, the judgement was that the contract continued to offer the Department value for money. The directly delivered services were consistently high, and the cost of the services as a proportion of the overall scheme fell from 15% to 9% in the past two financial years. We knew that the management costs were similar to those in England, which runs a massive scheme in comparison with ours. Therefore, it seemed to provide good value for money.

25. You are correct: aspects of the performance were problematic — for example, the speed of carrying out surveys and the quality of the work as judged against the Housing Executive’s standards. However, we did not regard either of those as significant failures in performance, and we were sufficiently satisfied with the quality of service to proceed with renewing the contract. The contract is now coming to an end, and we will be going out to competitive tender again in the next few months.

26. The Deputy Chairperson: The reply to Assembly question for written answer — AQW 3574/08 — which asked about the length of time taken to carry out the assessments, showed that there was a huge variation between different council areas as to the length of time taken by surveyors to survey properties. That delayed the offer of assistance to those who would qualify. The length of time can vary from two and a half months to over four months. Why is there such a huge variation?

27. Mr Richard Rodgers (Eaga plc): The length of time taken between a referral being received and a measure being completed has extended, particularly over the past two or three years as the demand for measures under the scheme have increased — especially heating measures — as fuel prices increased. We would meet any targets that were set, if one takes the time between the survey being carried out and the measures being implemented. That would certainly be consistent with delivery of the warm front scheme. However, we do not carry out the survey from a referral that we receive unless there is a reasonable prospect of us being able to complete a measure itself.

28. The Deputy Chairperson: My question asked why there was such a large variation between different council areas.

29. Mr Rodgers: There would not be any systemic variation between areas. We produce regular reports that show that the implementations of the measures across all the constituency areas are consistent and that there is no variation in the number of heating measures or insulation measures carried out across the constituency.

30. The Deputy Chairperson: I am sorry; I quoted an Assembly question about the fact that it takes 121 days to carry out surveys in some areas and only 74 days in others. Why is there such a large variation?

31. Mr Rodgers: Between 74 days and 121 days is not regarded as a wide variation — it is within the bounds of the scheme being delivered within 131 days.

32. The Deputy Chairperson: Is the Department comfortable with the extent of that variation?

33. Mr A Shannon: We must accept that the performance here is broadly comparable with that in England, where the gap between the survey being carried out and the work being completed is measured. We are generally satisfied with that element of performance, but less so with the length of time that it takes for surveys to be carried out. However, the fault does not lie entirely at the door of Eaga plc, because it does not carry out a survey until it has been assured that the budget is available for that work. As members know, we have struggled to meet demand in the past couple of years, and that has forced us to adopt a new prioritisation process. Therefore, the scenario is changing, and it will be different in the future.

34. Ms Purvis: How do you identify households that are living in fuel poverty?

35. Mr A Shannon: You have hit on a significant characteristic of the scheme, which is that we do not know, because the definition is that people who spend more than 10% of their income on all their energy needs are living in fuel poverty. Short of examining the income and expenditure of individual households, we have no way of telling who is living in fuel poverty. Therefore, the scheme is based on a proxy measure through which, by and large, we target people who are on various benefits. We do not know that every household that we target is living in fuel poverty, but they are certainly all vulnerable households.

36. Ms Purvis: Realistically, therefore, the figures that we have could be wildly underestimated.

37. Mr A Shannon: We do not think so, because the figures are supplemented by the house condition survey that the Housing Executive carries out every five years. That gives us the ballpark figures. We regard that comprehensive survey as a reliable indicator. Although it does not direct us to individual households, it gives us accurate information about the size of the problem.

38. Ms Purvis: The house condition survey is dated 2006, when 34% of all households were living in fuel poverty. What do you suggest that the figure is today? Is it approximately 40%?

39. Mr A Shannon: That is an extremely difficult question to answer because, as you know, energy prices have shot up considerably in the past two years, but oil prices are now coming back down. Another difficulty is that people move in and out of fuel poverty constantly; therefore, it is a moving scenario. I cannot give you a figure without having more scientific information.

40. Ms Purvis: Paragraph 1.3 of the report states that the scheme has assisted some 60,000 households. How many of those have been removed from fuel poverty?

41. Mr A Shannon: That is also difficult to measure. In 2003, we commissioned National Energy Action to carry out a survey. Based on that, we estimate that 50% of those 60,000 households have probably been removed from fuel poverty, and the other 50% have benefited significantly from the scheme. We estimate that the average household benefits by approximately £300 a year through the measures in the scheme. However, whether that is enough to take them above the line of fuel poverty depends entirely on their circumstances.

42. Ms Purvis: If the warm homes scheme is, therefore, not always enough to lift people out of fuel poverty, what other circumstances have an impact?

43. Mr A Shannon: The three key ingredients of fuel poverty are: levels of income; the energy efficiency of the property; and the price of energy.

44. Ms Purvis: Is it correct to say that the warm homes scheme has an impact on only one of those ingredients?

45. Mr A Shannon: That is correct.

46. Ms Purvis: How sure are you that the measure addresses fuel poverty efficiently?

47. Mr A Shannon: Our position is that the scheme has been successful. We are broadly content that it has been targeted at vulnerable people. However, the scheme is much bigger than it used to be — there is great need for it at the moment, and we accept many of the comments in the Audit Office report as to how we might target resources more accurately than we have done in the past.

48. At the same time, we have improved technology, so that some of the measures we are taking are more effective than they used to be, and we are using new measurements that were not available previously. For example, the introduction of the energy performance certificate, which one must obtain when one is selling a house, provides us with a group of trained people who can give precise information about the energy efficiency of individual homes. We propose to build on that in our new scheme.

49. Ms Purvis: Given that Northern Ireland has the highest level of fuel poverty in the UK, what do the latest comparisons across the UK show? What are you doing to ensure that lessons on best practice, which would enable you to tackle the greater problem of fuel poverty in Northern Ireland, are shared?

50. Mr A Shannon: The latest figures for fuel poverty that we have are: in England, 11∙5% of people are in fuel poverty; in Scotland, the figure is 23∙5%; and in Wales it is 20%. The figure in Northern Ireland is 34%, which is still significantly higher than in other parts of the United Kingdom.

51. To spread best practice, we maintain regular communication with the fuel poverty schemes of the other UK countries. In developing its proposals, the Fuel Poverty Task Force considered ideas from right across the UK. Some of those ideas are with the Executive for consideration. It is not a one-way street. On occasion, other countries have looked at what we have been doing and have picked up on our ideas.

52. Ms Purvis: Are you doing anything specific to incorporate ideas from the other UK schemes?

53. Mr Stephen Martin (Department for Social Development): The benefit entitlement check worked well in England, so we incorporated it into our scheme.

54. Another element that the Fuel Poverty Task Force picked up on, and which has been used in England, is the social tariff. That is the principle whereby some customers pay more for energy in order that others, who are more vulnerable, pay less. Unfortunately, the Department does not have statutory responsibility for that, but we are working with the Utility Regulator to test the feasibility of applying the social tariff principle to Northern Ireland. As yet, that process is at an early stage.

55. Ms Purvis: Is there any likelihood that that will happen?

56. Mr Martin: As Alan Shannon said, fuel poverty levels in England are at 11∙5%, so there is a considerable base of richer customers who can cross-subsidise those who are in greater need. However, in Northern Ireland, where fuel poverty levels are at 34%, we do not have the same base.

57. One issue that is not prevalent in England is that in Northern Ireland, 70% of heating needs are based on oil, which is an unregulated fuel. Therefore, it is more difficult to find a mechanism for cross-subsidising with oil because the social tariff principle is based on gas and electricity. Therefore, structural barriers exist to our introducing that tariff, but that does not mean that we cannot take a good look at it to ascertain whether we can at least apply the principles behind it.

58. Ms Purvis: Can I return to that issue before the end of the session?

59. The Deputy Chairperson: Yes.

60. Mr McLaughlin: Mr Shannon, figure 1 in paragraph 1.3 of the report makes clear how much public money has been spent through the warm homes scheme in order to improve energy efficiency for owner-occupied and privately rented housing. What is the Department doing to ensure that the design and construction of public and private housing incorporates the highest standards of energy efficiency and conservation? I am thinking of, for example, the Building Regulations (Amendment) Bill, which is passing through the Assembly.

61. Ms Cousins: Minister Ritchie’s new housing agenda makes a strong commitment to sustainable housing in the social sector. The Department adopted the code for sustainable homes level 3 as mandatory from 1 April 2008. Housing association stock, which is our newest stock, has high standard assessment procedure (SAP) ratings, which provide a measure of energy efficiency in dwellings. Their average SAP rating is 70, which is higher than any of the other tenures.

62. The Department’s adopting the code for sustainable homes level 3 will ensure that new social housing will, from April 2008, be 25% more energy efficient than homes that were built previously. Those standards greatly exceed those in the private sector. DSD has no role in setting building standards for private-sector housing — that is the function of the Minister of Finance and Personnel.

63. Mr A Shannon: That is a good illustration of the reason that it is best to get matters right at the outset; it is much harder to fix them later. Both those answers illustrate that the problem of fuel poverty requires an interdepartmental, not just a DSD, approach.

64. Mr McLaughlin: That is absolutely clear, and I will press that point in my dealings with other Departments.

65. The fact that the oil industry is unregulated provides us with an example of how we can give ourselves the tools to measure the problem — or the impact that schemes such as that which we are discussing have — in alleviating fuel poverty.

66. My question with regard to the Building Regulations (Amendment) Bill throws up other issues. For example, do we include a measurement for those households that are eligible for a grant, whether for lighting or heating systems, that will tell us whether they satisfy the new energy conservation standards? Is one of the steps towards alleviating fuel poverty ensuring that any household with which we engage after a scheme has finished qualifies for an energy performance certificate?

67. Mr Martin: That is one of the innovations that the Department is proposing to introduce into the new scheme: each house that is assisted under the scheme will be assessed for an energy performance certificate before any intervention is made. That is for two reasons: first, to identify the dwelling’s existing energy performance and to ascertain the work that that house should have done under the warm homes scheme; and secondly, the certificate also tells householders what simple steps they can take in order to reduce their energy use.

68. A recent National Audit Office report in England estimated that households waste 10% of their electricity just by leaving appliances on standby. Therefore, the energy performance certificate will be used in order to provide targeted energy savings advice to each householder, which, in addition to the measures under the scheme, will help them to reduce energy consumption.

69. Mr McLaughlin: To return to the matter of the oil industry, not only is it not regulated, but as a consequence of not being under the purview of the regulator, it does not subscribe to the energy-efficiency levy. Is that not an obvious gap in the Department’s efforts to lift people out of fuel poverty? Have you made any representations to the industry on the matter? An estimated 70% of homes use oil, yet the oil industry is unregulated and makes no contribution to the levy.

70. Mr A Shannon: That issue was picked up by the task force in the summer, and it is, strictly speaking, not a matter for DSD. That task force was an interdepartmental group, and it made recommendations to Ministers about movement in that area. The Department is awaiting Executive approval for those proposals.

71. Mr Wells: You will have a long wait.

72. Mr McLaughlin: Well, perhaps it will not be not so long: it depends on whether some people get sensible.

73. You did not answer my question, Mr Shannon, and I do not want to get diverted. Did you make a specific representation about the desirability or necessity of closing that particular gap?

74. Mr Martin: The remit of the Fuel Poverty Task Force was to focus on the short-term measures for this winter. However, it also made several recommendations for the longer term, one of which was that Government should consider regulation of the oil industry.

75. Mr McLaughlin: That is obviously something that we will all return to. The report sets out the targets for eliminating fuel poverty:

“subject to the availability of the necessary resources.”

76. When you set those targets, what was your estimate of the resources that you would require to achieve them, and how did it compare with actual expenditure for the scheme up to 2004?

77. Mr A Shannon: They compared pretty well. The targets were set by direct rule Ministers and were in line with those being set for England and Scotland. However, the problem was very much greater here, so we expected that we would need proportionately more resources than those received by England or Scotland. At that time, the assessment was that, with a certain amount of money for this particular scheme, with money for the parallel schemes that were run by the Housing Executive and by the housing associations, and with rising levels of income of the kind that we witnessed in the first half of the decade, the target was realistic. I have no complaint about the resources that were made available for the scheme at that time.

78. Mr McLaughlin: Are those projections under significant pressure now, given the rising costs?

79. Mr A Shannon: Yes. They have been blown out of the water. Nevertheless, we can demonstrate that until 2006, when energy prices really took off, we were on target in energy efficiency and in rising incomes. The energy increases have knocked us off course completely.

80. Mr McLaughlin: Committee members will want to pursue that point. The report contains a table showing the measures that were taken under the warm homes scheme in 2007-08. Will you explain the difference between the number of households that were equipped with heating systems and those that were provided with compact fluorescent lamps? What was the Department’s logic in thinking that providing energy efficiency advice and new energy efficient light bulbs would have the same impact on improving energy efficiency and tackling fuel poverty as would installing the full range of insulation and heating measures? Should impact measurement have been built into the scheme from the outset? Outcomes are what we want to focus on.

81. Ms Cousins: We never expected that those measures would have the same impact as others in the scheme. I do not wish to detract too much from those measures. Although they are simple and not particularly costly, they do save households the equivalent of two months’ electricity on their bills, so they are worthwhile.

82. Having said that, greater demands are being made on the scheme, and as part of the proposals for the new scheme, we will be dropping those measures and targeting resources towards others that will have a significant impact. Measures such as draughtproofing and energy efficient light bulbs will be removed from the scheme, and we will target resources towards heating and insulation. Insulation saves households, on average, £300 a year in energy costs, and an efficient heating system saves even more. We will be concentrating our efforts on those measures.

83. From the start, the house condition survey has been our tool for overall impact measurement. We accept that we must carry out more frequent calculations of the impact that our measures are having. We have used information from the Energy Savings Trust on the impact of each measure that we have used.

84. Mr A Shannon: Some of the minor measures were installed as part of a bigger package. In addition, everyone receiving those measures also received a benefits check, or the opportunity for a benefits check, and that was quite successful.

85. Mr McLaughlin: Thank you. I may have some further questions later.

86. Mr Lunn: Mr Shannon, it is quite evident from paragraph 2.11 of the report that the Department’s aim of eliminating fuel poverty in vulnerable households by 2010 cannot be achieved. That is not really a criticism, as I believe that the scheme has performed pretty well. However, I feel that the target was unrealistic to begin with and, indeed, remains so. What is the Department’s forecast for levels of fuel poverty in vulnerable households by 2010?

87. Mr A Shannon: I do not agree that the target was unrealistic, although I accept that one may get that impression after reading the report. It must be remembered that the warm homes scheme was aimed at making a contribution towards solving the problem of fuel poverty — it was not to be the complete solution to the problem.

88. The work carried out through the scheme, along with that carried out by the Housing Executive and the housing associations, added 20,000 homes a year. If the rising level of income is added to that, those targets were not entirely unrealistic, and, until a couple of years ago, the Department felt that there was a reasonable chance of meeting them. However, I accept that under current circumstances, meeting the targets is not realistic.

89. As to what the position will be in 2010, that question is very difficult to answer. It will depend on energy prices, the economic climate over the next two or three years, and the way in which the Department redirects the scheme. I cannot give you a specific figure today because the Department does not have one. However, as we finalise the new elements of the scheme, we will need to set some new targets, and the Department will then have something to work towards.

90. Mr Lunn: If you did have a target to work towards, you might be able to make a stab at answering my next question: when will fuel poverty be eliminated from those households after 2010?

91. Mr A Shannon: I am not in a position to answer that today.

92. Mr Lunn: Mr Shannon, you have said that the Department has no control over household income or fuel prices. Given that, is it fair to say that the current scheme is a short-term fix to a problem that is actually intractable?

93. Mr A Shannon: No. The scheme is much more than that. It is an important part of a three-pronged strategy. Given the limitations of the scheme, it has done its job pretty well.

94. However, it is also worth recalling the other two parts of that strategy. First, there is the Executive’s strategy for tackling energy. I am not an expert on it, but it includes — and has included for a number of years — factors such as: the introduction and rolling-out of gas supplies; revisiting some of the generating contracts; the ownership of the transmission system; the all-island energy market; and the role of the energy regulator. That strategy is attempting to create a more competitive energy market, the lack of which has been one of the major handicaps in tackling fuel poverty.

95. The Committee will also be familiar with the Department’s work on increasing incomes. The Programme for Government set out the importance of raising skill levels, enhancing economic performance and tackling economic inactivity. The Department for Social Development has put a great deal of effort into increasing benefit uptake, which, over the past two to three years, has produced £15 million of extra benefit expenditure. That money comes directly from London into Northern Ireland plc; it is not part of our Budget.

96. We expect an extra £4 million of benefit expenditure to come from the current scheme. On top of that, the Department has its own job-creation schemes, with regeneration measures. That is a fairly major agenda, and there is a lot going on.

97. Mr Lunn: I do not mean to be critical; indeed, you gave some impressive figures at the start of your presentation. Around £250 million worth of benefits was mentioned. As the warm homes scheme now stands, is it flawed? Ms Cousins already said that a range of policy instruments needed to be put in place, in conjunction with other Departments, agencies and the regulator.

98. Mr A Shannon: The fuel poverty advisory committee and the interdepartmental group have been trying to do that since 2004. We are beginning to see greater cohesiveness in the way in which the system tackles those issues. I accept that there are weaknesses in the scheme. It could be better targeted; groups of fuel-poor people are being missed, and some people who are of lesser priority are benefiting from it. We hope to pick those up with our new proposals.

99. Mr Lunn: The warm homes scheme is the Department’s main programme for tackling fuel poverty. Paragraph 2.5 of the report says that the Department has identified annual targets for the number of households that are assisted, and that is the only measure of the scheme. Why was the target not directly linked to the number of vulnerable owner-occupiers and private renters for whom the scheme was designed?

100. Mr A Shannon: As I said earlier, we could not identify individual households that were fuel poor, so we tried to use proxy measures. We have tried to target the scheme at people who are vulnerable — they are either in fuel poverty or close to being so. People move in and out of fuel poverty all the time, so it is a moving target.

101. We conduct household surveys to establish the percentage of households that are in fuel poverty, and we have some measures on the energy efficiency of the housing stock in Northern Ireland. Some of the new ideas for measuring the energy efficiency of individual properties will mean that we will get better at targeting where the resources should go.

102. Mr Craig: Although an internal review of the warm homes scheme took place in 2004, it has, essentially, remained unchanged since its inception in 2001. What guidance has your Department issued on policy and programme evaluation? More importantly, how does the Department monitor what is being done in that regard?

103. Ms Hamill: Guidance on policy and programme evaluation and monitoring is available to Departments from two sources. The first is contained in ‘The Northern Ireland Practical Guide to the Green Book’, which was issued by DFP. That makes it clear that any programme, project or policy should be reviewed either at completion, or, if it is on an extended timeline, at fixed interim points. There is no formal requirement for policies to be reviewed at a set time.

104. The second source, which provides specific guidance on policy making, was issued by the Office of the First Minister and deputy First Minister (OFMDFM). That makes it clear that it is important that the monitoring and evaluation of policy and programmes are built in to development of the policy from the start. DFP does not have a responsibility to monitor the evaluation of policy delivery in Departments; that is for Departments to review.

105. The Northern Ireland Civil Service (NICS) has a policy-champion network, which is led by one of the permanent secretaries. It has just completed some work on policy implementation and delivery in the NICS, and it is now considering its recommendations.

106. Mr Craig: It is clear from paragraph 3.14 of the report that there are people who are in fuel poverty but who do not meet the strict criteria of the warm homes scheme. That includes people with a very low wage who are just outside the benefits systems and do not meet the scheme’s criteria, yet they are in fuel poverty. What steps are being taken to address their needs? How could those people be targeted?

107. Mr A Shannon: The Department recognised that problem some time ago. Following the 2004 review, we established the fuel poverty partnership fund, to which the Department and Northern Ireland Electricity contribute. That enabled a number of people who just fell short of the criteria to qualify, including those who were working and were in fuel poverty. This year, DSD is contributing £1 million to that fund, which should provide assistance to a further 2,000 households. We accept that the situation is unsatisfactory and that we need to target better. Our new proposals are that working tax credit — or at least the highest rate of working tax credit — should be a passport to the scheme. That will be in addition to child tax credit. We think that that is a significant step, and it should enable some of the working poor to meet the criteria.

108. Mr Craig: I am glad to hear that. The other side of that coin is that there are people who have qualified for the scheme but who are not really in fuel poverty. It would be very complex to introduce something such as means testing, but how can one identify those who are receiving benefit when they should not be doing so?

109. Mr A Shannon: We are talking mainly about people who qualify for the scheme because of disability benefit payments, which are not means-tested. The change was made in 2004 by the Minister of the day in response to some fairly strong representation about that group. From memory, the Scottish scheme had been extended in that way at that time, and the argument was made that the same extension should apply here, so the change was made. The Department is not uncomfortable with it, because there is a clear link between disability, low income and fuel poverty. Many people who are disabled — although they may not be strictly in fuel poverty — are below the poverty line. We do not think that there are a significant number of people in that group who are benefiting when they should not be, but we accept the criticism, and our proposal under the new scheme is that those who qualify under the disability criterion should also have to qualify under an income criterion. That would cut out the group that you are concerned about.

110. Mr Dallat: Isolated rural areas are significantly under-represented in the scheme, which suggests to me that some kind of cherry-picking is going on. Urban dwellers are taking advantage of the scheme to the detriment of the — mainly elderly — rural dwellers who are living in very substandard houses that are often rented from farmers or others who perhaps did not have the money to restore the properties.

111. If one accepts that that is true, what will be done to improve the quality of life for people in isolated areas who must make do with a couple of pieces of turf or a few sticks on the fire?

112. Mr A Shannon: We are concerned about people in rural areas. Stephen Martin has been working on that matter.

113. Mr Martin: Our latest proposals have been published this week, and they focus more on rural areas. One of the challenges throughout the UK has been that there are many old properties in rural areas — the so-called hard-to-treat properties. Such properties often have solid walls and can be difficult to insulate.

114. Finding a solution to that problem has been a challenge, and Northern Ireland has been leading the way. Scotland and some of the other UK countries have been following our lead. This year, we are conducting a pilot scheme for hard-to-treat homes to ascertain whether renewable-energy technologies might provide a cost-effective way of improving energy efficiency and lowering energy bills in those houses. Depending on the outcome of that scheme, we intend to incorporate more such measures into the warm homes scheme, which would benefit the areas to which Mr Dallat referred. Although we have been doing a fair amount of work on that, we recognise that more must be done, and we intend to respond by utilising such measures.

115. Mr Dallat: I do not wish to sound party political; however, it is not every day that we come up with a pilot scheme that is so good that the Brits copy it —

116. Mr Wells: The what? Who? Do you mean us? [Laughter.]

117. Mr Dallat: I took a risk in saying that. On a serious note, the pilot scheme was brilliant. Was that OK, Jim?

118. In England, fuel poverty affects 11% of the population, whereas here, the rate is 34%. We took our eye off the ball, and the English ran off with our scheme and made a quare job of it.

119. Mr A Shannon: Are you referring to the warm zones initiative? Once again, Stephen Martin is our expert.

120. Mr Dallat: Stephen is not faring well today.

121. Mr Martin: The initiative was born in Northern Ireland and copied in England. We recognise the fact that it was successful here at one point and that the Audit Office report suggests that we should adopt that approach in rural areas. However, in England, the evaluation of the warm zones initiative indicated that it is not a cost-effective approach in rural areas; it is really an urban solution. Therefore, it would not necessarily address our problems. The initiative works where there is a high concentration of poor housing. It is obvious that houses are much more dispersed in rural areas.

122. There are alternative ways to achieve the same results. The Audit Office’s report recognises the success of the marketing, and we would like to build on that and use our new relationship with the Department of Agriculture and Rural Development (DARD) to ensure that our marketing targets rural properties more effectively. Therefore, although we recognise that the approach was successful, it does not offer the prospect of a cost-effective approach for the future. We prefer, in conjunction with DARD, to utilise an approach that builds on our marketing strategy.

123. Mr Dallat: That seems to be an excellent idea.

124. Nevertheless, as I reach into fading memories from my distant past of living in a substandard house in a rural area, I recollect that my first duty in the morning was to melt the ice on the inside of the window in order to see out. I then used to be embarrassed at school when my friends told me that, because they could smell smoke on my uniform, my parents must burn sticks on the fire. I want such scenarios to end, and I wonder whether the £400,000 that has been allocated to fund energy efficiency in rural homes will make a sufficient impact.

125. Mr A Shannon: That gives me a chance to pick up on a concern expressed in the report that is not entirely valid. In England, there is concern that rural areas are not getting their fair share of the resources. After this report was produced, we came across a Housing Executive survey. The Housing Executive has been examining expenditure in rural areas. The survey covered 2007 and the first quarter of 2008. It tells us that 35% of the grant aid went to rural areas, which is broadly proportionate to the population. It does not pick up the point that it is more expensive to solve the problem in rural areas, so one would expect — all things being equal — that a slightly bigger proportion of the funds would go in that direction. We have proposals in the revised scheme — and I keep talking about the future — to pick up the rural issue more proactively.

126. Mr Martin: Yes, that is right. We aim to set a specific target for rural areas to ensure that there is a clear focus on those particular needs. As the member said, there are particular needs that need to be addressed more fully.

127. Mr Dallat: A lot of the houses in rural areas are owned by landlords who may be farmers, and a very effective way of evicting tenants is not to do any repairs. Has any thought been given to ensuring that the people for whom the benefits were intended really get them? As I understand it, if landlords do not co-operate, nothing happens.

128. Mr A Shannon: Heather, would that be picked up by our legislation?

129. Ms Cousins: The warm homes scheme is open to the individual applicant rather than the landlord. In that sense, it is the applicant whom we are at pains to assist and not the landlord.

130. Mr Dallat: I understand. Am I wrong in suggesting that the landlord has to consent?

131. Mr Martin: The landlord does have to consent, but our experience with Eaga plc is that there are few who do not.

132. Mr Rodgers: The one perspective that I have given this, as the scheme manager, is that around 35% of households in Northern Ireland have access to gas. Yet, in the past couple of years, around 15% of the heating systems going in through the scheme are reliant on gas. That means that 85% of the systems are oil fuelled. We focus on rural areas. As far as constituency lists are concerned, Belfast city is always at the bottom of the league table compared with rural areas.

133. Mr G Robinson: I have two points to make. The first is mainly a funding issue. According to paragraph 4.5 of the report, the schemes benefit from a substantial amount of funding from NIE. That contribution is set to reduce and cease in 2010-11. How will that major loss of funding affect the scale and impact of the scheme? How will the Department replace it?

134. Mr A Shannon: That is a concern. The levy funding from April 2006 to March 2009 is £4∙1 million, which tops up around 7,000 homes. Quite a significant proportion of the whole is being helped in that way. We have to find a way of making up that loss.

135. We have considered various options, one of which would be to introduce a customer contribution. There are arguments both ways, but on the whole we thought that that might constitute a barrier for many of the people that we actually want to help. A second option is that we might identify other sources of funding, and we have not entirely given up on that. We are still exploring possibilities. A third option is that we realise that our grant maxima are not quite adequate, especially for rural areas, and we are proposing to raise the grant maximum and cover that in the reprioritisation of the way in which we use the money at the moment.

136. Mr G Robinson: What is the Department doing to engage other bodies such as the Department of Enterprise, Trade and Investment (DETI), the regulator and energy providers? Does the solution to this serious problem not require a joint approach?

137. Mr A Shannon: That is the sort of issue that the Fuel Poverty Task Force discussed. The task force recommended that Government should engage with energy companies — including oil companies — to ascertain what scope there might be for the provision of short-term help. The task force also recommended that, in the longer term, Government should examine the feasibility of introducing a levy system, similar to that in England.

138. Mr G Robinson: Further to paragraph 4.5, the withdrawal of funding goes against the arguments that are being made for energy companies — which have made super profits — to do more in the fight against fuel poverty. What steps are you taking to ensure that energy companies invest in tackling fuel poverty without passing the costs on to already-struggling customers, such as pensioners and people on low incomes?

139. Mr A Shannon: There is a limit to what DSD can do on the matter. As the task force recommends, we need to engage with other Ministers, especially the Minister responsible for energy. We are acquiring money for research; Northern Ireland Electricity Energy contributed to a £550,000 pilot scheme for assessing how to treat homes, particularly in rural areas.

140. Mr G Robinson: The increase in oil prices was blamed for the dramatic increase in the cost of electricity and gas. However, crude oil prices have dropped dramatically over the past few weeks. Why has that not been reflected in the cost of electricity and gas? What is your Department doing to put pressure on the energy companies to reduce tariffs? It is further evidence that Government must take a joined-up approach to eliminating fuel poverty.

141. Mr A Shannon: Your last point is absolutely right. Indeed, it makes my response to your first couple of points easier. DSD does not have jurisdiction to pressurise oil companies; that is the Department of Enterprise, Trade and Investment’s responsibility. Margaret Ritchie has a set of proposals on the table at the moment, which include engaging with energy companies, and we are awaiting developments on those.

142. Mr J Shannon: It sounds like a TV film: Shannon meets Shannon. We would have to change the storyline a wee bit though, because warm homes would not be a ratings winner. Perhaps it could be an espionage thriller.

143. Mr A Shannon: Shannon and Shannon sounds more like a firm of solicitors.[Laughter.]

144. Mr Wells: Who has the biggest salary?

145. Mr J Shannon: It is not me anyway. [Laughter]

146. Paragraph 4.6 states that heating systems, which could have the greatest impact in reducing fuel poverty, are only available to eligible householders who are over 60 years old. If you are genuinely serious about reducing fuel poverty, should you not make heating systems available to all vulnerable households that need them? Will you be revising the scheme so that the appropriate measures will be available to all who need them?

147. Mr A Shannon: The answer to both of your questions is yes. The original thinking was that heating schemes are expensive and, therefore, should be targeted at the over 60s because of the concerns about deaths from cold-related incidents or illnesses. As we measured the scheme’s impact, it became increasingly apparent that warm homes have genuine health benefits for children and everyone else in the household. Our proposition, which has just gone for consultation, would make the heating scheme available to everyone who met the criteria, and eligibility would not be determined by age.

148. Mr J Shannon: Is your plan based on the success of the warm front scheme in England? That scheme is available to everyone, not just people who are over 60. The warm front scheme has been tremendously successful, so I assume that you will seek to mirror its success.

149. Mr A Shannon: Yes, we would like to mirror that success.

150. Mr Martin: Yes. Research has demonstrated the health benefits of a warm home, particularly for children. Professor Christine Liddell conducted a study on that issue, on behalf of the Department. Its findings mirrored, or were fairly similar to, those of studies conducted on the warm front scheme in England, and they illustrated that fuel poverty has a lifelong impact on children, particularly those with respiratory conditions, such as asthma. Proper heating and insulation of a home can benefit a person for the duration of his or her life. We are keen to see that happen; the only difficulty is the cost. Obviously, some things will need to be rebalanced to cover the cost of extending the scheme to all eligible applicants, but, in principle, it is a good idea.

151. Mr J Shannon: You responded to my questions by saying “yes” and “yes”, but I want to know when the scheme will be extended?

152. Mr A Shannon: It is hoped that the scheme will be extended from 1 April 2009. From this week, the proposition will be the subject of an eight-week consultation. After consultation, the legislation must be amended, for which we will require DFP approval. With a bit of luck, it will be all systems go for that from 1 April 2009.

153. Mr J Shannon: I refer to paragraph 4.12 and the graph at figure 8, which is really quite illuminating. Why are energy efficient homes receiving assistance under the scheme? Surely, the whole idea was to offer the scheme to those people who need it most; some changes must be made to ensure that that happens. Does that represent value for money and the best use of resources?

154. The Committee has previously discussed the matter of efficiency. Efficiency not only relates to the scheme and to whom it is directed, but to the way in which the work to insulate and heat homes is carried out and who monitors the finished job. I have visited some houses that are so clean that you could eat your dinner off the floor; those homeowners are very proud of how they maintain their homes. However, I have seen some shoddy workmanship by builders who have left exposed pipes in people’s hallways; they have not even tried to conceal them or track them into the walls. Who monitors the scheme to ensure that jobs are not done in a ramshackle, DIY manner, but in a professional way and with quality in mind?

155. Two or three weeks ago, I asked the Minister for Social Development how many people are on the warm homes waiting list. She said that 2,300 applicants were waiting to be assessed. We are talking about efficiency in directing the scheme at the appropriate people and in the way in which the work is finished. Perhaps those 2,300 people need the scheme more than some of those who have already received help from it.

156. Mr A Shannon: I will answer the first question, and Heather and Richard will deal with the second and the third questions respectively.

157. First, why are people whose homes have a SAP rating of 65 or higher receiving help? The graph suggests that 31% of grants were given to energy efficient homes. However, those homes were relatively small and accounted for only 16% of the expenditure. Once again, the problem lies with the definition. It is possible to own an energy efficient home and to experience fuel poverty. We do not think that the money that was spent helping people whose homes had a SAP rating of 65 or higher was necessarily wasted. However, we accept that, if we want a big demand for the scheme, we must target applicants more accurately. We should concentrate on measures that will raise SAP levels in homes by around 20 points. The new proposals suggest that we measure the initial SAP level of a home, assess what impact the changes would have and concentrate on houses that will benefit most from the scheme. By doing so, homes that are already energy efficient will be removed from the scheme.

158. Heather, will you address the question about the quality and monitoring?

159. Ms Cousins: The Department has always had monitoring arrangements in place and, in addition, the Northern Ireland Housing Executive has been acting as our quality-control agent. There is no doubt that there have been issues with the quality over several years, and, as I said earlier, it is regrettable that it has taken so long to resolve that issue. However, the issue of quality may be more complex that it might seem initially. For example, some systems have hundreds of components and, if a simple pass or fail is used as the measure of quality, it may be the case that only one component does not pass muster but is not impacting on the efficient running of the scheme.

160. Over the years, the Department has had discussions with Eaga plc and the Northern Ireland Housing Executive about the interpretation of the specification and about standards. As a result of that process, we are now in a much stronger position with regard to quality assessment. We accept that it has taken a long time to establish that process, and we continue to have those discussions.

161. Mr J Shannon: Have there been many occasions on which work has had to be re-done or changes have had to be made? You may not be in a position to answer that today, but I am very keen to find that out. I represent Strangford, and I am aware that it is not top of the league table for uptake of the scheme — I understand that it is fourth or fifth from the bottom. Nonetheless, that indicates that many houses in my constituency are waiting for the scheme to be implemented. I have seen some work that people are very unhappy with. Therefore I am keen to know how many complaints there have been about the work. In other words: is your quality control working?

162. Ms Cousins: There are a couple of different dimensions to the issue. One is that the customer satisfaction rating for the scheme has always been very high — it ranges from 83% to 93%. On the other side, in cases where significant matters were wrong, they were put right at no additional cost to the taxpayer. Richard will elaborate on some of the issues that you have just raised.

163. Mr Rodgers: I, too, regret that, for three or four years, we were in discussions with the Department and the Housing Executive about the inspection regime. It is true that, as Heather said, although the pass rates — particularly for heating installations — were very low, the Housing Executive’s report highlighted a customer-satisfaction rating of between 80% and 90%. Furthermore, the number of complaints that we received amounted to less than half a per cent — we had, perhaps, fewer than five complaints a month.

164. It is important that the Committee understands that we take health and safety very seriously. Contractors have left the scheme as a result of health and safety breaches — those are managed very firmly. However, typically, the vast majority of failures are not to do with health and safety; they are a result of problems such as reflective panels not being put on the back of radiators, water pipes from the garage to the house not being lagged, or water pipes in the house not being boxed-in, as Jim Shannon mentioned. Although those problems must be put right, they are more to do with aesthetics, and they do not result in the system not working. The system is working in all cases; perhaps that is why, typically, people are happy with the service.

165. Mr J Shannon: I visited a house that was like a plumber’s heaven — there were pipes everywhere. I thank the Lord that I have not seen any others like it. I am not exaggerating — I saw pipes as soon as I went through the front door. When I went into the living room, I saw pipes going up, down and everywhere. I do not know what the exact intention was, but it was not good aesthetically — to use your word.

166. Mr Rodgers: That is not acceptable and is not the norm.

167. Your point about the waiting list is important. At the start of the year, there were 6,500 people on the waiting list for heating. The current number of people on the waiting list is 4,500, and we expect that that will be reduced to 2,300 by the end of the year. Since the beginning of April, a new prioritisation process that we agreed with the Department has been in place. That has allowed us to target the heating systems that are required for people who have no central heating or who use Economy 7 or solid fuel. The prioritisation process is based on those factors and on the age of the householders.

168. Obviously, we would like the figure of 2,300 people to be reduced to zero by the end of the year, and we are working with the Department to see whether that can be achieved. I am aware that the Department has made a bid for some extra money in the hope that it can achieve a clean sheet by next April, before the new scheme is introduced.

169. Mr Wells: Mr Shannon, figure 10 sets out what many people would believe to be very generous targets for performing a survey, installing insulation and installing a heating system. You gave Eaga plc four months to install a heating system. If I rang a private contractor to ask for a heating system to be installed and had to wait four months for it, I would quickly go elsewhere.

170. Figure 10 indicates that only one third to half of the households have had work completed within those target times. The figures for 2004-05 show that only 14% of households achieved the 81-day target to complete the installation of insulation, and only 17% of households achieved the 126-day target to complete the heating installation. I accept that those figures improved the following year, but was the Department watching that situation like a rabbit in headlights? Did it tell Eaga plc that those targets, which used taxpayers’ money, were simply not acceptable?

171. Mr A Shannon: Heather’s division monitored that situation, and she will be able to elaborate on what happened.

172. Ms Cousins: We were certainly aware of that situation. We monitored and discussed the situation, but we took numerous factors into consideration when we dealt with it. There have been very high levels of demand for the scheme, and our resources were limited. Those figures refer to the date of referral until the completion. We do not perform a survey unless we are sure that we have the resources to carry out the work. That partly explains why those timeliness targets appear to be overly generous and are not achieved. Our remedy involves bidding for additional resources to ensure that we can perform the survey and complete the work more quickly.

173. Mr Rodgers: The report implies that Eaga plc might not have been sufficiently resourced for its office administration or to engage with sufficient contractors to carry out the measures, but that is not the case. During this meeting, the Department has explained that the timelines begin with a referral. However, referrals do not lead to surveys until there is a good prospect that the money is available for the work to be done.

174. Perhaps the timelines are not a good measure, but if one takes the time from when the survey is performed until the heating system is implemented, the figure is 85%. Once we know that the money is available, we begin the job and the work gets done. Every year of those seven years, the Department sets targets for the number of households that we had to tackle, based on the budget available. We exceeded the target in each of the seven years.

175. Mr Wells: Mr Jim Shannon and several others mentioned the quality-assurance assessments that were carried out by the Housing Executive. You explained those in some detail, but why did the contract not contain any provision to impose penalties when performance was poor? Figure 12 indicates that pass rates were low during 2001-02. The figures improved towards the end of the period under review, but why did the contract not contain a clause that would have allowed the Department to step in when the pass rates were clearly not up to standard and impose measures that would have spurred on the contractors and would have led to a better quality of workmanship?

176. Mr A Shannon: I am happy to report that our position is much better than it was a couple of years ago, but this is a slightly uncomfortable subject for us because we allowed the unsatisfactory problem to drag on for longer that we should have. Heather will keep me right, but my understanding is that that was partly down to a difference of interpretation of standards between the Housing Executive and Eaga plc. The Department was somewhat caught in the middle regarding how best to resolve that difference.

177. It was not a question of right or wrong; but, for example, Richard mentioned the failure to install reflective panels behind radiators. Householders do not always want that. If the householder chooses not to have those panels installed, but they are installed, and if they fail because they were not up to the required standard, regulation-interpretation issues cause difficulties. Had the Department felt that the blame lay entirely with Eaga plc, it would not have shrunk from imposing penalties — the contract allowed for that. However, too much of a grey area was created by the prospect of an amicable settlement for the Department to impose penalties. Is that a fair summary?

178. Ms Cousins: That is a fair summary. The Department preferred to take a collaborative approach with all the parties around the table. That is how the Department improved the interpretation of quality, but that took far too long.

179. Mr Wells: Mind you, it is rather odd that, if that interpretation was at odds with Eaga plc’s and if the same criteria were being used by the Housing Executive, the quality of workmanship improved from 38% to more than 90%.

180. Mr A Shannon: That is not odd. Adjustments have been made. I was shown an example of that last week. For example, strictly speaking, building regulations dictate that an oil tank must be a certain distance from an adjacent property. Those building regulations did not apply six or seven years ago, when many such tanks were installed. Therefore, there is an issue about whether money should be spent on shifting an oil tank in order to conform to current building regulations, regardless of the householder’s wishes. In the years when those regulations were very strictly applied, that system would have failed. Now, the householder satisfies the regulation if he or she signs a document declaring that he or she does not want the tank moved.

181. That sort of common sense and flexibility has crept in, and it enables the Department to approve more systems than it used to.

182. Mr Wells: That is helpful. My experience in South Down is that — although it appears at odds with the statistics that have been presented to members — there is a high level of user satisfaction with the quality of workmanship. Anybody with whom I have spoken has been appreciative and regards the work as having been done well.

183. On a tangent, there is a proposal to transfer responsibility for the scheme from the Department to the Housing Executive, which remains in the Minister for Social Development’s ambit. It strikes me that the Department has experienced difficulties in dealing with the issue with an arm’s-length body. Will it not face more difficulty if it moves two steps away from having direct control? It will be responsible to a devolved Executive that will devolve the power to Eaga plc or to a similar body. Will that create further problems in maintaining quality control and direct accountability?

184. Ms Cousins: In the past, the roles and responsibilities have meant that the Department managed the contract and the Northern Ireland Housing Executive was the independent quality assessor.

185. The Department uses a small team to manage the contract, and that is part of the difficulty that has delayed progress. The Housing Executive’s own scheme and the warm homes scheme have achieved similar standards, and the Department is confident that the Housing Executive will effectively manage the scheme. A tender will be issued for new scheme managers, and the Department is considering dividing the scheme in order to enhance competition, enable benchmarking and internal quality control, and to establish external quality-assurance mechanisms.

186. Mr Wells: Who will police that system? The Housing Executive cannot police a scheme that it is running. Who will come in and carry out the quality assurance?

187. Ms Cousins: Stephen, as someone who has been involved in those negotiations, can you tell us whether that has been built into the scheme documents?

188. Mr Martin: Yes, the Department believes that the Housing Executive has considerable skills in managing contracts of that size — that is its job; it is what it does. The Department considers that the Housing Executive’s involvement will enhance the process. The Department has particular skills in relation to policy, monitoring and evaluation. Therefore, the scheme’s development plays more to the strengths of each organisation.

189. The Housing Executive will have the role of contract administrator in the new scheme. As part of that, it will also have a quality-assurance role. We feel that those roles go much more effectively together, as that is what the Housing Executive does for the contracts that it manages for its own properties. Instead of there being a conflict, there will be better synergies: the roles will link much more effectively, and the Department will have the space and expertise to monitor at a policy and strategic level to ensure that the objectives are achieved. It is a good measure and the roles will be much more complementary than they are at present.

190. Mr Wells: So the Housing Executive will police itself?

191. Mr Martin: It will not be policing itself. The Department will be responsible for ensuring that the scheme delivers according to the objectives that it sets for the Housing Executive, and the Housing Executive will be responsible for ensuring that the contractors deliver. There are very clear lines of separation.

192. The Deputy Chairperson: Several members have indicated that they wish to ask follow-up questions, and I ask them to be relatively brief.

193. Ms Purvis: I have several points — if you will indulge me, Deputy Chairperson. We talked at the beginning about there being no clear way of identifying homes that are experiencing fuel poverty — as Trevor Lunn said. Why did the Department set targets to eliminate fuel poverty in vulnerable households by 2010 and in all groups by 2016 if it had no means of identifying which households were in fuel poverty in the first place?

194. Mr A Shannon: We have no means of going round every home and identifying those that are in fuel poverty and those that are not. On the other hand, when the Housing Executive carries out its survey, which will be based on samples, it will be a fairly robust survey that will give us some fairly reliable information about the proportion of homes that are in fuel poverty. The target was linked to that survey, and it was thought that it could be measured against that survey and that, if the Department could bring the figure down to zero, it would not be too far away from cracking the problem.

195. Ms Purvis: Jonathan Craig talked earlier about the criteria for inclusion in the warm homes scheme being based mainly on benefits. You said that you would introduce an income measure for those on disability benefits. Some households — apart from those on disability benefits — are not necessarily fuel poor but are still gaining from the warm homes scheme. Is it not a bit of a blunt instrument in that respect? What other measures are being considered so that the Department can better target those who could benefit more from the scheme?

196. Mr A Shannon: The first target is to identify those who are vulnerable. By and large, we are saying that the vulnerable are those who are on benefits or are eligible for tax credits or, if someone is receiving disability allowance, it will be a combination of that and a means test of some kind. No matter where the boundary is drawn, someone who should be inside it will always be just outside it, and someone who should be outside it will be just inside it. It is a blunt instrument, but it is the best proxy that we can come up with.

197. As regards targeting the properties, we propose seeking out the properties to which we could make the most difference and giving priority to those for which the energy ratings could be best improved.

198. Ms Purvis: I have one final point, which Jim Shannon talked about earlier. Of all the household groups, fuel poverty is higher among older people. Jim talked about introducing new heating systems for all. Many older people are living with inefficient gas or oil boilers. Nevertheless, on 25 April 2008, you changed the entitlement to the warm homes plus scheme so that those who met the criteria, but who had operational systems — although probably the most inefficient systems — would be excluded from getting new heating systems.

199. Why did you do that?

200. Mr A Shannon: We propose to do that under the new scheme as well, but we did it because we were inundated with applications. We were unable to deal with them all at once, and, probably, we would have been unable to deal with them all within the 12-month period that we have been talking about. Therefore, we had to prioritise. We decided that the most deserving people were those who had no heating system or whose heating system was not working at all. Those who had a heating system — albeit an inefficient one — were slightly less of a priority.

201. Ms Purvis: Are we not going back to the Victorian times of the deserving and the undeserving poor?

202. Mr A Shannon: If our money is limited, we must draw a line somewhere. That situation will never be entirely satisfactory.

203. Ms Purvis: That may be the case, but some 80% of winter deaths are related to the cold; indeed, most of that 80% are elderly people. It is mostly elderly people who live with inefficient oil or gas-based heating systems. Given those points, should that group not surely be a priority for you?

204. Mr A Shannon: That takes us back to the arguments that prevailed at the time when we introduced the current scheme, when preference was given to the over 60s, regardless of whether they had a heating system or of the efficiency of that system.

205. The new scheme proposes to target our limited resources to those who have greatest need. We confine that to new, Economy 7 or solid-fuel systems. Others who have inefficient oil-based systems are further down the pecking order. However, the scheme is out to consultation, and there is room discuss it over the next few months.

206. Ms Purvis: It seems that the Department has already made up its mind about it.

207. Mr A Shannon: It has made up its mind about a set of proposals.

208. Mr McLaughlin: My question relates to the same general area. The report acknowledges that the marketing of the scheme is effective, and it draws attention to the advantages of using passport benefits to define eligibility. It then describes the difficulties that are involved with that. Such an approach excludes groups such as the working fuel poor — of whom Dawn spoke — near-benefit pensioners, and those who are eligible for benefit but do not claim it. That is a significant issue. Fuel-poor adults who are under 60 years of age without dependent children or a disability are considered non-vulnerable and also lie outside the scope of the scheme. It is estimated that those groups combined represent at least 35% of the fuel poor. Members can understand how meaningless a non-Executive target of eliminating fuel poverty would be, given that such a significant number of people fall outside the scope of the scheme.

209. Alan Shannon addressed the use of attendance allowance and disability living allowance, which are not means-tested but are passport benefits. The inclusion of recipients of those allowances in the scheme means that up to half the grants issued may have been made to people who would not qualify under a more objective test.

210. I did not pursue that line in my questions because it is a bit left-field. Nevertheless, I am interested in whether the review has picked up on the recently announced ‘A2B: Access to Benefits’ scheme. That has a tremendous advantage, in that it is a web-based scheme through which any constituency office can respond to a client about carrying out, there and then, a health-benefits check-up. It can tell a client whether people are eligible. Will the review interface with such schemes? Many of the fuel poor do not have computers at home and are not computer-literate. However, any advice centre, constituency office, Internet cafe or family unit that has access to a computer can answer many of the questions and supply much of the necessary information. That will then allow for a more focused approach.

211. The question is for Eaga plc as much as for the Department, but both need to address the fact that first, many people are excluded from the scheme and secondly, many benefit from grants but may not necessarily be in the priority group that should be targeted.

212. Mr A Shannon: The revised scheme will catch some of those people. As far as benefit-uptake issues are concerned, we are keen to make those links.

213. Mr Martin: Applicants who are successful in qualifying for the scheme are offered a benefit entitlement check, and so far that initiative has generated £4 million a year in additional benefits. One recommendation of the Audit Office report was that all applicants to the scheme should be offered a benefit entitlement check. That is one of our proposals, and it will address many of the issues that you raised. Such a move would be significant in that applicants could find out that they are entitled to a benefit that they have not claimed before and thereby become eligible to apply for the warm homes scheme. The short answer is yes, the Department is keen to do more in that area.

214. Mr McLaughlin: I am trying to work out how we can address the fact that more than one in three of those who should have access to the scheme have not been picked up.

215. Mr Rodgers: It is the age-old problem: how do we reach the people who most need help? The benefit entitlement check was first offered to recipients of the scheme in July 2006. It is interesting to note that only 25% of recipients accepted the offer; the other 75% said no to the check, perhaps because they were worried about losing benefits or because they did not want us to pry into their personal affairs. At the moment, the check is carried out on a one-to-one basis. As Mr McLaughlin said, the idea of offering a web-based service is very interesting, and it is a matter to pursue. However, at the moment, our benefit check is carried out over the telephone, and people seem to be more prepared to open up to an adviser on the telephone. If we have to carry out face-to-face checks, we have links to Advice NI. Based on our experience, we support the proposal to bring the benefit entitlement check upfront in the scheme in order that we can better meet our target in future.

216. Mr McLaughlin: One of the major benefits of the scheme is that people are dropping into a local citizens advice bureau or other centres to seek advice from someone they know. They are not worried about interfacing with the system, which might take their benefits away from them. Exploiting those facilities might be one way of cracking that particular problem.

217. Mr Lunn: I almost regret having to return to the quality-control issue, which I want to link to the harmonised pricing system. For the life of me, I cannot understand the reasons for using such a system. In the normal world of commerce and competitive tendering, a contractor must quote the best price that he can, and he is then expected to do a first-class job at that price. If he does not do it right, he has to remedy the problem, and all kinds of checks and balances are in place to ensure that he does. Under the harmonised pricing scheme — and I am thinking in particular of heating installations — it seems that the contractor quotes a price and, then, to his pleasant surprise, is told that he will get more money for the job. He then does the work, but there is a 40% failure rate. How can that be?

218. Mr Rodgers: The simple answer is that 17 contractors are currently part of the scheme, and they have a range of prices for about six different specifications. Having an individual price for each job would mean that 102 different prices would have to be managed. The simple approach — and it is a well-tested approach that is used in the much larger warm front scheme in England and Wales — is to deal with six prices rather than 102 prices.

219. You are absolutely right about the quality issue. Contractors do not get paid until the job is done properly; they get paid only when the remedial work is carried out. However, I do not want to revisit the earlier discussion. It is true that the quality pass rate was too low for too long, but we have resolved that issue at last. It is my regret that it took three or four years to do so. Pass rates are now in excess of 85%, but in the 15% — or almost 15% — of cases that still fail, the work is corrected before the contractor is paid. That applies to Eaga plc as well as to the person who does the job.

220. Mr Lunn: Is the harmonised pricing system commonly used across Departments? I know that it is used in England in the warm front scheme, the equivalent to the warm homes scheme, but what happens in other areas? For example, does Roads Service, which also employs small contractors, use a similar system?

221. Ms Hamill: No.

222. Mr Lunn: Can you name a Department that uses a similar scheme?

223. Ms Hamill: The approach is about value for money. That is the approach that is taken in this contract, but, no, it is not commonly used, and it would not be normal practice. However, it was the approach that was taken in the scheme.

224. The Deputy Chairperson: Can you provide us with details of any other harmonised contracts that are in operation?

225. Ms Hamill: If you will allow me to, I will refer that request to the Departments, and will write to the Committee.

226. Mr Lunn: I am not saying that I advocate it, but there must be other, similar situations in which that could have been considered and, presumably, not used, for whatever reason. Why was that system used in this scenario?

227. Mr A Shannon: There are not many schemes of this kind where the contractors are quite as small. Often, you are talking about plumbers who work with only one or two people, with the result that you get a much wider range of pricing and activity of that kind. When tendering for this, which, as you picked up, is done using harmonised pricing, we follow practice that is used in England and Wales. It is done on a proper tendering basis; we have not been using an unusual procedure.

228. Mr Craig: My question is for the departmental witnesses. I have examined the delivery of the project, and the figures show that there is an approximate overhead of 13% in the system. That is basically the cost of delivering the scheme. Are you satisfied that that represents value for money for the public sector? I have taken careful note that there is provision for clawback, in that if that figure goes over 15%, you will claw back some of the funds. Similar to Trevor, I come from a private-sector background, so I consider 15% — or 5% — to be quite high. Are you absolutely satisfied that we are getting value for money from the delivery of the project?

229. Mr A Shannon: The test is to look at what we are getting for that and how it compares with what others are getting for similar activities. My understanding is that it compares favourably with what is happening in England and Wales. We are clear about the services that we are getting for that sum.

230. Ms Cousins: Last year, the overhead was reduced to 9%. We keep a careful eye on that element of the scheme, and we are satisfied that we are getting value for money.

231. Mr Craig: Are you satisfied that that trend will continue if you transfer the scheme to the Housing Executive?

232. Ms Cousins: That 9% is the administration cost for Eaga plc, as opposed to the totality. You are asking what the cost would be of our managing the scheme, as opposed to the cost of the Housing Executive doing so. We would have to ensure that there was no difference.

233. Mr Rodgers: An issue that we have not addressed today is that, if we go back to 2001, the prices that were ultimately harmonised were put out to competitive tender by Eaga plc, which is the contract manager. As I explained, 17 contractors are working on the scheme today. There were another dozen or so who are no longer working on the scheme, either because they were not meeting standards or because of health and safety issues.

234. The report points out that the retail prices index (RPI) over the same period was 19%. The Government’s regulatory index on that says that the heating installers index had risen by 34% over the same period. That is because the price of copper and commodities has moved faster than the RPI.

235. On top of the 34% increase on that base competitively tendered price, there have been increases in building control requirements. Interestingly, we pay £150 to the local authorities in Northern Ireland for a building control certificate. However, that is not paid in England and Wales. Our move to condensing boilers, which give a better result to the consumer than bog-standard boilers, added £500 or £600 to the cost of the job. That move has therefore given better value to the consumers, but it is more expensive. Ultimately, when comparing like-for-like prices in 2007, we have driven £500 off the cost of a job. Any given job would have been £500 more had we not been incentivised by the Department to keep prices down. Effectively, we are incentivised by the Department to keep prices down because our fee structure is such that achieving the target number of households is the way in which we earn half our fee.

236. From our perspective, checks and balances are in place to ensure that we are getting value for money through the scheme. The cost of the job, which started at a competitive tender in 2001, demonstrates that.

237. The Deputy Chairperson: Why is the cost of the scheme in Northern Ireland one third more expensive than the schemes in England, as outlined in the report?

238. Mr A Shannon: That is because we are not comparing like with like.

239. The Deputy Chairperson: If the cost of the scheme is one third more expensive, it means that there are one third more households on the waiting list. There are several thousand households on the waiting list, and some homes are not even surveyed until there is an expectation that the scheme will be delivered. There is considerable demand for the scheme, yet you are deciding, through the process that you have put in place, that one third fewer households will benefit from the oil and gas elements of the scheme, which are more expensive.

240. Mr A Shannon: There are some interesting points to consider. We have a higher specification — we are going for more efficient boilers, materials that will last longer, and more radiators — than the scheme in England provides. There is a trade-off in that by going for a higher standard, we can afford to carry out fewer installations. That is the judgement that has been applied.

241. We do not enjoy the economies of scale that are available in England. The English scheme is worth £350 million, meaning that enormous economies can be made in buying materials in bulk, for example. On top of that, as Mr Rodgers said, there are fees to be paid here that do not have to be paid in England. Our assessment, when all those elements have been discounted, is that our scheme is roughly equivalent to schemes in other regions.

242. Mr Rodgers: Since 1 July 2008, we have been able to reduce the cost of a new oil-heating installation by £1,000. We have introduced advances in technology and a new specification, which have allowed us to drive the cost down and install more systems for the money that is available.

243. The Deputy Chairperson: You said earlier that costs are increasing. Given that, and given what you have just said, does that therefore mean that some are increasing and some are decreasing?

244. Mr Rodgers: Yes, but since 1 July 2008, the introduction of new technology has allowed the cost of the oil-heating installation to come down.

245. Mr McLaughlin: I take it that new technologies are also being deployed in England, Scotland and Wales.

246. Mr Rodgers: Interestingly, some of those innovations have been introduced in Northern Ireland, and that knowledge is then used elsewhere.

247. Mr Dallat: I know that we are drawing to a close. The report is valuable, and it is an excellent basis for discussion. The wind may be howling outside, but in here, the heating has probably been turned up. Unless we can look forward to a future in which the most vulnerable in society can benefit from the schemes that we are discussing, the report is a waste of paper.

248. The conversation that Dawn Purvis generated earlier suggested to me that in the face of swingeing cutbacks, older people can expect to have a bleak future. I thought that at one time you were making an argument that a commissioner for older people be established immediately. I do not see where older people are going to get the protection that they need. We are in Belfast, not at the foot of the Sperrins. As they grow older, and particularly if they are disabled, people are more dependent on warmer homes. If we can do something to protect that element of our population, we will have achieved something. That is my parting shot.

249. Mr G Robinson: When each job is complete, who checks the work?

250. Mr Rodgers: One hundred per cent of heating-installation jobs are post-checked by Eaga plc in order to ensure that the work has been done to the required standard. A sample number of checks is carried out by the Housing Executive, which acts as the independent inspector. The Housing Executive pays us and the contractor.

251. Mr G Robinson: Does that mean that the jobs are doubly checked?

252. Mr Rodgers: The Housing Executive checks a sample number of jobs.

253. The Deputy Chairperson: Mr Shannon, paragraph 5.22 details a scenario that was touched on earlier. The terms of the contract state that the Department has a clawback option, should Eaga plc’s profit be excessive. However, I understand that during the seven years, you never requested an independent set of audited accounts. How could you determine whether you were entitled to any clawback? Furthermore, would it not have been useful to have gathered that information to use in the development of any new schemes?

254. Mr A Shannon: We have not been quite as negligent as that paragraph might suggest. We monitored continuously — and had constant contact with — the organisation, and we knew the exact financial position throughout that period. We did not, during that period, ask for fully certified accounts. However, in response to the report, we do so now. The accounts confirmed, as we believed all along, that there is no scope for clawback.

255. The Deputy Chairperson: Will you explain why you did not request figures earlier, before the matter was drawn to your attention in the Audit Office report? Surely, the provision of accounts is a basic element of the contract on which — had you been diligent with public money — you should have insisted.

256. Ms Cousins: The Department discussed that issue throughout the seven years. In discussion, during internal reviews and before re-awarding the contract, we were satisfied that there was no profit to be clawed back. That situation was confirmed recently by a thorough review of the figures that was produced for us.

257. The Deputy Chairperson: Were those figures independently audited?

258. Ms Cousins: Yes.

259. The Deputy Chairperson: You seem to accept that it would have been much better to have received that assurance earlier.

260. Unusually, we have virtually had a second round of questions today, which demonstrates members’ interest in the subject and that they are trying to assist the Department to meet the need and demand for the warm homes scheme.

261. We examined how the scheme is targeted and how the Department assesses its effectiveness. The Committee will consider the evidence carefully before drawing conclusions, which will be included in its final report. We will forward to you in writing any additional questions that may arise. That concludes today’s evidence session. Thank you for attending.

Appendix 3 Correspondence

Chairperson’s Letter of 24 October 2008 to Mr Alan Shannon

Public Accounts Committee
Parliament Buildings
Room 371
Stormont
BELFAST
BT4 3XX

Tel: (028) 9052 1208
Fax: (028) 9052 0366

Email: Jim.Beatty@niassembly.gov.uk

24 October 2008

Mr Alan Shannon
Accounting Officer
Department for Social Development
Lighthouse Building
1 Cromac Place
Gasworks Business Park
Belfast
BT7 2JB

Dear Alan

PAC Evidence Session – Outstanding Questions

You attended the Committee’s evidence session in the Stormont Hotel on 23 October 2008 and provided information relating to the NIAO Report ‘Warm Homes: Tackling fuel poverty’

At the close of the evidence session the Deputy Chairperson advised that any outstanding questions would be sent to you for reply. Two questions were identified:-

(a) Why is the Benefit Health Check available to only those who meet the scheme’s eligibility requirements? Is this not a ‘missed opportunity’ to check that other customers are receiving their full benefit entitlement?

(b) How have you been assured that the above inflation increases in the costs of installations are justified and that Eaga continues to secure the best possible value?

A response is required by 7 November 2008.

Yours sincerely

Paul Maskey
Chairperson
Public Accounts Committee

Correspondence of 6 November 2008 from Mr Alan Shannon

From: The Permanent Secretary
Mr Alan Shannon

Lighthouse Building
1 Cromac Place
Gasworks Business Park
Ormeau Road
BELFAST
BT7 2JB

Telephone: 028 90 829002
Facsimile: 028 90 829560
E-mail: perm.sec@dsdni.gov.uk

Mr Paul Maskey MLA
Chairperson
Public Accounts Committee
Room 371, Parliament Buildings
Stormont
BELFAST BT4 3XX

6th November 2008

Dear Mr Maskey

PAC Evidence Session – Outstanding Questions

Thank you for your letter dated 24 October 2008 following the PAC evidence session in the Stormont Hotel on 23 October 2008, posing two further questions.

Benefit Health Check

The Audit Office report states that unclaimed passport benefits are a barrier to entry on the Warm Homes Scheme and goes on to recommend that the benefit entitlement check available within Warm Homes is extended to all applicants rather than all eligible applicants as at present. The Department accepts this and in its consultation document on a revised Warm Homes Scheme, launched on 21 October 2008, one of the proposals is an extension of the benefits health check to include all applicants. Providing a benefit health check has proved very successful with over 4,600 households having a benefit check since its inception in July 2006, 3,400 of whom have gone on to claim benefit worth an average of £24.23 per week.

Increases in Costs of Installations and Eaga Securing Best Possible Value

The Department acknowledges that there have been increases in the cost of heating installations above the general rate of inflation. The reasons underpinning these increases are set out in the table at the annex to this letter. The table is based on figure 9 on page 34 of the Audit Office report.

The cost of heating installations generally across the market place has risen more quickly than general inflation. Government’s indices of plumbing costs, compiled by the Department of Business, Enterprise and Regulatory Reform in England, show cost increases of nearly 35% from 2001 to 2007. This compares to 19% for general inflation as cited in figure 9 of the Audit Office report.

Other external factors have also impacted on heating installation costs. Changes to building regulations have been particularly important. These have added over £1000 to the cost of an oil heating installation and over £200 to a gas heating installation.

The Department has also enhanced the specification for the scheme during its life to capture emerging best practice. Such changes have added nearly £400 to a gas heating installation and nearly £700 to an oil heating installation.

Taking into account all these factors, the price of a new oil heating installation would have been £5829 and a new gas heating installation £3758. This is reflected in the column headed ‘new price’. However, the actual price paid in December 2007 was lower, in some cases by nearly 10%, as a result of work by the Department and Eaga to bear down on costs. The Department and Eaga have continued to exert downward pressure, making effective use of new technologies to reduce costs without compromising standards. This has resulted in considerable savings on oil heating installations in particular, as reflected in current prices, shown in the ‘existing costs’ column of the table.

Overall, the measures installed under the Warm Homes Scheme represent good value for money, evidenced by £100 million of an investment generating benefits in the order of £250 million.

I hope this has been helpful.

Yours sincerely

ALAN SHANNON

Updated figure 9

Measure	2001 Contract	Berr Uplift 34.58%	Building Regulation Changes	Increase Due To Tech. Spec. Changes	New Price	Dec 2007 Costs	Price Differential	Existing Costs As From Jul 2008
New Oil	£3,040.00	£4,091.23	£1,043.26	£695.00	£5,829.49	£5,390.00	£439.49	£4,444.00
Solid Fuel to New Oil	£2,635.00	£3,546.18	£1,043.26	£695.00	£5,284.44	£4,765.00	£519.44	£3,550.00
New Gas	£2,340.00	£3,149.17	£214.24	£395.00	£3,758.41	£3,665.00	£93.41	£3,665.00
Solid Fuel to New Gas	£1,830.00	£2,462.81	£214.24	£395.00	£3,072.05	£3,025.00	£47.05	£3,025.00

Chairperson’s letter of 24 October 2008 to Ms Fiona Hamill

Parliament Buildings
Room 371
Stormont
BELFAST
BT4 3XX

Tel: (028) 9052 1208
Fax: (028) 9052 0366
Email: Jim.Beatty@niassembly.gov.uk

Date: 24 October 2008

Ms Fiona Hamill
Deputy Treasury Officer of Accounts
Department of Finance and Personnel
Room P4, 3rd Floor
New Building
Rathgael House
Balloo Road
BANGOR
BT19 7NA

Dear Fiona

Re: Public Accounts Committee Evidence Session 23 October 2008

I refer to the evidence session at the Public Accounts Committee yesterday.

At the meeting the Committee discussed harmonised pricing and asked that you provide information on whether there are any other Departments, other than Department for Social Development, which use harmonised pricing for any projects.

I should be obliged for a response by 7 November 2008.

Yours faithfully

Paul Maskey
Chairperson
Public Accounts Committee

Correspondence of 6 November 2008 from Ms Fiona Hamill

Fiona Hamill
Deputy Treasury Officer of Accounts
Room P5
Rathgael House
Balloo Road
BANGOR BT19 7NA
Tel: Tel No: 028 918 58128 (x 68128)
email: fiona.hamill@dfpni.gov.uk
and joan.braniff@dfpni.gov.uk

Paul Maskey
Chairperson
Public Accounts Committee
Room 371
Parliament Buildings
Stormont, BELFAST
BT4 3XX

6 November 2008

Dear Paul

Public Accounts Committee Evidence Session 23 October 2008

Thank you for your letter of 24 October seeking additional information on whether there are any other departments, other than Department for Social Development (DSD), which use harmonised pricing for any projects.

I have consulted all departments and they all have confirmed that, apart from DSD, they do not use harmonised pricing for any projects. DSD has also confirmed that, apart from the Warmer Homes Scheme, they do not have any other projects which use harmonised pricing.

I hope this meets your information requirements.

Yours sincerely

FIONA HAMILL
Deputy Treasury Officer of Accounts

Appendix 4 List of Witnesses who Gave Oral Evidence to the Committee

1. Mr Alan Shannon, Accounting Officer, Department for Social Development.

2. Ms Heather Cousins, Director of Housing, Department for Social Development.

3. Mr Stephen Martin, Head of Housing Research and Legislation Branch, Department for Social Development.

4. Mr Richard Rogers, Managing Director, Eaga plc.

5. Mr Kieran Donnelly, Deputy Comptroller and Auditor General, Northern Ireland Audit Office.

6. Ms Fiona Hamill, Deputy Treasury Officer of Accounts, Department of Finance and Personnel.

Session 2008/2009

Fifth Report

Public Accounts Committee

Report on Warm Homes: Tackling Fuel Poverty

Together with the Minutes of Proceedings of the committee relating to the report and the minutes of evidence

Ordered by The Public Accounts Committee to be printed 27 November 2008 Report: 18/08/09R (Public Accounts Committee)

Membership of Powers

Table of Contents

Report

Appendix 1:

Appendix 2:

Appendix 3:

Appendix 4:

List of Abbreviations used in the Report

Executive Summary

Introduction

The extent of fuel poverty in Northern Ireland

Targeting Warm Homes’ measures to assist the fuel poor

Energy efficiency measures

Management of the Warm Homes Scheme

Summary of Recommendations

The extent of fuel poverty in Northern Ireland

Targeting Warm Homes’ measures to assist the fuel poor

Energy efficiency measures

Management of the Warm Homes Scheme

Introduction

The extent of fuel poverty in Northern Ireland

Recommendation 1

Recommendation 2

Recommendation 3

Targeting Warm Homes’measures to assist the fuel poor

Recommendation 4

20. The Committee welcomes the Department’s intention to review the eligibility criteria and how the Scheme can be better targeted. However, the Committee recommends that this is completed quickly and improvements implemented without delay.

Recommendation 5

22. The Committee recommends that the Department explores the scope to work further with advice centres, the voluntary and community sector and other information outlets to assess benefit entitlement and promote benefit take up.

Recommendation 6

24. The Committee recommends that the Department revisits the area based pilots in Northern Ireland and, together with the lessons emerging from the Warm Zones approach in Great Britain, develops action plans to tackle fuel poverty in conjunction with the local communities.

Energy efficiency measures

Recommendation 7

Management of the Warm Homes Scheme

Recommendation 8

Recommendation 9

Recommendation 10

Recommendation 11

43. The Committee recommends that the Department reviews the capacity of the Scheme to deliver to an acceptable timetable, from application to household survey to installation of the measures. The Department’s consultations and tendering on the new Scheme should inform this.

Recommendation 12

Appendix 1

Minutes of Proceedings of the Committee Relating to the Report

Thursday, 23 October 2008 Confex 2 & 3, Stormont Hotel, Belfast

2. Evidence on the NIAO Report ‘Warm Homes: Tackling Fuel Poverty’.

Thursday, 27 November 2008 Room 144, Parliament Buildings

5. Consideration of the Committee’s Draft Report on Warm Homes – Tackling Fuel Poverty.

Appendix 2

Minutes of Evidence

Appendix 3

Correspondence

Chairperson’s Letter of 24 October 2008 to Mr Alan Shannon

PAC Evidence Session – Outstanding Questions

Paul Maskey Chairperson Public Accounts Committee

Correspondence of 6 November 2008 from Mr Alan Shannon

PAC Evidence Session – Outstanding Questions

Benefit Health Check

Increases in Costs of Installations and Eaga Securing Best Possible Value

ALAN SHANNON

Updated figure 9

Chairperson’s letter of 24 October 2008 to Ms Fiona Hamill

Re: Public Accounts Committee Evidence Session 23 October 2008

Paul Maskey Chairperson Public Accounts Committee

Correspondence of 6 November 2008 from Ms Fiona Hamill

Public Accounts Committee Evidence Session 23 October 2008

FIONA HAMILL Deputy Treasury Officer of Accounts

Appendix 4

List of Witnesses who Gave Oral Evidence to the Committee

Report on Warm Homes:
Tackling Fuel Poverty

Together with the Minutes of Proceedings of the committee
relating to the report and the minutes of evidence

Ordered by The Public Accounts Committee to be printed 27 November 2008
Report: 18/08/09R (Public Accounts Committee)

Thursday, 23 October 2008
Confex 2 & 3,
Stormont Hotel, Belfast

Thursday, 27 November 2008
Room 144, Parliament Buildings

Paul Maskey
Chairperson
Public Accounts Committee

Paul Maskey
Chairperson
Public Accounts Committee

FIONA HAMILL
Deputy Treasury Officer of Accounts