Labour’s Zero-Based Review Interim Report Number 15: Department for Energy and Climate Change Labour’s Zero-Based Review Interim Report No.15 DEPARTMENT FOR ENERGY AND CLIMATE CHANGE FOREWORD The leader of the Labour Party, Ed Miliband, and the Shadow ChanCellor, Ed Balls, have made Clear that departmental budgets will be cut not only in 2015-16, but each year until we have achieved our promise to balanCe the books. Across every part of the Department of Energy and Climate Change (DECC), we need to take a tighter approach to finanCial management of taxpayers’ money, and reform the framework within which the energy market operates so that it is fair for bill payers. Under the Tory’s failing plan, energy bills have risen, and energy Companies have failed to pass on falling wholesale Costs. Record numbers of families with children Cannot afford to heat their homes. Investors face unCertainty and indeCision about the future of our energy system. And the mismanagement of taxpayers’ money, such as through the Government’s poor-value Green Deal Home Improvement Fund, and the NuClear Decommissioning Authority’s budget, have seen tens of millions of pounds wasted. Britain needs a government that will stand up to the energy Companies to deliver fairer prices and a better deal for bill payers. A government that is serious about tackling the sCandal of fuel poverty and cold homes. And a government that is putting in place the vital reforms neCessary for investment in the low Carbon future of our energy system, and to deliver value for money for the taxpayer. This interim Zero-Based Review highlights just some of the ways in which we will do this. These examples have been guided by our principles to: • Stand up for bill payers; • Tackle fuel poverty and cold homes; • SeCure greater investment in energy; and • Ensure value for money across every part of the Department of Energy and Climate Change, including tackling the UK’s long-term nuClear waste effiCiently and effeCtively. It was a Labour Government, through the Energy Act 2008, that legislated to ensure that new nuClear power station operators have secure finanCing arrangements in place to meet the full Costs of deCommissioning and waste management. But the UK Continues to face a legacy of nuClear waste built up over many deCades. Tackling this safely and effeCtively will remain an absolute priority under a Labour Government. However, we must ensure that the NuClear Decommissioning Authority, in managing such an important programme of work, and at such Considerable cost to the taxpayer, is able to demonstrate value for money. We highlight £38 million of potential annual savings from the Department of Energy and Climate Change, in addition to one-off savings of £10 million over the Parliament, and there could be scope for Considerably more. This represents just a sample of our work to find savings and efficiencies across Government. The next Labour Government will balanCe the books and deliver a surplus on the current budget and falling national debt as soon as possible in the next Parliament. There will be no additional borrowing for day-to-day spending. Labour will finish the job where this Government has failed. Caroline Flint MP, Shadow Secretary of State for Energy and Climate Change Chris Leslie MP, Shadow Chief Secretary to the Treasury 1 LABOUR’S ZERO-BASED REVIEW The Zero-Based Review is a root and branCh analysis of every pound the Government spends. It will help the next Labour Government to ruthlessly prioritise public spending and deliver service reform and improvements, rather than just salami-slicing budgets and watching services deteriorate, as has been the practiCe under this Government. This process is intended not only to reveal the current Government’s Costly errors and skewed priorities but will require the Labour Party to grasp opportunities to deliver reformed public services which are valued and justifiable; which provide value for money and quality services that meet the needs and demands of the public who use them; and which Can both make savings and secure economiC growth. Fundamentally reviewing current Government spending is a neCessary step in preparing for office. Last year Ed Balls MP, the Shadow ChanCellor, announCed that Labour would conduct a detailed review of every pound the Government spends, in order to help prepare ourselves for the Challenges that the next administration will face. We set out the principles of our Zero-Based Review in a Phase 1 discussion document in December 2013. Since the beginning of the year, Chris Leslie MP, Shadow Chief SeCretary to the Treasury, has been examining detailed departmental expenditure as part of our first round of the Zero- Based Review, analysing every budget and exploring public service reform and redesign in detail with each Shadow team. This process has been guided by the following five principles: • We will use public money more efficiently – and seek efficiencies in every area of government spending; • We will use all departmental budgets to strengthen the economy – supporting growth, job Creation, innovation and exports; • We will ensure greater fairness in the impact of spending – and will prioritise spending that prevents future problems; • At the same time as inCreasing efficiency, the quality and experience of public service must improve – offering the speed, simpliCity and responsiveness that people now expect; and • We will strengthen accountability and transparency across government – with Clear efficiency inCentives for all departments. No department has been exempt from this process, including any areas that we may choose to proteCt or ring-fence, beCause efficiency will be neCessary across all areas of spending. Our work for Phase 1 of our Zero-Based Review has been informed by the wide range of 2 reports which have Contributed to the Labour Party’s Policy Review: the Armitt Review of long-term infrastruCture planning; the LoCal Government Innovation TaskforCe; the Stevens Review of policing and crime; and the Adonis Growth Review, to mention just a few. Labour will Continue to expose waste, mismanagement and poor deCision making by David Cameron’s Government, as well as inCrease the sCrutiny of each departmental balanCe sheet over the months to come. We will Complete our Zero-Based Review with our first Spending Review in government, but this early work is CruCial to inform the policy choices we will make. As Ed Miliband and Ed Balls have outlined, the next Labour Government will be about big reforms, not big spending. 3 FAILURES OF THE TORY-LED APPROACH TO ENERGY AND CLIMATE CHANGE The current Government has repeatedly failed to stand up to the big energy Companies and demand a better deal for consumers, tackle fuel poverty and cold homes, secure greater investment in energy, and ensure value for money from every part of the Department of Energy and Climate Change (DECC), including tackling the UK’s long-term nuClear waste effiCiently and effeCtively. Failing to stand up for bill payers • Household energy bills are up by £300 a year Compared to 2010 – and have inCreased twiCe as fast as inflation, four times faster than wages, and faster than almost any other economy in the developed world1. • David Cameron has promised on 17 separate oCCasions to force the energy Companies, in law, to put all consumers on the lowest tariff. Yet he has failed to take action, with three out of four families still not on their supplier’s Cheapest tariff, and households being overCharged by an average £180 per year2. • Despite wholesale gas prices falling by an estimated 20 per cent since December 2013, energy Companies have passed on Cuts of just 1-5 per cent to bill payers in recent months, and only on their gas bills. In Opposition, David Cameron said “you have to give the regulator the teeth to order that those reduCtions are made, and that is what we will do”3. Yet six years later, the Government has refused to act, and voted twiCe against Labour’s proposals to give the energy regulator the power to cut energy prices when wholesale Costs fall4. • It is essential that consumers get value for money from the smart meter programme, which will be paid for by bill payers. The House of Commons’ Energy and Climate Change Committee agreed that a lack of leadership by this Government has led to delays which threaten to inCrease the £10.9 billion Costs of the programme, and delay progress against the target for all homes and businesses to have smart meters installed by 20205. Failing to tackle fuel poverty and cold homes • There are over one million families with children who Cannot afford to heat their homes – the highest level ever recorded. Fuel poverty is projeCted to inCrease to 2.3 million 1 House of Commons library, based on figures from the Department of Energy and Climate Change. 2 Department of Energy and Climate Change, Quarterly domestiC energy customer numbers, and analysis of suppliers’ tariffs. 3 David Cameron, Cameron Direct (Bedford), 8 September 2009. 4 Opposition Day debates on energy priCe regulation were held on 18 June 2014, and 14 January 2015. 5 House of Commons Energy and Climate Change Committee, MarCh 2015, Smart meters: progress or delay. 4 households, and the fuel poverty gap – the difference between people’s bills and what they Can afford – was estimated to have inCreased to £480 last year6. • Under this Government, only around 60 per cent of the money available under the Energy Company Obligation (ECO) goes to households on low incomes or living in fuel poverty. The number of homes getting loft and Cavity wall insulation has fallen by two- thirds since 20107. • By February 2015, just over 5,000 households in Britain had energy measures installed under the Government’s pay-as-you-save energy efficiency scheme, the Green Deal8 – far short of the Government’s target of 10,000 by the end of 20139.