[Relevant documents: The Fourth Report from the Energy and Climate Change Committee on Electricity Market Reform, HC 742, and the Government’s response thereto (Sixth Special Report, HC 1448), and the Sixth Report from the Committee on Ofgem’s Retail Market Review, HC 1046, and the Government’s response thereto (Eighth Special Report, HC 1544.]
I beg to move,
That this House
believes that soaring energy bills are driving up inflation, contributing to a cost of living crisis afflicting millions of families, and that the energy market is not serving the public interest;
notes the motion passed by this House on
regrets that since then the Government has failed to deliver on any of these measures;
further notes that consumer efforts to control their energy bills have been undermined by cuts to the Feed-in Tariff and Warm Front scheme, and that there are serious concerns about whether the Green Deal will be taken up by, and work for, consumers;
notes that over 90 per cent. of eligible families will not receive the Warm Homes Discount in 2012;
calls on the Government to require energy companies to provide the lowest tariff to over 75s and use their profits to ensure that all families eligible for Cold Weather Payments receive the Warm Homes Discount;
and further calls on the Government to reform the energy market to make it competitive and responsible, to cut VAT on home improvements to 5 per cent. for 12 months and to ensure that the Green Deal is offered on fair terms to consumers which will deliver real savings in energy bills.
May I wish you a happy new year, Mr Deputy Speaker?
Less than three months ago, the Opposition warned that soaring energy bills were driving up inflation, squeezing household budgets and contributing to the cost of living crisis afflicting millions of families. We warned, too, that trust in the energy sector had fallen to dangerously low levels as people grew sick and tired of the energy companies’ sharp practices. We set out a clear plan to provide real help now, as well as to reform the way in which our energy market works. We called on the Government to investigate the scandal of mis-selling, and to ensure that people were properly compensated. We also urged them to simplify tariffs, in order to put an end to the disgrace of four out of five families paying more for their energy than they needed to. We asked for more transparency on energy companies’ trading data, so that the public could see for themselves how much the companies were paying for their energy, as well as how much they were charging for it. We argued for a radical overhaul of the way in which our energy market was structured, to break the dominance of the big six and increase competition in order to drive down bills for families and businesses. We also called on the Government to make the energy companies use their record profits to help people with their bills this winter.
The Government did something unusual—so unusual that the Government Whip on the Front Bench at the time seemed surprised by it. They backed our motion. They agreed to support our plans. Indeed, commenting on the Labour motion, the Secretary of State said that
“there is nothing we disagree with”.
He went on to say that
“sympathy from the sidelines is not enough. It is our responsibility to do everything we can to help.”—[Hansard, 19 October 2011; Vol. 533, c. 944.]
Today, however, the scale of the Government’s failure is clear. More families are in fuel poverty and struggling to heat their homes. Consumer Focus says that a quarter of all households in England and Wales—5.7 million in all—are now in fuel poverty. National Energy Action fears that the figure could be as high as 6.6 million. These are levels not seen since the dog days of the last Conservative Government. The number of households in debt to their electricity and gas suppliers is up, too, but energy companies’ profit margins are still in excess of £100 per customer per year.
It is all very well for the right hon. Lady to lecture the Government, but in the last six years of the Labour Government, the number of households in fuel poverty rose by 2.8 million. Is she proud of that record?
I am proud of the fact that, by the time we left government, there were 1 million fewer people in fuel poverty. That included 500,000 in the most vulnerable households. The fact is that we took measures to tackle fuel poverty. Is there more to do? Yes. But what is happening now is that the figures are going up and, as I will demonstrate, this Government are not helping; they are hurting.
Confidence in the energy companies is at a near record low. Less than half of the public are satisfied with their energy supplier, yet energy company bosses have awarded themselves huge pay rises and bumper bonuses totalling millions of pounds. Complaints to the energy companies have soared, often over dodgy tariffs or incorrect billing or meter readings. There have been 4 million complaints in the past year alone, and the figure has gone up by 26% in the last three months. Today’s Which? report shows that one in five customers who have had problems with their energy supplier did not even make a complaint, and that nine out of 10 complaints are unresolved and never make it to the energy ombudsman. As much as £4 million pounds in compensation is going unclaimed. There are real concerns about whether the watchdogs, the consumer groups, and organisations such as the energy ombudsman and Ofgem have the powers that they need to protect the public. We need to think clearly about the kind of infrastructure that is needed to ensure that those organisations do their job.
Time and again, we see a Government who are not just out of touch but completely unable to stand up to vested interests in the energy industry. Far from doing everything they can to help, this Government are making things worse, not better, for millions of hardworking families. Their failing economic policies mean that the average family faces the worst squeeze on income since records began in the 1950s, with families and children hardest hit.
What, then, are the Government doing to help people? What have they done for pensioners forced to choose this winter between heating their homes and having a hot meal? They have cut the winter fuel allowance, despite promising not to. We have been honest that under a future Labour Government that might be
something that we cannot reverse, but let us be clear about the facts. Before the election, we warned that the Conservatives wanted to cut the winter fuel allowance. In response, the Prime Minister said:
“We would keep the winter fuel allowance. Let me take this opportunity to say very clearly, to any pensioner who is watching this or reading any of these reports, I know that you are getting letters from the Labour party saying the Conservatives would cut the winter fuel allowance…Those statements from Labour are quite simply lies.”
Our 12.7 million pensioners now know that we were not lying.
The Government, however, have tried to change the story. Now they like to say that the decision had already been taken by the last Government. Even today, the Prime Minister repeated that allegation. It is simply not true. When Labour left office, the decision had not yet been taken. It was perfectly within the Government’s power to continue with the extra payment, as Labour Chancellors had in previous years, but they chose not to. This Government took the decision in last year’s Budget—and they should take responsibility for it.
The difference between Labour Members and Government Members is that we do not just give up; we look to find other ways to help pensioners with their fuel bills. Nobody should have to pay more for their energy bills than they need to. This is especially important for pensioners over 75 who are more susceptible to the cold and least able to take advantage of online deals. That is why my right hon. Friend the Leader of the Opposition announced yesterday that, to start with, we would ensure that all pensioners over 75 got the lowest tariff on offer, saving them up to £200 a year—on the Government’s figures, not ours. There might be less money around, but for those 4 million pensioners, Labour can still deliver fairness in these tough times—not by spending more money, but by saying to the big six energy companies that, at a time when people are struggling yet they are enjoying strong profits, they must act in a way that is responsible and fair to the public.
Does the shadow Secretary of State agree that whatever the situation with the winter fuel allowance, one thing that would have put a lot more money into pensioners’ pockets is the restoration of the link between pensions and earnings—something Labour promised in 1997. They failed to deliver that yet we delivered in our first Budget, which will bring about a record rise in pensions this year?
One of the first actions taken by the Labour Government after winning in 1997 was to look at the situation of the poorest pensioners in our country, many of whom were women who had never been able to earn enough to have a second pension. We had priorities in respect of what we were going to achieve—pension credit, the winter fuel payment, other support through the Warm Front scheme: we did more for pensioners than any Government for generations. What is happening is that we are now going backwards, not forwards.
Does my right hon. Friend agree that it is not what people say, but what they do? The last Labour Government took pensioners and families out of poverty, while introducing help and assistance for fuel costs. This Government have cut fuel cost assistance and are putting more people into poverty. Is that not the difference—not what we say, but what we do?
My hon. Friend is absolutely right: actions speak louder than words. The actions going on at the moment mean that the number of people in fuel poverty is going up and there is less support coming forward to help the most vulnerable. We are heading for a car crash when the Warm Front scheme ends and we wait to see whether the green deal will happen in a way that will help people. I shall say a little more about that later, and I am sure my hon. Friends will want to make some points about it in their contributions.
Let us talk about helping low-income families with their energy bills. The Secretary of State likes to boast about the warm home discount scheme. He says it is a statutory scheme and that Labour had only voluntary agreements—never mind that those voluntary agreements secured £375 million to help almost 1.6 million households with their energy bills over three years. What the Secretary of State forgets to say is that the present scheme exists only because Labour legislated for it when we were in office. When the present Government decided to take it on, we warned that, on the basis of their plans, they could exclude hundreds of thousands of people from the help that they needed.
In Committee, my hon. Friend Luciana Berger said
“there are concerns about the make-up of the broader group and the discretion given to energy companies to fund it.”
She asked for assurances
“that the Government will evaluate how effective the discretionary nature of the broader group will be and, if necessary, take steps to expand the core group if households are falling through the gap”.—[Official Report, Third Delegated Legislation Committee,
The Government did not heed those warnings, and, as research by Save the Children revealed last week, only 3% of families who are eligible for help from the warm home discount scheme will receive the support to which they are entitled this year.
The Secretary of State may try to tell us that more people will be helped as the scheme develops, but those families need help now, not in three or four years’ time. This is not about spending more money or adding to customers’ bills; it is about standing up to vested interests in the sector, and telling them that they have a responsibility to their customers and to the public.
The Government are not only cutting help for people in need, however. They are also hitting families who want to do their bit—who want to do the right thing, to have more control over their energy bills, and to make their homes more energy-efficient. The Government’s disastrous and chaotic cuts in the feed-in tariff for solar power will be back in court on Friday. In defence of their plans, Ministers have been forced to resort to ever more outlandish claims about how much it is costing the public. First it was £26 a year, then it was £40, then it was £80. The actual figure—what it is really costing consumers—is just 21p per household per year, compared
to average bills in excess of £1,300. What the Government do not seem to understand is that one of the reasons why so many people, especially pensioners, chose to install solar was the fact that it enabled them to control their energy use and cut their bills.
We have had a number of debates on the subject. One of the problems with off-grid energy is that some of the schemes that the Government are coming up with do not help the people who are affected by it. I shall say more about that later in the context of the green deal. There are real questions about who will be excluded, but we are talking today about energy prices, and about what we can do to make the market more competitive and responsible.
I look forward greatly to learning what the Select Committee has discussed in relation to off-grid energy, and will think about some of its recommendations. We will make up our own minds about what we should do, but I acknowledge that there is a problem. During the three months for which I have had my present job, it has arisen many times in debates. I also acknowledge that there are insulation problems for many people in rural communities whose homes have solid walls. I am afraid that I cannot give the hon. Gentleman chapter and verse today, but he can be reassured that the issue is on my radar.
The witnesses who gave evidence to the Select Committee made it clear that the statutory protections that exist under the licences for mains gas or electricity supply do not exist for off-grid gas customers, who are the vulnerable customers. Will my right hon. Friend at least consider committing the Opposition to regulation if the code of practice that the industry is seeking to introduce on a voluntary basis is inadequate to secure such protections for those customers?
I feel that the time has come for us to take stock of our position. The first line of the motion refers to an energy sector that works in the public interest. That does mean that we can still support competition, and I think there should be more competition in the sector. For all types of energy—on-grid and off-grid—it is time that we had another look at what is happening in the market. For me, energy is not like buying a phone or a car; rather, it is essential to life, and therefore a higher order of accountability is required. I will be very happy to look at the issues raised by the Committee. Select Committees are useful for the Opposition as well as the Government. I will be very happy to talk to my hon. Friend and to Guy Opperman and to see what the Select Committee comes up with, but I think the time for standing by has past.
In Blurton in my constituency, there was the fantastic sight of houses having photovoltaic panels erected on their roofs, but the project that E.ON had with Stoke-on-Trent city council covering thousands of houses across the city has now been cut short. E.ON said to me that it understands why the Government were looking at the
issues of feed-in tariffs and the cost, but it cannot understand why it was given six weeks to complete projects that were going to take five weeks to bring in.
It is always very helpful to hear of real examples. We have listened to many smaller businesses in this sector of course, but even the big six energy companies have concerns about the way the Government have gone about changing the rules on solar. Sadly, about 100,000 social homes may not get solar in the future because of these changes. We all agree that the tariff should come down, but, aside from that point, if the Government’s plans go ahead, people will only be able to have solar if their home is a category C residence in terms of efficiency, and therefore about nine out of 10 homes in England will no longer have the option of having solar even under the changed rules and tariff. This is another example of bad management of a project that was clearly popular among the public and that has created jobs—the sector is one of the few that has experienced growth.
In the long run, we know that the most sustainable way for people to cut their bills is for them to use less energy.
“Energy efficiency is a no-brainer because it makes homes warmer and cheaper to run.”
Those are not my words; they are the words of the Secretary of State from back in September, but what has actually happened on his watch? The number of families getting help to insulate their homes or make them more energy efficient has plummeted.
Let us take the month of April as a point of comparison. In April 2010, the month before the general election, more than 15,000 households got insulation measures through Warm Front. In April 2011, just six households got insulation through Warm Front—not 6,000, 600 or even 60, but just six. The Minister of State, Gregory Barker, has said that this year he expects 50,000 households to get help with insulation through Warm Front, but so far fewer than 15,000 properties have been helped—not even a third of what the Minister promised. On the current trend, fewer than 20,000 households will get help with insulation this year, a fall of more than 90% on what we delivered in our last year in office.
Unfortunately, the right hon. Lady is making completely the wrong point. Warm Front does not deliver insulation; it introduces heating systems for people who do not have heating systems. Insulation is primarily the responsibility of CERT, the carbon emissions reduction target, and CESP, the community energy saving programme. Warm Front is not primarily an insulation programme. Perhaps she would like to try again?
Well, I have to say that some of my constituents have had help with things such as boilers, heating and also insulation.
have had replacement boiler systems fitted, not systems fitted for the first time. That is not the point he made a moment ago, as he will see if he checks
The truth is that the Government are not on the same planet as most of the rest of us.
What the Minister did not answer is why the number of homes being fitted with insulation went down from 15,000 to six within a year. That is the question the Government should answer today. Let us be clear: when Warm Front is finally abolished next year, this will be the first Administration since the 1970s not to have a Government-funded energy efficiency programme in place. That is disgraceful. But, it is okay, because they say, “Don’t worry, we’ve got the green deal.” However, real questions have to be addressed about whether the green deal will be offered on fair terms and will actually deliver real energy bill savings, and whether it will really work for the public.
Let us start with the interest rates. Time and again, Ministers have been asked what sort of finance will be available to households interested in taking up the green deal. Time and again, they have failed to provide a straight answer. The reality is that if the level of interest is too high, given all the other pressures that families face at the moment, they will just not be interested in taking it up. Polling conducted by the Great British Refurb Campaign found that only 7% of home owners would be interested in taking up the green deal if the interest rate was 6% or more. However, we are hearing that the rate could be as high as 8% or 10%, so I ask the Secretary of State again today whether he can assure us that the green deal will be offered on fair terms and at a fair rate to the public.
In the autumn statement, the Chancellor also announced £200 million to provide incentives for the green deal. We still do not know what that money will be spent on or how it will encourage take-up. Most important of all, the fundamental idea behind the green deal—the “golden rule”, as the Government like to call it—is that the savings from better energy efficiency should cover the costs of the green deal. That is the promise being made to the public, but on looking at the small print, it is clear that the golden rule is not so golden after all. There is no guarantee that bills will not be higher after the green deal. If there is no guarantee, there is a real concern about the potential for mis-selling. The danger of what might happen out there is obvious: people will say, “We’re a Government-backed scheme—we promise you this”, but down the road they will not deliver. This measure will not balance out the costs that people are having to pay. In the light of stories about people not saving money or unwittingly inheriting higher energy bills after buying a green deal property, any credibility the scheme had will be shot to pieces.
Will the right hon. Lady consider the fact that after a green deal installation, people might find themselves in a home that is at least warm, even if their bill is the same? They might not have saved any money, but they will for the first time be warm in their homes.
The warmth issue is not really part of the equation. The question of what this measure should mean has been discussed in Committee. The “golden rule” is about people saving money. With all due respect to the hon. Lady, the problem is that the scheme should be far further forward than it is. We already know from what has happened with solar that a number of businesses doubt whether they are going to enter the field to work within the green deal. For example, those involved in insulation are worried about the measure’s impact on the work they do, an issue I will say a little more about later.
So many questions have been left unanswered, and any Government scheme that allows anyone to go out and say that they are Government-backed has to stand up to scrutiny. We have to make sure, first, that the public are not priced out of taking part, but we must also ensure that they do not become the victims of cowboys involved in the scheme.
I am going to make a bit of progress. The Department of Energy and Climate Change website actually states:
“The Warm Front scheme provides heating and insulation improvements to households on certain income-related benefits”,
and it goes on to refer to grants for loft insulation and draught-proofing—I rest my case.
Perhaps the Government will also respond to firms, such as those I have met, undertaking cavity wall insulation, which provide a sensible, professional product under the carbon emissions reduction target—CERT—scheme. Some 6 million homes have cavity walls without insulation, and 10 million lofts do not have insulation. That provides enough work for a whole industry to do—work that is good both for the public and for the environment. However, I understand that, under Government proposals, if this work is to be undertaken under the green deal, a full assessment of the property will have to be made—the householder’s lifestyle and behaviour will be included in this. The assessment sounds as if it will have to be paid for by the consumer, yet the work that they wish to have done may be blindingly obvious. I hope that the Government will ensure that the public and businesses are still able to improve the energy-efficiency of homes without being forced through a bureaucratic and unnecessarily costly process.
With the end of the Warm Front scheme, and of the community energy saving programme and CERT, what will happen to families in fuel poverty, or in hard-to-treat homes, for whom the green deal might not be suitable? The Government’s solution is the energy company obligation—ECO—but only a quarter of the money from ECO will help households in fuel poverty; the rest will go to able-to-pay households. So the Government’s promise that ECO will do more to tackle fuel poverty than either CERT or the Warm Front scheme just does not stack up. In what way is ECO’s £325 million a year for fuel-poor homes greater than last year’s Warm Front budget of £370 million or the CERT spending of nearly £600 million on priority groups?
We know that as well as coming up with policies, even in these tough times, to help families with spiralling energy bills now, we must also reform the energy industry to secure a new bargain in the future. I have said it
before and I am going to say it again: to start with we have to deal with the sheer number and complexity of tariffs on offer. We have 400 tariffs, with about 70 new ones in the past year. They are confusing and unfair, and they must be reformed. At his infamous energy summit in the autumn, the Secretary of State implored people to switch. Perhaps he could tell us today exactly how many people took his advice and switched, and how much they have saved. The problem is not that people are not shopping around enough; the real problem is that there are too many tariffs on offer, that they are too complicated to understand and that even when people do switch, they do not always get a better deal.
Does my right hon. Friend agree that it is clear that the energy companies have made the tariff system as complicated as they can? Is it not a fact that even when people do switch and take the Prime Minister’s advice, they often find that they get a worse deal than the one they started with?
I am afraid that that is the case. I have met a number of the energy companies over the past few months and they are obviously hurting as a result of the public criticism being directed their way. However, when we examine today’s Which? report, we find that 4 million people complained in the past year and that the number of complaints rose by 26% in the past three months, so something is seriously not right. The real problem is that there are too many tariffs on offer. Having more than 400 tariffs is not about competition or choice, and it does not serve the public interest; it serves only the interests of the energy companies. So we need, as we have said before, a simple new tariff structure that is clearer and fairer, and that will help all customers to get a better deal. I know that consultations are going on at the moment, but the Government really need to step up the pressure. We should not be unable to knock a few heads together, and we need to do that sooner rather than later. We must keep the pressure on as that is the only way to make the companies change. The Which? report has highlighted the terrible situation with bills that were overestimated or incorrect as well as the mis-selling that went on in the past. We need a proper investigation and proper compensation for people who have been ripped off. Only then will we start to rebuild trust in our energy companies.
As well as a more responsive energy industry, we need a more competitive energy market. The energy market is dominated by just six firms that supply more than 99% of electricity and gas. Today we heard that EDF will cut its gas prices by 5%, but the public will ask why energy companies are still so quick to put up people’s bills when wholesale prices go up but slow to bring them down when they fall as well as when the other big energy companies will follow suit.
First, that is not about the point I was making, but is the hon. Gentleman defending the way in which prices have soared in the past year? Is he
defending the companies’ atrocious record in dealing with people’s complaints? I would not stand in his shoes and make that case. The truth is that prices need to be transparent and we need to know how they are arrived at. It is quite clear—it has been proved by an Ofgem report and the Secretary of State might back me up on this point—that there is evidence that when prices go up the bills go up far quicker than they come down when prices fall.
No, I will not give way to the hon. Gentleman again.
The bigger issue is how we carry out a root-and-branch reform of the energy market for the future.
It was actually 15.4%, but I do not want to be churlish. I am pleased that the prices have come down, but part of what we are seeing from the energy companies is due to the fact that they are starting to smart from the criticism levelled at them. The problem is getting worse and, as I have said, complaints have gone up and prices, which went up steadily over the past few years, have soared in the past year. We are not the establishment—the Government are, they are in the driving seat and they have the tools to do something about it. I only wish they would.
We must ask the fundamental questions and the fundamental problem in defining whether prices are reasonable and fair and considering the other pressures on those prices is the fact that we are hampered by the lack of transparency in the market. The energy companies that generate energy sell it on to themselves and then on to customers. If the few big dominant firms were forced to sell the power they generate to any retailer, companies such as supermarkets and other independent retailers—like Good Energy, which came top of the poll for customer service in the Which? report—could play more of a role in the market. There would then be more competition and the upward pressure on prices would be eased.
Times are tough, we all know that, and we know that it means difficult decisions must be made. When times are tough, fairness is our first priority but, unfortunately, for the Government fairness is the first casualty. Millions of families and pensioners across the country are struggling with their energy bills and a cost of living crisis, but the Government are so out of touch that they are making things worse rather than better. They are cutting the help people get with their energy bills and scaling back on energy efficiency. By failing to stand up to the energy companies, they are letting down the public. We know that people need real help now and a more responsible and competitive energy market for the future. For those reasons, I commend the motion to the House.
Order. The wind-ups will start at about 6.40 pm. As hon. Members can see from the clock, we do not have a lot of time for
the debate so if people could have in their mind a five-minute limit and aim to make a four-minute speech we will be able to accommodate more Members. Brevity has to be the order of the day.
Thank you, Mr Deputy Speaker. I shall try to take on board your injunction for brevity.
Last year, we saw a big energy price rise, which came on top of increasing petrol and food costs. With the cost of gas imports now falling, I welcome today’s announcement from EDF, which has responded to the smaller companies leading the way such as Co-op and Ovo by joining them in cutting domestic gas prices. Some of the big energy suppliers were quick to pass on rising costs last year and it is only right that they should now pass on cost reductions to hard-pressed householders as quickly as possible. I urge the remaining five large energy suppliers to follow suit and give consumers some respite this winter. If suppliers do not reduce prices, consumers can send them a clear message by voting with their feet and taking their business elsewhere.
On that point, has the Secretary of State contacted those energy companies and made it absolutely clear that if they do not drop their prices, he will take action to force them to do so?
I have been very rapid in my reaction to the EDF announcement and I have been pressing the energy companies and saying that they need to act to inform their customers about the cheapest tariffs.
The House last debated this topic in October, when I said that simply expressing concern and sympathy for those who are struggling to pay their bills is not enough. It is our responsibility to do everything we can to help. The clear steps we have taken to increase competition are working and it is right that energy companies should feel the pressure to keep bills down. We are not complacent and I can report that the action I promised then to help people with their bills is taking place now.
In the objectives that the right hon. Gentleman has set for himself and no doubt for the Government he makes the point about keeping energy prices down. Is he satisfied that Ofgem, the regulator, is exercising the powers that it has? Are those powers insufficient?
I am grateful to the right hon. Gentleman for raising that issue, which I shall address in greater detail. Ofgem is working closely with us on this and I think it is tackling many of these issues. I will give further detail on that.
Following the consumer energy summit, at which my right hon. Friend the Prime Minister and I brought energy suppliers, consumer groups and Ofgem together, we have been working together to make sure that consumers know about the help that is available and about how they can cut their energy bills this winter. In October the Government launched the “Check, switch, insulate to save” campaign on the Directgov website, and next week Citizens Advice is co-ordinating a big energy week
campaign. Big energy week is designed to connect consumers who are struggling to cope with energy bills with the support available to help them to reduce their energy costs and maximise their income. More than 100 events will take place across the country, reaching out to people who might not know about those schemes.
In December, Ofgem published for consultation radical proposals to require suppliers to simplify their tariffs and billing information so that consumers can compare suppliers’ deals much more easily. Currently, as Caroline Flint has pointed out, more than 400 different tariffs are available. Frankly, this leads to confusion rather than to greater choice. I suggest that is part of the reason why the switching of rates in the UK has declined over time. Ofgem’s proposals should help consumers to identify more easily the best deal for them. I support Ofgem’s work in this area and will continue to work with it to boost the transparency of bills and competition in the energy market.
It should be quick and easy to switch supplier. As part of our implementation of the EU third energy package in November, we have cut to just three weeks the time it takes to switch. Citizens Advice and Ofgem have received the highest level of funding yet from suppliers for the energy best deal campaign, which helps vulnerable consumers to shop around for the best available deal. Even without changing supplier, millions of households could save just by switching tariffs or payment method.
As agreed at our consumer energy summit, suppliers are placing messages on the front page of all bills to encourage consumers to phone them or visit a website to find out if they could be saving money. They are also writing to about 8 million customers who pay on receipt of their bill to tell them that they could save up to £100 a year if they move to direct debit payment. Nearly all of these letters have now been delivered.
Has my right hon. Friend made any progress in sorting out the situation faced by people who have prepayment meters and therefore do not receive a bill? It is difficult for them to establish what they are paying over any period, and the most vulnerable customers are often in that situation.
I am grateful to my hon. Friend for the concern about prepayment meters. It is one thing that we have been looking at closely. Thankfully, people on prepayment meters are not paying more than was previously the case, and that is a step forward. I am sure there is more work to be done and we are looking at it closely.
Tessa Munt raised the issue of people on prepayment meters. There are two other key issues concerning people. One million households across the UK do not have access to a bank account so they cannot have direct debits; likewise, there are those who do not have access to the internet—the digital divide.
Further to the point that the Secretary of State made about the energy companies that are writing to their customers, I received one of those letters asking me to go on to direct debit. I called my energy company, E.on. It wanted to put me on to a monthly payment, which would have cost me at least a third more and I would
have had to wait until May before I could reassess the situation. So even when energy companies are writing to their customers, myself included, they are not offering consumers the best deal. I cannot move on to direct debit because the company wants to charge me more than I pay already.
I can only recommend that the hon. Lady look at switching energy supplier to see whether she can find a better deal. We know from Ofgem that people can save substantial sums of money by doing that—£200 a year. Her particular case is obviously regrettable.
The Secretary of State rightly talked about the simplification of tariff structures. Will he give a commitment to the House to look carefully at the possibility of enforcing a rising block structure? In an era of rising energy costs, it seems inequitable that the highest per unit cost should be paid for the first tranche, which of course the poorest families have to use. We should be applying the polluter pays principle, which means that as we use more energy, we pay more per unit for it. Please will the right hon. Gentleman look at that?
The hon. Gentleman makes a good point. One of the first things I did on becoming Secretary of State was to ask for a serious look at the issue. It is unfortunately much more complicated than one might suppose at first glance, not least because there is such an enormous variation in energy use in different income groups. For example, among the poorest people measured by income, the variation in energy use, off the top of my head, was as much as a multiple of six. There could be dramatically different effects from a rising block tariff, which do not correspond neatly to what the hon. Gentleman and I would want.
We want the companies to take more account of the wholesale market. Up like a rocket and down like a feather—that was the old days, and it must end. I agree with the right hon. Member for Don Valley in her points on that, although I note that Ofgem did not find evidence that that was the case. We are helping, through greater competition, to get the consumer the best deal and we have done a great deal to defend the consumer interest over the past 20 months—rather more, I would say, than the right hon. Lady’s Government did in 13 years.
Can the right hon. Gentleman answer my question? How many consumers have switched since the energy summit?
I will let the right hon. Lady know the information as soon as we have it. When it is available, I will write to her.
It is important to get the message across that households can save money not only by switching supplier, but by using less energy. Insulating lofts and walls can cut energy bills. The six largest energy suppliers all offer free or cut-price insulation, yet many households still have not taken up the offer. That is why the Government are writing to 4 million of the most vulnerable energy customers to tell them that they are eligible for free or heavily discounted loft or cavity wall insulation, and I am pleased to say that the initiative has been funded by suppliers.
“The number of gas and electricity customers paying by prepayment meters has increased compared to the same quarter in 2010, by 6% and 4% respectively”.
Those are worrying statistics indicating that people are moving to prepayment meters and falling through the gaps despite the Government’s attempt to contact them and get them on to cheaper tariffs.
I agree with the hon. Gentleman. Sadly, during tough times people tend to fall behind with energy bills and so can be moved on to prepayment meters. One of the things that it is very important the Department does is try to ensure that those who no longer need to be on prepayment meters, from a credit point of view, are moved back so that they pay more directly and can take advantage of those schemes.
If the Government are writing to so many vulnerable people, can we not make it as simple as possible? When we start talking about the elderly shopping around, why can we not just say, “Here are two or three very good deals that will work for you”, and then use that to ensure that energy providers bring their prices down? We should say to energy providers, “We are going to recommend this, so you had better bring your prices down.” That is what we need. We want to keep it as simple as possible.
I entirely agree with my hon. Friend on the need to continue the whole process of clarifying energy bills and making them simpler so that they are absolutely transparent and people find it easier to switch. That applies to all age groups. Compared to those of us in our 50s, those in their 60s and 70s—the silver surfers—actually do more on the internet, so we should not underestimate the ability for that to happen.
My hon. Friend Bob Stewart might be interested to know that the letters the Government are sending out direct customers to a dedicated independent helpline as part of our programme to ensure that an extra 3.5 million homes are properly insulated by the end of 2012, and later this year we will be rolling out the green deal to help even more households save money through energy efficiency. We are ensuring that extra support is available this winter for the most vulnerable households. We are requiring energy companies to provide help to around 2 million low-income households through the warm homes discount, at a cost of £250 million for 2011-12, which is 40% more in cash terms than last year under the voluntary arrangements operated by the previous Government.
The right hon. Member for Don Valley made much of our apparent meanness on this exercise, but I do not see how the Government can be accused of being mean to those in the most vulnerable groups when it comes to energy bills when we are increasing the warm homes discount by 40%. The scheme will help around 600,000 of the poorest pensioners with a core group discount of £120 this winter. We are spending £110 million on heating and insulation for low-income and vulnerable households living in energy-inefficient housing through the Warm Front scheme. We will also provide winter
fuel payments to pensioners and cold weather payments to some households in areas that have extended periods of very cold weather.
The hon. Gentleman’s constituency is clearly a perfect place for the green deal, because the ECO subsidy will in part subsidise solid-wall homes with solid-wall insulation. That will be a very substantial step forward for many people who have not been in a position to benefit from energy efficiency because they have not had cavities to fill. A very large number of people in housing built before the first world war, and in more recent housing built quickly after the second world war, are in that position, and this measure will help.
There was a ten-minute rule Bill yesterday on park homes. Will they benefit from the green deal?
Park homes will be eligible for the green deal. We in the ministerial team are very keen to ensure that park homes, which are often the Cinderella of the housing stock, are looked after, and we are trying our best to ensure that they are eligible for the full array of measures that are available elsewhere.
The new energy company obligation, alongside the green deal, will include support not just for solid-wall insulation, which I mentioned to Robert Flello, but provide “affordable warmth” to low-income and vulnerable households, through heating and insulation measures. That is the direct replacement for the Warm Front scheme, so the right hon. Lady’s charge that we are the first Government not to pay for help through public expenditure is disingenuous, because there will be help, but it will be delivered in a different way through the ECO subsidy, and with greater targeting and, I believe, greater help.
Those policies will make a difference this winter and next, but, as I said in October when I addressed the House on this topic, we also need to take the right long-term decisions so that energy does not become unaffordable. We must keep the lights on in the cheapest, cleanest way to ensure that households get the best deal in the long term. Over the next 10 years, we need £110 billion of investment in power plants and another £90 billion of investment in energy infrastructure to avoid the risk of blackouts. We must invest now not only to improve our energy efficiency, so that we do not need to produce as much energy to keep warm, but to reduce our dependence on fossil fuels in the long term, so that we do not have to rely on ever-more expensive imports.
I wonder whether we are in the position we are in today because of the previous Administration’s inability to take the decisions needed to ensure that we had a firm energy future.
My hon. Friend is absolutely right. The story of energy policy under the previous Government is one of stopping and starting, and of failing to face up to the need for many years to deal with the problem of renewing our energy infrastructure. But we are not dithering or delaying any longer: we in this Government are biting the bullet. We are determined to proceed with what is necessary to ensure that we have clean, green and secure energy for our nation.
Our proposals to reform the electricity market will deliver the best deal for Britain and for consumers, ensuring secure, low-carbon electricity supplies, and providing green jobs.
This is not the point that I was going to make, but I recall the previous, Labour Government making the difficult decision on nuclear so convincingly that even the Liberal Democrats are now in support.
On the long-term issue, however, what is missing from this debate is the global dimension, although the Secretary of State has touched on it. Given that world energy demand is going to increase by 30-odd% in the coming years, with consequences for pricing, has the Department made any forecast of the implications for British energy prices and costs over the next 10 or 15 years?
I very happily exempt the right hon. Gentleman from my strictures about the previous Government’s policy, because when he was in the post of Energy Minister he certainly took some tough decisions, but sadly the record over the 13 years is not one of which Labour Members can be proud.
On energy prices, the right hon. Gentleman is absolutely right, and we have of course produced a forecast in the annual energy statement. Like all forecasts, it gets more uncertain the further out it goes, but it does point to a rise over time in oil and gas prices worldwide because of increased demand from, in particular, the far east. One of the current environment’s most striking features, about which there ought to be much greater public awareness and debate, is the sharp recovery in oil, gas and other commodity prices, despite continued relatively slow growth in Europe, the United States and Japan. This is the first time that that has happened in the post-war period. That shows the influence that the rapid growth and catch-up in the far east will have on world commodity prices.
I merely reiterate the point that with 24% of the north-east in fuel poverty, the situation in relation to heating oil and liquefied petroleum gas for off-grid customers is clearly unsatisfactory. Does the Secretary of State accept that and what specifically does he intend to do about it?
My hon. Friend makes a good and important point. People who are off-grid have traditionally had to deal with substantially higher costs than those who are on grid, and that continues to be the case. The case for regulating off-grid is weak, because as long as the market is competitive, it ought to deliver a reasonable result for consumers. I was surprised, as were other members of the ministerial team, that when we asked the Office of Fair Trading to look at the market, it was
given a clean bill of health on competition grounds. We need to continue to watch this situation and we are very much on the case. With the renewable heat incentive and the green deal, it will be important that people who are off-grid think about other options rather than being reliant on heating oil, such as ground source heat pumps and biomass, which can already be cheaper than on-grid options.
The Secretary of State correctly points out that all projections on future energy prices show an upward trend. There is a debate about how much of that is down to renewables. One interesting difference between the UK and European market and the United States market is that there has been a decoupling of the gas price from the oil price in the north American market because of the intense use of shale gas that has been developed. What will the right hon. Gentleman do to develop shale gas in Lancashire and elsewhere in this country to change the projections so that the price of gas goes down?
I am grateful to the hon. Gentleman for his question. Shale gas is potentially an exciting development that could bring enormous prosperity to the parts of the country where it has been found, such as Lancashire. Provided that all the environmental safeguards are properly in place, it presents the opportunity to reduce the cost of gas. Of course, for the same calorific value, gas is about half as polluting in carbon terms as coal. Used with carbon capture and storage, it may be a long-term source of electricity generation. We are looking closely at this issue. We have been in contact with Cuadrilla, the energy company that has been involved in exploration in Lancashire. I hope that we will be able to make progress. Crucially, we must learn the lessons from the mistakes that were made in the United States. I do not want to see water tables contaminated; nor do I want the industry to be exempted from the provisions for clean water, which is what happened in the United States. There will be a different regulatory environment. In that context, I am sure that we can see success.
As so many people want to speak, I will curtail the remarks that I was going to make about our work with Ofgem. I will simply say again that we are considering giving Ofgem powers to order companies to provide redress to consumers who lose out as a result of a company’s regulatory breach. As a result of our implementation of the EU’s third energy package, companies are no longer able to block action by the energy regulator, Ofgem, by forcing it to seek a second opinion from the Competition Commission. We are determined to be on the side of the consumer in ensuring that the market is as competitive as we can make it.
We are doing everything that we can to help households with their energy bills this winter. On tariffs, bills and insulation, we are making it easier for people to save money and energy. We are taking action to help the most vulnerable households cope with rising bills and inefficient properties, and from the green deal to the reform of the electricity market we are making the right long-term decisions to ensure warm homes and affordable, secure energy for the future.
Order. Please keep in mind the need for brevity, as we have less than an hour before the wind-ups.
It is always a pleasure to follow the Secretary of State. I, too, welcome the debate, and I congratulate my right hon. Friend Caroline Flint on calling it and on keeping up the pressure on the energy companies, which is very important. As she said, the Government agreed to a motion in October calling for investigation of mis-selling, the simplification of tariffs and improved transparency, and for energy companies to use their profits to help with bills. We have not seen a lot of action yet on the points in that motion, but I acknowledge that there has been some progress, which can be laid at the door of the regulator, which has been more proactive, and of the consumer groups. I pay tribute to Consumer Focus, Citizens Advice and Which?, which have highlighted many of the issues involved. The House and politicians from all parties can also take credit, because we have embarrassed many of the energy companies into taking action. I welcome today’s 5% price reduction, but I agree with other Members that it does not in any way make up for the previous double-digit rises.
Although we have had a mild winter—[Interruption.] I know that there are exceptions, such as the wind in Scotland, but compared with last year we have had a mild winter. However, that does not disguise the fact that there will be huge rises in the bills that people receive in January.
I wish to concentrate my remarks on those who are not on the gas grid. I make no apologies for doing so again and again. They are not a fringe group but some 2 million households in Britain alone, which does not include Northern Ireland, where 80% are off-grid. Those families do not get the same protection as those who are on-grid when it comes to simple matters such as help with prices. I make a direct plea to the Government to help those people. I cannot overstate that case. They ruled out social tariffs for those off the grid, I believe in June 2010, and I ask them to reconsider that.
The Energy and Climate Change Committee is undertaking a mini-inquiry into fuel poverty and off-grid gas, and we heard evidence today from the Office of Fair Trading. Unlike the Secretary of State, I was not surprised that the OFT came to the conclusions that it did, because it has a very narrow remit. The people who undertook the inquiry did not look at the matter in enough detail to conclude what we all know—that people off the grid have been ripped off in many ways.
It is not enough to refer the matter to the Competition Commission. The problem of higher prices is real, but anecdotal evidence that we have received from consumer action groups such as the one from the constituency of Guy Opperman that gave evidence today, and from the constituents who write to us, suggests that people off the grid are being treated unfairly. There might be four companies in an area providing fuel, but they are all selling at very high prices.
Fuel poverty in off-grid areas is going up. I have some figures from Consumer Focus that I will share with the House. Some 28% of fuel-poor customers in England,
34% in Scotland and 37% in Wales are not connected to the grid. To be fair to the Minister of State, Charles Hendry, he has met Members representing off-grid customers since the last debate. I urge him to give Ofgem the responsibility to treat customers who are off the grid equally. As I said, there are 2 million such households, and they deserve the same treatment and the same protection as those who are on the grid.
I urge the Secretary of State to consider radically extending the gas mains. The renewable heat incentive may be a good thing, but it is a long way in the future. We could create jobs in construction and help to alleviate fuel poverty if we extended the gas mains to off-grid areas. They include not just isolated areas but those very close to the original gas mains that supply towns and cities. Such an extension could be done relatively quickly and would be real action, which is what our constituents demand.
The motion’s opening line states:
“That this House believes that soaring energy bills are driving up inflation”.
No one can argue with that. There has been a massive increase in energy bills, and before we continue with the debate, we should assess the reasons for that. All the independent financial analysts recognise that there has been a double-digit inflationary rise in energy bills, and that has spread to the economy. We live in a dangerous world, where there is much instability. The European Union recently approved sanctions on oil exports from Iran. All that has a knock-on effect on energy prices in this country. It is important, when setting the scene for the debate, to understand why energy prices have increased and that the Government can do something, but not everything.
In the summer I was in the United States when Michele Bachmann amusingly commented that she would reduce the price of fuel back to $2 a gallon. Perhaps that is why she has polled only 5% in the primaries—one simply cannot say, “We’ll reduce it back”: that flies in the face of dealing with the world crisis. There has been discussion for many years—certainly when I was at school, but it is now coming to the fore—about whether we have reached peak oil. Whether we have or not does not matter because the markets believe that we have reached that position.
There has been a 30% increase in energy demand in the recent past. As the Secretary of State pointed out, there are forecasts, but the further into the future they go, the more unreliable they are.
Yesterday, the Leader of the Opposition said that the previous Administration had not made enough progress, and he was Energy Secretary at the time. Is my hon. Friend as relieved as I am that we now have a ministerial team that is taking action to deliver real change, not only on lowering prices but on securing our energy future?
I am most grateful for that intervention. Half the problem with such motions is that they ignore the facts that I outlined in my opening remarks and
simply state that everything is the fault of the existing Government. Many people feel that the Labour party likes to be in perpetual opposition—my constituents certainly feel that, and I see nothing to disprove the theory. Caroline Flint was very clear about the reforms that she wants to make, so why was she not clear when she was in government only two years ago? Perhaps the comment about window dressing goes a lot further than we thought.
Of course, we are trying to move forward in our proposals for energy consumption in this country, and the Secretary of State is right to say that we have bitten the bullet on how to generate energy. Let us be honest: we are in a coalition and we know that the Liberal Democrats had views on nuclear power. They held a perfectly acceptable view in their manifesto, and I greatly respect the work that Tessa Munt has done throughout her life as a member of CND—they were her beliefs, but we had to move forward.
They still are my beliefs.
Quite right—the hon. Lady corrects me from a sedentary position. However, we had to bite the bullet and make decisions to secure this country’s energy future. All those things have a knock-on effect. The Labour Government’s dithering, delay and unwillingness to make those decisions because of the fright their Back Benchers gave them have been shown up massively by the two parties that came together to run the country after the mess left by the last lot, with one coalition partner making a decision that it did not want to take, but realising that it was right for the country. That is what is important: what is right for the country.
The right hon. Member for Don Valley said much about the Government’s cutting the winter fuel allowance for 2 million pensioners; there was a lot of “We told you so.” Later in her speech, however, the right hon. Lady said that the proposed legislation was initiated by the Labour Government and we have picked up on it. She cannot have it both ways. Labour was quite clear in its manifesto and previous decisions that it would do exactly the same thing on the winter fuel allowance. In these austere times, it is the Government who are resisting the populist pressure, coming perhaps from some of the more right-wing media, to means-test the winter fuel allowance, and we are ensuring that it is all there. The tax bribes that Labour was giving out at the last election were seen through, which is why it suffered the worst defeat since 1918.
I have already outlined the need for a coherent policy on energy futures, which will help to bring prices down. The situation with the feed-in tariffs is difficult, but we need to ensure that progress is made. We have done many other things to help people with their pensions, including introducing the triple lock, and ensuring that pensioners this year will receive the highest cash settlement that they have received in the last 100 years—it is huge.
There is every chance that the Opposition motion would lead to more borrowing, less tax, and disaster. When people cannot pay their bills, it is because of the economic incompetence of the Labour party.
I shall try to talk to the subject that we are here to discuss, unlike Alec Shelbrooke.
Last year, the average household saw energy costs rise by about £300 and Ofgem announced last October that the profit for energy companies had risen to £125 per customer per year, from £15 in June. My contention is not that the cost of energy is rising, but that the big six do not have a great track record of passing on wholesale decreases as quickly as increases.
Today’s wholesale energy prices are lower than they were a few years ago—and lower than they were only a few months ago. According to Bloomberg, the wholesale price for gas in autumn 2008 hit over 70p a therm. If we compare that with 59p per therm last October, we see that wholesale gas prices have actually dropped 15% since then. Similarly, prices in the wholesale electricity market reached £120 per megawatt-hour in autumn 2008. Today, they are just over £50 per megawatt-hour—less than half the price back then. But gas prices have dropped by only 15% and electricity prices by only 11% since last May’s peak. According to Bloomberg, in December natural gas futures declined by 30% compared with 2011. Today, energy companies can buy their gas for 53p per therm, some 9% cheaper than even last October.
The reason for this is sadly apparent. European demand is going down as the continent is moving towards a downturn and productivity is declining. This may be why EDF announced today a 5% cut, but—as my right hon. Friend Caroline Flint pointed out—the company raised its gas prices last year by 15.4% while future gas derivative prices were falling, and while current market prices are down on previous years.
As a result, there is great suspicion among many, including Ofgem, that the big six have not been passing on wholesale market price reductions, not only last year but this year. These are clear acts of anti-competiveness in themselves, especially towards smaller energy companies, let alone customers and small businesses. For example, section 2 of the Competition Act 1998 prohibits the abuse of a dominant position in a market by one or more undertakings which may affect trade within the UK. I will quote competition law guidelines again as it seems that the Secretary of State did not hear me the last time I did so. They state:
“Conduct may be abusive when, through the effects of conduct on the competitive process, it adversely affects consumers directly (for example, through the prices charged) or indirectly (for example, conduct which reduces the intensity of existing competition or potential competition). A dominant undertaking is under a special responsibility not to allow its conduct to impair undistorted competition.”
I strongly suspect that one reason behind the price rises is probably that the companies have grossly failed to stockpile their energy reserves to hedge adequately against future prices. That could explain why, when future prices have fallen by almost a third, the companies are not passing on the reduction. There may be numerous reasons for that—one reason is probably ineptitude—but I feel that the main answer lies more in the lack of any incentive to pass on substantial price rises.
I will not give way. There are a lot of people wanting to speak.
My constituents are grossly disadvantaged. The Secretary of State talked about going on the internet, but the low internet uptake in Glasgow—we have one of the lowest uptakes—will not allow that to happen for my constituents. However, I was pleased to hear that he has taken on board the point about severe housing, which is what we have. Efficiency savings cannot be made in concrete housing blocks. In fact, all my constituents seem to do is pay to heat up the concrete blocks in the winter and cool them down in the summer. I therefore look forward to hearing more from the Minister. I hope he will look at the prices, go back to the companies, give Ofgem the teeth that it needs and ensure that the fines that should be imposed on the companies in question are indeed imposed.
In October we saw the launch of the “Check, switch, insulate to save” campaign. There is a clear need to raise awareness of what people can do today to reduce their bills. Many people can go online, check around for better deals and switch suppliers or change to a cheaper tariff, but three in every five consumers say that, in fact, they have never switched supplier. There are perhaps a number of reasons why not, one of which is that there remains a digital divide, which means that the information is not as easily or quickly available to all. What is more, many of the best deals are for online-only web accounts. Many households could save around £100 immediately by simply moving to an online account, but this is little help to those who have not embraced the internet, which in many cases also includes poorer households. Those who are not online include more than half the UK’s over-65 population.
Other households tend to avoid doing too much of their business online, because they have poor quality internet access where they live. I strongly welcome the Government’s investment in better broadband for Norfolk. Better communication links will allow more people to search online for the cheapest services and, as a result, become more powerful consumers. However, even with 100% broadband coverage, many households will still not connect to the internet. It is therefore vital that every effort be made to ensure that support is available for offline consumers to ensure that everyone can access the cheapest tariffs, not just the internet-savvy. I welcome the work that citizens advice bureaux and Ofgem are doing to help.
Is that not the very point that we were making earlier? Citizens advice bureaux and the Department, in sending out these letters, should advise vulnerable people exactly what they think is best for them. That should make it as simple as possible for very vulnerable people, and that is our duty.
That is a very good point, and I thank the hon. Gentleman for making it, but given the sometimes huge price differential between online and offline accounts, I hope that Ministers can work with Ofgem and the suppliers to seek to narrow the gap.
In recent years, competition for new customers seems to have been increasingly focused on price comparison websites. That has meant that those who use such tools can find massive discounts for web-only accounts, while the majority, who do not, end up paying more. To improve competition, we need simpler tariffs. Over 70% of consumers tested in Ofgem’s market research said that they would be more likely to switch if tariffs were made clearer. With a bewildering 400 or so tariffs available, only 44% of people in Ofgem’s research were able to select the cheapest tariff, even under a simplified form of the current arrangements.
We also need tariffs to be structured in a way that encourages energy conservation. A system of rising block tariffs—which was mentioned earlier—where customers pay less for the initial blocks of consumption and a rising amount for subsequent blocks, would provide an additional financial motivation for households to consider energy conservation. Low energy users would be rewarded for their efforts. At present, intensive energy users pay proportionately less.
I recognise that there are concerns about the unintended impacts that such a system could have on households that necessarily consume high amounts of energy, such as those of people with long-term health conditions who need to keep their house at a higher temperature. Perhaps we could consider other forms of social tariffs for such households, and examine whether extra support could be made available for housing insulation improvements, possibly through the green deal and through energy company observation. I know that Professor Hills’s fuel poverty review will consider tariff structures in its final report, and I hope that energy conservation will be seen as an important part of that work.
I also want to mention smart meters, which could play a massively important role for consumers. Every household should have one by the end of this decade. As well as encouraging more efficient energy use and allowing for more precise billing, these meters will provide consumers with billing information on what they are paying for, at the touch of a button. There is great potential for people to use that information to ensure that they are getting a good deal. For households to get the maximum benefit, consideration must be given to how best to inform, engage, and motivate consumers to use their meters to the best effect. The consumer engagement strategy, which I hope to see being developed and implemented during this year, will have a vital role to play in that regard.
Simplifying and reforming tariffs and improving transparency are all necessary short-term steps required to increase competition. There are a few encouraging signs of competition in what is, overall, a difficult market for consumers. Today’s announcement by EDF of a reduction in its customers’ gas bills in response to the falling cost of imported gas, following similar moves by smaller suppliers such as Ovo and the Co-op, will be welcomed by many of my constituents. Last year, however, rising costs were passed on to customers very quickly, and I now want to see—on behalf of all of my constituents—action being taken by the other big five energy suppliers to reduce their prices. Whether or not they do so will be an indicator of how competitive the market is for consumers. If suppliers do not reduce
prices, how many of their customers will go elsewhere? Promoting competition now is vital, and I welcome the emphasis that Ministers, working with Ofgem, have given to this issue.
Today’s debate is important. The issues are not simple, but the public rightly expect Ministers to intervene, and I welcome the progress that has been made in recent months. We are heading in the right direction, and I urge Ministers to continue.
My objective today is, as it has been in similar debates under the previous Government and this one, to speak up for my constituents who are getting a very raw deal from the energy suppliers. Energy companies are renowned for using fluctuations in wholesale prices as an excuse for unacceptably high domestic energy bills. The issue affects every household in my constituency, particularly those of pensioners and families on low incomes with young children, and it causes financial misery to consumers.
I have written to Ofgem, and met representatives of the organisation. I have sought to remind it of its duty to consumers. Likewise, I have been in touch with the Office of Fair Trading, which has a duty to ensure that a cartel is not operating against the public interest. I remain to be convinced about that. The problem that we are discussing today will not simply go away, and my activity will continue until pressure is brought to bear on energy suppliers to reduce the inflated prices that are being unfairly charged to all households.
As I travel round my constituency, I find that the issue uppermost in the minds of my constituents is the rocketing price of gas and electricity. The price of both has gone up substantially, leaving those consumers helpless or in debt from dealing with the problem. Food inflation is up by 6.2%. Electricity prices have risen by 10%, and gas prices are up by as much as 17.4%.
I was hoping that during this debate we might be spared the fool’s bargain solution of asking the public to switch providers. By heavens, we have heard that so often. This has not, is not and never will be the solution. I have a sense that the Government know, deep down, that what I am saying is perfectly true.
There is no need for extensive research into the domestic energy supply industry. The man and woman in the street are absolutely convinced that energy companies are simply leapfrogging one after another when it comes to increases. An unregulated energy market that allows consumer prices to soar while wholesale prices are decreasing is unjust, irresponsible and is hitting the poorest households hardest. The rip-off continues unabated, and I think we are right to challenge it today.
Let me issue this challenge to the Minister: can he name any other product or commodity that has risen in price so steeply not just during last year, but during the last decade? This explains why energy prices have, frankly, become a national scandal. I am in constant touch with ordinary decent people in my constituency who are struggling against extraordinary energy price increases. Consumers need energy to keep themselves warm and to cook meals, and they need hot water. Wholesale price fluctuations have largely been blamed on the energy supply from the continent, but there is a healthy scepticism
about this rationale. I am not against companies making a profit. What I am against are the profits of energy companies rocketing while consumers are facing human misery.
Clearly, we need to ask whether competition is working as it should. Are companies becoming too comfortable in this small sector in which the price-setter, British Gas seems more keen to keep its prices up than to keep its customers? I am not especially concerned with the profits that those companies are making—obscene though I believe them to be. Nor am I concerned about whether they should face competition inquiries or fines, because fines will be of no use whatever to low-income families in my constituency. My concern is that those people should get a fairer deal—no less and no more than that.
The previous Government made huge strides to combat fuel poverty through the winter fuel payment and other measures such as pension credit. The tragedy is that those efforts are being completely undermined and devalued by the scandalous energy prices that consumers are being—
It is always a great pleasure and honour to follow Mr Clarke, whose defence of his constituents is always reasonable and valiant. I think he is right to this extent—that appealing to people to switch supplier will not be the entire cure for problems in the energy market. The reason for that is that the energy market is broken, so competition will not work entirely. It can work to a certain extent, but not entirely, if the market cannot deliver what the consumer wants.
To understand how to fix the market, we have to look at the history of the market and why it went wrong. If we look at energy prices, we find that they have moved since the privatisation of the late ’80s. They fell consistently beneath the retail prices index every year from the late ’80s and the early 2000s. They did so over a longer period than at any time since records of energy prices began. Then, from the mid-2000s they levelled out, and from 2005 to 2007 they increased further than RPI until 2010 when the last Government left office.
I am fully aware that this is often not a moment to talk about the previous Government’s record, but they had a fundamental hand to play in the reasons why we are in the position we are in now. It is also incumbent on us to point out that much of the responsibility lies with the man whose name stands at the head of the motion who seeks to lead the British public as Prime Minister after the next election. He is responsible for the complete lack of action taken to do anything about the broken energy market, which has caused the problems from which our constituents, including those of the right hon. Member for Coatbridge, Chryston and Bellshill, suffer today.
A Secretary of State does not call for a reform of the energy market, or of the electricity market. The right hon. Gentleman’s purpose should have been to do something about the situation, but far from doing something about it—or even calling for something to be done about it—he issued the following warning to the then Opposition Front Bench during a 2009 debate on the Energy Bill:
“I have to say that the alarmism... is of no help at all.”—[Hansard, 7 December 2009; Vol. 502, c. 43.]
It was not alarmism, however. We understood that the market was broken, and we understood that fundamental changes were needed. That is why it is we who are introducing the changes that need to be made now that we are in power.
My first problem with the proposals in the motion is that they do not have the agreement of even small energy providers, who say that the right hon. Lady’s pooling mechanism would not work.
I can tell the right hon. Lady, in answer to her sedentary question, that even the small providers have put that on record.
Secondly, the right hon. Lady alluded to a series of reforms that she believes would combat fuel poverty. That suggested that the last Government’s attempts had somehow been successful, or would be successful were they to be continued. In that earlier debate, the right hon. Lady also said:
Let me remind her of that policy. Between 2000 and 2008 the last Government spent £20 billion on abatement of fuel costs, and what happened to fuel poverty during that period? It increased by 333%. That was indeed ambitious. It was ambitious to the extent that for every household the Labour party put into fuel poverty, the taxpayer paid £5,700. The taxpayer paid £5,700 to reduce a household to fuel poverty, yet Labour Members have had the cynicism to come to the House and claim that their policies would work again, and that the brave and principled position of Her Majesty’s Government is somehow misguided. It is a hypocrisy which lays bare a party that has no ideas of its own, and is reduced to attacking its own record.
I have spoken in every energy debate in the House since my election. That is because my constituency is largely rural and is in the north-east, and because 25% of my constituents are living in fuel poverty. Many of them are on low incomes, there is high unemployment in the constituency—it has doubled in the last 12 months—and we have an ageing population. Any suggestion of an increase in fuel costs always causes real fear and anxiety in constituencies such as mine.
I listened carefully to what the Secretary of State had to say. While apparently guiding us carefully through the complexities of the energy industry, he seemed to me to be doing so from the point of view of the chief executive of an energy company, and I found that
incredibly disappointing. I thought it was complacent in the extreme, and I believe that my constituents would be rightly angered by it. The Secretary of State spoke of dithering and delay in the last Government, but in the two years in which I have been in the House, I have witnessed a master class in dithering and delay. We need to get on with doing something about the present situation.
In my brief speech, I want to raise two issues. As a past student of economics, I want to discuss the artificial economy created by successive Governments in the energy industry, and I also want to return to the issue of off-grid and heating oil prices.
Successive Governments have created and modified the artificial market in the industry, but that artificial market has failed to establish safeguards that would prevent companies from manipulating the market in order to achieve massive profits at the expense of the consumer and at virtually no risk to themselves. It has failed to prevent an oligopoly in which these companies can operate with impunity. We now have few suppliers in the market and entry into the market is almost impossible, and the actions of those few suppliers have a disproportionate and negative impact on consumer prices.
Most of our strategic energy companies are also now foreign-owned. I sat through the previous debate on transport, and I heard the shadow Secretary of State tell us how the rail industry is being gradually renationalised and returned to Government ownership, but, unfortunately, not British-Government ownership; foreign companies and Governments now own our rail industry, and the same is happening in our energy industry.
On off-grid and off-gas, I was stunned by the Secretary of State’s remark that the Office of Fair Trading report gave a clean bill of health to the industry. It is clear to me that he has not read that report. I accept that the report said there was no monopoly in heating oil, but I think that is because its remit was far too narrow so the investigation was too limited.
I am the hon. Lady’s constituency neighbour and we share a great deal of common ground on the issue of off-grid problems. So far as my constituents are concerned, there is no genuine competition and fairness of pricing in respect of off-grid, so from their point of view the report by the OFT, which was only a market study, is manifestly insufficient and not right. Do her constituents convey the same concerns?
Yes, exactly the same issues are raised in my constituency surgeries. The OFT accepted that in some parts of the country there are fewer than three suppliers, but in practice even though there may be three advertised suppliers, sometimes only one company is prepared to deliver. That is certainly the case in parts of my constituency, and I am sure that is also the case elsewhere. That may not be a monopoly in the view of the OFT, but for my constituents it is definitely a monopoly. Some of my constituents were faced with increases of almost 100% in heating oil prices in the run-up to Christmas last year, and only one company was prepared to deliver. I call that a monopoly. I urge the Government, and my party’s Front-Bench team, to look again at the regulation of this sector.
I am pleased that the Prime Minister seems recently to have woken up to the public’s anger about irresponsible capitalism. We have a culture in which obscene profits are made and consumers are suffering as a result. However, I do not believe that the Prime Minister is serious about this; rather, I think it is just focus-group rhetoric. If he is really serious about doing something about irresponsible capitalism, the energy industry in this country is a good place to start.
I simply do not accept the criticism we have heard this afternoon from the Opposition that the Government are sitting on their hands and letting people die in their homes this winter. In the few minutes available to me, I shall demonstrate that, as Opposition Members have said, actions do, indeed, speak louder than words, and I shall describe a fraction of the things that are being done in my constituency to tackle fuel poverty now, as we speak.
Cornwall council and the council of the Isles of Scilly have led a successful bid to the Department of Health for more than £140,000 for a campaign called “Warm homes, healthy people”. It is estimated that each year about 300 people in Cornwall die as a result of living in cold homes, which is, of course, 300 too many. Partners in this campaign include the NHS in Cornwall and the Isles of Scilly, Age UK, Community Energy Plus, the citizens advice bureaux, Cornwall Voluntary Sector Forum, Truro Homeless Action Group, the home improvements agencies, St Petroc’s, the Cornwall drug and alcohol team, New Connection and the councils’ own housing and adult social care teams. All of them are combining their efforts to tackle this problem. They will identify those most at risk of fuel poverty. They are going to make sure that people access all the advice and support that is already available for them. As Caroline Flint said, millions of pounds go unclaimed in benefits and compensation from energy companies. This practical programme will make sure that the people who need support actually access it.
I will not, because I want to allow more colleagues to join in.
The programme is going to give people really good advice on how to protect themselves from the risks of high humidity and on insulating their homes, and it will make sure that they are taking up the available grants. It is also going to make sure that people really take advantage of the many existing free programmes.
This programme has had widespread support from people in Cornwall. The council cabinet member responsible for health and well-being has said:
“This is a great example of community and voluntary organisations coming together with the public sector to offer a joined up approach to a big issue. The funding is very welcome indeed as it will help all the agencies involved target support to those in most need and at most risk. By working together, frontline workers and volunteers will have systems in place to make sure that vulnerable people are directed to the service most able to help them.”
Our director of public health for Cornwall and the Isles of Scilly has also warmly welcomed this investment, saying that it will be used alongside money that Cornwall
council and the NHS already spend in subsidising the Warm Front scheme to ensure that all the costs of insulating people’s homes are met.
In addition, the council cabinet member responsible for housing has said that this funding is “great news” and is going to back up the money already being received from the Government to tackle homelessness. People who are homeless or living in very poor quality accommodation—in the mobile homes and park homes that we have heard about; in poor quality, poorly insulated private rented sector accommodation—will be able to top up the money the Government are already giving to people at risk of homelessness, which will actually make a difference this winter.
In addition, I have been working with all these different voluntary sector organisations, and together, along with Church groups and poverty forums, we have come up with a practical guide that will be widely distributed to people. Anyone and everyone who is worried about heating their homes this winter will have the full range of advice about all the benefits and services available to them.
I challenge my colleagues on the Opposition Benches. Yes, actions do speak louder than words, and rather than spending hours in these sterile and futile debates, why do they not roll up their sleeves, go back to their constituencies and work with those who really want to make a difference to people this winter?
Order. I want to allow some people who have been here throughout the debate to get at least something on the record. I do not like dropping the time limit to three minutes, but I am afraid I have to. I call Mike Weir.
In the brief time available I just want to make a few comments. Rising energy prices are obviously causing huge problems for many families. Every 5% rise puts a further 46,000 households into fuel poverty. It is not a completely grim picture. For once, there is some good news in Scotland. The Scottish house condition survey, which measures fuel poverty, published in November, shows a reduction in the number of homes in fuel poverty in 2010, although, like the rest of the UK, the figure remains far too high. The current average dual fuel bill is now £1,345 a year, an increase of almost 50% over the past four years. Today, EDF trumpeted the decision to reduce gas prices by 5%, but that comes on top of an increase only a couple a months ago of 15.4%.
There are other related issues. I raised with the Secretary of State in an intervention the issue of prepayment meters. There is great concern about the huge increase in the number of people moving over to prepayment meters—presumably, people who are unable to meet their energy bills—and there is a real danger of self-disconnection when that happens. We do not always know when some of these people are doing this. That is a real worry and we need to do something about it.
The mantra of switching simply does not work. The energy companies appear to be doing a “follow my lead” on rising prices; I very much doubt whether that will necessarily occur when prices start to go down.
I note that Labour’s motion suggests that we should
“require energy companies to provide the lowest tariff to over 75s”.
That, in itself, is a good idea, but the problem is that it will work only if the tariffs are lower; there is no point putting people on the lowest tariff if all the tariffs are high, which tends to be the position at the moment. At the Scottish Government’s energy summit last November, Scotland’s six largest energy providers pledged to help vulnerable customers transfer to their most efficient tariff, so there has been some movement on this issue and it should be encouraged. However, the previous system of higher winter fuel allowances for elderly people is a much better option, because it reduces the amount they have to pay out, irrespective of what bill they are on, and I am slightly disappointed that Labour seems to be moving away from that approach.
I wish to make the point about off-grid customers, of whom my constituency has many and about which other hon. Members have spoken. I have previously raised this prospect, but the Government should consider, at the very least, making the winter fuel payment earlier to vulnerable people who are off-grid, as that would allow them to fill up their tanks in the summer or early autumn, when the price tends to be lower, although it is not always. That is a no-cost and positive option, so I urge the Minister at least to consider it again.
I have been sitting here for a few moments trying to work out whether to talk quickly in the next few minutes or to curtail my remarks. I wish briefly to say something about the structure of the UK gas and electricity industries.
First, I shall discuss the gas industry. I heard the comments made by hon. Members from both sides of the House, but particularly by Labour Members, about the predatory nature of the industry, cartels, price fixing and so on. I return to my earlier intervention by saying that this country has the lowest gas prices in Europe, leaving aside three small countries. I am not defending these organisations and if the prices could be lower, they should be lower. However, if that situation is the result of predatory pricing and the operation of a cartel, the companies are not very good at it.
Is my hon. Friend aware that the probe initiated by the previous Secretary of State found that the energy companies were not acting as a cartel and that there was indeed price transparency between them?
I was aware of that, and I shall finish on this point by saying that if Labour Members have evidence of directors operating a cartel, which is a criminal offence, they should come forward with it. Alternatively, they should just stop making the accusation, which is becoming increasingly silly.
I was somewhat disappointed by the Secretary of State’s answer to the question about shale gas, because it has the potential to be a game changer. In the United States gas prices have reduced by a factor of three and, in 2015, the US is going to start exporting shale gas, and if we do not have it here, that could well have a major impact on the structure of the industry and how it will work in the future. For the first time, we are seeing the
decoupling of gas and oil prices, and once that has happened, all bets are off. The price of gas in Europe—in the European balancing hub—is three times what it is in the US. If a fraction of what happened in the US happens here, the results could be very radical and could create some issues to address in terms of the debt strategy.
Whereas we have nearly the lowest gas prices in Europe, the same cannot be said for electricity prices. We have structural issues to address in our electricity market. We do not have cheap nuclear power, as France does. We have missed the opportunity on that, although we are doing our best to catch up.
In the minute remaining, I want to suggest to the Minister one area that I believe we have got wrong in policy terms. The Climate Change Act 2008 sets a very ambitious target of 80% decarbonisation, and I accept that, but I believe we have confused the need to decarbonise with the need to go for renewables. The 20-20-20 directive from 2009, which imposes a renewables target over and above what we could have done to reduce carbon, has confused the issue. As a result, we have gone into nuclear more slowly than we should have done and, frankly, we have gone more slowly into carbon capture and storage, which is an alternative. Will the Minister assure us that the Green investment bank will be concerned with decarbonisation, not just renewables, and that the money available from it will therefore be available to the nuclear industry, which is in as much need of it as other parts of the decarbonisation chain, and the CCS industry?
Since 2004, gas and electricity bills have increased more than six times faster than household incomes, meaning that a quarter of all households in England and Wales are now in fuel poverty. Increasing energy bills and stagnating incomes also mean that an additional 25% of people now face energy debts and more than 850,000 electricity consumers and more than 700,000 gas customers are now in debt to their energy supplier.
I would dearly love to give Ben Gummer a lesson in the history he so eloquently went into earlier, but I shall defer that to another occasion. I would point out, however, that although he accused the previous Government of not having tackled structural reform in the energy market, they did so on two occasions with the new electricity trading arrangements, or NETA, and the British electricity trading and transmission arrangements, or BETTA. We will save the rest of that debate for another day.
The point that I most wish to make is that the costs of environmental and social measures, such as CERT and the renewables obligation, now account for about 4% and 10% of gas and electricity bills respectively. This is an unpopular thing to say—and certainly unfashionable, coming from me—but it is the truth and we have to face up to it: developing a low-carbon energy infrastructure will require long-term planning and significant investment. Whereas 84% of recent energy price rises were unrelated to low-carbon measures, the remaining 16% were and the Committee on Climate Change estimates that policies to achieve a low-carbon economy will add about £110 to
bills over the next decade. That is because it expects electricity consumption to drop by 50%, meaning that per unit costs of electricity will skyrocket. The most important thing we can do, therefore, is achieve energy efficiency.
On that point, I want to challenge the Secretary of State on ECO. He will know that the Fuel Poverty Advisory Group and National Energy Action have said that ECO spends only 25% of its funds on the fuel poor and 75% of its funds on trying to reduce carbon emissions, which could be better directed at targeting solid-wall insulation for the fuel poor in the private rented sector. I ask him please to consider that, as it can achieve his energy emissions objectives and increase the benefits to the fuel poor.
As many other Members have said, this is an issue of huge concern to constituents across the country, and my constituents have some particular concerns that make the impact of rising energy prices much greater. We have a lot of properties that are off-grid, which is a huge issue particularly in the marshland villages, and I also represent in the Scunthorpe part of my constituency a large number of park homes, which other Members have mentioned. A lot of people in my constituency live in single-skin properties, many privately rented, where landlords, despite their legal right, require them to be on energy meters. That was an experience I had for about three and a half years before I was able to buy my house. I lived in a rented property with one of those meters and I know the added costs. Like other Members, I am getting increasing amounts of casework about this matter. I hope the Secretary of State will act on the concerns about private rented landlords, park homes and single-skin properties.
There is not a great deal of time to go into casework issues, but another issue I want to discuss is switching. I was saddened by the comments of Caroline Flint and I remind her that, under her Government, in the region we represent, Yorkshire and Humber, fuel poverty went from 7.7% of households in 2004 to 19.9% in 2009, so this issue has not appeared overnight. It is wrong to pooh-pooh the idea of switching. One thing that I have done—my hon. Friend Sarah Newton said that she had done something similar in her constituency—is to produce a book and guide for my constituents to assist them as best I can by informing them about how they can switch and how they can make use of the social tariffs and their replacements. There are practical things that we can do, but I do not deny that it is sometimes incredibly confusing. I had a lady in her 80s at my constituency surgery the other week. She explained that she was unable to switch because she did not have access to the internet and her children lived a long way away. We need to do more for such individuals.
I want briefly to address a point made by the right hon. Member for Don Valley. I intervened on her about it but it is worth saying again. If a point is worth making once it is worth making twice. Never mind the nonsense about the winter fuel allowance and the fact that Labour would probably have raised it—even though she committed today to not raising it, which tells us all
we need to know—the one thing that would have helped pensioners in my constituency previously, instead of giving them that disgusting 75p rise, would have been Labour making good on its 1997 election pledge to link pensions to earnings. I am proud that we have done that, and it should put £5 or more into the pockets of pensioners.
I am pleased to respond to this very important debate. At the start of the debate, my right hon. Friend Caroline Flint reminded the House of the last time we debated rising energy prices—in October, just three months ago. In that debate, the Government supported our motion calling on them to investigate mis-selling, simplify tariffs, improve the transparency of trading data, reform the energy market to increase competition and drive down bills, and to demand that energy companies use their profits to help with bills this winter.
Since then, the Government have failed to deliver on every one of those promises. No action has been taken to address the chronic lack of trust between energy companies and their customers. There has been no action to increase transparency and competition and no action to help with the soaring cost of bills. Today, we have heard in speeches of Members from across the House about the consequences of the Government’s failure. They have told us about constituents who have been let down and who are struggling to keep warm this winter. Families and pensioners are facing a cost-of-living crisis. They are being squeezed by huge increases in prices at a time when their incomes are decreasing in real terms. In the latest round of price increases, electricity has gone up by 10% and gas has gone up by more than 17%, and that has come on top of high fuel prices and food inflation at 6.2% as well as the Government’s VAT rise, which is costing the typical pensioner around £275 a year.
Several hon. Members have talked about unfairness. My hon. Friends the Members for Ynys Môn (Albert Owen) and for North West Durham (Pat Glass) raised the issue of the 2 million customers who are off-grid, which is a specific issue in their constituencies. Those households suffer specifically from the monopolistic situations in their area and do not have choices about electricity and gas when such services are not available to them.
Simon Wright rightly talked about people who do not have access to the internet as a means of identifying the cheapest deals. A number of Members talked about the scandal of prepayment meters and the high costs incurred for those customers.
My hon. Friend Barry Gardiner, my right hon. Friend Mr Clarke and my hon. Friend John Robertson all highlighted that at a time when their constituents are being squeezed by record rises in their bills, energy companies are seeing record rises in their profits. It cannot be right that while the cost of a typical dual fuel bill now stands at more than £1,300, thereby making energy bills one of the biggest costs that
households face, the profits of the big six, which supply 99% of our households, have risen to more than £100 per customer.
The Government are exacerbating the situation by making the wrong choices for Britain’s bill payers. They are wrong to withdraw support from the most vulnerable consumers when they need it most. They are cutting winter fuel payments by £50 for the over-60s and by £100 for the over-80s despite having promised before the general election not to do so. They are also running down the successful Warm Front scheme before they scrap it completely next year. That scheme was introduced by Labour and has helped more than 2 million households to save money by improving their homes’ heating systems and energy efficiency.
Ministers are quick to lecture consumers about the importance of energy efficiency, yet at a time of soaring energy costs they are cutting help for those who are trying to install those vital measures, be it insulation or more affordable and energy- efficient heating systems. In 2009-10, during the last year of the Labour Government, over 200,000 homes received new heating and insulation under the Warm Front scheme. By November last year, fewer than 15,000 households received such help—a staggering reduction of 85%. Sarah Newton must be receiving the majority of the Warm Front support in her constituency.
It shows just how out of touch this Government are that, when they should be supporting those who are trying to do the right thing, they are instead making it more difficult. They are wrong, too, because as well as scrapping existing successful schemes, they have introduced new programmes which are not delivering. I am pleased to see Alec Shelbrooke back in his place. He did not know the difference between the warm home discount and winter fuel allowance. It is a shame that he was not able to stay for the debate, because he might have learned about it.
The new warm home discount is failing to help those in fuel poverty. We warned the Government that the scheme was too narrowly focused and would not deliver the support needed. It seems that those warnings went unheeded. Research by Save the Children which came out last week highlighted the huge shortfall in funding provided by energy companies for the schemes, which means that only 25,000 of the 800,000 households eligible for the warm home discount will get help this winter. That is just 3% and it is not good enough.
When pensioners and low-income families are struggling to make ends meet, it is time the Government got tough with the energy companies. We would provide real help now by making the energy companies ensure that all vulnerable pensioners and low-income families with children at risk of fuel poverty who receive cold-weather payments automatically receive the warm home discount. When in government we took action to help consumers, thanks to measures such as Warm Front and the winter fuel allowance, which the Government are now cutting. The number of households in fuel poverty fell by 1 million. Of course we would have liked to have reduced that even further, but now fuel poverty is rising and things are getting worse, not better, as a direct result of the decisions being made by this Government.
At the same time as cutting support, the Government’s plans for the new schemes, the green deal and the energy company obligation, will not deliver either. We have just
The Minister of State, Gregory Barker, told the House in 2010 that the green deal would be the game-changer for fuel poverty, but his figures revealed that only 350,000 to 550,000 households would be lifted out of fuel poverty by 2020. These are derisory ambitions. His plans mean that the Government will be gifting three times as much subsidy to households that can already afford to improve their homes, compared with those in fuel poverty who cannot even afford to keep theirs warm. To echo my hon. Friend the Member for Brent North, why, when money is tight, is the Minister not prioritising support for those who need help most?
We have seen a clear choice emerge in this afternoon’s debate. On the one hand, there is an out of touch, out of date Government unable to stand up for hard-working consumers—out of touch because when energy bills are rising, millions are struggling to keep warm and fuel poverty is rising, their only answer is to cut support and tell consumers to shop around. Although it is refreshing to hear from Ben Gummer that he believes that the energy market is broken, the Government are out of date because they are wedded to an orthodoxy which for too long has allowed utility companies to do what they please at the expense of their customers. On the other hand, the Labour Opposition have plans to deliver fairness in tough times, to provide real support for struggling households this winter, even when Government have less to spend, and to take on the vested interests, reforming the energy market so that it benefits the many and not just the few.
We heard throughout the debate how the huge rises in gas and electricity prices mean that bills are one of the biggest costs that households face. The Government lecture consumers, telling them that it is possible to save up to £200 on an annual bill by shopping around. In some cases that might be true, but Ministers are out of touch if they think that it is easy for consumers. We have heard from many about the 400 different tariffs. It is those who need help most, Britain’s pensioners, who are losing out from the Government’s failure to force companies to introduce simpler tariffs. Research by Ofgem has shown that elderly customers are much less likely to investigate cheaper tariffs or switch suppliers, compared with the average consumer. It is crucial that at times like these, when money is tight and people right across the country are struggling to get by, the Government do everything they can to help them.
Yesterday my right hon. Friend the Leader of the Opposition showed that Labour will deliver fairness for elderly people struggling with soaring fuel bills as well as taking action to cut the deficit. The plan he set out in today’s motion would cut gas and electricity bills for up to 4 million elderly pensioners, not by spending more money, but by getting energy firms to show greater responsibility towards their most vulnerable customers. We want energy companies to move their customers who are over 75 automatically to the cheapest tariff they offer for gas and electricity.
As well as taking action to protect the most vulnerable in our society, we must ensure that everyone benefits from fairness and responsibility in our energy market, so we would go further by introducing real reform to increase competition and drive down prices. For too long the market has been dominated by a handful of companies. Today’s debate has shown once again that the market is broken and that we need to fix it. I hope that the House will vote for action today and I urge Members to support the motion.
I am delighted to have the opportunity to respond to the debate, which I think we all would agree has dealt with some extremely important issues that concern us all. I think we should start with the recognition that there is no monopoly of care when it comes to fuel poverty. Every Member of the House, regardless of party allegiance, cares about their constituents being able to pay their bills and worries about how they can do more to assist them. This is a long-term concern. Fuel poverty started to come down in the 1990s under the Conservative Government and continued to decline until 2002. It then increased from 2 million households living in fuel poverty to almost 6 million over the course of the Labour Government. As prices have continued to rise, fuel poverty has continued to go up. It is an issue that no party can claim to have addressed, but one that every Member cares about finding the right solutions to.
Important issues were raised in the course of the debate. John Robertson talked about the difficulty of insulating the types of housing found in his constituency and Mr Weir referred to the problems faced by people on prepayment meters. We heard the continuing debate about off-gas grid customers. We welcome the progress and the interaction we have had with the hon. Members for Ynys Môn (Albert Owen) and for North West Durham (Pat Glass) and my hon. Friend Guy Opperman to try to ensure that constituents who are off-gas grid get a better deal than they have had so far. We have ensured that the warm home discount will be payable to those who are off-gas grid and have seen good engagement with the Office of Fair Trading, which said following its market study that if there was evidence of market abuse it would carry out a full investigation in that area.
I have asked Members on both sides of the House to provide evidence of how the market is working in their constituencies and, if they find that there is not the range of market providers that the OFT suggests, ensure that that is brought to my attention. If there are problems with delivery in some areas or with advance payments being required, I want cast-iron evidence so that we can decide on the most appropriate way to go forward on those issues.
We have heard discussions about the green deal, which Caroline Flint raised. I well remember a discussion with Dame Joan Ruddock in 2010, when she was Energy Minister, after we had put forward an amendment to the Energy Bill. She said that the green deal was not possible and the Labour Government voted it down. We could have
had the green deal in place 18 months ahead of where we are now and delivering the sort of help we want to see. It is the most ambitious programme this country has ever seen for insulating our homes, with the ambition of 14 million homes having good energy insulation over the course of the next decade, which knocks into oblivion any other scheme that has been tried by previous Governments. I well remember the current leader of the Labour party, when he was Secretary of State for Energy and Climate Change, telling the House in December 2009 that their ambition was to have five pilots in different parts of the country. We have taken it from five pilots to a nation-wide scheme delivering on a level that has never before been possible.
My hon. Friend Alec Shelbrooke was absolutely right to draw our attention to the upward pressure on prices. Indeed, the Leader of the Opposition, in his Labour party conference speech last year, said that
“over time there is going to be upward pressure on energy prices.”
Yet from the right hon. Lady there was not a word about the global picture—the fact that towards the end of last year gas prices were 40% up on the year before, after the world’s worst oil incident in the gulf of Mexico, the world’s worst nuclear incident in Japan and a war in the middle east. She wrote that out and acted as if the only reason for prices going up is the greed of the energy companies, saying that we in this debate have to get a sense of reality.
What the Government have been doing, however, is working to remove some of the levies that Labour put in place. Indeed, over the course of this decade we will have reduced people’s energy bills by £100 compared with what they would have been if Labour’s levies had stayed in place. The renewable heat incentive is now to be paid from general taxation, rather than from a levy; and the carbon capture and storage levy, which, in the words of the leader of the Labour party, was going to cost £9.5 billion over the coming years and be paid for by consumers, is no longer on consumers’ bills.
Introducing the green deal, the warm home discount and electricity market reform, rebanding the renewables obligation and changing the feed-in tariffs will all help to bring down consumers’ bills by £100 when compared with what they would have been under Labour’s levies. So where Labour put in place stealth taxes on bills, this Government have now removed them.
As my hon. Friend David Mowat said, the issue is not just one of global energy prices, but whether there is enough electricity generation to meet demand. There was not a word from the Opposition about the need to rebuild our energy infrastructure—the £200 billion that is necessary, or the fact that during this decade we have to secure twice as much investment as Labour achieved during the previous decade. In reality, if we do not secure that investment, the lights in this country will go out. The leader of the Labour party, when in government, referred to that as “energy demand unserved”, whereas all of us know that in ordinary people’s language it means power cuts. That is why we have started the most ambitious programme of market reform—things that Labour in government told us were not necessary. The carbon floor price, the capacity mechanism and market reform more generally have all been put in place in less than two years by this new Government.
We are also clearing Labour’s backlogs. Last year, the highest number of planning consents since the Electricity Act was passed in 1989 were granted to get those new projects under construction, and the highest number of oil and gas licences for more than a decade were approved, as we try to get the most out of our indigenous resources. We have already brought forward by 12 months the roll-out of the smart meter programme, because of its importance in giving consumers control over their bills, so it was no wonder that Steve Holliday, the chief executive of National Grid, when interviewed on television a week ago said that we were closer to having an energy policy now than at any time in his lifetime.
My hon. Friend Ben Gummer also highlighted the role of the Leader of the Opposition in the issue. It is worth looking at what he has said and where his policy has gone. It has not been a good week for the right hon. Gentleman, and it may not get any better now. In government, he said that there should not be a Competition Commission inquiry, yet the Labour party in August said that there should be, and now it is silent. We do not know its view on that issue now. In government, he said also that the energy companies should not be broken up, but in his conference speech he talked about breaking the dominance of a market that has clearly failed. Now, a few months later, he is silent on that as well.
The right hon. Gentleman talked about pooling electricity generation, yet he did not agree with that in government, and now the Labour party is silent. Ahead of his conference speech, he talked about cutting energy bills for four out of five families, but that has been lost. All we hear today is that people who are over 75 years old should be given extra support: bizarrely, a Labour party giving more support to wealthy 75-year-olds than to 74-year-olds who are struggling to pay their bills.
As my hon. Friend Sarah Newton said, we have in place measures that are working. We have simplified tariffs, and we have helped with switching, although there is more to be done, as my hon. Friend Simon Wright said. We have introduced the biggest energy efficiency initiative ever, and there is more help to encourage new entrants—
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