Electricity (Standing Charges)

Oral Answers to Questions — Trade and Industry – in the House of Commons at 2:17 pm on 8th February 1995.

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Photo of Thomas McAvoy Thomas McAvoy , Glasgow Rutherglen 2:17 pm, 8th February 1995

To ask the President of the Board of Trade if he will discuss with the Electricity Consumers Committee the benefits of abolishing standing charges to customers on low incomes.

Photo of Ian Taylor Ian Taylor , Esher

That is a matter for the Director General of Electricity Supply and for the regional electricity companies, which must decide how best to structure their charges.

Photo of Thomas McAvoy Thomas McAvoy , Glasgow Rutherglen

As electricity companies can afford share options worth £23 million to the executives and directors of National Power and PowerGen, does the Minister agree that those companies should use their profits to abolish standing charges, which would go a long way towards offsetting the extra cost of VAT on fuel imposed by the Government?

Photo of Ian Taylor Ian Taylor , Esher

For a start, the hon. Gentleman should know that electricity prices have been falling, which has been more than offsetting the cost of value added tax to the consumer. Secondly, it is within the remit of the regional electricity companies to abolish standing charges if they so wish—the Merseyside and North-Western electricity board has done so. Thirdly, in nearly all cases, standing charges have been frozen for the past two years, and where that has not happened, they have been reduced. I hope that the example set by Eastern Electricity only yesterday will be copied in other parts of the country.

Photo of Mr David Shaw Mr David Shaw , Dover

Will my hon. Friend confirm that many executives who are leading the nation's privatised electricity companies are performing extremely well? Electricity prices have fallen in real terms and they are likely to continue to fall. Will he confirm that the executives at the head of our privatised utilities earn a lot less than many of those who contributed to the Leader of the Opposition's fighting fund in his bid to lead his party?

Photo of Ian Taylor Ian Taylor , Esher

The job of senior management in any company, including electricity companies, is to run that company and ensure that it makes a profit which ultimately can be reinvested to improve services. As the electricity companies have clearly improved services since privatisation, senior management can be congratulated on those grounds. How they are remunerated is a matter for them and their shareholders.

Photo of Mr George Stevenson Mr George Stevenson , Stoke-on-Trent South

The Minister said that standing charges have been frozen and have not increased, but does he realise that, in the five years following privatisation, standing charges in the Midlands electricity board area increased by no less than 33 per cent? Does he also realise that standing charges have not been frozen but have increased through the application of value added tax? Standing charges have nothing to do with the use of electricity and they hit those people on low incomes the hardest. When will the Government stand up for those on low incomes and intervene to remove standing charges?

Photo of Ian Taylor Ian Taylor , Esher

The hon. Gentleman should remember that the overall decline in electricity prices included standing charges. In the past two years, prices—even in the Midlands area—have been effectively frozen.

The hon. Gentleman should bear in mind the help that is targeted on those who are most in need and he should also realise that, if standing charges were abolished, the cost would have to be recovered by changes in consumer pricing based on consumption. Many people have high levels of electricity consumption because of the way in which their houses are heated, and they would be penalised. The argument is not quite as simple as the hon. Gentleman makes out.