In the traditional way, I most sincerely congratulate my hon. Friend Dr. Whitehead on securing this debate on a matter of great concern to many colleagues in the House and to many outside it. I thank him for the very thoughtful way in which he has introduced the subject. He is a great authority on it and has a great track record on energy issues and the social aspects of energy. Indeed, at a meeting today with a non-governmental organisation, I heard about the great work that he is doing with combined heat and power in his Constituency in Southampton.

I want to respond to my hon. Friend's contribution as thoroughly as I can in the time allowed. In doing so, I shall say a little about the size and make-up of the pre-payment meter market, an issue that he has touched on. We are talking about a substantial market. There are 3.5 million electricity pre-payment meters and 2.25 million gas pre-payment meters in this country. More than a tenth of customers use these meters to pay for their gas or electricity supply and one in 50 customers uses such meters to repay debt.

As my hon. Friend emphasised, pre-payment tariffs are not low, but installing and maintaining pre-payment meters is itself not a cheap exercise. An average credit meter costs £10 or less, but a pre-payment meter costs between £50 and £80 and requires a complex payment and support infrastructure involving suppliers, meter owners and thousands of retail outlets. There will inevitably be a tendency to charge less to those customers who make fewer demands on a company's systems compared with those who make more. Internet tariffs tend to be cheaper than direct debit; direct debit tends to be cheaper than standard credit; and standard credit, in turn, tends to be cheaper than pre-payment. However, there is more to be said about differentials, and I would like to return to that subject later.

It is helpful—indeed, it adds an important nuance or complexity to the debate—to ask who uses pre-payment meters. They are found in a variety of places, including holiday homes, rooms let to students and so on. However, I think that no one would disagree with the view that low-income households constitute the Majority of pre-payment customers. Indeed, some will have these meters because, for one reason or another in the more or less recent past, they have fallen into debt to their supplier.

Less well known is the fact that pre-payment meter customers are by no means synonymous with the fuel poor and by the "fuel poor", I use the standard definition of those who spend or who are required to spend more than 10 per cent. of their income on the energy needed to heat their homes adequately. Although about a quarter of the fuel poor use pre-payment meters and although there is certainly a greater likelihood of Fuel Poverty if a household uses a pre-payment meter, three quarters of the fuel poor do not use such meters. Indeed, more fuel poor households pay their energy Bills by direct debit than by pre-payment meter and only 5 per cent. of elderly people—the pensioners who make up a significant number of the fuel poor—use pre-payment meters.

If we want to help the low-income customers who use pre-payment meters, the conclusion that we can draw is that we can take one of two broad approaches, although some might argue for a blend of the two. The first is to focus on customers in terms of the type of meter that they use and the second is to focus on low-income customers irrespective of their payment method. Many of those who want to help, including, I think, my hon. Friend, are attracted to the first approach, but I am not saying that he is not also attracted to a blend with the second as well. There is nothing wrong in that, but inevitably the focus of those attracted to the first approach makes them impatient for the Government or the regulator to take specific measures of some sort.

What sort of measures are we talking about? The model we hear most about involves forcing gas and electricity suppliers to reduce pre-payment tariffs to levels similar to those paid by direct debit customers. Much of that was the force of my colleague's analysis.

The difficulty is that the cost of any reduction in pre-payment meter prices forced on suppliers by the Government or the regulator might not simply be borne with a smile by companies and their shareholders. Like other costs, it would probably be passed on to the customer, and therefore not only better-off customers, but the poorest customers who are not on pre-payment meters, would pay more. The worry is that the poor would be subsidised by some of the very poor, and so on. That is the nuance, or complexity, that I wanted to introduce into the discussion.

There is a sense in which, as my hon. Friend said, there is statistical support for the fact that differentials have risen far enough to give rise to concern, and to call for an explanation. I refer not just to direct debit and pre-payment meter differentials, but to differentials between direct debit and standard credit. All suppliers have been considering their tariff structures. I may have more up-to-date information than my hon. Friend, because this is fairly quickly moving territory. EDF and Scottish and Southern Energy have equalised their standard credit and pre-payment prices for electricity, while Scottish Power offers pre-payment customers a lower price for both fuels than that paid by standard credit customers. Other suppliers have also acted in this area by introducing social tariffs for vulnerable households that either remove the differential or, in some cases, offer customers prices that are below even direct debit levels. I am in the midst of a series of discussions with the chief executives of our major supply companies on this and related social policy matters. Without prejudging the issue, I should report to the House that I will soon be meeting Sir John Mogg, the Chairman of Ofgem, to discuss the matter with him.

I would like to talk about what we are doing, and what more we will be doing, to get at what I see as the real heart of the problem. That is how—rather than focusing narrowly on the pre-payment tariff—we improve the lot of low-income customers as a whole. We need to redouble our efforts to increase understanding of the market and how customers can use it to cut their energy bills. There are two simple messages. First, there are still big gains to be had from switching supplier, and half of us have not taken that most basic step. I do not think that, even under freedom of information legislation, I will say what half I fall into, although things have been busy recently. There are big gains to be had from switching payment method. Why not use the differential as a trigger to look at paying in other ways? Almost all of the population have bank accounts or can open basic accounts with direct debit facilities. We should encourage people to use them. I fully appreciate that some customers are using a pre-payment meter to pay off debt, but the overwhelming majority are not and that majority could save £200 a year by switching supplier and payment method. That is a message that the Government, Ofgem and bodies such as Energywatch have pushed hard, and continue to push.

There are additional benefits. Just as suppliers like direct debit because accounts are much easier to administer, so customers using direct debit avoid the nuisance of recharging keys or buying tokens. Although pre-payment meters, Fuel Direct and weekly payments all have their place in the market—I am glad they are available—they can also signal self-imposed exclusion from the financial mainstream, which is in turn closely linked to wider social exclusion. If people want to keep their pre-payment meter, of course that is fine. If they want to stay with their incumbent supplier, fine. But let us do all that we can to ensure that these are positive decisions, not simply the product of inertia, because the very best interventions in markets are those that customers make for themselves.

I hope that what I have said underlines the Government's commitment to addressing the problems faced by energy customers on low incomes. I am bound to say that I am very aware of the theme that often the poor pay more, not just for energy, but in many other fields. I am sensitive to that.

I hope that I have explained why our preferred approach is not to treat pre-payment meter customers in quarantine, but to help them, as we help all low-income customers, irrespective of the payment method that they use. We encounter the same challenges in reaching and helping pre-payment customers as we do with other customers, and the same range of measures helps them as helps other customers. That does not mean that we will not keep a close watch on the treatment of pre-payment meter customers; I am keeping a close watch on it, as well as on the progress on recalibrating token meters and replacing them with more efficient key meters. Nor does it mean that we will not keep a close watch on tariffs and how they compare with other payment methods. I do see movement from supply companies on that, and I expect further movement in the months to come.

Those are essential elements of the work of a Government concerned with customer protection and social justice, but that close watch will continue to form part of our larger strategy of helping low-income customers to reduce energy bills, improve their thermal comfort, and maximise their household income.

Question put and agreed to.

Adjourned accordingly at ten minutes to Eleven o'clock.