I inform the House that I have not selected the amendment.
I beg to move,
That this House
notes that annual energy bills have risen by more than £200 since May 2010, with further price rises on the way;
calls on the Government to help families and pensioners with their energy bills this winter by requiring energy companies to put all people aged over 75 on their cheapest tariff;
and further calls for it to reform the energy market to break the dominance of the Big Six by requiring them to sell power into a pool, and allowing new businesses to enter the market, thereby increasing competition and driving down energy bills for all, and to replace Ofgem with a tough new energy regulator with the power to force energy companies to pass on price cuts when wholesale costs fall.
Since this Government came to power, energy bills have gone up by more than £200, and last week three of the big energy companies announced another round of price hikes, adding a further £100 to people’s energy bills this winter. People worried about how they will afford to keep the lights on, heat their homes or have a hot meal deserve a Government who understand their challenges and have the ideas to provide the change that Britain needs and the strength to see them through, but all we get from this Government is another shambles from an out-of-touch Prime Minister who seems to make it up as he goes along. From the disgraceful conduct of the former Chief Whip to the incompetence on the west coast main line that has cost taxpayers millions, this is a Government who promised change but instead are delivering chaos.
I am grateful to the right hon. Lady for giving way so early on in her remarks. Labour was in government for 13 years and, indeed, the Leader of the Opposition was Energy Secretary for almost two years. Does she agree that if her party truly thought that Ofgem was ineffective, it should perhaps have done something about it in those 13 years?
Of course, my right hon. Friend the Leader of the Opposition did make some changes to Ofgem, but we have given more consideration to this over the past two years and, as I will explain later, we now feel that we need to take a more radical look at it.
“What we cannot do, of course, is tell big energy companies what prices they should set.”—[Hansard, House of Lords, 16 October 2012; Vol. 739, c. 1368.]
On Wednesday, though, the Prime Minister directly contradicted her when he said:
“we will be legislating so that energy companies have to give the lowest tariff to their customers”.—[Hansard, 17 October 2012; Vol. 551, c. 316.]
By Wednesday evening, a spokesman for the Department had told the Financial Times that energy companies would not in fact be forced automatically to put all customers on cheaper tariffs. By Thursday morning, the
Minister of State, Mr Hayes, was reduced to taking the ridiculous line that the Government did still want to use legislation to get people lower tariffs but could not explain how they were going to do it.
All the while, the Secretary of State, the man responsible for this country’s energy policy, had gone AWOL, leaving an empty chair on “Newsnight”, refusing to answer questions from the media, and sending his deputy to answer my urgent question. The Minister put in a valiant performance of which he should be proud; those of us who were there could say that it was parliamentary comedy gold. However, what did we actually learn from last week’s urgent question? We learned, in the words of the Minister, that
“DECC has a wonderful relationship with…the Treasury and No. 10” which
“has improved since my arrival.”—[Hansard, 18 October 2012; Vol. 551, c. 493.]
Despite that wonderful relationship, we also learned that the Department of Energy and Climate Change is not told about announcements on energy policy until after they are made. We learned that one of the options being considered is a change to the law to require the energy companies to write to people to tell them what the cheapest deal is, even though the Government already announced that back in April and the Energy Act 2011 already gives the Secretary of State the power to force energy companies to provide information about the lowest tariff.
It was a very bad decision by the Treasury to refuse to attend the Committee. We know how important energy policy is for DECC, but it is also a cross-cutting issue for Government. Decisions and influence from the Treasury, and also the Department for Business, Innovation and Skills, for that matter, are essential to the perception of how our energy policy is being developed. That decision was a great shame, but I am afraid that it is just another example of a lack of joined-up government, which is to the detriment of such an important policy area.
We also learned that the Government have been working on the proposals for months and that we should expect them to feature prominently in the forthcoming Energy Bill, but there is no mention of them at all in the draft Bill, the White Paper, the technical updates or the impact assessments. Perhaps the only real thing that we learned last week was that when it comes to energy bills this Government are not just out of touch, but completely clueless.
I will give way shortly; I have taken two interventions already.
Such is the complete and utter confusion in Government, the Energy Bill has now attained near mythical status. Ministers talk as though it is the answer to every problem and the solution to every ill in Britain’s dysfunctional energy market. The Minister told the House last week that
“we will use the Energy Bill to get people lower tariffs.”—[Hansard, 18 October 2012; Vol. 551, c. 489.]
Why is it that the draft Bill, which has been in preparation for two years, contains nothing to reform the way in which energy is bought and sold, or to make the energy market more competitive; nothing to open up the market or open up the books of the energy giants so that we can work out the true cost of energy; nothing on demand reduction to help families and businesses cut their energy use; nothing to protect vulnerable customers or stop everyone else being ripped off; and, whatever the Prime Minister claims, nothing to simplify tariffs or make it easier for people to switch, or anything remotely close to what he promised last week? If the Government are as concerned about energy bills as they claim to be, why does their flagship Energy Bill do absolutely nothing to help people struggling to make ends meet?
Over the past two years, we have had countless White Papers, consultations, updates and even a draft Bill, but not once have we seen anything that recognises the need for urgent reform, that challenges the prices and practices of the big companies, or that lives up to its name and genuinely reforms the energy market. The House will forgive me if I am a little sceptical of this Government’s sudden conversion to the cause of reforming this market, to make it more competitive, more transparent and fairer for consumers. I am afraid that, on the evidence so far, this is a Government who back business as usual in an energy market that is not working.
I thank the right hon. Lady for giving way. A back to the future-type approach to energy pooling has already been proven to have failed. Will she explain why her party is now pursuing energy pooling so vigorously when the Blair Government with whom she served were opposed to the policy on the basis of the cost to the consumer?
We went into the last general election with a manifesto commitment to introduce a pool. That put our cards on the table. According to the Government’s own statistics, 1.7 million people were brought out of poverty during our time in government.
Does my right hon. Friend agree that, while it is all very well for the Government to have a mythical lowest-tariff policy, until they have a coherent energy policy that ensures security of supply, prices will continue to go up and uncertainty will remain?
Security of supply is key, and the Energy Bill has to address that with regard to where we source our energy from and for how much. That is part of the Energy Bill, but what is so disappointing is that none of the matters that the Prime Minister gave such prominence to last week has featured in any of the discussions about the draft Bill.
People are worried about how they are going to pay their bills this winter and are sick and tired of this ridiculous soap opera in Government. This time last year the Government promised action at their infamous energy summit. What was the result? It was a campaign telling people to click, switch and insulate to save. It is fair to say that, one year on, the time has come to review that. When it comes to clicking and switching, the Government’s campaign has been an abject failure. Information that I have obtained through parliamentary questions reveals that the number of people switching energy supplier has fallen to the lowest level on record. In the quarter before the energy summit, nearly 1.2 million people switched electricity supplier and nearly 1 million more switched gas supplier, but in the quarter after the energy summit, fewer than 750,000 people switched electricity supplier and only 0.5 million switched gas supplier.
How have the Government got on in the other area that they are keen to promote: insulating to save? Labour’s Warm Front grants helped more than 2 million households, which means that, on average, more than 200,000 people were helped each and every year. Last year, however, according to more information obtained through parliamentary questions, just 43,585 households received help from the Warm Front scheme. That is down 80% compared with our last year in government. To add insult to injury, nearly 30,000 applications for help were turned down by the Government, even though the Warm Front budget underspent by more than £50 million.
Does my right hon. Friend not feel that this is a bit like groundhog day? When prices went up a year ago, the Secretary of State had meetings with energy companies and there was a lot of sound and fury promising action, but nothing happened, because this Government do not care about the pound in the pocket of constituents in my constituency and elsewhere, and are fiddling while the energy companies keep putting their prices up.
My hon. Friend is absolutely right. She was the shadow Secretary of State before me and I pay credit to her and to my hon. Friend Luciana Berger, who was part of her team. Ever since the general election, the shadow DECC team has been pointing out concerns about rising prices. This is not new and each year there is some stunt telling us that things will get better, but I am afraid that they are not getting better at all.
I want to make more progress.
When this House last debated energy efficiency in May, I used information that I had once again obtained through parliamentary questions to warn that the energy companies were on course to miss their targets. The Minister of State, Department of Energy and Climate Change, Gregory Barker, complacently told the House that
“we fully expect them to deliver their obligations and we will make sure that they do.”—[Hansard, 16 May 2012; Vol. 545, c. 554.]
Now, with the schemes due to end in less than 10 weeks, Ofgem is warning that the companies will not meet their targets, and families across the country will miss out and be left facing a cold winter with poorly insulated homes. Why have the Government failed to get a grip on this situation? Why have they failed to tackle the energy companies’ lack of activity and joined-up activity with local people to deliver? We have 10 weeks left and it looks like we are not going to meet the targets that the Minister said we would in May.
We should not worry, however, because we are told that everything will be okay as a result of the green deal. The Government originally said that this scheme would reach 14 million households by 2020, so why is it that when the scheme was launched earlier this month there were just two registered providers? Why would anyone want to take up the green deal when they will end up paying more in interest rates and charges than for the actual energy efficiency measures? Support on energy company obligations for the fuel poor and low-income households will be cut by half next year, and the end of the Warm Front scheme means that this will be the first Administration since the 1970s not to have a Government-funded energy efficiency programme.
Ian Lavery and I inherited in excess of 20% fuel poverty in the north-east when we were elected in Northumberland in May 2010—but I will leave aside the past. Does the right hon. Lady not accept that these plans for, to use her own words, more competitiveness, more transparency and a fairer way forward are, at the very least, a step in the right direction?
We are going to make three propositions today that we think will help boost the market and make it more competitive, and I look forward to receiving support from the Government’s Front-Bench representatives. I know that the hon. Gentleman has raised on many occasions the issues faced by his constituents who are off-grid. Part of our proposals for a new energy watchdog is to bring those who are off-grid back under the arrangements that everybody else benefits from by being under one regulator. That is one of the ways in which we would reform Ofgem.
We want to help people do the right thing. We believe that, even in opposition, we can help people make their homes more efficient and find the cheapest deal, which is why we have launched our own collective switching campaign, “Switch Together”. When it comes to it, that is the big difference between us and the Government. They think that the public are to blame, because when they tell people to shop around, what they are actually saying is, “It’s down to you. You’re on your own.” We do not think that the public are to blame for rocketing energy prices. The problem is the way in which our energy market works.
Let us look, therefore, at the dominance of the big six energy companies, which between them supply about 99% of the homes in Britain. By itself, that does not necessarily mean that competition in the market is ineffective. However, the fact that no new entrant has achieved anything like the scale of operations that would challenge the big six shows that there are barriers for newcomers in trying to break in.
Secondly, let us look at the market shares of the big six energy companies in their former monopoly areas, which T he Independent on Sunday exposed using information that I obtained through parliamentary questions. Privatisation was meant to lead to greater competition and a better deal for consumers, but in every part of the country, the company that used to run the regional electricity board still has a stranglehold over the market.
Thirdly, energy companies like to tell us that electricity and gas prices in the UK are among the lowest in Europe. However, when tax is taken out of the equation, which is an instrument of Government policy, not an indication of market efficiency, electricity and gas prices in the UK are among the highest in Europe, not the lowest. Tax on energy is lower than that on most goods only because Labour defeated the last Tory Government’s plans to increase the VAT on domestic fuel in 1994.
Fourthly—this is perhaps the most damning point of all—whenever the energy companies announce their latest round of price hikes, they tell us that they are only passing on their costs. However, if pricing is competitive and the market is functioning properly, falls in the wholesale cost should be passed on as quickly as increases. So why is it that when prices rise, bills go up like a rocket, but when prices come down, they fall like a feather, if at all? The only reason for that is that the market is not functioning in a proper, competitive way.
Of course the energy companies dispute that, but in 2011, Ofgem found evidence that energy suppliers were slower in passing on reductions in wholesale energy costs than in passing on increases. Its report stated:
“We have found some evidence that customer energy bills respond more rapidly to rising supplier costs compared with falling costs.”
That is what Consumer Focus thinks too. It found a gap between the price at which energy companies buy electricity and gas, and what they sell them to the public for. Its research shows that even though the wholesale prices for both electricity and gas have fallen since 2008, retail prices for both are significantly higher today than four years ago.
I was particularly interested in the point that the shadow Secretary of State made about the relative prices here and in Europe. I have in front of me information from the EU website which shows that we have the 26th lowest gas prices in Europe. I take her point that that is to do with tax, but our gas is 60% cheaper than gas in France or Germany. If our companies are operating a cartel, it would seem that they are not very good at it.
I am just presenting the facts as they have been presented to me. The energy companies and parliamentary colleagues often say that our prices are among the cheapest in Europe, but the truth is that when tax is taken off, we are not among the cheapest in Europe. In fact, in some areas, our prices are considerably higher.
GoWarm, a community interest company, and Stockton-on-Tees borough council have developed an innovative and effective programme to externally insulate hundreds of homes, which gives people in the poorest households in my
constituency a better deal from their energy bills. That could be done for even more homes if it was not for the fact that BT would charge them an absolute fortune to refix bolts to the sides of their properties. Does my right hon. Friend agree that that is another large utility that needs to be brought to book?
That is another bit of casework to look into. The obstructions to energy plans are numerous. At our party conference, we launched the “Power Book”, which is a collection of ideas and articles on ways to decentralise energy through energy generation and energy efficiency. It looks at ways in which community groups can be supported, rather than hindered, in doing the right thing. In many ways, that could be far more cost-effective.
When I did the right hon. Lady’s job at the end of the last Parliament and shadowed the current leader of the Labour party, who was then the Secretary of State for Energy and Climate Change, I tried to get Labour and Ofgem to reduce the number of tariffs from a ridiculous number to a small number. That was not done. Secondly, I tried to get them to legislate to persuade Ofgem that there should be an obligation to reduce the price to the consumer when the wholesale price went down, and not to leave it for six, nine or twelve months. None of those things was delivered. I welcome the conversion, but does the right hon. Lady not recognise that it has come several years later than it could have done?
On the basis of the right hon. Gentleman’s contribution, I look forward to our being in the same Lobby for the vote. Our proposals would tackle some of the issues that gradual reform has not tackled. The energy market has changed a lot since it has been privatised. Efforts were made to enable Ofgem to be stronger, but on the evidence of the past few years, it has not been. That is why we believe that our proposals, which are now on the stocks, are the best ones to take us towards a market that is more competitive and more use to consumers.
The right hon. Lady has said quite a few times that the energy market has changed. Will she confirm that in 1998 there were 14 of the original 15 incumbent energy suppliers, but that by the time Labour had finished, that had gone down to six? That is a consolidation in the energy market, does she not agree?
That is exactly why this needs to be tackled. [ Laughter. ] No, this is being grown-up. I will repeat what I said earlier. I hope that the Secretary of State heard me. I do not know what commitments the Liberal Democrats made in their manifesto, but the manifesto that was written by the current leader of the Labour party before the last election said that we needed to reform the energy market more radically.
That is why we have said that we need to have a pool into which all the energy would be put to open up the market. We were very clear about that.
When Ofgem, as the independent authority, took away some of the price caps, it was meant to be on the basis that the market was mature and competitive enough to be able to deliver the consumer choice and competition that were needed. That did not happen and the number of companies reduced. As I said earlier, when we look at the situation regionally, rather than just nationally, we see that it is not only about the big six—in some areas, there is just the big one.
As I said, it was our manifesto commitment radically to reform the market and we have been saying every single day since that we need to do more. Unfortunately, the Government have not been open to that discussion. I hope that that will change when we debate the Energy Bill in a few weeks’ time. We have propositions in today’s motion that, having listened to the comments today, I hope will get support from a number of quarters, and not only from our own Back Benchers.
The right hon. Lady is right that there has not been enough competition in the generating side of the market. I will speak at length about competition in both the retail and wholesale markets. The real issue between us is whether we should get extra competition in the generating side of the market through pooling, as she proposes, or by addressing the lack of liquidity in forward markets, which we believe to be the real problem. Does she want to compare and contrast her approach with ours?
There are a number of measures that we should be taking to tackle liquidity. Pooling is just one of them. No doubt there will be more detail on this matter and amendments when we have the Energy Bill before us. The issue is that there has so far been nothing in the draft Bill that has opened up that debate. After the Prime Minister’s intervention last week, it seems that we will now have a debate that he did not realise would be forthcoming.
I will make some progress, because we only have a half day on this issue and colleagues from across the House want to speak. We had a shambles last week. We can only imagine that civil servants in the Department of Energy and Climate Change are now busily rewriting the Energy Bill. If they are, we would like to put forward three clear proposals that could help people now and reform the energy market for the long term.
First, there is a proposal on which we think there could be action for this winter if there were unity, but on which we might need to legislate somewhere down the road. It is about targeting help where it is needed most this winter, not next year once the Energy Bill is passed, and not when Ofgem finishes the consultation on its retail market review in 2013. We all know that something like 75% to 80% of people are not on the cheapest tariff. Ministers say that it is possible for households to save up to £200 on an annual dual fuel bill by shopping around for the lowest online rate, but elderly customers, who are most vulnerable to the cold weather and most at risk of fuel poverty, are among the least likely to be able to access the cheapest online deals or switch supplier.
In January, we proposed putting all over-75s on the cheapest gas and electricity tariff, which would save as many as 4 million pensioners, including 8,000 in the Secretary of State’s constituency, as much as £200 a year. The Government rejected our proposals, but given what the Prime Minister said last week, their position now appears to have changed somewhat. If it genuinely has, can we come together today and send this clear message to the energy companies: “If you don’t put the over-75s on the cheapest tariff, we will legislate to make you”? That is our first proposal—getting help to those who need it most.
We also want everyone to benefit from a more competitive and responsible energy market, which means wholesale reform to how energy is bought and sold, so here is our second proposal. At the moment, no one really knows what the true cost of energy is. The way the market is structured means that the big energy companies are allowed to generate power, buy it from themselves and sell it on to the public. We believe that has to end. The time has come to open up the energy giants’ books, stop the backroom deals and end the secret contracts. If the energy companies were forced to sell the power that they generate into an open and transparent pool, anyone could bid to retail energy. That would encourage new entrants, increase competition and ease the upward pressure on prices.
Does my right hon. Friend recall that when the Select Committee on Energy and Climate Change discussed vertical integration, one energy company chief executive was asked why a company such as EDF, which generates most of its electricity from nuclear power, should benefit from the high price of gas, which sets the market rate for the sale of the wholesale supply into the retail market. The answer, of course, was that Ofgem would not allow cross-subsidising from one side of that barrier to the other. Is that not why the tough new regulatory powers that we have called for are exactly what the Secretary of State should introduce?
I absolutely agree, and I commend the Select Committee for its fantastic work over the past year. Since I have been in my post, it has been most useful to my discussions and thoughts about how policy should develop.
Thirdly—this takes me on to Ofgem’s role—I am afraid that too often in the past, Ofgem has ducked the opportunity to get tough with the energy giants. I believe that we therefore need to create a tough new regulator that people can trust. I can tell the House that we seriously considered whether it would be better to reform Ofgem or start again from scratch. In the end, I do not believe that just giving Ofgem new powers is the answer, because it is not using the powers that it already has. It has failed to enforce its own rules, and time after time it has let the energy companies get away with ripping off hard-pressed families and pensioners.
As I said earlier, when Ofgem removed price controls a decade ago, it did so in the belief that competition had developed sufficiently, and that privatisation had delivered a functioning competitive market. It is now clear that that was a mistake. Almost every indicator, such as consumer engagement and market share pricing, gives us cause for concern. The answer is not to go back to nationalisation but to reform the energy market to make it more open, transparent and competitive. Until that happens, we must ensure that the regulator has the power and authority that it needs to protect consumers.
That was why, at the Labour party conference, I announced that the next Labour Government would abolish Ofgem and create a tough new regulator with a statutory duty to monitor the relationship between the prices that energy companies pay for their energy and the bills that the public pay. It would have the power to force companies to pass on price cuts when wholesale costs fall. It would be a new watchdog with new powers, new responsibilities—including for small businesses and off-grid customers—a new focus and new leadership.
I have given way to the right hon. Gentleman already. I am sure he will want to make a speech, and I will be very interested to hear any other policy ideas.
The Government promised change, but nothing is changing. Energy bills are up by more than £200 on their watch and fewer people than ever are engaging with the energy market, which is untransparent, uncompetitive and unfair. People need real help now and a more responsible energy market for the future, which is simpler, works in the public interest and protects the most vulnerable. Real action, not warm words—that is Labour’s promise, as shown in today’s motion, which I really do commend to Members of all parties.
Order. Given the intense interest in participating in this debate, I have imposed an eight-minute limit on each Back-Bench contribution.
There is, I hope, at least one thing that unites the House today: we all want to help people struggling with high gas and electricity bills. When times are tough, as they are now, and when salaries are not going up yet prices of many essential things are, the last thing that people need is higher energy bills. We have heard the same worry in debates on the cost of petrol and diesel, for very similar reasons. When the price of oil and gas on world markets goes up, that pressure can feed through, and not just in the UK. The challenge to many Governments around the world is how to react to that and how they can insulate their people and their economy from fossil fuel price hikes. I therefore welcome the debate, which enables the House to test out the Government’s policies and the Opposition’s ideas.
I will set out the Government’s policies on how we believe we can best help people and businesses facing higher bills. Our position is based on a combination of ever tougher competition and ever more ambitious efforts to save energy. I wish to spend some time talking about that competition today.
I thank the Secretary of State for giving way so early in his contribution. We face the start of a cold snap at the end of this week, and it seems that we are getting into the cold spell of the year. Will he consider, if not legislating immediately, at least calling in the big six and the other energy providers to encourage them, instruct them and demand that they provide the lowest-cost tariff to the over-75s? We know that the older someone is, the more vulnerable they will be to cold snaps this winter, not just next winter.
The hon. Gentleman may or may not be aware that two or three months into my time as Secretary of State, I secured a voluntary agreement with the big six. I negotiated it and the Deputy Prime Minister announced it in April. The agreement was clear, and the big six are delivering on the promise that they made to us, namely that they will inform people of the lowest tariff available to them. That was part of a range of policies that we have agreed with them. For example, there is the warm home discount, which is often forgotten in this debate. We legislated for that discount to ensure that £130 will go straight off the bills of the poorest pensioners and the poorest people in our society next year. That will get money to the people who really need it and help them with their energy bills.
The Secretary of State may not be aware of this, but I understand that research by Which?indicated that there was some confusion about whether energy companies were informing customers of the cheapest deal when they wrote to them.
The point about the over-75s is that a lot of them are not online. If they ring up their energy company and say, “I would like to go on to that online deal”, the company will say that they cannot do it in that way. We say that not being online should not be a barrier to that group of people getting access to the cheapest deal.
I could not agree more. We want to ensure that all people can access the best deal, whether or not they are online. That is why we have made the voluntary agreement and why we will take powers in the forthcoming Energy Bill to ensure that the energy companies have to inform people of the best deal. As I will set out in my speech, we want to enable the poorest people in our society to get the help that they need, whether about switching, competition or energy insulation.
Every poorer person will be pleased with the subsidy that other consumers are paying for, but probably 75% of them are paying way beyond what they need to pay. It is great for people to have a subsidy, but that subsidy may, and probably will, be wiped out by the price that those companies charge. There is a redistribution—quite rightly—from those of us who are better off to those who are less well off, but the money goes not towards extra fuel for our poorest constituents, but into the coffers of the companies. Surely there needs to be a combination with the current subsidy. I would go slightly further than my right hon. and hon. Friends on the Opposition Front Bench and ask why the scheme should not be extended to the 4 million people who are eligible for cold weather payments, which we know is the most vulnerable group.
One thing I agreed during my negotiations with the big six earlier this year, ahead of this winter, was that those who receive a reduction in their bill through the warm home discount should also receive the most attention from energy suppliers to help them get the best available tariff. Those people were the priority then and they are the priority now.
What I find slightly odd about Labour’s position, is that they seem to be worried only about the over-75s. What about everyone else facing high energy bills? What about families who are struggling with those bills? The Government’s policies will address everybody.
I want to make some progress and I will come to my hon. Friend in a moment.
The Government’s policies combine competition and energy saving, and are designed to drive a wedge between rising world energy prices and the actual energy bills that people in Britain end up paying—decoupling bills from prices. If tougher competition in the UK energy market can take the sting out of rising global prices, and if we can help people to use less energy, we can cushion families and firms.
In many ways, Caroline Flint said similar things. She talked about competition and markets, and it was music to my ears. Where we differ, however, is in the detail, and in particular on how to generate the extra competition that she spoke eloquently about.
No, I will make some progress and give way later.
When we consider competition in energy markets we must first separate the retail side from the wholesale side—or, in English, competition between firms that sell us energy and firms that generate it. There are, of course, many firms that are on both sides of that equation, just as there are policies to help on both sides.
Let me start with the suppliers, the retailers, the people to whom we pay our bills. We can drive competition in that area in two ways: by making the existing bigger players compete harder to keep their customers, and by enabling more firms to enter the market and grow—something on which the right hon. for Don Valley is rightly keen. Switching has, of course, been the principal way to do both those things, which is what happened by letting customers choose their supplier and forcing energy firms to offer better deals to hold on to customers. As the right hon. Lady rightly said, however, that system has not been working well, and switching has not helped the vast majority of people. In fact, it seems that switching rates have been falling just as prices have been rising. That bizarre finding seems to be the result of the virtual end of door-to-door selling which, as many of us know from our constituencies, was fraught with problems. Switching rates appear to have fallen in recent years, and those who continue to switch tend to be the internet savvy and often the more well-heeled, leaving the less well-heeled and internet savvy out in the cold when it comes to getting the best deals. In essence, it is a very unsatisfactory situation.
The policy question is about whether we can promote competition through switching in other ways, or whether switching is simply not the way to go. I am delighted because it seems from the right hon. Lady’s speech that the Opposition have not given up on switching, and in fact they seem to be copying some of the policies that I first articulated. Since imitation is the sincerest form of flattery, I take that as a vote of confidence. For Members who may have missed that neat trick from the Labour Front Benches let me explain. The right hon. Lady talked about her commitment to collective switching, and she mentioned Labour’s “Switch Together” scheme. The Government support collective switching because we talked about it first. The right hon. Lady knows that the Labour party could have pushed that idea when in government, but it did not, and it was this coalition Government who got it.
When I was the Minister responsible for consumer affairs in the Department for Business, Innovation and Skills, I pushed the general notion of rekindling the spirit of co-operatives into different retail markets, and, in league with Co-operatives UK, I set up a competition to stimulate new ways for communities to buy things together. From that work, energy co-operatives emerged as among the most promising. That is because gas and electricity are pretty similar commodities, wherever and however people buy them, and because people are increasingly worried about their bills. However—this is crucial—many people find it too difficult to switch by themselves, and I have been addressing that problem. I have talked to a range of people about the barriers to collective switching, and I have got people—including Ofgem, the large energy companies or firms, and organisations capable of managing a collective switch—round the table where we have made real progress.
Regulatory barriers are coming down. Last week, we announced a nationwide competition, in which the winners, whether councils, community groups or others, will get seedcorn cash to help them get going. That national competition—not a Labour party competition—is called Cheaper Energy Together and should provide a boost to awareness and learning that could transform switching in the UK, not least because winning bids must show how they would involve the fuel poor in their schemes. If we are to see a revolution in switching, with collective switching, I will insist that the most vulnerable are part of that.
It must be slightly embarrassing for Labour Members to know that when they were in government, they did not use the collective principle to help people. It must be embarrassing because, although the current Government are using the collective principle to tackle fuel poverty, the Labour party did not. I am, however, genuinely delighted that the Opposition have overcome their embarrassment, and taken up our idea.
The Labour party was the first political party in British history to organise a collective switch, and we are proud of that. I am not sure what the Liberal Democrats might do—it might be switch apart rather than switch together.
Switching is important, but in truth, even if people are on the cheapest deal, it does not mean they are getting value for money and a fair price. That is why we must reform the way the energy market works, and tackle the dominance by certain companies that both generate and retail energy, and do not let others get a look in.
I will come to that point, but I remind the right hon. Lady of what I said earlier. Under her party’s watch, the number of companies went down from 14 to six, so we will not listen to her too much.
Let me finish my point about switching and say why it is so important. Collective switching got going in Belgium just a few years ago, and we have now seen live, successful switches in the UK. The Consumers Association, Which?, led the way with its big switch earlier this year. It helped around 37,000 people to switch and get an average saving of £223. We have also seen smaller collective switches. Last month, South Lakeland district council was the first local authority to run a switch. Nearly 1,700 residents signed up, and early indications suggest savings that range between £60 and more than £200.
Yesterday, Oldham borough council launched its collective switch, which I attended. I did not see the right hon. Lady; perhaps she was there at a different time. That collective switch is called “Power to the people”—Citizen Smith would be proud. A wide variety of schemes are coming forward. I am already aware of eight, perhaps the most ambitious of which is Cornwall Together, in which the council, the NHS, the trade union Unison, the third sector, and St Austell brewery have come together to organise a collective switch.
Collective switching is not a silver bullet or panacea, but people are seeing how it can be part of the answer and reform the way switching works. Switching does not just force existing firms to compete more vigorously to keep customers, it enables smaller suppliers to grow their customer base faster. We know that customer inertia can be a barrier to competition, preventing new companies from getting market share, and collective switching reduces that barrier for small companies. Co-operative Energy won the big switch organised by Which?, and doubled its customer base overnight. Collective switching has the potential to be part of the way that we reshape the market.
I welcome the Secretary of State’s comments on community involvement and the role of local councils. Many years ago, I wrote to all six energy companies to seek their support. Some were aggressive in their replies, not least Scottish Power. Only one—Scottish and Southern—wished to participate in such a scheme. What is the Secretary of State’s experience of energy companies’ reactions to the important role he mentioned?
I am disappointed that the companies did not respond more positively when the right hon. Gentleman wrote to them. I do not know whether he wrote to them under the Labour Government. The voluntary agreement that we managed to secure after two months in office included a commitment from the energy companies to take part in collective switching proposals. A number of the big six took part in the Which? big switch, so we have moved them and we are changing things.
A key barrier to collective switching and ordinary switching is individual bill payers getting their details to the third party organising the switch, the switching website or the new supplier. In principle, that should not be too difficult, but the evidence we have found is that it is. We have therefore started to tackle the problem. In the voluntary agreement I negotiated, the companies agreed to put quick response codes on their bills. “What,” hon. Members may ask, “is a QR code?” It is a bit like a bar code, but smarter. The QR code should make it much easier for people to provide the energy bill details needed for switching, reducing the effort people must make. I can announce to the House that we will be consulting on that and a number of other measures when we introduce our consultation on consumer bills.
The Government have gone further to reduce the hassle of switching. In another consumer project I worked on at the Department for Business, Innovation and Skills—it was called midata—we looked at other ways in which an energy company could provide the customer with the customer’s data, for example, in easy-to-use or easy-to-pass-on electronic formats. BIS is now consulting on making the midata ideas a statutory requirement. Coupled with the work of Ofgem on simpler bills, that could be a huge catalyst for helping many more people to switch.
An energy Bill is imminent. We have had pre-legislative scrutiny, white papers and impact assessment. Has it only just occurred to Department of Energy and Climate Change Ministers, including the Secretary of State, who took over at the beginning of this year, that they should consult in the run-up to a Bill that will be before the House in the next few weeks? Labour did a lot in government: 1.7 million fewer people were in fuel poverty when it left government.
Unlike the right hon. Lady, this Government respect an independent regulator. Ofgem has been conducting its retail market review. It would have been completely inappropriate for the Government to publish a consultation before the independent regulator completed its work. She ought to know that. We have been waiting for the report and got it just last week. As a result of receiving that work, we will take forward our consultation, which will enable us to introduce new legislation in the Energy Bill.
My right hon. Friend is right that it would have been nonsense not to wait for the review to finish before considering what to do, but given that it is also absolute nonsense to propose abolishing a regulator, only to create a new regulator to do a similar sort of job—namely, regulating the energy industry—will he take the much more sensible option of being open to suggestions from wherever they might come as to ways in which we might toughen the role of the current regulator to make it much more responsive to the needs of our constituents?
My right hon. Friend is absolutely right, and the Government will do just that.
I pay tribute to Ofgem’s work on simpler bills—the retail market review it published last week is an excellent piece of work. I was disappointed that the right hon.
Lady did not welcome it. That might be something to do with her policy of abolishing Ofgem, which I should like briefly to turn to as my right hon. Friend has raised the matter. We want to understand why the right hon. Lady believes that abolishing one regulator and replacing it with another will make any difference whatever. That is a recipe for delay and chaos and for letting the energy companies get away with it while the Opposition mess around moving the deckchairs on the Titanic.
The right hon. Lady said that the previous Government looked at whether reforming the regulator would be better than creating a new one. She gave no good reason why we could not reform Ofgem, which is what this Government will do. It is interesting that she wants to spend time rebranding public bodies. I do not know whether she believes that is a good use of taxpayers’ money, but, interestingly, her proposal is rather disloyal to the Leader of the Opposition. I am sure she is aware that he legislated on Ofgem when he was Secretary of State for Energy and Climate Change. Just two and a half years ago, he told the House that the purpose of his Energy Act 2010 was
“precisely to strengthen Ofgem's powers in a number of respects and to make it a more proactive regulator”—[Hansard, 7 January 2010; Vol. 503, c. 254.]
The truth is that despite the powers extended to Ofgem, it is just not delivering. Four years ago, it found that some customers were charged different prices for using the same amount of energy, but energy companies are still using predatory pricing tactics. In 2008, Ofgem launched reforms aimed at supporting consumers, but according to its own evaluation in 2011, the reforms failed. In August 2011, Ofgem commissioned BDO to undertake a forensic investigation of how to improve transparency in the market, but by May 2012, Ofgem had quietly dropped six of the eight BDO recommendations and varied the remaining two. It is not delivering; it is not doing its job.
I am extremely disappointed that that is the position the right hon. Lady has arrived at. The retail market review last week proposed to reduce and limit the number of tariffs from the massive number that exist at the moment to just four core tariffs. As my right hon. Friend reminded us, he asked the Labour Government to do that just a few years ago, but they did not. Ofgem has acted where the Labour Government did not. It will help to tackle the complexity of multiple tariffs, which have not helped transparency or competition. I am delighted that its plans allow collective switch tariffs to emerge in addition to the core tariffs. I am surprised that she wants to abolish a body that, under this Government, is taking the action that the previous Government failed to take.
I have a very simple question for the right hon. Gentleman. Will the Government require energy companies to put all over-75s on the cheapest tariff, which is important in the run-up to Christmas?
I am grateful for the hon. Lady’s question, not least because I was born in her constituency. The Government want to help everybody. I am surprised that she is focusing simply on over-75s. We are acting on over-75s and on all poorer pensioners, because the warm home discount will get £130 off their bills this year. We are taking action.
No, I will not.
I have spent some time on competition in the retail energy markets, but the right hon. Lady spoke a lot about competition in the generating markets, to which I should like to turn. She made a great deal of wanting to reintroduce a pool to the UK and said it was in the Labour party’s manifesto. She did not really explain why, having abolished the pool in the UK in 2001, Labour wanted to re-introduce it. The Labour Energy and Competitiveness in Europe Minister at the time of pool abolition—she now the noble Baroness Liddell—told the House:
“There is no question but that the electricity pool has distorted the market”.—[Hansard, 15 June 2000; Vol. 351, c. 1102.]
When the NAO reported on the old pool in 2003, it said that the
“the centralised arrangements of the pool carried with them a risk that some generators could manipulate the market and Ofgem consider that this risk materialised through much of the period of the Pool’s operation to the detriment of consumer interests.”
Is the Secretary of State aware of how many generators there were at the time of the abolition of the pool compared with the number of retailers, and does he think those circumstances have been replicated today? It would help the debate, if he could provide some numbers.
I want to focus on how we can tackle the real problems in the energy market. I think we all agree that there is a problem with competition. When we compare the UK market to overseas markets, a key observation is that our markets are less liquid, especially the forward market. To get a good, competitive energy market, firms should be buying and selling electricity three, six, 12 or more months in advance. If they were, and if we had greater market liquidity, it would be much easier for independent generators to enter the market and invest in generating plant confident that they can buy and sell electricity and manage their risks.
Faced with the might of large, vertically integrated energy companies supplying their own power, independent generators find it difficult to enter the market. I think we agree on that. The question is: how do we deal with that? The problem is with liquidity, not the pool. The right hon. Member for Don Valley, who clearly dislikes Ofgem, has not noticed that by threatening to take action Ofgem has, to some extent, already made progress on liquidity. As we have seen, large volumes are now being traded in the day-ahead market, which has improved price transparency. That is a good start.
No, there is more than one company, as I think the right hon. Lady will find when she checks.
Ofgem and my Department agree that Ofgem’s voluntary measures do not go far enough, so the latter has been working on a mandatory auction, and it might well be that some sort of trading obligation is the way forward. I can confirm that I have been considering this matter intensively for some time, and that I will bring forward measures in the Bill to address it. At the very least, these will be back-stop powers in case the efforts of industry and the regulator prove insufficient. If we are to drive competition in the generating side of the electricity market to help people and firms struggling with bills, we must address the liquidity problem. The right hon. Lady’s policy does not do that, but ours does.
I agree that it is important to free up liquidity in the forward market—I do not think there is any dispute about that—and, in so far as that goes, it is welcome. However, it will not address the problem of a generator such as Centrica making a £1.5 billion profit while the retail prices of British Gas rise, because it will not be possible to see that integration—it can show its profits where it likes. The Secretary of State talked about integration of the retail and wholesale market. He has to address that, otherwise we will not resolve this problem.
The only way to ensure greater transparency is to have more liquid markets. That is the whole point of liquid markets. Without them, people cannot compete or buy and sell their electricity forward, and we cannot ensure price transparency. That ought to be welcomed by the Labour party. I would be worried if they set their face against greater liquidity in the forward market. It would be a very odd position to take.
We put quite a lot of social obligations on them now. As the hon. Gentleman knows, the carbon emissions reduction target scheme is being replaced by the energy company obligation, which will include the affordable warmth target to help people in fuel poverty, and the carbon saving community obligation to help areas in fuel poverty. There will also be measures promoting solid wall insulation and other things needed to take energy efficiency policies forward.
I strongly support all the initiatives that my right hon. Friend is describing, but the energy companies are not addressing all the issues of fuel poverty. Those on the margins of credit still cannot take advantage of direct debit deals, while the falling block tariff also works against their interests, and there are a number of other measures where those companies are not addressing fuel poverty. Does he agree that they could do much more to help those in fuel poverty?
That is one reason I welcome the retail market review, and we will be consulting on measures and introducing them in the Energy Bill to address those and other matters.
I want to talk briefly about energy efficiency, although I am conscious of the time. On the social tariffs that Gavin Shuker talked about, and on energy policy across the board,it is important to see both sides of the equation and understand what we are trying to do with clean energy. By 2020, all the energy and renewable subsidies combined will add £95 to bills, yet those same bills will fall by about £220, thanks to the energy efficiency improvements that our policies are bringing forward. Our green policies are about lower bills, not higher, and we are delivering on that.
As part of our policy, energy efficiency is a top priority for me, because reducing demand saves consumers money now and reduces future pressure on supply. I will give just two examples, although I am sure that Members across the House could give many more. Installing solid wall insulation saves about £270 a year on the average energy bill, while upgrading an old, G-rated boiler to a modern, A-rated one can save £200 a year. Our flagship green deal scheme will make it easier for home owners and tenants to improve the energy efficiency of their homes, paying for those improvements through savings on their fuel bills. I hope that we will continue to have the Opposition’s support, but I am not always clear where they stand on the green deal.
The Deputy Prime Minister suggested in a speech last year that he would tackle the concern about the high interest rates associated with the green deal. It will be about 7%. What progress has been made on bringing it down?
The right hon. Lady ought to know that the interest rate will be set by the market, and that this—I say this as a former consumer credit Minister—is actually a great deal. People would not get an unsecured loan of this nature at the interest rates in the green deal. This will be a good deal for people on low incomes, in particular.
Through the energy company obligation, which will be introduced with the green deal, we will be requiring energy companies to provide an estimated £1.3 billion a year of support for energy efficiency in our homes, including £540 million to fund energy saving improvements to around 230,000 low-income, vulnerable households every year. Whether through reform of the energy market, our proposals on competition or our proposals on energy efficiency, the Government are taking action that will help people with their bills. The right hon. Lady’s motion would do the reverse—her proposals are fundamentally flawed—so I invite my colleagues to join me in the Division Lobby and defeat her motion.
I remind hon. Members that an eight-minute limit on speeches has been imposed.
The Secretary of State is very good with a brief in front of him but very poor when he comes before the Select Committee, where he has to answer questions. He beats around the bush and never answers a question, and I congratulate him once again on doing the same thing.
I congratulate my right hon. Friend Caroline Flint on her motion, although we would probably disagree on a couple of things.
A month or so ago I introduced a ten-minute rule Bill on prepayment meters that would change the amount of debt that customers build up from £200 to £350 and give 200,000 people the opportunity to reduce their debt. Since then, Ofgem has announced that it wants the limit to be increased to £500, taking 400,000 people out of debt. I congratulate Ofgem on not only listening to me but going further than even I had suggested—I cannot have a go at it about that. I also worry about the 68 people it employs in Glasgow and, of course, the 722 staff in London who do the best they can with the rules they are given.
Ofgem and many other regulators such as Ofcom were introduced at a time when we wanted light regulation. That was a particular request shouted by those on the Opposition Benches while we were in government and we gave them that, but unfortunately times change. We are in a double-dip recession and things are harder. Many people in my constituency worry about whether they will be able to pay their bills this winter. The Secretary of State talked about helping people with energy efficiency, but how can we offer someone who lives in a multi-storey concrete block energy efficiency when they spend the summer cooling down the concrete walls and the winter heating them up? How can they have energy efficiency? They cannot. Those people do not have computers; they cannot switch providers.
I wrote to the energy companies three weeks ago and asked them to outline how they identify vulnerable people and what they do to try to help them. I have had three replies and three companies—E.ON, EDF and SSE—have not bothered to reply. They might not have quite got round to it or they might have been too busy counting money, but I want to know how they identify vulnerable people and, more importantly, how we can reach those people. No energy company has ever come to me to ask where I think the vulnerable people are in my constituency. I think I probably know better than those companies what happens in my constituency, given that I have lived there nearly all my life, yet they will not talk to me about these matters.
I asked about the cheapest tariffs—perhaps the Secretary of State could try this for his own house. People wanted to talk to me about that—not because I was a member of the public but because I was an MP, so they thought that they should give me some attention—but even they could not tell me the cheapest tariff. If they cannot tell me what the cheapest tariff is, what are they telling people outside this place?
The Secretary of State talked about four tariffs. If I pay by direct debit, will I get a lower bill? Yes. We have now doubled the four tariffs to eight. If I pay by cheque, will it be cheaper than a payment by standing order? Before we know it, there will be 20 or 30 tariffs rather than four. It is ridiculous, however, that we have 400 tariffs, and I raised that question in my Select Committee when the previous Government were in power.
Is it not also a problem when we try to compare different tariffs from different companies, as they are not always trying to sell the same thing? We need identical tariffs—perhaps four of them—across the companies because otherwise it is meaningless.
The hon. Gentleman is absolutely right, but I would go even further. I met Which? this morning and its representatives said that they wanted energy to be like petrol and diesel. We are given a price for petrol and diesel and we know how much we are paying per litre; Which? wants to do the same for units of energy. Different companies can charge different prices. I do not have a problem with companies making a profit, but if they make an obscene profit I expect the next Labour Government to consider a windfall tax. We let these companies run as businesses and we want them to act responsibly, but if they make obscene profits on the backs of people, particularly poor people, I would expect my Government to consider that and to tax them accordingly.
I have to agree with the Secretary of State on the question of the over-75s. I would bring the minimum age down to the retirement age. As the retirement age is going up, 75 might not be off the mark in a few years’ time, but at the moment it is 67. If I retire, I will be 65, fortunately, so it would be nice if that age limit was 65.
That takes us back to vulnerable people. There are many single parents and disabled people, and we forget about them at our peril because they sometimes need more help than the elderly. As we move towards becoming the next Labour Government and proposing our own energy Bill, we need to consider these matters as they are very important.
In Prime Minister’s questions today, the Prime Minister was asked about his previous statement on tariffs. As I said earlier, no one really knows what those tariffs are. The Department of Energy and Climate Change told our Select Committee that it could not intervene and that it was down to the companies, but now it says it can intervene.
The regulator is, unfortunately, very poor at delivering. It is not that it does not want to do the right thing—it does—but the Government set the agenda for Ofgem. If the direction is poor and the regulator is not given the power to impose fines—
If the Secretary of State listened for a second, he might learn something.
There is an imbalance in how the generating companies spread energy about the country and it seems to be a bit of a rip-off. We pay the companies to shift electricity from one side of the country to another and it costs the taxpayer more than £340 million. It used to cost only £35 million, but it is now closer to £350 million, so why have the Government and Ofgem, who know that that fiddle goes on, not taken any of those companies to court to try to get the money back? I am told that one of the worst areas for that double dealing is the Cheviot hills, which are only about 20 miles from my house.
If wind farms are part of the problem and are being paid to close down, there is something wrong with our energy policy in this country. We need to look at that. I believe that Ofgem does a reasonable job but could do better and a reorganisation would be the best way forward, as we cannot reinvent the wheel once we have it. The Secretary of State also needs to get on top of his job and portfolio so that he can help people as he is supposed to, rather than engaging in stupid political point scoring from the Dispatch Box.
I welcome today’s debate, because energy is one of the most important issues for my constituents. The pressure on the cost of living over the past four or five years has been relentless, with petrol and diesel prices going up almost weekly, food prices going up in the same fashion and energy bills soaring. Over that time, people’s incomes have not increased anywhere near in line with those increased costs and salaries in both the public and private sectors have been pretty much static.
Despite the rhetoric we have started to hear from the Opposition, the Government have made moves to try to help with the cost of living. We all know that had the Opposition been in power, petrol and diesel would be 10p a litre dearer at the pumps. We all know that the Government have frozen council tax for the third year in succession, in stark contrast to Labour, which doubled council tax during its 13 years in government. My constituents who commute using Nuneaton station will also be heartened that regulated rail fares are to be capped this year.
Much of the problem with energy prices stems from energy generation issues and the energy market. We all know that the wholesale cost of oil and gas accounts for half the cost of energy. Given Labour’s inertia, inactivity and lack of enthusiasm about energy generation during its 13 years in government, it seems opportunistic for Labour Members to put forward this motion.
I welcome the fact that the Government are working hard to incentivise low-carbon energy, and I hope that the Minister will provide some reassurance about the energy mix and confirm that clean coal will be a firm part of that mix. Many of my constituents work at Daw Mill colliery—one of the largest deep producing coal mines in the country. I am sure that my constituents will be very interested to hear the Minister’s comments.
The hon. Gentleman quite rightly said that wholesale electricity prices are based on the wholesale price of gas, but will he explain why a company such as EDF, which supplies electricity to its customers yet generates from nuclear, should benefit in exactly the same way from the higher price of gas, which of course it does not pay?
The hon. Gentleman’s comments are interesting. I am a firm supporter of nuclear energy—he might not be, but it is absolutely necessary. This Government are trying to incentivise companies to make sure that nuclear is a firm part of the energy mix and that we are not switching off the lights.
I thank the hon. Gentleman for raising that point, as this Government have been helpful and have followed the situation at Daw Mill very carefully to try to help it have a future. I am aware that positive negotiations are going on between the work force, the unions and the company to try to secure its future after many years of poor management, which left the colliery without the necessary work being done on the coal faces to help the company sustain an operation employing 800 workers. There are challenges there, but I am confident that the interested parties can come to a deal. I assure the hon. Gentleman that my hon. Friend Dan Byles and me, as constituency MPs, and the Minister responsible for energy have spent a lot of time trying to help.
Let me move on to discuss another important part of our future energy policy—shale gas. Notwithstanding the environmental impacts and assessments that need to be done, I very much feel that shale gas has a real future. In coming years, it will help to create sufficient energy supplies and contribute to energy security, as well as helping to bring people’s bills down, as it has in the United States.
The energy market itself is an important matter. Caroline Flint came up with a gem—or probably what I would call an “off-gem”—when she admitted that Labour had created the problem by reducing the number of energy providers from 15 to six. She now expects the current Government to sort it out, which is quite interesting and seems to be a recurring theme: this Government having to sort out the inadequacies and the mess left by Labour.
I went on to a price comparison website this morning to find out the position if I chose to move energy suppliers. Under the dual fuel section, I clicked on to E-ON and noticed that I could change to any one of 52 tariffs. For example, there was the E-ON fixed price 5, E-ON fixed two-year Tesco clubcard points, Age UK one-year fixed, not to mention the other 49 different tariffs of different descriptions. There is a real issue of transparency; people need to know what they are signing up to and what else is available to them. I welcome the Prime Minister’s announcement that the Energy Bill, or part of it, will be used to encourage energy suppliers to take responsibility for letting people know the lowest tariff and for trying to move people on to it.
The cost of living is another important point, and I shall particularly mention the mortgage market. People finish a fixed deal with a mortgage lender and are put on to a standard variable rate, which might not be the best rate, or are not told that a better rate could be achieved. People who do not always look at these things are paying more than they need to. We definitely need to consider this issue across the piece.
We need to ensure more consumer choice for energy. We have more competition and more transparency in the market. I am heartened by Ofgem’s proposals to pare down all complex, multi-tier tariffs and limit energy companies to a smaller number of core tariffs. I think that will help people better to understand what they are signing up to and what they can go on to. We must also ensure that people know that they are getting value for money. We know all the trouble and hassle that swapping providers can cause; we know that it puts people off, so we need to make it as simple as possible to swap providers.
In my remaining minutes, I want to highlight consumption as a major issue. We must keep working hard, and I know that the Government are trying to reduce people’s energy consumption. I am sure that the green deal will make it easier for people to make home improvements that reduce their energy consumption. Many people who have worked and are working hard might not have the necessary capital sum available, might not qualify for benefits and might not be able to get other incentives, payments or grants to improve their property, but the green deal will give them the opportunity to help themselves to reduce their bills.
We need a balanced, open and honest debate on this issue. We need to make sure we do all we can to reduce the cost of living across the piece for all our constituents in these hard-pressed times. What we certainly need to do through this debate—and, I hope, through the Energy Bill—is to put in place a framework that will ensure that we have long-term energy security, enabling our constituents to reduce their bills in the coming years.
I have no great problem with the motion moved by Caroline Flint. I might even vote for it—despite the fact that she would not take any of my interventions. I would, however, like to comment on one aspect. The motion is headed “Energy Market Reform”. In fact, both Front-Bench spokesmen entirely concentrated—apart from one brief mention from the right hon. Lady—on the big six of the electricity and the gas markets. As often happens in these debates, they totally failed to address the problem of those who are off the gas grid. To their credit, this Government brought forward the Office of Fair Trading review of the energy market. To almost universal disbelief, however, it was decided that the market was working fairly.
The Secretary of State spent a good deal of time talking about competition and how he was going to introduce it; again, this seemed to be focused on the electricity and gas market. However, those who are off the grid have faced some of the highest price rises over the past year. The OFT said that that market was working OK because there were plenty of suppliers in it. I should like to think that that there are plenty of suppliers, because many of them are connected with each other, but does that not illustrate the difficulty of dealing with the issue if we rely on competition? Competition has failed in that market, and, indeed, in the bigger market as well.
There has been much talk about switching. There are several problems with that. For instance, when one of the energy companies puts up its prices, there is a follow-my-leader process: over the next month to two, the rest start to follow suit. People who have switched have found themselves in a worse position, because although the company to which they switched was giving a better deal at first, suddenly it is not a better deal any more.
The Secretary of State spoke said that the community base must include the fuel-poor. That is true, because they are the only people who will really benefit from switching. When I joined the Which? Campaign, I looked into whether it was worth my while switching. However, I am still using the former monopoly supplier in my area, which was much derided earlier in the debate. When I received the figures from Which?, I concluded that switching would not be worth my while because the savings would be so low, and in view of the hassle that would be involved in switching, I did not bother.
John Robertson mentioned his private Member’s Bill, which deals with pre-payment meters. People with pre-payment meters will only make significant savings if they are on a very high tariff. Those of us who have made the effort to reduce consumption and become more energy-efficient also find that it is not worth switching, because we are not using enough energy for it to be worthwhile. The real problem is that energy bills continue to rise, and that hits everyone.
The hon. Gentleman was an excellent member of the previous Energy and Climate Change Committee, although we did not always agree, particularly when nuclear matters were being discussed. Does he agree that those who would save the most money by switching are the ones who do not receive the necessary information, or even have an opportunity to switch?
The hon. Gentleman is right. There are many reasons for that, but one of the most basic is the digital divide. Many people who might otherwise benefit have no access to these deals, because many are online. They find it very difficult to obtain information. Furthermore, they tend not to have bank accounts.
Let us be honest: the energy companies are not interested in those people. They are the customers who may run up debt, and the energy companies do not generally want to take them on. They make sympathetic noises now and again, but the customers whom they want are people such as the hon. Gentleman and me, who are relatively well off and can pay by direct debt. I presume that the hon. Gentleman pays his bills on time; I would certainly expect him to. Those are the people whom the energy companies are after, and those are the people who are being targeted for the purposes of switching.
The Secretary of State is right—it will make a great difference if we can get community switching on the go and target the fuel poor—but he will have to change the energy companies’ thinking, and ensure that not just the well off but the fuel-poor are taken on board. Unless that happens, community switching will make no difference. However, I do not oppose what the Secretary of State said. It interested me, and I should like to see how it works out.
Let me return to the issue of off-grid gas, which affects my constituency and, indeed, much of rural Scotland. While 15% of households that are on the gas grid are in fuel poverty, the figure rises to 32% for those that are off grid. The Government should think about ways of getting into that market and doing something about it. In my own private Member’s Bill, I suggested that one way of helping everyone quickly, particularly pensioners, was to bring forward the payment of the winter fuel allowance. My suggestion was never debated, because the Tory Whips objected to it for their own reasons, and the previous Bill was talked out. I have raised the matter time and again in the last Parliament and in this one, and I am still waiting for a member of the past or the present Government to explain why my suggestion cannot be considered or even debated.
It is not always the huge changes that make a difference; we can make a difference by means of small, incremental changes. They may not be revolutionary, but they will help, and any help during the coming winter will be very welcome to pensioners and those in fuel poverty. Although the great schemes all sound grand, it may be years before any of them actually makes a difference, and people are suffering from fuel poverty now. As a Labour Member pointed out earlier, a cold snap is predicted for the end of this week. Winter is approaching, energy bills are creeping up, and people are worrying about how they will pay them.
Rather than talk of, for instance, getting rid of Ofgem, we need action. As I have said, small incremental steps can make a difference, but the Secretary of State—the Government—should tell the energy companies that unless they address the problem, there will be stronger action. The Prime Minister promised legislation to put people on to the lowest tariffs, but that seemed to unravel in hours rather than days, and we are still none the wiser about what will be in the Energy Bill. Ofgem’s proposals at least had the benefit of being better thought out, but they too rely on switching and making tariffs simpler. Unless we reach the people who are suffering from fuel poverty and who are at the bottom of the heap as far as the companies are concerned, those changes will make no difference.
I urge the Secretary of State to speak to his colleagues in the Treasury and the Department for Work and Pensions, and to consider measures such as bringing forward the winter fuel payments for pensioners off grid. Such small steps will make a difference, and they will make a difference now.
The problem is that electricity suppliers buy the fuel that produces the electricity from the world markets. Gas, oil and other fuel supplies are bought on the open market: the gas supplied in Russia, for example, can be sold to the United Kingdom, or indeed to any country, at a price. When the price of gas rises, the end result is that the price of electricity also rises, and the same applies to oil.
That is true, but my point is that fuel is bought and sold on the open market. We need to ensure that supply of both gas and nuclear fuel in this country is secure for the long term. We do not want to rely on foreign suppliers, because that could bring about a situation similar to that in Chechnya when the Russians turned the gas off.
The hon. Gentleman is right to focus on security of supply, which is an essential part of the future of the market. He said that the price of gas would go up and down in accordance with the cost of procuring it on the open market. Can he explain why the wholesalers who generate the electricity by means of that gas do not drop their retail prices when wholesale prices have dropped in the international markets?
Order. May I remind those who continue to intervene that they will be placed at the bottom of the list rather than the top, because they have already spoken? I am sure that they will want to save something for their speeches.
I take the hon. Gentleman’s point, and I agree with him. Maybe it takes a while for the price of gas to go down. Gas is bought in advance, and gas bought six months hence could be a lot cheaper than that bought now, but the expensive gas might have to be used up before the cheaper gas can be used. I do not know the gas market; I am only trying to make the point that we are in a world market and we buy in those markets.
As for the idea of pooling—a suggestion made by the Opposition Front-Bench team—who will be the suppliers? We do not know who they are. That is an issue, but the main issue is that we have to be able to understand the tariffs. I do not understand the tariffs. I have been with the same supplier since I signed up many, many years ago. I buy my gas and electricity from British Gas, because it tells me that I am getting the best deal. Every time British Gas changes the tariff, it tells me what the tariff is and assures me that, because I am a loyal customer, I am on the bottom deal. I have never checked: I believe British Gas and I accept what it says, because basically I cannot be bothered to have a look. However, at the end of the day, we have to resolve the issue by ensuring that the people who can be bothered have a chance to do that, if they are able. The collective switching arrangement that has been suggested by the Secretary of State is an extremely good idea—certainly the arrangement is extremely good for Cornwall, where everybody can take advice from a switching consortium, as is the arrangement taken up in Oldham only yesterday. Indeed, the same thing can take place right across the country.
If I remember rightly, many years ago we had things called co-ops. We used to buy from the co-operative, which had itself made purchases, with discounts given through the system. I remember that my mother’s divvy number was No. 50, and we got a divvy every year from the savings that the co-op had achieved by buying in bulk and selling to the general public.
In the time I have left, I would like to talk about the real way to save money on electricity: by using less. If people use less, they obviously pay less. I would like to mention a scheme from my constituency of Burnley, where well over 15,000 properties got solid-wall insulation from outside cladding. It was done in co-operation with the Government, British Gas and the registered social landlord that owned the properties, a company called Calico. I took great notice of what happened—it was the biggest scheme in the UK, I was told—and I have since followed up and visited quite a number of people who had their properties done. I said to them, “Apart from the house looking a lot better than before—you’ve had the outside cladding done, your roof spaces all clad and all the new boilers fitted—can you tell me whether you have had a substantial change in your electricity bill?” The first gentleman I spoke to said to me, “The house is now so warm that I’ve persuaded my wife to turn the thermostat down, which in itself is a major achievement. I had my loft space insulated and my wife volunteered to turn down the thermostat, because it was now too warm to wear the extra jumper that she was wearing.”
When I asked people, “So have you found that by turning your thermostat down you have seen a major saving?” the answer every time was “Yes, and a substantial saving.” In one case, the gentleman had taken a note of the savings he had made, which were approaching 30%. No matter what tariff someone is on, no matter where they look for discounts and no matter what allowances are made for certain people, they will never, ever be able to get a 30% discount. The Government could not fund a 30% discount, the companies supplying the electricity could not give a discount of 30% and the tariff changes will never give a 30% discount. I believe that the way forward and the way to save money is to spend money on cavity-wall insulation—the outside stuff: I am not keen on filling the cavity with insulation, because that creates damp—plus everything that goes inside, plus the new high-efficiency boilers. That is why I welcome what happened in Burnley and why I welcome the new green deal, which will enable RSLs to provide such insulation on the properties they rent out, particularly in my constituency. I do not really accept that what is in today’s motion will change things.
Finally, on Ofgem, I have to say that I am definitely anti-quango. We have far too many quangos. The day we get rid of 90% of the quangos will be the day I can leave this place and say that I have really done something. However, we do not replace a quango that is inefficient with another quango. The way to do it is to get the existing quango to do its job. I hope that the Secretary of State will lean on Ofgem and make it do what it is paid to do and make it deliver to the general public what it is supposed to deliver. If Ofgem is not doing that, we should not change it, but get rid of the people in it who are not performing and replace them with people who will deliver what Ofgem is supposed to deliver.
Order. I am going to have to drop the limit to six minutes to get everybody in. [ Interruption. ] It is no use sighing with great disdain. If Members were a bit more careful and took up less time with interventions, this would not have happened. Let me remind Members: if you want to speak, try not to intervene; and if you do intervene, understand that you will end up at the bottom of the list.
When the Government announced that they were going to introduce electricity market reform and publish a White Paper and a Bill, I was pretty excited, because I thought it would be an opportunity to reform the way the electricity market works—or rather does not work—in delivering choice and providing for entry to the market and price stability, as a result of competition, and how it might do that in future on a low-carbon basis. In truth, however, we see from the electricity market reform Bill that is coming forward that there is no reform of the electricity market. In fact, the Bill that is coming our way ought to be called the “Additions and wheezes to try to make the existing market work rather better, particularly as it refers to lower-carbon energy” Bill, because that is in practice what is happening—that is what is before us at the moment. The Secretary of State appears to be happy to go along with that, not only in not reforming the electricity market at all, but by relying on a wonky grasp of history to reject alternatives ways that the market might work to secure better competition, a better level of entry and an end to the vertical integration that has plagued the market over recent years.
The pool has been mentioned this afternoon, but the pool as was—up to 2000, when it was abolished—was in fact never a full pool. Something like 90% of bilateral trades were allowed to escape the consequences of the pool, and for most of its time it had only two generators—and sometimes three—for the wholesale end of the market. Circumstances are fundamentally different today, inasmuch as one thing has remained constant. Most trades escape the day-ahead market and are done bilaterally—and completely non-transparently, in defiance, essentially, of what the market was supposed to do—and those who generate the power have an overwhelming stranglehold on the retail market. The market is vertically integrated to the extent that an awful lot of deals take place not between people, but within a company.
Consequently, the market simply does not work; it does not keep bills down, get new entrants in and work properly for consumers. The idea of a modern pool therefore seems essential to moving the market forward. A pooling arrangement would separate who sells into the market from who buys out of it. Such a system, as put forward by the Opposition as part of their proposals for real electricity market reform, can on the basis of a low-carbon and a high-carbon pool ensure a proper market for those low-carbon generators that are independent of the vertical integration that goes on elsewhere.
What I find truly dispiriting is that the electricity market reforms proposals as they stand will end any obligation to purchase any power from low-carbon and renewable generators in 2017. As a result, vertical integration is likely to proceed apace into the areas of some independent entry among low-carbon generation providers. With the ending of the renewable obligation in 2017 goes the ending of any power purchase agreements, which have given people certainty that they might be able to sell the power they generate on a low-carbon basis into the market. Surprise, surprise, the only people who will be likely to offer anything like a power purchase agreement once the renewable obligation has gone will be the very companies that are integrated into the market at the moment. Therefore, the prospect before us is of further vertical integration of the market as so-called electricity market reform proceeds.
We have to break that cycle. Over and above the half-hour settlements, the only way we can do so within the central trading arrangements in the market is to ensure that all trades are conducted within a pool system and are completely transparent and completely contestable both ways—low carbon or high carbon. That system would make eminent and straightforward common sense given the current failure of the electricity market.
If we do not address this problem in our reforms, we will live to regret it, because we will not have given ourselves the opportunity to introduce a key instrument that can bring about price discovery and stability and competition in the market. If that is what we want, we will be sorely disappointed as the market will subsequently fail to protect both the consumer and routes for new entrants to make their way into the market and to provide greater choice for the future. I urge Members to take careful note of the proposals both for that reason and because we want a stable market for the future which provides low-carbon energy.
I would suggest that fuel poverty and energy prices are apolitical, cross-party issues. These matters greatly affect the residents of Northumberland whom I and my colleague on the Opposition Benches, Ian Lavery, represent. Successive Governments have, to their credit, tried to address the problems. I do not come here to criticise the previous Government. As I have made clear to the shadow Secretary of State, Caroline Flint, there is much that could be said on that, but I am more interested in how we should proceed.
I wholeheartedly welcome the current Government’s decision to address the issues we face robustly and properly. It is good that we are seeking greater transparency and competition, and greater opportunity for people to have cheaper energy. Much of this debate has focused on electricity, of course, as it is the primary source of power, but I want to talk, too, about heating oil, liquefied petroleum gas, biomass and shale gas.
I support this Government’s efforts to explore shale gas provision through the Department for Environment, Food and Rural Affairs as well as the Department of Energy and Climate Change, and to try to make the most of the fact that we have so much potential shale gas power. It has transformed the energy market in the United States of America. If we do not push forward with this, we will have to face up to the consequences. We must proceed in an environmentally sound way, of course, but we should be pursuing the shale gas option.
I listened very carefully to the shadow Secretary of State’s weighty and lengthy speech. I must point out, however, that it is undoubtedly the case that the reduction in tariffs now being sought was most certainly not sought by the Leader of the Opposition when he was Labour Energy Secretary. He could have legislated for Ofgem to act, as the current Government are now doing.
The motion talks about those aged 75 and over, which I welcome, but we are addressing these issues as they impact on everybody, not just the over-75s. In the main energy market, it is true that there used to be 14 major competitor companies and there are now just six. The heating oil market is important in Northumberland, and there used to be 17 different providers in the Northumberland area, but due to the way the market was—supposedly—being run by the previous Labour Secretary of State, they were amalgamated and the amount of competition rapidly reduced. Similarly, there is now a single provider of LPG in my area and to the west of the region; there is no competition whatever. This market is manifestly broken, therefore, and I welcome the action that has been taken.
Dr Whitehead is clearly very learned in respect of the issues under discussion. He talked about a modern version of the pool—that sounds like something somebody would propose for planning permission—but that was scrapped in 2000, and neither was it in the 2010 Labour party manifesto. [Interruption.] I am not going to get into this topic now; I look forward to hearing evidence to the contrary in the winding-up speeches—when it will, perhaps, be pointed out to me exactly where in Labour’s 2010 manifesto is the proposal to establish the brave, modern pool features.
I have one particular criticism of the policy of the current Government, however. It is to do with the provision of biomass, whether by way of companies or households. I should declare an interest in that there is a company called EGGER in my constituency, which employs more than 400 people, and it is materially affected—as are vast numbers of other people—by the fact that the state continues to subsidise domestic purchase of biomass so that those who wish to purchase timber and other core products are priced out of the market. This is a cross-party issue which I and others have raised with the various relevant Ministers and Secretaries of State, but we must address the fact that energy is currently costing more because we are subsidising it, and that subsidy could be got rid of. Renewables obligation certificates could be reformed so that imported timber is subject to a subsidy, but domestic timber is not. That would save taxpayers’ money. It would allow a level playing field for the use of the core product and it would allow businesses to prosper and move forward in the right way.
I will reject the motion, therefore, as it is manifestly wrong, and I will support the Government.
In order to save time, and to help those on the Government Benches who might be tempted to intervene on me, let me say that I will be making the same kind of speech that I have made for the past six or seven years, although progress has been nothing like I would have liked. However, I support the motion, of course, as its proposals are radical, relevant and realistic.
I urge the House to look at the situation we now face. I found it chilling to read in this morning’s Order Paper an early-day motion entitled, “Excess Winter Deaths.” It points out that there are
“30,000 excess winter deaths each year in the UK”.
That alone is a powerful argument for saying we should address the real problems. The early-day motion also says that the cost
“has been estimated by the Chief Medical Officer at £890 million per year in England alone”.
That is another price we are paying for the current situation.
This is a real problem for my constituents. Of course we can make great statements about the markets and talk about who did and did not intervene, but the reality is that we find ourselves in the current situation because we have left so much to the markets over the years and because the regulators either do not have the power to act or do not seek to use the power. I want, as I did when we had a Labour Government, to change that.
What is the reality of the situation? In a recent poll, 90% of people surveyed claim that they are concerned about their energy bills, and continued rocketing prices mean that this is now the top household worry. Even worse is to come, as it is predicted that half the population will be in fuel poverty by the end of this year. That is a very sobering figure. About 2 million more people are experiencing fuel poverty than when I first secured a debate in Westminster Hall about six years ago. Eight years ago, the average household spent £522 a year on electricity and gas, but the figure has now risen to a staggering £1,232. That is an average increase of 140%, whereas average household income increased by a mere 20% during the same period.
People on low incomes, single parents, people with disabilities and many others are terribly worried about what is going to happen this winter. I had hoped that, arising from our debate, we might be able to offer more hope than I have been convinced has been offered so far. The price of no other commodity has risen so steeply as that of energy. Consumers have been hit with huge energy price increases and they are powerless to do anything other than suffer in fuel poverty in increasing numbers, which is wholly unacceptable. New research has shown that half the population will be in fuel poverty by the end of this year. I know that I am citing statistics, but I plead with the House to remember that this is all about individuals and families; it is about ordinary households in our constituencies. On average, 37% of consumers are spending more than 10% of their income on gas and electricity bills, and the figure will rise by a further 13% by the end of 2012, leaving 30 million people falling into the defined category.
So there is a problem, and it does call for transparency, for improving competition and for driving down energy bills. The average energy bill doubled in the past seven years, and 2 million more people are experiencing fuel poverty. I support, profoundly, everything the Labour Government did to give heating grants and so on, particularly given the problems faced by pensioners. However, I do not believe that it is the role of government to look at the profits that the energy companies are making and say, “We should be subsidising them.”
That is the reality of the situation we are in. What can we do about it? We have to act and we must have real regulation. In the limited time left available, I have to say that I do not believe that Ofgem has the confidence of consumers to the extent that I would want to trust it with the role that it has. There ought to be a new role for people who are given real teeth to deal with an absolutely scandalous problem, which is predictable and predicted. People should not be suffering this winter. We can avoid that and we can do so through a rational approach to energy policy.
I want to discuss the part of the motion that talks about
“allowing new businesses to enter the market”.
I would have used the word “encouraging” rather than “allowing”, but I support that section and the Government’s efforts in that direction. Last week, in Seoul, South Korea, a deal was signed by the Minister of State, Foreign and Commonwealth Office, my right hon. Friend Mr Swire, the British ambassador to South Korea, and the chief executives of Korean South-East Power, Daewoo Securities and Eco-Frontier. The deal was signed with the UK company MGT Power to build a new 300 MW biomass power station at Teesport in my constituency, at an estimated cost of £500 million. The deal is being announced today, and the whole House should welcome the investment by ambitious Korean companies in the UK energy sector.
Last week, the House debated the Infrastructure (Financial Assistance) Bill. The support it provides will, no doubt, aid investment by new players, and it represents another move by this Government to encourage new projects. The measures were rightly supported by the whole House.
I thank the Minister for that approbation. Such investment is all good news, but to encourage new investors, especially green investors, we need clarity of policy, simplicity of policy and, above all, certainty of policy over the long term. Any arrangements made must be grandfathered over the period of a project. I wish to say a bit more about green investment, because one of the key features for investors is political risk. Gyrations in policy have seriously damaged the nascent biofuels industry in the past decade, and we must remember that policy can emerge independently in both Westminster and Brussels. Without giving too much encouragement to hon. Members sitting behind me, I believe that we must sometimes stop the change and the conflicting policies emerging from over the water—we are dealing with one such policy on biofuels right now.
The hon. Gentleman mentions Brussels, and he, like me, is a strong supporter of carbon capture and storage technology; I not sure whether he was about to make some remarks about it. Given what he just said, does he share my concern about today’s suggestion by his Lib Dem MEP colleague Chris Davies that the NER300 money that was supposed to be available for potential UK CCS projects is now not going to be available? Chris Davies said:
“Carbon capture and storage blocked. UK to lose out on €600 million” and that this
“is a major defeat for Lib Dems”.
Does the hon. Gentleman share my concern about that? Does he want the Minister to respond to it?
Not dealing with long-term political risk will make potential investors simply go away. Alternatively, they will charge a huge risk premium, which may in turn make many schemes not viable. The recent whispering campaign against this Government’s green policies from some quarters has been particularly unhelpful.
I agree with what has been said about the problem of the market between generators and suppliers, and between the sellers and the customers. I spent the first five years of my careers in the Yorkshire Electricity Board, which was a monopoly supplier to that part of the world and was buying from a monopoly producer, the Central Electricity Generating Board. So I am well aware of how inefficient such markets are. Despite our criticisms today, I think that we are in a lot better place now than we were at that time.
Encouraging new investment in energy is good for UK business and good for growth. I know that because I see it in my constituency, where, as we well as the project that has been mentioned, Ensus runs the largest bioethanol plant in Europe, which has recently restarted; Northumbrian Water has invested £60 million in an anaerobic digestion power generation unit; and EDF is, right now, building 27 giant wind turbines just off Redcar beach.
One part of the Teesside carbon capture and storage project is for International Power to bring its mothballed 1.8 GW gas-fired power station at Wilton back online, and I hope that the current bid in the UK will be successful. The recent Ensus 12-month shutdown was salutary. I made a ten-minute rule Bill speech on bioethanol in this House some time ago, highlighting four different areas of Government policy that were causing problems for that industry. I am delighted that the plant has restarted, but as I said, the recent news from Brussels about indirect land use legislation and proposed new tariffs is extremely unhelpful when people have put £300 million into a long-term investment.
All such projects are for the long term; nobody makes a fast buck on these investments. So the Government must be focused on the long term—far longer than a single Parliament. I am confident that Ministers understand that, that they will put long-term legal, financial and regulatory measures in place, and that they know how important energy investment is to economic growth. So I will be supporting those Ministers in the Lobby today.
I am extremely grateful to be called to speak in the debate, Mr Deputy Speaker.
I do not take my energy from one of the big six, so in a sense, for the first time in my life, I am not one of the 99% but one of the 1%, but I recognise that most of us do not even know which of the big six we are with, because someone else in the household deals with that, and many of us do not look regularly to switch. It was interesting to hear the Minister so keen talk about switching, as though it were the be-all and end-all of energy reform, but we all know that a range of measures is needed.
I intend to make three brief but, I hope, helpful points. We need a short, a medium and a long-term approach. Looking at the short term, where do we stand today? Many of our constituents face a real cost of living crisis: their bills are going up and their wages are stagnant—if they have a job, that is. Despite the recent changes in the economy, unemployment continues to be persistently high. Young people have to pay for energy, but youth unemployment is high. Times are tough for everyone, whatever their economic position—commuters’ rail fares are going up, water bills are increasing, and the cost of living generally is quite high—and energy must be viewed in that context. There is a specific reason why the current energy price increases are so egregious: it is a matter not just of the figures, but of the economic backdrop.
Growth is flatlining. Since the review two years ago, the economy has shrunk by 0.4%. One of the best ways to deal with the problem is, of course, to get economic growth going and get a rise in real-terms living wages for people, but that is not happening at the moment. Against that backdrop, it becomes all the more important that we, this House, convince the energy companies that we are serious when we say we want change and we want consumers—our constituents—to benefit in the same way as the companies have benefited. That is why the botched announcement by the Prime Minister last week was so serious: it was an example not just of the shambles and U-turns that seem to be happening, but of the Prime Minister not understanding his power to put pressure on the energy companies.
A year ago, when the state of the market was similar—prices were going up but not coming down sharply enough—the Government clearly believed that by putting indirect pressure on the energy companies, they could get change. The former Secretary of State for Energy and Climate Change, Chris Huhne, gathered the big six together for a Downing street gaggle. That resulted in a series of announcements, but a year down the line, the problems have only got worse. The short term is important.
In the medium term, we need market reform. Energy is an incredibly powerful resource. I do not mean only the energy that allows us to manufacture or to heat our homes. I mean the word in the purest political sense, which includes big and powerful entities. It is not for no reason that in recent times we have fought and drawn ideological lines about where energy companies should sit and where the means of manufacture should reside politically.
We need to get suppliers to pool power generation. We need Ofgem—or its successor body, if my party wins the next general election—to achieve real change in the industry. It must carry a stick as well as a carrot and be able to say, “We need proper market reform.” We also need a debate about the social expectations we have of energy companies. I feel uncomfortable about the Government directly subsidising the fulfilment of many of the social responsibilities to which the energy companies, which have had a very good run over the past 20 to 25 years, should be responding themselves. It cannot be all about switching, although I welcome the Labour party’s “switch together” initiative. Fair markets are the key to customer buy-in, which is essential if the energy companies are to have a sustainable business model. Doing the right thing is therefore good business sense.
Right hon. and hon. Members know the long-term challenges. Often we do not get caught up in talking about them and instead focus on the short-term politics, but there is a clear and consistent direction of travel: climate change and our domestic energy security require us to make significant changes to our markets. Building on the previous Government’s success, this Government have introduced a range of initiatives, including energy efficiency measures and the green deal. Although we have expressed our concerns about the green deal, we welcome the Government’s direction of travel.
Most important of all, though, is how we achieve our aims while also achieving affordability. There is only one answer: to make sure that energy markets and energy reform are such that there is customer buy-in and confidence, measured by the bottom line on their bills. Switching alone is not sufficient to achieve that. That is why I believe radical action is needed and why I welcome radical action being taken by those on my party’s Front Bench.
It is a pleasure to follow Gavin Shuker, who spoke from the perspective of the consumer. I, too, will focus on that viewpoint. I welcome the fact that the Government are to use the Energy Bill to get consumers the best deal on their energy. Today, I want to discuss some of the specific measures.
Many hon. Members have talked about simpler tariffs. In 2011, Ofgem proposed that each supplier be required to offer one standard tariff for each payment type. Martin Lewis of MoneySavingExpert.com conducted a survey of 3,500 people on what they wanted. They were given three choices: lots of choice—there are already hundreds of different tariffs and unravelling them is an extremely complicated process—a few simple tariffs, or one flat rate per company. In the responses, 18% voted for lots of choice, 37% for a few simple tariffs and 46% for one flat rate per company. That shows clearly that the Prime Minister was on to something. Consumers do not want to be diddled—[ Interruption. ] The shadow Secretary of State, Caroline Flint, claims that we are out of touch, but I think the evidence shows that that is nonsense.
A number of people have asked why fewer people are looking to switch. One of the answers is welcome—it is a result of reducing the use of the aggressive and misleading door-to-door sales techniques that used to go on. We are thankful for that. I have been championing the cause, which is supported by 234 cross-party MPs, of financial education. Working out which is the best deal is a complicated process, so if we can equip the next generation of consumers and make them savvy, financially educated people, more of them will take advantage of the ability to do that.
Another reason is that people have had their fingers burnt. What tends to happen is that a customer is sat on one tariff; then, their supplier hikes up the price, which makes them proactive in looking to change supplier. Suppliers that have not already hiked up their prices increase their sales activity, tempting the customer to switch, but a few days later the customer discovers that the new supplier is raising its prices, probably by far more than the old supplier had.
There were welcome moves to put annual energy usage on customers’ bills, giving the information they needed to make comparisons more easily, but now we are all being encouraged to take e-bills. A lot of customers simply cannot remember their password or choose not to access their account, so fewer are getting the information now that it no longer comes on the traditional paper bills sent through the post. Which? carried out a survey—I think the shadow Secretary of State mentioned it—on whether consumers were given accurate information and found that 44% were not. People cannot rely on suppliers to give them the promised price. With Martin Lewis, I have been calling for measures to ensure that people who transfer get that tariff for at least six months, so that they avoid that “sudden price hike three days later” problem. In the current market conditions, people would be sensible to seek a fixed tariff.
There have been some welcome moves. Last December, 4 million of the most vulnerable energy consumers were written to so that they could be given advice. Savvy financial consumers and those who have internet access can find the information, but not all people can do that. The big energy saving week highlighted the issue in the media, and the home heat helpline has helped a considerable number of people by providing independent advice.
I am keen to extend the use of smart meters, so that people can see the tangible cost of their energy usage. One of my colleagues has just moved into a new flat, where there is a pay-as-you-go meter. Since she has had to physically charge up her key with £20 each time, she has made an effort to turn off any electrical appliance that is not needed. That is a good thing, but it also highlights a problem, because a lot of the most vulnerable consumers are on that extremely expensive tariff. We must ensure that vulnerable consumers have access to the cheapest tariffs.
An apt point.
Businesses that go into administration are in a similar position to vulnerable consumers. Although the law says that businesses that have gone into administration should continue to be supplied, the suppliers will crank up the tariff to the highest level available, further endangering the prospects of that company in financial distress. That is something that I have been working on with R3, the insolvency practitioner representatives.
There is confusion about what is the lowest tariff. We all understand the standard rate charge and unit price, but all consumers are different. Some may opt to pay a premium for a green tariff, for example, or for the different forms of payment. We will need to take that into consideration, but there are examples of how the policy could work. With my mobile phone contract, for example, I regularly get texts from my mobile phone company mid-contract, advising me that I could be on a better tariff. By a simple telephone call I am able to change to a better deal without having to extend my contract.
Many speakers have mentioned breaking up the dominance of the big six. I welcome moves to allow more liquidity for independent suppliers and potential new entrants. The hon. Member for Luton South will then not be one of the 1%; he will become part of the majority. We must accept that over the next decade higher global oil and gas prices are to be expected, so we need to get tariffs right not only now, but in the medium and long term. We do not necessarily control our own destiny. We need to control more of our energy supply and have greater energy security. We as a nation should be exporting energy to other countries, the profits of which we can use to subsidise our own consumers.
In conclusion, I echo the words of my hon. Friend Guy Opperman who said that energy market reform is a step in the right direction. We must show collectively that we are on the side of the consumer. The market is complex and there are vulnerable people who have a vested interest in our getting it right. We must press on and do so.
This debate provides a great opportunity to discuss the Government’s energy policy, which is in a state of total disarray. The Secretary of State says one thing, the Minister says another, the Department says another, and they are all trumped by an out-of-touch Prime Minister.
Let us be honest. The statement made by the Prime Minister last week at Question Time was ridiculous. It probably was not a statement, but it could be described as a reactionary outburst. I enjoyed the urgent question, which was replied to by the Minister of State, Department of Energy and Climate Change, Mr Hayes, a man for whom I have tremendous respect. He valiantly and gallantly supported the Prime Minister, defending the indefensible. It was something that every Member of Parliament would have been pleased to experience. That was a very difficult task.
We are determined to decarbonise our energy sector. We set target after target. We do not have a cohesive energy policy, we do not have a cohesive strategy, yet we set targets in line with commitments that we are not sure we can keep. The Department of Energy and Climate Change is at its lowest point in my time here. There is uncertainty out there among large and small businesses, leading to investment unrest. They are not sure whether the energy plans proposed by the Government will change from one day to the next. There is no evidence-based financial structure to the policies being pursued by the Government. That creates mayhem for businesses that wish to invest in all types of energy in this country, mainly renewables and nuclear. DECC is in meltdown. It has some grand ideas, but the problem is that those seem to be hugely curtailed by the Treasury.
As has been suggested today, there is a huge problem for the coalition partners, who seem to be at odds about all sorts of policies. They are at each other’s throats about energy policy, whether on wind turbines, nuclear or subsidies. We live in a perverse world, with tax cuts for the rich and fuel poverty for the poor. This winter people will have to choose whether to eat or to heat, because they cannot afford to keep themselves warm and to keep themselves fed. There are 6.6 million people who cannot afford to heat their homes this year, which will put them at severe risk of health problems.
At the same time as energy companies are inflicting massive hikes on their customers, they are recording massive profits for their shareholders. British Gas increased its prices by 18%, EDF by 15.4%, E.ON by 18.1%, SSE by 18%, Scottish Power by 19% and npower by 15.7%. That is modern day Britain, divided into those who have and those who have not.
In the time available, I shall focus on the problems of poverty. Research shows that a quarter of all households in England and Wales—5.7 million households—are now in fuel poverty. The proportion of homes in fuel poverty has increased from 18% to 25%. The Hills fuel poverty review warned that unless Ministers change course, 200,000 more people are set to be in fuel poverty in the next four years, and millions of families will be pushed deeper into fuel poverty. There are more frightening statistics. The typical dual fuel bill is up by £200 since the last election to £1,310. More people—up by 25% to 850,000—are in debt to their electricity suppliers. The figure for gas is in the region of 700,000, a rise of 20%. People cannot afford to pay for their energy and are in debt to both the gas and the electricity companies.
I had planned to say much more, but the time allocated to us has been cut substantially, as is normally the case when I get up to speak. There are many topics that we could have discussed. The green deal was touched on. Some of the comments from the Government Benches were wholly incorrect and should be put right on the record. We could have discussed the success of Warm Front, the carbon price floor and the emissions performance standard. Another critical issue is the strike price of the contracts for difference. All these are important, but I wanted to focus on fuel poverty versus the excessive profits being made by the energy companies. We are living in a multi-tier Britain, which we need to highlight.
Thank you, Mr Deputy Speaker, for allowing me to speak in the debate. I endorse many of the comments of my hon. Friend Justin Tomlinson about the tariffs, the need for competition and the need for people to understand those tariffs. The only way the market will work is by ensuring that there is proper competition and that people are able to switch easily from one company to another, without those companies having tied the consumer in.
The policies of successive Governments, both the Labour Government and this coalition Government, are driving up the price of energy. There must be competition between the companies to keep the overall level down, but in the end consumers will pay more for their gas and electricity. Our green policies are good, but they cost money and they will cost the consumer money. We must be realistic about how we deal with that. I have every sympathy for the fuel poor but the addition of a green tariff is bound to push up energy prices. We need greater competition and we must look after the poorest in society.
I will now make some specific points. Those who can access pipeline gas to heat their homes, however much the price might have gone up, are actually—dare I say it?—the most fortunate, because those who have oil heating are paying even more. Not only are they paying £1,400 for 2,000 litres of oil, which it does not take the average household long to get through, but they might live in a house that is listed or has traditional windows, which they cannot replace with double glazing, or solid walls, which are very difficult to insulate.
I congratulate the Minister on the money he has put forward to help insulate such properties in rural areas, but I do not believe it is enough. As I said at the start of my remarks, the whole idea is that the green deal is essential because energy prices will continue to rise, but the trouble is that many of my constituents cannot necessarily get the green deal because the figures do not work with the cost of insulating solid walls, for example. Ultimately, those consumers in my constituency and across the country will end up paying more for the insulation than they will save on their energy bills, and that is something we need to deal with.
We talk about competition in the gas and electricity markets, but where is the competition in the heating oil industry? There is virtually none. It is almost a cartel—I can say that in the House—so there is no competition. Two years ago we saw prices almost double when there was snow on the ground. Some of the worst snow in the United Kingdom was in Northern Ireland, but the prices there did not rise as much as they did on most of the rest of the mainland for the simple reason that there is greater competition there because more people have oil-type heating.
The previous Minister referred the oil companies to the Office of Fair Trading. I want that to be pursued, because consumers who cannot get gas must get either liquefied petroleum gas or oil, and LPG is usually dearer than oil and covers the same spectrum of prices. That is absolutely key. I want to see exactly what we will do to help those consumers in my constituency and many other rural constituencies. It is not just rural constituencies; there are old cottages in many town centres across the country and they have to be dealt with. I want to see real progress in that regard.
My final points are on energy security and what we will do in future. It is no good simply saying that we have shale gas; let us actually try to exploit it. Look at what has happened to the gas market in America—I am not suggesting for one moment that we have the same amounts of shale gas—where the price has been reduced by about two thirds. We also have a lot of coal, believe it or not. It is not fashionable to burn coal, but clean coal could be quite effective, and gasification could be another great use of that resource.
Meanwhile, will we rely on gas from the Russians? I spent 10 years in the European Parliament and know that various European countries, especially Poland, do not like the idea of the Russians being able to turn off the gas and hold Europe to ransom. We have the whole mix of energy, but we must face up to the fact that—it is no good the Labour party saying otherwise, because they pursued the same type of policy, which is to drive up energy prices—if we are going to drive up prices, we have to make sure that the poorest in society can get help and that those who are not on mains grid gas have particular help because of the high cost of their bills.
With the economy and real wages having shrunk over the past two years, no issue is more important for the living standards of my constituents, and indeed those of all right hon. and hon. Members, than electricity and gas prices. As my hon. Friend Ian Lavery points out, average fuel bills have risen as high as £1,310 a year over the past five years. Prices over the past two years alone have risen by £200, high gas prices could, without adequate action, add £175 to bills by 2020, and wholesale gas costs added £290 to average energy bills between 2004 and 2010. Under the Government’s present policies, the number of tariffs stands at 430; it has risen by 70 in the past year. We have soaring fuel poverty; as many as 3 million elderly people across the country are now affected by it. There are 6,400 over-75s in my constituency alone who would benefit right now from a change of Government and a change of policy to ensure that they are on the lowest possible tariff and have a £200 saving on their electricity and gas bills this year.
The Government have shown in the debate that they simply do not get that a more comprehensive reform of the electricity market is required. They simple do not understand that 54% of the average electricity bill is affected by wholesale energy costs. Our constituents ask, “Why is it that when wholesale energy costs fall our bills do not fall, but when they rise our bills immediately go up?” There is something broken in the electricity supply market. The Government, in their remarks today, simply show no inclination to tackle it.
Sadly, the Government’s policy is marked by shambles and confusion. It seems that the Government are now suffering from the reverse Midas touch; they cannot produce a Budget that stands scrutiny for 24 hours, they cannot run our trains properly and they have made U-turns on forests and on badgers. The joke is that the ghost of John Major is now stalking the Government, and I do not mean the amiable, spectral presence of the Chief Whip, which graced the Chamber a few moments ago. This policy, and the way the Prime Minister mishandled it last week, shows that this is a Government in a state of shambles and breakdown.
Sadly, I must also strike a discordant note with Mr Weir, because the Scottish Government are unfortunately letting down my constituents on the issue of fuel poverty. Dr Brenda Boardman, who did so much to coin and develop the concept of fuel poverty, described the Scottish Government’s policies as
“feeble, inadequate and namby-pamby” and said that they are now putting 800,000 Scots in record fuel poverty. That is at the same time they are cutting the budget for fuel poverty, which is an area devolved to Holyrood. It is small wonder that Dr Boardman accused the Scottish Government of failing to back up their weasel words with proper actions—something we have seen a lot of in the past few days from the First Minister and Deputy First Minister.
We are also seeing confusion in this Government’s policy. The industry is losing confidence in the Government’s ability to commit to green investment. It is small wonder that we have seen little improvement in our energy mix, as the Chancellor wages an ideological crusade against green investment and make outrageous references to the green Taliban. He refuses to capitalise the green investment bank properly and his failure on growth and debt means that the bank will not have proper borrowing powers by 2015. We see shambles, confusion and a disjointed Government.
At the same time, our market is not being reformed. The Institute for Public Policy Research recently produced evidence showing that the least efficient company spends twice as much per customer on its operations as the most efficient company. Some people pay £330 a year more for their electricity and gas than their next-door neighbours, as many as 5 million people across the country are being overcharged and the number of switchers is at an historic low of 15% a year, the lowest since records began in 2003. If the market worked at the moment, competition would ensure convergence on operational costs, but that is not happening at all. In fact, those costs have risen, not fallen, in the past three years, as the IPPR has shown.
We need a radical change of course. We need an arrangement that brings in proper pooling, a new regulator and a much stronger link between the wholesale gas and electricity market and the prices paid by domestic consumers.
I want to draw attention to a couple of areas where I agree with Opposition Front Benchers. First, it is clear that the best way of making progress is better insulation. The green deal is fundamental to energy policy, and Ministers need to be accountable for making progress with it. It is also true that we need more transparency in the energy market. Mr Bain noted that there are 430 separate tariffs; that is unacceptable and it needs to be fixed. I understand that it will be fixed by next summer, but I am disappointed that it is taking so long. I also agree with Opposition Members that the market needs new entrants and that the process of new businesses coming in has been too slow.
Where I disagree with Opposition Members is on their lazy assumption that there is a cartel in operation—leaving aside the fact that that is a criminal offence, and that if they have evidence of it they should take it to the police. I intervened on the Secretary of State to point out that in the gas market we are 26th cheapest out of 27 in the European Union. If that is a cartel, it is not a very effective one. The reason we are so cheap has nothing to do with tax. In France and Germany, gas prices are 60% more expensive than ours, but that is a market effect difference not a tax difference. It would be good if we addressed some of that. On electricity, the position is less clear; our prices are not so cheap. Frankly, that has a lot to do with the decisions that we make in this House and the tariffs we impose on the market.
The gas market and the electricity market are two separate markets. We sometimes talk about them as though they are the same, but they are not. There is an issue with off-grid gas, as we have heard from several Members on both sides of the House. In the case of on-grid gas—Members can, by all means, intervene on me if they disagree, but we have had a three-hour debate that has been broadly fact-free—the evidence is that our prices are not more expensive than anywhere else. Other
Members have talked about shale gas, and I will not go any further on that, other than to say that this morning, on the Henry hub, US gas prices were one quarter of our gas prices in the European balancing point. That will make a massive difference to the competitiveness of the US economy in a variety of ways. Even if we do not, or cannot, exploit our shale gas to that extent, we need to start to think about the differences in economics that will arise with America.
The three main policy areas in the electricity market are carbon and decarbonisation, which we must achieve, cost, and security. Interestingly, we sometimes assume that we are behind as regards carbon. It is true that we are behind France—with massive amounts of cheap nuclear energy, we use more carbon per head than the French by a long way—but we use a lot less per head than Germany, despite the fact that Germany has four times as much renewable energy as we have because it continues to burn coal to a massive degree. That is what we need to address in terms of our decarbonisation agenda. The previous Government signed us up for renewables targets that were extremely onerous and will have only a minor impact on the amount of carbon that we use. The country that has reduced its carbon by the most over the past year or so is the United States as it has replaced coal with shale gas.
The big issue is security. Ofgem, which we are giving one of its routine kickings, has said that we will have about 4% surplus electricity capacity by 2015-16. We seem to be in a slow-motion car crash with electricity supply. The likelihood of there not being power cuts by the end of this decade is getting increasingly low. When the House starts to debate that issue, we will begin to make progress on what will really be important. One of the mechanisms by which we can avert this situation is imports. I gently say to the Minister that imports now represent about 10% of electricity in this country. That is a massive policy failure. French nuclear electricity and Dutch electricity is coming to this country, and there are no jobs in that.
I do not have much time to talk about costs. My hon. Friend Neil Parish made several good points about the somewhat hypocritical tone that this House can have in imposing costs that create fuel poverty and then beating up people we perceive as being responsible for not somehow wishing those costs away. It is right that we—
Order. We have 15 minutes left and three more speakers. I call Jamie Reed.
Thank you, Mr Deputy Speaker.
Energy costs are soaring and fuel poverty is on the rise. Energy bills are now one of the single largest bills faced by any family. Away from the numbers, what does this mean? It means that in constituencies such as mine across this country, people are choosing to sit in the dark, to sit in the cold, and to fear the winter. It is no exaggeration to state that the choice between heating and eating is a now a reality. At one time, we would have dismissed such a claim as hyperbole, but Members in all parts of the House know that it is true. The consequence of higher energy bills, and the across-the-board inflation that they bring to other goods and services such as food prices, is, frankly, that people will die. That is the stark reality of the scale of the challenge facing us as a country as we set about reforming electricity markets.
I cannot speak in this House about energy policy without mentioning the enormous contribution of the late and much missed Malcolm Wicks. He was a tireless campaigner on fuel poverty and a superb Energy Minister, foolishly removed. In 2005, Malcolm brought me, as a new Member of Parliament, into the No. 10 policy unit to help to create the new nuclear policy for this country, and I will always be grateful to him for that. As a national politician, he made a huge difference to the lives of my constituents.
From the outset, and squarely within the national interest, but also in the best interests of my constituents, I offer the new Energy Minister, who is in his place, all the support he could possibly ask for, should he make the right decisions—but, more importantly, should he make them in a timely manner. The truth is that we are running out of time if we are serious about tackling fuel poverty, tackling security of supply—a looming crisis of incredible proportions that this House too readily ignores—and reducing our greenhouse gas emissions.
Wherever energy market reform ends up—I commend the motion in the name of the Leader of the Opposition—the truth that many of us in this House dare not whisper is that the days of cheap energy may well be over. For years, a deregulated market ensured moderately low prices that the consumer could ordinarily accept. Generating companies, which not only sweated their assets but failed to invest during the fat years, now face massive public policy concerns and—let us be clear—massive public policy responsibilities, and in many cases the market wants to reach for the easy options and the quick fixes. It is in this context that we should view fracking for shale gas. Charles Hendry was right this weekend to warn the Government against betting the farm on shale—it is short-sighted and idiotic to do so. There are no easy ways out of the situation we now find ourselves in, but there are solutions and I will focus on the nuclear industry and nuclear power production in general.
Unlike fossil fuels, nuclear energy is not subject to major price fluctuations. I could say an awful lot more about the benefits of the nuclear industry and nuclear power. Electricity market reform must deliver long-term price stability for consumers and businesses, and it must also ensure long-term revenue stability and predictable returns for investors. Only in this way will we ensure the investment that we need in our nuclear fleet and the investment necessary, in whatever generating form, for the ultimate benefit of our consumers and our society.
The Minister knows that we need new nuclear and that we need it quickly. He knows that over the next 15 years, barring lifetime extensions, we will be down to one operating nuclear station. The heavy lifting on support for nuclear generation has been done already over many years. The public support it, the need is clear and the demand is great, but we must accelerate delivery or else invite collapse. I urge the Government to pay close attention to the evidence given by Vincent de Rivas, the EDF chief executive officer, to the Energy and Climate Change Committee yesterday. He said:
“With investment going in and demand rising we must expect the unit price of electricity to increase over the coming decades.”
Given that we need that investment, and given that, without question, we need new nuclear, surely the question for Government is: how do we protect the most vulnerable from these rises? This requires a policy response from the Government; it cannot simply be left to the market.
The final investment decision in the first new nuclear reactor at Hinkley will be taken at the end of the year and it is now imperative that the Government do everything they can to assist EDF in making the right investment decision in our national interest. Mr de Rivas said yesterday:
“We are shovel ready. We are on the brink of delivering an infrastructure project similar in scale to the London Olympics. We are poised to deliver immense benefits in terms of jobs, skills and economic growth—locally and nationally.
But like all investors in capital intensive infrastructure projects we need to have a compelling business case. In this respect our final investment decision requires more progress to be made.”
We must please both the consumer and the industries and investors that are ready to help us.
On the vexed issue of subsidy for nuclear, I say to the Minister: do it. I am explicitly pro-subsidy for new nuclear generation, because the reality is that not a single electricity generation source is not subsidised in this country in one way or another. We can call it whatever we like, but the nuclear renaissance in the United Kingdom needs direct Government assistance and I will support any moves to do so.
Finally, will the Minister say how he will help me to progress new nuclear developments in my own constituency; how we can resolve the mineral rights issues that are affecting them; how we can speedily progress grid connection issues and plutonium re-use; and how we can effectively, assuredly and credibly take forward deep geological disposal with the right, credible partners? Time is of the essence and we have no time to lose.
I declare an interest as a Co-operative Member of Parliament. A year ago we stood here, had the same debate and heard the same stories. We heard that energy companies were always putting their prices up. This year we are back, but what has changed? I read this morning that, last year, 13 pensioners died every hour of cold-related diseases and illnesses. There are about 20 hon. Members present—the equivalent number of pensioners die every two hours.
I am fed up of hearing those on the Government Benches blame the Labour Government for everything. They play the blame game over and over again, yet tonight, in my constituency of Islwyn and in constituencies represented by Government Members, somebody will be wearing their coat to watch television, thinking about going to bed early and not putting an extra bar on their fire because they cannot afford it. That is the reality that they face. They look to this House—to us—to stand up to the energy companies.
I have received e-mails all week as a result of what the Prime Minister said last week. I am afraid that, again, he is offering false hope to all those people who are struggling. It is a crying shame that, when privatisation of the energy markets was first mooted, Members of this House, including Baroness Thatcher, talked grandly about rolling back the frontiers of the state. When she did so, I do not think she expected that one company—a monopoly—would be replaced by an oligopoly of six companies, or that the Government would stand back, without teeth.
I have heard Government Members say, “Oh, but we had the energy companies round to 10 Downing street and we told them in no uncertain terms that they have to help the most vulnerable in society.” After 18 individual investigations—by Ofgem, Committees of this House and the European Parliament—does anybody actually believe that the energy companies will listen? Their attitude will be just like that of the boy called into the headmaster’s study at the public school I never went to, who says, “Yes, sir, I promise I’ll never do it again,” and then, when he walks out the door, says, “Don’t worry about him; what’s he going to do to me? Absolutely nothing.”
Yes, that does sound like him.
There has to be a radical reform of our energy market. It is no good going on with only six companies buying in and selling energy. I have talked before about having a central energy supplier to buy energy at a fixed rate and then to sell it to whichever companies want to buy it, so that we can bring more people into the market.
We must talk in the here and now, and we have the draft Energy Bill. Co-operative and community energy programmes have raised massive concerns about the Bill, and I hope that the Government will listen to them. Which? has said that the Big Switch campaign was the best of its type, but there is still more that we need to do.
A constituent came to see me last Friday and produced a bill from SWALEC. I looked at it and could not understand it. A member of my staff who worked for SWALEC for a number of years looked at it, and he said he could not understand it. Other people looked at it, and they could not understand it. I have read in Which? that a chartered accountant has looked at his own energy bill and not been able to understand it. What chance do elderly people and the most vulnerable in our society have of switching when they cannot understand their bills? I spoke to my member of staff who had worked for SWALEC and said that I would have just offered it a £50 ex gratia payment to go away. That seems to be the way forward for the energy companies. When I looked at that bill, the most amazing thing that I saw was a £15 charge for being a low user. SWALEC was charging my constituent for using less energy. It is crazy.
We have heard that there are 400 tariffs, and the most basic economic argument that anybody could put to the energy companies is that people cannot buy luxury energy. If I go to Currys wanting to buy a television, I might buy one with an LCD, LED or plasma screen, or I might even want an old-fashioned box in my living room. The thing is, I have a choice, because some of them are better-quality products. There is no luxury gas or other energy. We can only use one type to heat our homes, and we have to remember that. People are being ripped off, and it is up to the Government to stand up for them.
If one is going to reform the energy market, it seems to make sense to configure that market according to one’s objectives. When the Secretary of State spoke earlier, it was extraordinary that he did not set out the clear objectives of the reconfigured energy market. I will set out mine.
The first objective is on carbon targets. We have our 2020 targets and our 2030 targets, and the Committee on Climate Change has been clear that we should look to set a target of 40 grams to 60 grams of carbon dioxide per kWh and move towards achieving our renewables targets. If we are to reconfigure the market, let us do it to achieve that objective.
The second objective is on fuel poverty. The price per unit of energy will rise, but fuel poverty must come down. That means that energy efficiency has to be an integral part of the reconfiguration of the market.
Security of supply is the third objective that I wish to put forward. We require a mix of energy from both within and outside the UK. We need both base load sources such as coal and nuclear and intermittent sources such as wind and hydro, as well as dual-purpose sources such as gas.
How do we go about configuring the market in that way? First, I want to hear the Government talking about standards—building standards and product standards. Why is the percentage of excess winter deaths lower in Finland than in the UK? That seems like madness when we compare the climates, unless we understand the importance of the role of building standards. That has to be part of a sensible reconfiguration of energy policy in this country, which cannot be achieved through encouragement and incentivisation alone. We need compulsion to ensure that those standards are driven throughout the market, which the Government have refused to address.
We need honesty. Unit prices for energy will rise, because world demand is rising with increased wealth in Asia, which is a good thing, and with increased global population, which is not such a good thing. That means that we have to structure the market to ensure that it is maximally efficient. Vertical integration allows a company such as Centrica to show obscene profits for its wholesale side, while making what the regulator considers to be “normal” profits in its retail arm of British Gas. Yes, increased liquidity in the forward supply market will help promote competition on the retail side, but it will not solve the abuse that vertical integration is allowing. By tackling that issue, retail unit prices will not rise by as much as they otherwise will—although if we are honest, we should say that they will still rise on a per unit basis.
Security of supply includes the investment of £200 billion over the next decade in our energy network and of £110 billion in our electricity infrastructure. That is to replace the 30% of generation that will go off stream by 2024. We need base load, yet today’s rumour is that the EU new entrants reserve carbon capture and storage project in the constituency of my right hon. Friend Caroline Flint will not now proceed because of the Government’s failure either to match fund or to submit the appropriate information to secure the bid. CCS is vital because coal is vital—vital to India and to China—and whatever we do with renewables in this country, unless we come up with a CCS solution for coal-fired generation around the world, any paltry reduction in emissions achieved by the UK will not stop climate change. That is why we need a global perspective on our own energy policy. The CCS technology that we can put in place could drive the entire green economy to which both sides of the House claim to have signed up, but of which we see very little evidence.
Nuclear base load is an essential part of the mix, but the Government are set to negotiate a strike price for the nuclear feed-in tariff in the region of £100 per megawatt-hour. The cost of the two EDF reactors at Hinkley Point has risen by £14 billion and is tied in with the strike price. That is madness for a 40-year lifecycle project when onshore wind is already performing at as low as £94 per megawatt-hour, and figures from the Department of Energy and Climate Change suggest that offshore wind will achieve £100 per megawatt-hour by 2020.
It is one week since the Prime Minister sent the Government’s energy policy spinning into chaos, yet after this afternoon’s debate, I am not sure that we are any closer to knowing what actually is their policy. One thing, however, is clear: the soap opera of the past week has shown that the Prime Minister’s shambolic, “make it up as you go along” approach to energy policy has failed, and will do nothing to help hard-pressed consumers struggling with rising bills this winter.
As my hon. Friend Ian Lavery said, the Government are in disarray over energy. Even the Liberal Democrats did not know what the coalition’s policy was, and during last Thursday’s urgent question, Andrew George was reduced to asking the Energy Minister:
“Do I understand from his reply…that this is not a firm policy proposal, but merely an item that is currently under consideration?”—[Hansard, 18 October 2012; Vol. 551, c. 490.]
Since that urgent question, neither the Secretary of State nor any Back-Bench Member of the coalition has defended the Prime Minister’s policy announcement that he made last week during Prime Minister’s questions.
Despite the confusion on the Government Benches, we have heard a number of excellent speeches this afternoon. In his response, will the Minister address the serious points raised by a number of Members about the circulating rumours that the UK is set to lose out on up to €600 million for CCS because the Chancellor has blocked the match funding?
Members have rightly highlighted the public’s concern about increased energy prices and the urgent need for Government action to curb those prices. As my hon. Friends the Members for Luton South (Gavin Shuker) and for Islwyn (Chris Evans) said, it is a whole year since the Government’s infamous energy summit. The situation for all our constituents has got worse not better, and it is set to get even worse.
As Mr Jones said, we have a cost-of-living crisis. My hon. Friend the Member for Wansbeck reminded the House that in the two years since the Government were elected, energy bills have risen by £200, with the average household now paying more than £1,300 for their dual fuel bill. That was before we heard last week that three of the big energy companies are imposing another round of price hikes, adding a further £100 to people’s bills this winter.
Some 850,000 people are already in debt to their energy companies. My hon. Friends the Members for Glasgow North West (John Robertson) and for Islwyn highlighted in their contributions the shocking prices and conditions that many of their constituents will face this winter. A constituent has e-mailed to tell me that their energy company wrote to them last week to say that their bills will rise by 14.1% for gas and 16.1% for electricity this winter. Faced with those huge increases, it is no wonder the public cannot understand why the Government are not doing anything to help them.
Millions are suffering in fuel poverty, as my hon. Friend Barry Gardiner and my right hon. Friend Mr Clarke said. On this Government’s watch, the number of households spending 10% or more of their disposable income on electricity and gas has increased to one in four—a staggering figure. As my hon. Friend the Member for Wansbeck exposed, that is 5.7 million people. As my hon. Friend Mr Bain said, 3 million pensioners are in fuel poverty.
What about when people try to switch? Justin Tomlinson rightly drew the House’s attention to a recent investigation by Which? showing that a staggering 44% of consumers who called their energy supplier to find out the best deal were not offered it.
In his opening remarks, the Secretary of State mentioned the record of the Labour Government—I am delighted he wanted to talk about the Labour Government, because I am proud of our record. We lifted 1.75 million people out of fuel poverty; an average of 200,000 every year were helped under Warm Front; and 6 million homes were insulated thanks to obligations placed on energy companies. We had the decent homes standard, winter fuel payments and the world’s first climate change legislation.
What have we had from this Government? We have had an energy summit that was nothing more than a photo-op, and a check, switch and insulate campaign that led to fewer people switching suppliers. The number of people getting help through Warm Front, which the Government are scrapping, is down by 80%. We have had an energy efficiency scheme—the green deal—but the Secretary of State’s Department predicts that it will lead to an 83% reduction in the number of people getting loft and cavity wall insulation.
A number of hon. Members, including Neil Parish, made representations on how the golden rule does not stack up. From next year, support for fuel-poor, low-income vulnerable households will halve, with no Treasury-funded scheme to help the fuel-poor for the first time since the 1970s. I do not know about the Secretary of State, but I would rather have Labour’s record than his. Every day the public are paying the price of his incompetence through higher and higher energy bills. It simply is not good enough.
There is a lack of competition, with six companies supplying 99% of homes, squeezing out new entrants. We have some of the highest pre-tax energy prices in Europe. The Secretary of State went to great lengths to talk about switching, but on his Government’s watch, the number of people switching supplier is the lowest on record. Bills shoot up when wholesale costs rise, but they never seem to come down when energy prices fall.
No one is saying that the energy market is not complicated, or that changing it is easy. Difficult questions need answering. How do we move from a high-carbon, high-cost economy to a low-carbon, low-cost one? How can we meet our climate change obligations while keeping the lights on? How can we help those who are off-grid as much as those who are on-grid? A number of hon. Members made representations to that effect.
Those are fundamental challenges for the future of our country, but because of the scale of the challenges, we need to raise our ambitions and not lower them. It is not good enough for the Government to stand aside and tell people, “You’re on your own.” The public need a Government who will face these problems head on, not simply accept business as usual, yet all they offer is more of the same.
Despite the Government’s claims to the contrary, the Energy Bill contains nothing fundamentally to change our energy market, nothing to help people who cannot afford to stay warm this winter, nothing to change how power is bought and sold, nothing to support co-operatives or community energy schemes and nothing to make the market more competitive or more transparent. What is needed is proper market reform, not an acceptance of the status quo. Our motion offers real change.
Today’s debate has shown a clear choice between a shambolic, out-of-touch Government making policy on the hoof and lurching from one disaster to the next, a Government whose only answer to rising bills is to tell people they are on their own, and a Labour party that would provide help now for people struggling to keep warm and have the determination to take on the big energy companies and make the market simpler and more responsible. That is the choice hon. Members face when they vote today. I commend the motion to the House.
A long, long time ago, cavemen discovered that flint made fire, but the opening speech by Caroline Flint barely raised a flicker, let alone a flame. I grant that there was a good deal of heat, and she certainly generated plenty of friction, but there was not a gleam of illumination as to why, in power, Labour did so little to deliver the kind of market reform that Luciana Berger just claimed was so necessary. Is it any wonder that the right hon. Lady finds herself in the dark shadows of opposition, not the bright light of power?
I say that not in anger but in sorrow—sorrow not only because I know that the right hon. Lady is a great deal more than window dressing, and because she made some strong points about market entry and creating a more plural marketplace to create downward pressure on prices, but because, more profoundly, she knows, and I know she knows, that the debate on energy policy deserves better than a half-hearted advocacy of a half-baked motion, and because she also knows that the country’s future should be characterised by a cross-party approach and a bound commitment to plotting a path to a future where energy supply is secure; a future where we build an energy infrastructure that is fit for purpose; a future where the vulnerable are protected from unaffordable energy bills; and a future where the needs of the many, not the interests of the few, drive an energy policy that is for the people, not, as was sadly the case under the previous Government, coloured by the demands of the powerful.
Yes, absolutely that means market reform in order to foster clarity and sow certainty so that businesses can make their business plans and invest in the way I described. Yes, it does mean a generation mix sufficient to guarantee resilience and bring security, as my hon. Friend Neil Parish and Ian Lavery said. It means, too, moving to a market that is more responsive and competitive, as my hon. Friend Guy Opperman advocated. It also means more nuclear, by the way, as Members who are as great fans of nuclear power as I am will be relieved to hear. And it means communities benefiting, guiding and owning the energy infrastructure, not having infrastructure, such as onshore wind turbines, scattered across our precious land like an atavistic echo of dark satanic mills.
I am reluctant to be too hard on the Opposition, however, because I never seek contumely, as you know, Madam Deputy Speaker, and because I know that they are handicapped by two things, among many. First, they know that tariffs are an important way of driving down the price people pay for heat and light and that the Prime Minister’s intervention and the subsequent discussions have opened up that debate in a new and helpful way. Secondly, they also know that in the 13 years for which they were in control there was none of the landmark legislation necessary to secure our energy future—they dithered, they delayed, they deferred.
Who was the ditherer in chief who presided over this spectacular inaction? It was none other than Disraeli’s new best mate, the Leader of the Opposition. Just a couple of years ago, as Secretary of State for Energy and Climate Change, he told the House that the purpose of his own energy Bill was
“to strengthen Ofgem’s powers in a number of respects and to make it a more proactive regulator”.—[Hansard, 7 January 2010; Vol. 503, c. 254.]
Yet now, when asked what they would do by a hard-pressed pensioner living in fuel poverty, by a hard-pressed farmer facing a cold winter or by a hard-pressed family anticipating Christmas with fear because of energy bills, Labour’s answer is clear as crystal: reform Ofgem and yet again rearrange the regulatory framework to invent a new quango. If they were running Byzantium, they would want it to be more bureaucratic.
In contrast, we will take direct action with a Bill published in weeks, not months, to help people get lower tariffs, using all in our power to address the issues of fuel poverty and bills that are too high for the vulnerable groups that have been supported by so many speakers in the debate. We are also providing immediate assistance to those who need help with their energy bills through our four-year warm home discount. The previous Government’s voluntary scheme meant that vulnerable people were offered different tariffs simply because they happened to have different energy suppliers, but our mandatory scheme helped 600,000 vulnerable pensioners last year alone through a £120 rebate on their energy bills.
Luciana Berger said that she would rather have Labour’s record than ours. Let me tell her that the number of fuel-poor households rose year on year from 2004 to 2009 from 2 million to 5.5 million. That is Labour’s sorry record in defence of the poor.
I have to say that in my hon. Friend’s constituency there are really only two principal heating oil suppliers. He is right that that does not create necessary competitive pressure. I shall certainly ask my officials to consider such issues. Indeed, my hon. Friend made a powerful and persuasive speech on the subject during the debate.
We are providing support through the winter fuel payments and cold weather payments, which this Government have increased from £8.50 to £24. I accept that, as John Robertson and Mr Field have said, we need to target the support in the most effective way. Through a new obligation from 2013 we will require energy companies to deliver support for heating and insulation for the most vulnerable. This is about demand. As Gordon Birtwistle said, we have too often debated energy only in terms of production and insufficiently in terms of consumption.
How curious it is that, bedazzled by the glitz and glamour of wealth, the Labour party pandered to corporate power over those 13 years. Keir Hardie must have looked down, wringing his hands in horror. They pander and ponder, bourgeois left minds honed to wander.
As an admirer of Joseph Chamberlain, only in my dreams did I believe that one day I would be the first Tory Minister in decades to advocate tariff reform at this Dispatch Box. Although these are different tariffs and different reform, I am delighted to do so today. I repeat that we will use all in our power to ensure through the Energy Bill that people get the best deal.
That is the difference between my party and the Labour party. We act; they meander, pander and ponder. They want to change the regulations; we want to change the policies. They want a different Ofgem; we want to make a difference to people’s bills.
I can think of nothing that would give me more delight. I will certainly come to the hon. Gentleman’s constituency.
What gives me the most sorrow about this motion and the Labour party is the fact that with real pathos they have made the worst mistake of all for an Opposition: they have confused opposition with opportunism. They have put party interest above national interest and short-term instincts above long-term interests. They are about fiction, not facts—and for fans of shale gas, friction, not fracts——[Hon. Members: “Oh!”] That one might have been too clever for them. While they face years of hard labour on the Opposition Benches, and—to reference Dylan Thomas, while, rather than raging against the dying of the light, they go gently into that good night—and languish in the darkness, we will bring heat to homes and light to lives through energy policy for the many, not the few.
Before we proceed to the next debate, I have to announce the results of the deferred Division on the Question relating to the draft Housing Benefit (Amendment) Regulations 2012. The Ayes were 260 and the Noes were 206, so the Ayes have it.
[The Division list is published at the end of today’s debates.]