– in the House of Commons at 5:57 pm on 9th January 2023.
With permission, Mr Deputy Speaker, I will make a statement on how the Government are continuing to support businesses, charities and the public sector with their energy bills. Before I outline how we are helping businesses, I remind the House why we are in this position.
Although wholesale energy prices are now falling, some businesses are still exposed to higher energy bills after Putin’s illegal invasion of Ukraine pushed prices far above their historical averages. Putin’s military aggression has put households and businesses across Europe and beyond under serious financial pressure. For that reason, we have already provided a package of support for non-domestic users through this winter that is worth £18 billion, as per the figures certified by the Office for Budget Responsibility at the autumn statement.
The energy bill relief scheme gave a direct discount on energy costs for all eligible businesses. It lessened the shock of the immediate increase in prices; it gave businesses the certainty they needed to plan for the winter; and it is one of the most generous packages in Europe. It comes on top of our support for households, including the energy price guarantee worth £900 this winter according to the OBR, which further helped to support consumers and the businesses that rely on them. I remind hon. Members that that followed unprecedented business support during the pandemic.
The Government are proud to have helped businesses through a twin combination of unprecedented shocks that nobody could have expected a few years ago. We will always do what is necessary to keep the economy and the British people secure, which is why the Prime Minister has been clear that we will halve inflation this year to ease the cost of living and give people financial security before returning it to target. That is also why we unleashed the furlough scheme, which avoided 2 million forecast job losses; a groundbreaking vaccine roll-out, which saved lives and ensured the safe reopening of our economy; grants for pubs, shops and other retail businesses; and now, humanitarian and military aid to Ukraine as it fights for democracy, with the UK giving more than any other nation bar the US. All those steps have been right, but all have come at a significant combined cost, leaving our national debt standing at £2.48 trillion or 98.7% of GDP.
To secure the future of public services, we have committed to get national debt falling, including two new fiscal rules—that the UK’s national debt must fall as a share of GDP by the fifth year of a rolling five-year period, and that public sector borrowing in the same year must be below 3% of GDP.
As we look to the next steps in supporting businesses, it is therefore in our national economic interest that we chart a path to withdrawing such support and restoring fiscal sustainability, but in a sensible and fair way that strikes a balance between supporting businesses now and protecting taxpayers’ exposure to volatile energy markets. As my right hon. Friend the Chancellor said at the autumn statement, one of our key economic priorities is stability, and we cannot have stability without financial prudence. So all Members must recognise that there is a balance to be struck, and it is not sustainable for the Exchequer to continue to support large numbers of businesses at the current level.
No Government—no responsible, serious Government —anywhere in world can permanently shield businesses from this energy price shock, and we must cap the taxpayer’s exposure to volatile energy prices. We have also been clear throughout that such levels of support were time-limited and intended as a bridge to allow businesses to acclimatise. Firms need to adapt and invest in energy efficiency to remain viable, and as they do so, we will be at their side to help, including with £6 billion of additional investment to cut the UK’s overall energy use.
Yet we remain fully alive to the fact that businesses would be facing a cliff edge as support comes to an end. To avoid this, we are going to provide a further package of transitional support, so today I can confirm a new energy bills discount scheme for businesses, charities and the public sector. Up to £5.5 billion will be made available from the end of the energy bill relief scheme period on
The Chancellor has been working with the key industry stakeholders to get this right. We heard that they needed a 12-month rather than six-month scheme. We have listened and, as a result, I confirm that we will be providing a year’s worth of support for all non-domestic bills beyond the current six-month scheme. This will give certainty and ongoing assistance to businesses locked into contracts signed before recent substantial falls in the wholesale price, and provide others with reassurance against the risk of prices rising again. It is different from the previous energy bill relief scheme, but provides long-term certainty for businesses and reflects how the scale of the challenge has changed since September last year.
We also recognise that some businesses, especially intensive users such as major manufacturers, are highly exposed to both energy prices and international competition, which means they are unable to pass through or absorb all of these costs. I can therefore confirm that the Government are targeting a substantially higher level of support beyond April 2023 to energy and trade-intensive sectors, providing a major boost for the manufacturing sector. Businesses in scope will receive a gas and electricity bill discount based on a price threshold that will be capped by a maximum unit discount of £40 per megawatt-hour for gas and £89.10 per megawatt-hour for electricity. This discount will only apply to 70% of energy volumes. These firms will continue to be supported at source, based on a price threshold of £99 per megawatt-hour for gas and £185 per megawatt-hour for electricity. This means a typical medium-sized manufacturer would expect to receive nearly £700,000 of direct support over 12 months.
This comes on top of the £13.6 billion of support for firms with business rates over the next five years, a UK-wide £2.4 billion fuel duty cut this year and the protection from full corporation tax rises for businesses making profits of less than £250,000, with those making profits of less than £50,000—the vast majority—not facing any rate rise at all.
I have set out how this transitional support will reduce overall as a cost to the Exchequer while remaining significant at a time of elevated energy costs and providing certainty for a further 12 months. However, I have also been clear that, just as we withdrew covid support when we moved to a position of living with the pandemic following the success of our vaccination efforts, this energy support is deliberately transitional in nature. That means that in due course we will move unambiguously to a point where there is no universal support for businesses with energy bills from the taxpayer.
Ultimately, it is in the national economic interest that we move to a position where the Government do not routinely subsidise UK businesses. It is not for the Government to habitually pay the bills of businesses any more than it is for the Government to tell businesses how to turn a profit, and it cannot be that the taxpayer props up failing or unproductive firms. Instead, we must protect the forces of free enterprise and entrepreneurialism that have led to our economic success for generations. [Interruption.] Labour Members do not understand free enterprise and entrepreneurialism, and I do not think many of them have ever run a business.
The approach I have outlined today does just that: it is fair in balancing the needs of non-household energy users with the need for prudence and a restoration of competitiveness, and it shows that this Government remain committed to supporting businesses, charities and the public sector through these challenging times. I commend this statement to the House.
Thank you, Mr Deputy Speaker, and happy new year. I thank the Minister for advance sight of his statement.
Businesses have been crying out for some much-needed clarity. In September, the Government promised a review to look at targeted support, saying of the energy bills support scheme:
“We will publish a review…of the scheme in three months”.
I noticed the Minister made limited mention of this review. Could he tell the House where it is, who was consulted, what were the outcomes and whether it even took place? Many industries have suspected that the review was always intended as a delaying tactic. They have strung businesses along, playing for time, just like everything the Government do—living day to day and crisis to crisis, and hoping the blame does not land on them.
It is criminal that this sticking-plaster politics has forced British businesses into the same cycle, with firms unable to plan and not knowing what the next month will bring, let alone the next quarter. Business owners and their staff have faced two Christmases racked with worry because of covid and half-baked announcements from this Government, not forgetting the £6.5 billion of money recklessly squandered by this Tory Government. Firms were promised clarity last year, but Tory chaos meant that they spent another Christmas worrying about their energy bills. Will the Minister apologise today for the distress and uncertainty caused by the Government, not least for the hospitality sector during what should have been its most profitable trading period? What has been announced today is just a sticking plaster. What are the Government doing to ensure the take-up of energy efficiency measures for small businesses, and what plan does he have to deliver energy security and lower bills for the long term, or are businesses to be treated to this merry-go-round every winter?
The Minister spoke about support for energy-intensive industries. Can he confirm what businesses are in scope and how this will be implemented? Can I point out that Wade Ceramics in Stoke-on-Trent closed while the Government dithered and delayed over energy support? What does he have to say to those 140 workers? Our steel producers paid twice as much per megawatt-hour than German producers did last year. [Interruption.] Conservative Members do not want to hear this, but these are the facts. Reports from the Scunthorpe plant are deeply alarming, so can I take this opportunity to ask what steps his Government are taking to secure the future of the domestic steel industry? Will the Minister confirm today that he will commit to the long-term investment that steel needs to protect our manufacturing base and national security?
With delayed announcements, constantly changing plans and a Government living day to day, they are forcing industries to do the same. I agree that firms need to invest, but what steps have the Government taken to make this possible? There was no mention in the statement of support for businesses investing in green technology. The British Chambers of Commerce and Make UK are very clear that, rather than inspiring business confidence and investment, the Government’s policy decisions have reduced confidence.
It simply does not need to be like this. Labour would back British businesses and give them the certainty they need to plan and invest, scrap business rates with a fair tax on the online giants, have a long-term industrial strategy alongside which our industries can invest and, crucially, deal with the energy crisis at source.
For 13 years, Britain’s energy policy has been a perfect example of sticking-plaster politics. Of course the Government are not responsible for the effects of the war in Ukraine, but the truth is that it was not the war that banned onshore wind, scrapped the home insulation and shut our gas storage facility; the Tory Government did that. That is why we are so exposed as a country, and families and businesses are paying the price. Labour’s green prosperity plan will deliver green electricity by 2030, getting bills down, ending the cycle of Tory crisis; the choice is between proper energy security that benefits Britain and a real plan to back British business with Labour, or an out-of-touch Tory Government with no ideas.
I am grateful to the hon. Lady. She asked what happened to the review. Well, I am making a statement about the results of the review, and the policy decisions that we have come to a conclusion on, based on the review and consulting all the key stakeholders in business and industry and also the voluntary sector, who I spoke to only this week.
The hon. Lady used the word “criminal” to describe the announcement today. I think that is a little over the top. We are continuing to provide significant support for businesses. We have a universal scheme, plus the targeted support for energy and trade-intensive sectors, with significant expenditure of up to £5.5 billion. We must balance this, however. She talked about failing to support business, but I remind the House that at this precise moment we are in the middle of a six-month scheme worth £18 billion, which is an extraordinary sum.
The hon. Lady said that we have somehow betrayed hospitality. The last statement I made, the day before the House rose for the Christmas recess, was that we would be freezing alcohol duty for another six months. We have supported pubs throughout the pandemic. To a typical pub, this will be worth about £2,300 in support over the next 12 months. Beer duty is now at the lowest real-terms level for 30 years, having been cut or frozen in nine of the last 10 Budgets, and spirits duty is at the lowest level in real terms since 1918, and of course we have extended the discount on business rates for the hospitality sector—previously it was 50% and we are increasing it to 75%. So there is a huge amount of support for hospitality.
The hon. Lady called for energy security. I agree that the long-term answer to this problem is investment in energy security; it is about having robust British energy, and we should look at the figures on that. Only a few days ago we heard from the BBC that in 2022 we had a record level of wind production in this country producing electricity: almost 27%, with just 1.5% from coal compared with 43% from coal in 2013.[This section has been corrected on
I will make one final point. A few days ago the Leader of the Opposition said that it was no longer the time for the big Government cheque book and that we need to put the cheque book away. I am not sure that his Front-Bench Members have got the memo, because there is a balance to be struck here: we need fiscal prudence. The underlying problem for the country is inflation: inflation is the reason why people are experiencing cost of living problems. If we want to get a grip of inflation, we need to set a path for fiscal sustainability, because the problem with what the hon. Lady is suggesting is that it implies not just getting the Government cheque book out again, contrary to the words of the Leader of the Opposition, but getting a blank cheque book out. The problem with that is that if a Labour Government start writing blank cheques, we know where that ends up: with them writing a letter saying there is no money left, and bankrupting the country. We must balance prudence with supporting businesses and the voluntary and public sectors with their energy bills. We have done that today as a result of our review, and I believe this is the right balance of policy for the House.
I call the Chair of the Treasury Committee.
I welcome the Minister’s announcement. He rightly points out that President Putin has, by illegally invading Ukraine, effectively weaponised the cost of energy against western economies, and he is right to highlight that we have been able to withstand that attack with £18 billion of support over this six-month period.
We now have a gas price close to where it stood before the invasion of Ukraine, and businesses across the country have realised the big risk they face in terms of their energy costs. Will the Minister encourage them not to pass on the cost of higher energy through inflation to their customers, and instead call for the wholesale price of energy to feed through more swiftly to the retail price our businesses pay?
I think this is the first time I have taken a question from my hon. Friend since her appointment to the chairmanship of the Treasury Committee and I congratulate her belatedly on her success. She makes the good point that wholesale prices have fallen significantly. The gas price is back to where it was before the invasion. Of course, we should be clear that before the invasion it was still elevated in relative terms historically, not least because there was an increase in energy prices following the reopening of the economy after the pandemic. Of course, we do not want prices to be passed on to customers in terms of inflation—that is the last thing we want to see—but I should stress that one reason why we are giving extra support to energy and trade-intensive sectors is that, because they tend to trade internationally, they are particularly exposed to those price pressures and find it harder than other companies that are energy intensive but not trade exposed to pass on those high prices.
I call the Scottish National party spokesman.
Happy new year, Mr Deputy Speaker.
I thank the Minister for his statement and for early sight of it, although I suspect businesses will be as underwhelmed and disappointed by it as they were frustrated by the delay in making it. I am disappointed that the higher level of discount will be removed after March this year, which is less than three months away; it does not give businesses the time or opportunity to plan.
There is also a degree of sleight of hand. I do not think the public will buy the £5.5 billion budgeted between March 2023 and March 2024 being portrayed as a year’s worth of support given that, as the Minister said, the cost of the package for six months to March this year came in at £18 billion. To dress that up as fiscal prudence simply will not wash.
The key thing is that the Minister said that no Government anywhere in the world can permanently shield business from the energy price shock—that mirrors what the Chancellor said a few days ago—and he went on to say that levels of support were time limited and intended as a bridge to allow businesses to acclimatise. May we have an assurance, however, that if this turns out to be not a short-term price shock but a medium-term price problem, this package and the level of the discount will be reviewed before next winter so that we do not have businesses that manage to survive this year falling over next December, January or February because they cannot afford to heat or light or power their workshops?
There will have been 18 months of support for non-domestic accounts for businesses, charities and the public sector, in which time we have emphasised—I was very open about this—the need to adapt to the new environment we all face. Everyone is having to do that —households and businesses, and so on. In the autumn statement, the Government announced a new long-term commitment to drive improvements in energy efficiency and to bring down bills for households, businesses and the public sector, with an ambition to reduce the UK’s final energy consumption from buildings and industry by 15% by 2030 against 2021 levels. Alongside existing support to 2025, the Government committed an additional £6 billion from 2025 to 2028 for energy-efficiency schemes across households, businesses and the public sector.
On the right hon. Member’s point about the £5.5 billion, I do think that we need some perspective, as £5.5 billion is roughly the cost of a 1p cut in income tax. That remains a significant fiscal intervention. It may be that, because of the huge amount of support that has been needed by our country, particularly since the pandemic—we have seen £400 billion-worth of support, and potentially close to £100 billion on energy—a figure such as £5.5 billion does not look as large.[This section has been corrected on
I welcome my hon. Friend’s statement. He will understand that many businesses face the prospect of having to pay significant up-front costs to enter into new contracts, which is a real challenge for those in my constituency and elsewhere. What work will he do with Ofgem, the regulator, to ensure that such punitive contracts can be ended and businesses can operate on a much fairer basis?
My right hon. and learned Friend asks an excellent question. Through the review, we have heard of issues in and around the pricing and availability of non-domestic tariffs, including increased standing charges, prohibitive contract renewal terms such as those he referred to and, in some cases, decisions by individual suppliers to withdraw from supplying particular sectors. Ofgem and the Department for Business, Energy and Industrial Strategy are working urgently to understand those issues, and Ofgem is launching a deeper review of the market. I can confirm that today, the Chancellor has written to Ofgem, asking it to do that work with the utmost urgency and to update him in time for the Budget. The Government recognise the importance of that work to many pubs, restaurants and other businesses that feel they are not getting a fair deal from their suppliers.
We know from the design of the domestic scheme that people in particular circumstances are not being helped as the Government perhaps intended. Will the Minister therefore confirm that the Government will tweak the design of this policy in the same way that they did the domestic scheme where there are legitimate cases of businesses not being helped as Ministers intended?
It is a good question. Obviously, there are quite a few of those categories. As the hon. Gentleman is the Chair of the Select Committee, I am happy to engage with him—I think we will be speaking later, if not tomorrow—and to go through some of those categories. There are some important examples, but I can certainly confirm that where those exceptions arise, we will look to see what we can do to provide assistance.
I welcome the extension of energy price support for non-domestic users. However, may I give my hon. Friend a real-world example of what is happening in the non-domestic sector? A popular local pub in the Kettering constituency emailed me this week. Up to
I pay tribute to my hon. Friend for being an absolute champion for his constituency. I know that he had a question on hospitals earlier and now he is championing his pubs. We all know how important pubs are to all of our constituencies. I will make two points.
First, in response to my right hon. and learned Friend Sir Robert Buckland I referred to the letter that the Chancellor is sending today to Ofgem, urging it to update him as a matter of urgency on its review of the non-commercial market. Hopefully, that will look at some of the factors around how contracts operate and, indeed, at whether there are abuses and what can be done about it.
Secondly, one of the reasons we are maintaining universal support is precisely because there will be examples, such as the one my hon. Friend raised, of those who came to the end of a deal and fixed when prices were high, and so will not have benefited, even though prices are falling. This support is there to prevent that sharp cliff edge. It is about getting the balance right.
The Christmas period should be a boom time for hospitality companies; sadly, in Bristol we saw quite a number go under, and energy bills were a huge reason for that. The Newtown Park Brewing Co. was forced to stop production—a 500% increase in its energy bill quote was the final straw. It was not helped by the fact that, when it tried to speak to its energy company about what support was available, its energy company did not know. It said, “We would tell you if we did know, but we have no idea what we can offer you.” Will the Minister ensure that, with packages going forward, everybody is in the know, the details are communicated and there is enforcement so that people get the help that they are entitled to?
The hon. Lady asks a pertinent question. I will make a point about hospitality this Christmas. Of course, a particular factor facing hospitality was that people could not get around on our railways to enjoy hospitality at Christmas as they normally would. We all know the reasons for that. It is a great disappointment to me that that industrial action has threatened many otherwise viable businesses up and down the country. However, her question was perfectly fair. Payments should be automatic. I obviously do not know the exact circumstances of, I think, the pub—
Sorry, the brewery that she was talking about. Assuming that it is still going, it would benefit from the scheme; I hope that it can. On whether it would benefit from the universal scheme or the intensive scheme, it would likely be the universal one. If colleagues want to find out whether a particular sector is in the intensive scheme, that information should now be available on gov.uk.
I take no lectures from the Opposition on support for the steel industry: not only did they preside over the loss of thousands of steel jobs, but they have supported policies that have put costs on our industry and flirted with climate extremists who would close down the steelworks in Scunthorpe if they had their way.
I thank the Minister for the support for intensive industries such as steel. However, we are not operating on a level playing field across Europe, as other Governments continue to subsidise their steel industries unfairly against ours. Will he therefore continue the engagement taking place at a senior level between the steel industry and Government to look at what other support can continue into the future?
My hon. Friend is a stalwart champion of the steel sector, which I know is so important to him and his constituents. I absolutely agree with him. Of course, we are aware of the differing levels of support. In fact, with schemes such as this, it is difficult to make a comparison internationally because of the variations. On the additional discounted support for energy and trade-intensive industries that we have announced today, international comparators were a factor in considering the greater generosity of that support. Obviously, in the long term, what we need is secure energy supplies so that we can have choice and secure energy. That is the most important thing in the long run, but across Government we want to see what we can do to support the steel sector.
In the long term, we need to reduce the reliance of energy-intensive industries such as steel on fossil fuels, and for that we need further investment in innovation. On
I am not aware of what has happened to the letter or where it is, but I am more than happy to look into that as a matter of urgency and to ask my officials to chase it up. We will write to the hon. Lady as soon as we can.
While I agree with my hon. Friend that support cannot continue indefinitely, I welcome his recognition that high energy users will continue to require special help. Will that support cover agricultural businesses that are high energy users such as Dengie Crops in my constituency, which uses gas to dry crops to produce animal feed?
My right hon. Friend asks an important question. Like him, as an MP representing an East Anglian arable constituency, I am aware of the importance of such businesses to the wider agricultural sector. As I said to Kerry McCarthy, we will be publishing a list on gov.uk showing those energy and trade-intensive industries that are eligible for the higher level of support; I refer him to that. I am also happy to write to him to confirm it exactly, because within one sector there will be a range of different types of industry that may qualify.
At the end of October, I had a meeting with a number of publicans in my constituency. They were looking forward to strong demand during the World cup and over Christmas, but they were deeply, deeply concerned about what would happen between January and March in particular. They were desperate for clarity on support for fuel bills. The fuel bills issue is the biggest issue they are experiencing, although it sits alongside other pressures such as staff shortages, supply chains and so on. What consultation did the Treasury have with UKHospitality and other bodies before making today’s statement and the new policy on fuel bills? What discussions did it have with UKHospitality about other potential forms of support for the sector as it comes through the crucial first quarter of 2023, which will be so challenging?
All I can say is that I suspect pubs did get a boost from the World cup. I wish it had run for longer, but I am afraid that is beyond my control. We very much enjoyed the tournament none the less. I understand the challenges facing hospitality. In my statement on our last but one sitting day of 2022, I announced the six-month extension of the freeze on alcohol duty. This has been a particularly challenging time for pubs. As the hon. Lady knows, we are in the middle of the £18 billion EBRS support, which has helped pubs in particular. We have been clear that we have continued what is effectively a universal scheme, notwithstanding the specific extra support for the energy and trade-intensive sectors. UKHospitality has been included in that consultation. That has happened at an official level, but also through the Chancellor and me, with the voluntary sector and others. We continue to engage very closely with UKHospitality through our Department, the Department for Business, Energy and Industrial Strategy and others on those matters.
I, too, welcome the Government’s announcement. It is really important that we avoid the cliff edge. Speaking to businesses across Aldridge-Brownhills, whether they are part of the energy-intensive sector, retailers, hospitality or even funeral directors, they are all deeply impacted by the energy costs. Can the Minister provide any more clarity or confirmation on whether all business sectors will be covered by today’s policy announcement?
My right hon. Friend makes a very good point about how broad the impact is of rising energy bills. She used the phrase “cliff edge”. That is precisely why we have continued with a universal scheme. Yes, I am happy to confirm that there will be support for every single business, charity and institute in our public sector, but there will be additional support if they are in the energy and trade-intensive sector. The reason for that is the exposure to internationally competitive pressures and how much harder it is for them to pass on those prices. We recognise the energy challenges for small and medium-sized enterprises in every single sector. We are doing what we can, but balancing that against the need for fiscal prudence.
On possibly tweaking the scheme, last week I visited a housing scheme for older people in Blaenau, where constituents with private pensions were complaining of increased energy costs of 400%, or £50 a week, just for heating the common social areas. The housing association complained that none of the Government’s energy schemes is of help to the organisation, so it had to pass on the costs. Will the Minister please meet me to hear those important concerns?
The hon. Gentleman raises a very important point. I would have to know the exact details, but, yes, I am more than happy to meet him. He will be aware that the care home could benefit from EBRS, which will become the energy bills discount scheme after March, but I stress that there are 900,000 in England, Scotland and Wales without a direct relationship with an energy supplier, such as care home and park home residents. This month they will be able to apply online for £400 of non-repayable help with their fuel bills.
I very much welcome the package of support announced this afternoon and the enormity of the total support package, but may I push my hon. Friend a little on what is energy intensive? Padbury Meats, a butcher in my constituency, wrote to me over the weekend. It is a healthy business with a huge gross income per annum, it employs six staff and has no borrowings. Thanks to careful decisions, it managed to buy a freehold and therefore pays no rent, but it has seen a fourfold increase in its energy bills since the invasion of Ukraine and is not making a profit. The owner is personally subsidising the business through their own savings, which is not sustainable. Instead of looking at specific energy-intensive industries, will he look at the proportionality of energy bills to total revenue to determine which businesses, such as butchers who have huge fridges and walk-in freezers, need support?
My hon. Friend makes an important point. The first part of my answer may disappoint him, but I want to be clear. The additional support, particularly for manufacturing, is not just about energy intensity but trade intensity. There are two measures that determine if sectors are entitled to support: whether they are above the 80th percentile for energy intensity and the 60th percentile for trade intensity. So, it may be that the sector does not fit in that category. But that is why—I appreciate the support is less generous, but it is still significant—alongside the additional support for the intensive users, there will still be a universal scheme offering a discount from April this year to March next year.
A much-loved institution in my constituency, Gorgie city farm, is facing closure. Its energy bills for 18 months were previously £17,000, but its last bill for just eight months was £27,000—an increase of over 300%. Can the Minister not see that what he is offering is a drop in the ocean for charities like Gorgie city farm? How does he expect fantastic community institutions, such as the city farm in my constituency, to survive crippling costs when what is on offer is such a drastically reduced package?
I am grateful to the hon. and learned Lady for mentioning the charity in her constituency. As I said, I appreciate that the energy increase has been a challenge for every type of SME, charity and institution up and down the country. I am sorry to hear about the challenges for Gorgie city farm, which I have not had the pleasure of visiting but it sounds fascinating. Charities have shown huge resilience over the past two years and will continue to receive support with their energy bills from the latest iteration of the discount scheme. I emphasise that there is wider support to help them with their costs, including a reduction in VAT from 20% to 5% and an exclusion from the main rates of the climate change levy on some of the energy they use. The key point is that we are announcing a scheme that is still universal in nature and still includes charities. It is not as generous as before, but when we engaged with stakeholders about the £18 billion six-month scheme, what was interesting was the number of them who remarked that they had not expected that scheme to continue at that level of generosity. They could see the issue about sustainability for the taxpayer, which we all have to understand and address. It is in all our interests, and in the interests of every single business and charity, that this country has sustainable public finances.
Has any analysis been made available to Ministers regarding the movements in wholesale prices and the tariffs actually being offered to customers going forward?
It is very timely that my right hon. Friend raises that point. He will have heard me mention to the former Lord Chancellor, my right hon. and learned Friend Sir Robert Buckland, that the Chancellor has today written to Ofgem to encourage it to update him as soon as possible and as a matter of urgency about the review of the non-domestic market, because we are hearing about many issues with it. A key point I will be feeding back is that colleagues on all sides of the House have experienced cases in their constituencies relating to deposits being asked for, deals being rejected and what will happen at the end of fixed rates. There is clearly work to be done and that is why the Chancellor has written as he has. I will ensure the letter is published on gov.uk along with the other documents.
Businesses small and large in my constituency, from shops to my local steel plant, have raised very serious concerns with me, so they will no doubt look at the statement very, very closely. I have one group of constituents who have lost out on any support so far. The Minister mentioned the energy bills support scheme alternative fund. I have residents in an apartment block in Sully who have not yet received any support at all because they fall into that category. When will the website portal be open? Will they receive backpay? Why will they get only £400 of support, instead of £600 like everybody else? The Government website says it is because the overall block may have benefited from business support schemes, but if they believe that not to be the case—it has not been passed on or the apartment has not been eligible for one of those schemes—how will they get what they need? They are really struggling at the moment and they have not had any answers from the Government so far.
I totally understand the hon. Gentleman’s point. There are issues with people in apartment blocks in certain specific cases; I do not want to second-guess the case that he raises, because there are lots of different schemes. A £600 payment is going out in Northern Ireland: the £400 general support payment that everyone will have had this winter will be paid out together with the alternative fuel payment, because so many people in Northern Ireland use heating oil, whereas in this country it is less common except in rural areas and constituencies like mine.
The hon. Gentleman is absolutely right that there is a category of user who has not yet received the £400. They may be on a contract under which the energy provider is benefiting from the current EBRS and should be passing that benefit on. I am happy for the hon. Gentleman to write to me with details of his case. As for the website, we have said that the relevant link should be available this month so that people can go online and find it. If he writes to me with the details, I will push my officials on when we can expect it to be live so that his constituents can apply for the £400. He makes a good point.
I really welcome the fact that businesses in my constituency will get another 12 months of support, but none of us can be in any doubt that the global energy price shock will continue to make circumstances extremely difficult for many businesses across the country. May I urge the Minister to put relentless focus on energy efficiency, which gets costs down for business and for taxpayers and helps us to avert disastrous climate change?
My right hon. Friend makes an excellent point. The long-term answers are about increasing energy security in this country and the amount of energy that we generate. We have made huge progress with renewables, for example, and in North sea transition. I can confirm that alongside energy efficiency measures, businesses can take advantage of the £315 million industrial energy transformation fund and the £450 million boiler upgrade scheme. There are also several capital allowances that may help businesses to make energy efficiency investments, such as the annual investment allowance, which has been set permanently at £1 million; the structures and buildings allowance; and, until
Diolch yn fawr iawn, Mr Dirprwy Lefarydd.
Pen Llŷn entrepreneur Siôn Edwards has had to take the difficult decision to temporarily close his farm shop in Abersoch because the business cannot afford the electricity bills. He tells me that what he desperately needs is Government support with investment in energy efficiency measures and renewable energy production measures such as solar panels for small businesses, so that he can permanently reduce his energy bills. Will the Minister please meet me to discuss the proposal from the Federation of Small Businesses for support to be delivered via “help to green” vouchers?
That sounds like an interesting idea. I would be more than happy to meet the right hon. Lady.
I welcome the measures announced today, particularly those relating to energy-intensive industries, and the duration of those measures. I will look very carefully at what has been announced.
The Minister will know that thousands of world-class steelmakers in Scunthorpe are listening carefully to what is being announced. May I press him to look at the evidence over the next 12 months so we can reassure ourselves that our support is in line with that in other countries, and so we know we are providing a level playing field for the domestic steel industry in this country? That is all it asks.
My hon. Friend, like her constituency neighbour sitting next to her—my hon. Friend Andrew Percy—is a champion for the steel sector. She makes a very good point. I understand the huge importance of the industry to her constituency and hope that it will welcome today’s announcement on the energy and trade-intensive industry support and the additional discounts that will be provided. I should stress that as well as having a more generous discount, the scheme will apply at a lower threshold; that is important.
My hon. Friend makes a really important point about duration. The current £18 billion scheme is for six months; the industry said that it wanted 12 months, and we have delivered that. We absolutely want to look at what more we can do to be internationally competitive.
Post offices provide incredible support not only to our communities, but to the economic vibrancy of our high streets. However, they are often on quite a tight turnover. Having heard from many postmasters and postmistresses in my constituency, including in Forton, Brookhouse and Knott End, I wonder whether post offices will continue to be eligible for the same level of support. They will be well aware that the headline figures in the support package have been reduced.
The hon. Lady makes an important point. I know from my own constituency that sub-post offices are incredibly significant in our communities. These days, they are often where we do our banking as well as our shopping and everything else—that is certainly the case in some of my villages.
Sub-post offices are not in the intensive scheme. The level of support that they receive will therefore be less generous; we are being absolutely open and transparent about that. That is because there is a balance to be struck. If we are to be fiscally responsible, making something universal will by definition mean making it less generous than if it were targeted narrowly. We have tried to strike a balance, with more generous support for those sectors that are exposed to international competition and find it much harder to pass on higher costs. At the same time, although it is less generous, our support for the rest of the economy is still significant. That includes sub-post offices.
Businesses have certainly appreciated the support that they have had over the past six months through the energy bill relief scheme, but businesses like and want certainty. The Minister will know that his announcement today has therefore been eagerly awaited. The 12 months of support that he is providing will go a long way, and I welcome the additional support for energy-intensive businesses. He spoke about businesses being in scope; I know that he has been challenged already today, but could he say a little more about where businesses can find the definition of “in scope” to identify whether they qualify?
My hon. Friend speaks with great knowledge of manufacturing, which is very important in his constituency. I am glad that he welcomes the 12-month duration, which I agree is important: it is what businesses were calling for, and it gives them extra certainty. I am afraid that I do not have the exact “www” off the top of my head, but hopefully it is live on gov.uk; I look nervously at my officials. There will certainly be a list on gov.uk at some point today. Is it live? [Interruption.] Noises off and a nod from the officials tell me that it is now live on gov.uk. I will tweet the exact address in due course.
From talking to local businesses before Christmas, it was clear to me just how important it was for them to get clarity on the issue. It is a shame that we did not have a statement before Christmas—I am afraid that businesses have already had to make some decisions, because they could not afford to wait—but we have had a decision now.
I want to pick up on a point that other hon. Members have made in relation to blocks of flats. Communal areas are charged at a commercial rate, but obviously that will be changed as a result of the decision announced today. How can we ensure that costs are not passed on to leaseholders?
The hon. Gentleman makes a very good point. Just to be clear, we are aware that some domestic customers receive energy bill support via the EBRS—the current scheme, which is non-domestic. They include people in park homes and on heat networks, which are presumably the sort of case that he is talking about. While domestic consumers on a non-domestic meter will continue to benefit from the discount offered through the extension of the EBRS to the new discount scheme, we are developing options to ensure that they receive support in line with other domestic users after April.
Micro and small businesses are the lifeblood of my constituency. Many of those businesses will be off grid and will be using oil. I welcome my hon. Friend’s statement, but can he say something to give them a crumb of comfort? Can he assure me that they and others in similar circumstances across the country will be in his thoughts going forward?
I am grateful to my hon. Friend for raising those cases and exceptions, as did his fellow Select Committee Chair, Darren Jones, who chairs the Business, Energy and Industrial Strategy Committee. As we announced at the 2022 autumn statement, the Government will provide £150 in support for UK non-domestic consumers who are off the gas grid and who use alternative fuels, with larger users of heating oil receiving additional top-up payments based on actual usage. No decisions have been made on further support. We will continue to monitor the situation.
Many theatres, galleries and museums are in energy-inefficient buildings—listed buildings with high energy costs, which are necessary if they are to maintain appropriate conditions for their audiences or their collections. We know that there will be a reduced support scheme, but the Minister has not given details about the public sector and charities. That lack of clarity will compound anxieties about financial pressures in the spring. Theatre and orchestra tax reliefs are already planned to be cut by 15%. Can the Minister tell me what the Government are doing to reassure our critical arts organisations and protect them from this storm of financial challenges?
I assure the hon. Lady that those organisations would at least qualify for the universal scheme. If she wants to hear the exact details, from
Energy-intensive industries, particularly the ceramics industry in Stoke-on-Trent, have been most exposed to global energy price shocks, as they have to fire their wares at over 1,000°C. Many of those businesses have not been eligible for the support received by other energy-intensive sectors. Can the Minister reassure me that all ceramics producers in Stoke-on-Trent will receive the additional support that they need?
My hon. Friend is a champion for the ceramics sector, and I know how important it is to the Potteries and to his constituency. If he looks at SIC code 23 in the list of sectors, he will see a range of ceramics industries that are covered. It is worth looking at that list, because there are a great many specific types. Obviously we want to support business as far as possible. As I have said, the qualification for support is for the sector in question to be above the 80th percentile for energy intensity and the 60th percentile for trade intensity, and that is likely to cover much of the ceramics sector.
I welcome this package, and I especially welcome the inclusion of charitable organisations, but the fact remains that even if energy prices stabilise, given Government policies on net zero and the decarbonisation of electricity, there will be continued upward pressure on businesses’ energy bills for the foreseeable future, and I do not believe that the package will help many of the small businesses that are hanging on by their fingertips at present because of the massive energy price increases.
First, will these measures apply to Northern Ireland automatically or, because of the separate regime, will they have to be tailored to the Northern Ireland market? Secondly, when it comes to energy-intensive industries that do a lot of trade, will the package include businesses such as food processing, which is very important in Northern Ireland?
Yes, food processing would be included. If the right hon. Gentleman is asking whether food processors would be in the energy and trade-intensive section, I suggest that he look at the website later or ask the company in question to do so. As with the current energy bill relief scheme, support will be given to UK non-domestic customers including those in Northern Ireland.
The statement will be welcomed by many ceramics manufacturers in Stoke-on-Trent North, Kidsgrove and Talke, but they also want to ensure that they are all eligible. The support to date has meant that £4 million has been saved for one of them, but, sadly, hidden clauses, never used before, are being exploited by some energy suppliers that are trying to smack companies such as Churchill China and Steelite with millions of pounds’ worth of costs on the basis of a past spot price. Will the Minister meet me, other Stoke-on-Trent Members of Parliament and Rob Flello, the chief executive of the British Ceramic Confederation, to look at those examples and hold to account the energy companies which are trying to exploit the Potteries?
Like my hon. Friend Jack Brereton, my hon. Friend is a champion for that incredibly important industry in his constituency, and he is right to stress the importance of energy support. I entirely understand that there has been great anxiety about the prevailing level of energy costs, and we hope that this package will provide vital help. According to a message that I have received on WhatsApp, ceramics are dealt with in SIC codes 23.1, 23.2, 23.3 and 23.4 and, I think, one more. As for my hon. Friend’s other request, of course I would be happy to meet him to see what more we can do, because this is an important sector for him and, indeed, for the rest of the United Kingdom.
As well as considering the excessive deposits about which we have already heard, will the Ofgem inquiry consider the high charge for the delivery of energy to business premises, which, in some cases, can amount to double the wholesale price? Does the Minister agree that any inquiry will need to be swift, with immediate action, if we are to avoid a raft of businesses going bust later this year?
The hon. Gentleman is right about the need to be swift. I have responded to a number of Members by referring to the letter to Ofgem that the Chancellor was sending today, asking it to produce an urgent update, before the Budget, on the review of the non-domestic energy market, because of all the stories we are hearing from colleagues about the way in which some non-domestic providers are behaving. I will ensure that the letter can be found on gov.uk. It must be said that there are many excellent providers in the market, but it is less regulated than the domestic side, so I think it important for Ofgem to consider these many points. I should also say to the hon. Gentleman that there have been some recent changes in the cost of connecting to the grid, and I am happy to write to him with further details about that.
I appreciate that balances must be struck, but I think that small businesses, including many in my constituency, will have listened to this announcement with deepening anxiety. Research from the Federation of Small Businesses suggests that one in four small businesses are expected to close, downsize or radically change their business models when the Government reduce energy support. Obviously, that research was conducted before we knew the shape of this proposal, and it is much less supportive than the FSB and others hoped.
Let us be clear: this decision poses an existential threat to small businesses, many of which think that, in a sense, they are being left vulnerable to wholesale energy price hikes while the Government wash their hands and walk away. Will the Minister look at it again, and, in particular, will he look at other ways of supporting small businesses with the multiple challenges that they face, for example by suspending covid loan debt repayments so that they have some hope of surviving this year?
I understand why colleagues are concerned when they receive correspondence, whether it involves the FSB acting at a national level or individual businesses in their constituencies. These have been incredibly challenging times. I ran a business before I came to the House, and I went through the credit crunch, which was unbelievably stressful. We were a mortgage company, and mortgages disappeared on a far greater scale than they did some months ago. It is good to see them returning, and with lower rates in recent days.
Let me say to the hon. Lady, however, that this remains generous support. It is not as generous as it might be—I have been clear about that—but it will still be significant for businesses. Let me also stress a point that I made in an earlier answer. If we go back to the beginning of the EBRS and then up to the end of the discount scheme in April 2024, we see that there are 18 months in which businesses can adapt. I know that it is not easy, but significant funds are available to support efficiency. I think that, in circumstances such as these, all of us—people who run charities or businesses, and Ministers —must look at what more we can do to run our operations more efficiently in the face of huge changes in energy prices.
What would the Minister say to Mr Uppall, who runs a vital service—a post office—in Hartford, in my constituency? What would he say to the likes of Alison, the landlady of the Bulls Head in Frodsham, also in my constituency, about his rationale and that of the Government in reducing vital support at this particular time?
The hon. Gentleman is absolutely right to raise the points made by his constituents. As I said to Caroline Lucas, we do understand that the way in which prices have risen has caused great anxiety. In Government, however, we have a duty to consider not only what support we can provide, but the cost to the Exchequer. We have to take that balanced approach. The £18 billion six-month scheme that is currently operational is extremely expensive, and, as I said earlier, stakeholders to whom I have spoken, including those in our major industrial lobbying organisations, did not expect support to remain at its former level because of the huge cost. We have to balance this continued support—which will help the businesses and institutions to which the hon. Gentleman has referred—with the need for fiscal prudence.
On Friday I visited Gills convenience store, which provides essential services for constituents in Brakelaw and Fenham. The owners told me that the No. 1 threat to their business was spiralling energy costs, and that message is being echoed by pubs, the hospitality sector, charities, and small businesses across Newcastle. The Minister says that this support will be limited to £400 because, he says, it is not for Government to pay the bills of business. Will he at least agree with me that it is for Government to deliver a sustainable, secure energy market which works for small businesses, and that his Government are entirely failing to do that?
One of the reasons for the Ofgem review that I have referred to several times is precisely to ensure that we have a non-domestic market that works as effectively as possible for businesses. A situation such as this will bring to the surface problems that businesses would not experience to the same degree in normal times.
Let me make this point to the hon. Lady: not a single Opposition Member has stood up at any point and acknowledged to any degree that we have to consider the cost of these schemes. Of course we have to consider the impact of rising energy prices on businesses, but it was only a few days ago that the leader of the Labour party said that the era of the “big Government chequebook” was over—those were his words. We have to take a balanced approach. We are continuing to provide universal support for businesses, charities and the public sector, and targeted additional support for internationally trading sectors, particularly manufacturing. At the same time, we have to consider fiscal prudence if we are to run a stable and growing economy.
I am sure the Minister would agree that a key aim of the support scheme must be to ensure that our steel industry can compete internationally on a level playing field. The German Government have guaranteed their steel industry an electricity price of €130 per megawatt hour for 2023. In contrast, what the Minister has announced today only provides our steel industry with a discount on electricity prices above £185 per megawatt per hour. That leaves UK steel producers to pay an estimated 63% more than their German counterparts. Why are the Government once again letting down our steel industry and forcing our steelworkers to compete with one hand tied behind their back?
I do not agree about the level of support. I cannot speak for what is happening in Germany, but this remains significantly more generous support for the energy and trade-intensive industries. The hon. Gentleman is right about the figures for this country: the price threshold for the scheme is £99 per megawatt hour for gas and £185 per megawatt per hour for electricity. To be clear, about 60% of the up to £5.5 billion that we have allocated for this scheme would be for the energy and trade-intensive industries. That is more than half of all the funding. It is a significant commitment and includes major manufacturing sectors such as steel.
The Minister talks about financial prudence, but when any business goes out of business this Government lose the tax from pay-as-you-earn and all the other income from them. His own Government have described the hospitality sector as a vulnerable industry. We have heard in the Chamber today that increases of 400% and 500% are common. Energy costs of £5,000 to £15,000 a month are not uncommon. Does he think that a maximum of £191 per month will make them feel any less vulnerable?
We do see the importance of the hospitality sector in every part of the United Kingdom. That is precisely why we have the current six-month scheme—£18 billion. Let us be clear about something: if a Government wanted to raise £18 billion year on year, that would require an increase in the basic rate of income tax of 3p. That is enormous and puts into context the scale of that cost.
Yes, we want to support hospitality. To give one example, because of freezes or cuts to the duty on whisky and spirits, that duty is now at the lowest level in real terms since 1918. Alongside that, next August, for the first time ever in this country—something not possible when we were a member of the EU—we will have a differential duty with a lower rate on a pint in a pub compared with a can of the same beer in a supermarket. We are supporting hospitality but we are balancing that against the need to run a tight fiscal ship.
The Minister has already clarified that the scheme will automatically apply to Northern Ireland. However, energy policy is normally devolved in Northern Ireland. As he knows, we have a distinct energy market with a different profile in the use of fuels, including alternative fuels. Will a restored Executive have the opportunity to shape that policy to suit local needs? I suspect that we will get a much greater share through the Barnett formula based on the population than we would through direct support, given that we do not have the same degree of reliance on gas.
The hon. Gentleman makes a fair point. There are substantive differences between the way the energy market works in Northern Ireland and how it works on the Great British mainland, as it were. We want to see, as far as possible, the same support in Northern Ireland as in England, Scotland and Wales. He will know that the £600 payment, which combines the £400 support that all households should have had and the £200 alternative fuel payment, is being paid out this month. That shows the degree of support for Northern Ireland. On what would happen were an Executive to be in place, although we would very much like to see that, I will not speculate on Northern Ireland politics at this stage.
The delay in this statement has already left several businesses in Putney to go under. I am now concerned about the post office in Southfields, where the sub-postmistress thinks they will be unable to continue operating. There will be a community cost if post offices across the country go under as a result of the increase in bills. Has the Minister assessed the impact of the energy crisis on post offices? Can he confirm whether they will be included in the cut-back scheme after March? Could he consider a community impact criteria in the scheme so that there will not be a high cost for our communities in Southfields and beyond?
On the point of going under as a result of the delayed announcement of the results of the review, we were due to announce on the last sitting day before recess, and we have announced on the first sitting day—it is a delay, but not a huge one. In that time, those businesses, whatever they are, will have been benefiting from the current support running until the end of March. We have now given them certainty for the next 12 months with a scheme that remains generous and universal. It is not as generous as before but I can confirm that it will include the sub-post office.
The Minister seems to be missing the point. Many businesses I speak to are now locked into impossibly expensive contracts. They have no choice. That is not just the cost per unit but the standing charges that they are asked to pay. The best deal that the charity Toryglen Community Base in my constituency could get was to go from £9 k a year to £62 k a year. The food manufacturer Calder Millerfield is paying six times more now than it was before—that is what it has been offered with the Government support at its current rate. Many small businesses and hospitality businesses in Glasgow Central are facing the same. What will the Minister do about these hopelessly expensive contracts that businesses are being locked into now at these high prices? What negotiation is he doing with the energy companies to bring those prices down? They will push businesses under more than anything else.
I was absolutely clear in my statement that the precise reason that we are continuing the universal support is for those very companies, charities or other public sector organisations that fixed while prices were higher and have since reduced. We have precisely those companies in mind, but it is also for those companies that may currently be on a lower tariff that is about to finish, who had a long-term fix from some years ago when energy was much cheaper. The point is that it is another 12 months of security. It is right that it is not as generous as it was, but when speaking to stakeholders there was no expectation that a Government would continue a level of support costing £18 billion for six months. That is a very expensive intervention. This remains a significant intervention and will remain generous for charities, businesses and public sector institutions.
Since the autumn statement, I have raised the case of an agricultural food manufacturer in my constituency in relation to energy support four times. Despite positive noises in the Chamber and its offer to engage in the review, to date we have heard nothing back. I have two questions for the Minister. First, will the review be published on gov.uk so that we know exactly who has been consulted? Secondly, he mentioned the different centiles, but what if a business disagrees with the Government’s assessment? Who does it appeal to? Who is the ultimate arbiter?
If the hon. Lady has a business that wrote in to the Department to contribute to the review and did not receive a response, I would be grateful if she forwarded me a copy of that correspondence so that I can look into it.
The energy profits levy measures are predicted to bring in £56 billion and most of that money is coming from Scotland, yet businesses across Scotland are left struggling, particularly in the hospitality trade. The Struther Farmhouse Tea Room in my constituency is facing a 500% increase in its gas bill, with its gas and electricity up by £25,000 in a year. Despite what the Minister says, these businesses are now reaching a cliff edge because Government support is estimated to be a maximum of £2,000 against these increases. How many small businesses and jobs does he think will be lost under the guise of Government fiscal prudence?
I know that the Scottish National party struggles to understand the basic concept of fiscal prudence, but let me just explain this to the hon. Gentleman. When he talks about the £56 billion, it is not just for the energy profits levy; it also includes the energy generator levy, and we see that money as coming into the UK Treasury from across the UK to support the United Kingdom. It will support businesses in Northern Ireland, as we said earlier, as well as businesses in England, Scotland and Wales. Scotland has benefited from huge support, not just in the pandemic but through the increase in energy costs that has been seen across the United Kingdom. It has benefited from the fact that we are stronger together as a Union supporting every part of our Union.
Meanwhile, back in reality, I am sure the Minister will agree that manufacturing is the lifeblood of any economy. Many of the manufacturing successes across these islands are small and medium-sized enterprises such as ScanStone in my constituency, which manufactures outstanding potato systems. It is competing with the Germans across not just the UK market, but the EU market. The existing support that it is enjoying is not proving enough, and now it is going to get less. Can the Minister help me to understand what I should say to ScanStone in Angus about its need to navigate its way through this energy crisis? It is not an intensive user but energy is a major overhead that it is really struggling to accommodate.
The hon. Gentleman talks about being back in the real world, but when I made my statement about our plans for alcohol duty, the day before the House rose for the recess, he asked me if I had considered having a differential duty. We had been consulting on a differential duty for months before then. As to his particular question, I suggest that the company looks at gov.uk to see whether its sector qualifies under the energy intensive industries support scheme, because that remains very generous and significant, and I am sure it will be welcomed by many in that sector.
I would like to thank the Minister for the statement and for responding to questions for just under one hour and a quarter.