Fuel Poverty and Energy Price Caps — [Christina Rees in the Chair]

– in Westminster Hall at 1:30 pm on 19 November 2020.

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Photo of Christina Rees Christina Rees Labour/Co-operative, Neath 1:30, 19 November 2020

I remind hon. Members that there have been some changes to normal practice in order to support the new call list system and ensure that social distancing can be respected. Members should sanitise their microphones with the cleaning materials provided before they use them and then dispose of the materials as they leave the room. Members are also asked to respect the one-way system around the room. They should speak only from the horseshoe and can speak only if they are on the call list. That applies even if debates are undersubscribed. Members cannot join the debate if they are not on the call list.

Photo of Martyn Day Martyn Day Shadow SNP Spokesperson (Public Health and Primary Care)

I beg to move,

That this House
has considered fuel poverty and energy price caps.

It is a pleasure to serve under your chairmanship today, Ms Rees. I thank the Backbench Business Committee for granting my application, for two reasons. First, the issues to be discussed are important ones that affect millions of households across the United Kingdom. Secondly, despite the statutory requirement to debate fuel poverty annually, it was not met last year. I am also grateful to my hon. Friend Allan Dorans for agreeing to co-sponsor today’s debate so that it could go ahead if I had not been able to attend in person. I certainly echo the Minister’s closing remarks in the previous debate in December 2018 in so far as I also hope that a cross-party consensus can be reached to eradicate fuel poverty, which, unfortunately, continues to be a scourge across the whole of the UK.

Fuel poverty and energy efficiency are of course devolved matters, yet it is recognised that fuel poverty is impacted not only by a home’s energy efficiency, but by household income and the cost of energy. That therefore leaves the devolved nations exposed to Westminster policies when trying to tackle fuel poverty. We are fighting it with one hand tied behind our backs. As a devolved policy area, fuel poverty is defined and measured differently in different parts of the UK. For that reason, it cannot be directly compared because of the differences in methodology.

In Scotland last year, with unanimous cross-party support, the Scottish Parliament passed the Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019, which sets statutory targets for reducing fuel poverty, introduces a new definition that aligns fuel poverty more closely with relative income poverty, and requires Scottish Ministers to produce a comprehensive strategy to show how they intend to meet the targets. The final fuel poverty strategy was due to be published in September, but, like many other important issues, the covid-19 outbreak has delayed it and it is now expected next year.

The targets set for the 2019 Act are that by 2040 no more than 5% of households should be in fuel poverty, no more than 1% of households should be in extreme fuel poverty, and the median fuel poverty gap of households in fuel poverty is to be no more than £250 in 2015 prices before adding inflation. Each of those 2040 targets must be achieved not only in Scotland as a whole, but within each of the 32 local authority areas to ensure that no part of the country is left behind in tackling the root causes of fuel poverty. In my opinion, and I am sure others here will agree, not even one home ought to be caught in the misery of fuel poverty. One home is one too many, but if we can achieve those targets it will at least be a step in the right direction.

The 2019 Act also established a new two-part definition whereby it is determined that a household is fuel poor if, after housing costs have been deducted, more than 10% of net income is required to pay for reasonable fuel needs, and, after further adjustments are made to deduct childcare costs and any benefits received for disability or care need, the remaining income is insufficient to maintain an acceptable standard of living, defined as 90% of the UK minimum income standard, which is the minimum amount required to meet material needs and participate in society. A household is considered to be in extreme fuel poverty if, after housing costs have been deducted, more than 20% of net income is required to pay for reasonable fuel needs.

No doubt there are nuances in how other devolved nations refine their own definitions, but we all use the 10% criteria. A household in Wales is described as fuel poor if it needs to spend more than 10% of its net income on energy costs while in Northern Ireland a household is considered fuel poor if it needs to spend in excess of 10% of its household income on all fuel use. The UK Government, however, moved away from using the 10% benchmark in 2013 when they adopted the low-income, high-cost approach. This categorises a household as fuel poor if the cost of keeping the home at a reasonable temperature is above the national median level and if it were to spend that amount, its residual income would be below the official poverty line.

On the other devolved issue of energy efficiency, it is worth mentioning that energy efficiency does not only go a long way to keeping household bills down; it also helps devolved nations play their part in tackling the global climate crisis, but that is a debate for another day. Indeed, the Scottish Government have classified energy efficiency as a national infrastructure priority and they have been praised by the Business, Energy and Industrial Strategy Committee for doing so. In its report “Energy efficiency: building towards net zero” it recognised:

“Scotland has made much faster progress in improving the energy efficiency of its fuel poor homes than England”.

The same report also recommended that the UK Government

“follows the example of the devolved nations by supplementing ECO with central Government funding for fuel poverty.”

For the sake of clarity, I should make it clear that ECO is the energy company obligation.

I expected Members from the other devolved nations to share their experiences, but given covid-19 lockdowns and other business in the House, Members from other parts of the UK are not present. Therefore, I will highlight some of the achievements of the Scottish Government in this regard. They have spent four times as much as the UK Government on household energy efficiency—the highest average annual per capita investment in the UK. In the periods from 2013-14 up to 2018-19, their total investment in domestic energy efficiency was £636 million. The schemes helped more than 150,000 households throughout Scotland to benefit from energy efficiency measures and, by the end of 2021, they will have allocated more than £1 billion since 2009 through energy efficiency programmes to make homes warmer and cheaper to heat. Over the lifetime of the measures installed, Scottish households will cumulatively have saved more than £854 million on fuel bills.

Furthermore, for the next Parliament, the Scottish Government will invest nearly £1.6 billion in transforming our buildings to ensure that emissions from heating are eliminated by 2040 and to remove poor energy efficiency as a driver of fuel poverty. This uplifts heat and energy efficiency spend from £112 million in 2019-20 to £398 million per annum in 2025-26 and will include an additional £55 million to support the scale-up of energy efficiency programmes.

Our progress in this area is encouraging. However, continuing to improve the energy efficiency of Scotland’s buildings—both domestic and non-domestic—and over time decarbonising the heat supply to those buildings, providing warmer homes and better outcomes for our consumers, remains a major challenge. It is a challenge that we are determined to meet. That is why on 16 December, despite the challenges posed by covid-19, the Scottish Government provided a further £16 million investment to improve energy efficiency in fuel-poor households. The money will be used to improve insulation and install energy-efficient heating systems, including those using renewable technology, thereby contributing to Scotland’s net zero targets and helping to meet a key programme for Government commitment. This new investment will help to improve the lives of fuel-poor people in Scotland by enabling them to live in warm, comfortable homes and pay less on their fuel bills by living in a greener and more sustainable way. Importantly, in the current, climate, it is expected to help to secure up to 200 jobs.

Yet we have not lost sight of the fact that energy remains unaffordable for far too many in Scotland, creating hardship for individuals and families. Energy prices and market failures play an obvious part in that, but the building stock in parts of Scotland is old and, all too often, profoundly wasteful in energy. However, as I have said, fuel poverty is driven by more than energy efficiency and, collectively, we need to do more, because thousands of people die from it every year. As winter approaches, we have a responsibility to be mindful that temperature-related excess winter mortality remains strongly evident. We must also take heed of the growing body of evidence that shows links between indoor temperatures and excess winter mortality.

The reason that I applied for a debate on energy price caps is because it is a UK Government fuel poverty policy that relates to energy costs—one of the reserved key drivers of fuel poverty that the devolved nations have no control over. Moreover, like the energy company obligation, this UK Government policy is not the panacea for fuel poverty that was anticipated. Indeed, even Citizens Advice, an organisation that welcomed it as some semblance of protection for households on default tariffs, simultaneously warned that customers could still get a better deal by switching supplier or investing in energy efficiency.

It was evident—in fact, it was pointed out in the last fuel poverty debate, which took place nearly two years ago, before the Domestic Gas and Electricity (Tariff Cap) Act 2018 came into force on 1 January 2019—that the energy price caps would be set at a sustainably higher level than the cheapest available tariffs. Therefore, the intention behind the price caps—to protect consumers in England, Wales and Scotland who were on default tariffs—was questionable from the get-go. Additionally, research carried out in 2018 by the consumer group Which? found that the energy price cap would not help customers who were on some of the priciest deals on the market. For example, 30% of customers who were on fixed tariffs, rather than default tariffs, were not able to benefit.

There is also the issue of some energy customers having access only to certain tariffs due to having a prepayment meter. The Competition and Markets Authority’s report recommended the first price cap for customers on prepayment meters because they had fewer options, which resulted in less competition and a higher likelihood of being overcharged. Ofgem introduced that recommendation as a temporary cap in April 2017.

Furthermore, there are customers across the country who are subjected to unaffordable tie-in tariffs because of the type of heating system and meter that are installed in their home. Indeed, I presented a public petition earlier this year on behalf of Falkirk’s Forgotten Villages, a group made up of some of my constituents, whose experience of the THERMAflow wet electric heating system and its related ScottishPower’s Economy 2000 tie-in tariff is not only fuel poverty, but food poverty and physical and mental health issues.

I pay tribute to the work done by the Falkirk’s Forgotten Villages group, and I recognise the significant investment that Falkirk Council has made in agreeing to install a new mains gas system in 86% of the affected properties. That is a great example of partnership working, and it shows what can be achieved. I am looking forward to seeing continued progress with the project and to learning what renewable technologies will be engaged for properties where gas installation is not available. Falkirk Councillor Laura Murtagh, who has also been working on the replacement of wet electric heating systems in her area, says:

“These residents are particularly vulnerable to fuel poverty due to the double whammy of high heating tariffs and inefficient systems, which cause eye-wateringly high bills for residents, who are often in a position to least afford this.”

Councillor Murtagh has been assisting residents in her ward with energy-efficiency measures for some time. However, the rise in the tariff, which was introduced last year by ScottishPower, highlighted the breadth and depth of the issue and galvanised council officials to work at pace over the past year to find solutions for the affected areas. Hopefully, I will hear about progress being made in these areas over the coming months.

Having no access to mains gas affects another group of households, who I understand are generally unable to benefit from the Domestic Gas and Electricity (Tariff Cap) Act 2018, as they have little choice in their heating source, pay more for their fuel and are thereby more at risk of fuel poverty. We must not underestimate the economic and social implications of living in a fuel-poor household, and we must do everything in our power to end the dilemma of whether people heat their home or feed their family, because being in that situation causes distress and ill health, both physical and mental.

Earlier this year, the SNP called for a package of measures to help households get through the crisis, and I urge the UK Government to heed the calls and to look urgently at introducing an emergency coronavirus energy grant to support households struggling to pay their energy bills, and to prevent them from accruing unmanageable debts. For example, I saw evidence from one of my constituents, who lives in accommodation within the boundaries of Falkirk’s forgotten villages and uses the THERMAflow heating system, that they pay an average of £170 per month for their home energy. Members will not be surprised to hear that after their housing costs were paid, they were not left with £1,700 of net income to make that energy affordable. That was not the worst that this area of my constituency experienced, nor are high energy costs unique to those using the THERMAflow system. I have heard about bills far in excess of that being received in those remote villages.

Other constituents, who live in a three-bedroom semi with the THERMAflow wet electric heating system and the domestic Economy 2000 meter tariff, had an average monthly energy bill of £270. When they raised an inquiry, they were advised by a ScottishPower representative that THERMAflow wet heating systems can be notoriously expensive to run. That had not been brought to their attention before installation, nor were they given any guidance about how to effectively use the system after it was installed.

ScottishPower is not linked to THERMAflow systems in any way and my reference to it is as the local provider. There are currently 60 or so alternative energy suppliers in the UK who could offer a cheaper tariff but do not. There is no cost-benefit for constituents to switch, which is why we need Government action on energy policy.

It is unacceptable that constituents could not access the cheapest payment method, just because they do not pay by direct debit, in common with many others across the country. Such draconian measures target the least advantaged and most vulnerable in our society. Energy companies must end that discrimination voluntarily or legislation should be introduced to ensure that they do.

Another constituent, who paid ScottishPower for their electricity by direct debit, contacted me in distress in June this year after receiving an outstanding statement for over £1,500, despite making the regular requested payments. That constituent is a vulnerable pensioner who lives alone in accommodation that does not have the THERMAflow system. In fact, their home has no central heating at all. All the distress was down to billing errors because a new meter had to be installed when my constituent did not want to be a victim of an expensive pay-as-you-go tariff.

That is a prime example of someone trying to be prudent, yet still being caught out by a system that lets people down. Fortunately, that constituent was lucky to have the support of their family, who stepped in and found the best available option was to change supplier. That is a bad enough situation, but it begs the question of how a pensioner living alone on a fixed income copes with such a dilemma if they do not have support from their family or others. It exemplifies what I mentioned earlier, about energy price caps being set at a level substantially higher than the cheapest available tariff and proves customers can get a better deal by switching.

It is relevant to point out that ScottishPower is the energy provider in the cases I have talked about and that these are just a few of my constituents who have approached me since the start of the year. These cases do not cover all the constituents who have experienced problems with unaffordable energy costs, because there simply is not time to cover them all. Even with as few speakers we have today, I would be here until next week going through the cases. I am fairly certain that not everyone has come forward for help since I was first elected five years ago.

To summarise, it is deeply regrettable that the UK Government have not met their statutory requirement to debate fuel poverty annually. Additionally, the situations I have highlighted indicate that the energy price cap is not having the desired effect. Indeed, in his statement to Parliament on 20 October, the Business Secretary said that when the price cap on standard variable and default energy tariffs ends there will be

“more to do to ensure consumers will not face unfair prices”.—[Official Report, 20 October 2020; Vol. 682, c. 38WS.]

Although extending the price cap to next year may provide some protection for some customers, that does not go far enough. It is just more of the same. Instead, I urge the Government to prioritise the faster switching initiatives and consumer engagement schemes that the Secretary of State referred to in his statement, and to replace the price cap with a scheme that will ensure all customers are protected from the energy inefficiency and high tariffs imposed by energy providers, which target the least wealthy in our society.

Photo of Allan Dorans Allan Dorans Shadow SNP Spokesperson (Foreign Affairs Team Member) 1:49, 19 November 2020

The difficulty with following Martyn Day is that he makes such a comprehensive case. As we prepared our speeches individually, there is some repetition in our remarks. However, as he was speaking, I took the opportunity to take out some of the repetition, as it is such a short debate, rather than take up too much time.

Fuel poverty rates vary significantly across the United Kingdom and cannot be directly compared, owing to differences in methodology. However, the latest estimates show that around 11% of households in England are classed as fuel-poor. The figure is 12% in Wales, 18% in Northern Ireland and 25% in Scotland. That is a remarkable difference, and one that needs to be addressed.

In Scotland, fuel poverty is generally measured on the basis that, in order to maintain a satisfactory heat regime, a household would be required to spend more than 10% of their disposable household income on fuel. Some of the areas of the worst fuel poverty in Scotland are in my constituency of Ayr, Carrick and Cumnock. There is deep injustice in that, as many of those areas are in communities still living above the great Ayrshire coalfields that powered the economy and the industrial revolution for centuries and they are home to many wind farms, which power the economy today. Adding to that sense of injustice, those wind farms now play a major part in the transfer of electricity from Scotland to other parts of the United Kingdom. As of April 2020, that transfer stands at 25,000 gigawatt-hours annually—enough to heat 700,000 homes.

Parts of East Ayrshire in my constituency have some of the highest levels of fuel poverty in Scotland—a staggering 32% of households—while neighbouring South Ayrshire, also in my constituency, has one of the lower levels in Scotland, at 22%. Both figures are much higher than the English average of about 11%. Most shockingly, 13% of households in East Ayrshire suffer from extreme fuel poverty and need to spend at least 20% of their disposable income on fuel.

Fuel poverty and the ability to properly heat homes really matters for health outcomes. According to research published in June 2020, cold temperatures are strongly related to cardiovascular and respiratory diseases and they double the risk of respiratory problems in children. Cold also suppresses the immune system, increasing the risk of infections and minor illnesses such as cold and flu. Living in poverty exacerbates existing conditions such as arthritis and rheumatism and negatively affects the mental health of the population by increasing the financial stress on households.

We know that 91 per cent of those who have died from the effects of covid-19 had a pre-existing medical condition—commonly, chronic lower respiratory disease. The End Fuel Poverty Coalition has warned that fuel poverty puts households more at risk from the worst effects of covid-19. Reducing preventable ill health arising from cold homes will be vital in protecting the national health service and care services this winter.

Without any doubt, the major contributor to the existence of fuel poverty is the overall level of poverty in this country. The Scottish Government have already implemented a number of specific actions to reduce household poverty by increasing disposable household income, which have been widely praised by the United Nations and the Joseph Rowntree Foundation.

The actions include the Scottish child payment, which will commence in February 2021. It will provide families on low incomes with a payment of £10 per week for each child under six, which the Joseph Rowntree Foundation has said will

“make a significant contribution to tackling child poverty in Scotland.”

There are also community care grants, where £25 million has been paid out to help with one-off cost purchases, to allow those on low incomes to purchase essential household items. Since 2013, an annual package of more than £125 million has been paid to mitigate the impact of the UK Government’s welfare cuts, including the bedroom tax, the two-child benefit cap, the five-week wait for universal credit and the sanctions regime.

The Scottish Government aim to reduce fuel poverty to no more than 5% and extreme fuel poverty to no more than 1% by 2040, but they are constrained by their partial controls over benefits and the levers of the economy. They have also recently introduced a child winter heating assistance programme—a new payment of £200 to help families with severely disabled children.

Using Scottish Government funding and advice, East Ayrshire Council and South Ayrshire Council have had external wall insulation fitted to improve energy efficiency, lower costs and improve health outcomes. In South Ayrshire alone, a programme to fit external wall insulation to 1,900 properties saved more than £400,000 on fuel bills per year and significantly reduced admission rates for respiratory and cardiovascular-related conditions in those areas. That project is an impressive example of what can be done, despite the limitations of the devolution settlement, by the Scottish Government in partnership with local authorities to make a real improvement to lives by reducing fuel poverty.

Despite the fact that Scotland’s energy generation, produced by oil, gas and renewables, is way beyond its domestic demand, energy prices for consumers in Scotland remain high. According to Age Scotland, price capping has made little difference to them.

Fuel poverty is a major issue across all nations of the United Kingdom, but it is particularly serious in Scotland. It has also been brought into sharp relief recently by the number of people working from home or on furlough due to covid-19, and the significant increase in their home fuel bills, by as much as 37%. They have generally not been compensated by employers. The reality of fuel poverty is that today, as winter approaches and we gather here in the relative warmth of Westminster Hall, in all our communities there are families with young children who, through no fault of their own, are out of work; people on benefits; working families on the minimum wage or zero-hours contracts; elderly people alone and isolated; the long-term sick and disabled, and many others, including those who have been excluded by the Chancellor from receiving grants, loans or any other benefits in our society, who have to make the difficult decision daily whether to heat or eat.

Although the Scottish Government have made progress on tackling fuel poverty and improving energy efficiency, the constraints of the devolution settlement, under which 85% of expenditure and income-replacement benefits are reserved to Westminster, prevents the kind of structural change and investment required in a country that has a harsher climate and, ironically, generates far more power than it requires. The immediate impacts on levels of fuel poverty are directly related to general poverty and are the direct result of the austerity policies of the United Kingdom Government over the past 10 years.

To effect meaningful change in levels of fuel poverty, Scotland needs powers on welfare, the ability to cap energy prices to affordable levels, and the control of economic levers, and not only in respect of fuel poverty and overall poverty. That would best be achieved by an independent Scotland or, in the short term, by powers being devolved to the Scottish Parliament as a matter of urgency.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Energy and Climate Change) 1:58, 19 November 2020

It is a pleasure to serve under your chairmanship, Ms Rees. I congratulate my hon. Friend Martyn Day and my constituency neighbour, my hon. Friend Allan Dorans, on securing this debate. I thank the Backbench Business Committee. This is a very important subject, and it is a shame that there are not more hon. Members here to debate it, but obviously, between covid and the fact that it is a Thursday afternoon, it is understandable that the Chamber is not as full as it would normally be.

My hon. Friend the Member for Linlithgow and East Falkirk set out the issues really well. He highlighted the need to work on a cross-party basis. It was interesting to hear about the work undertaken with Falkirk’s forgotten villages. I am sure many of us have villages that claim to be forgotten villages. It is great to see them working together to secure a successful outcome and a gas grid connection. Hon. Members can tell how steeped my hon. Friend is in his constituency and the work that he does for his constituents by bringing forward those examples, defending his constituents and trying to effect change, as highlighted today. My neighbour, my hon. Friend the Member for Ayr, Carrick and Cumnock, reiterated Scotland’s contribution to the generation of the UK’s energy supply and fuel over the years. He also highlighted how East Ayrshire Council, which is my local authority as well, suffers from fuel poverty and poverty in general, which we would like to be addressed.

On that point, I welcome the fact that the UK Government, the Scottish Government and the three Ayrshire councils today signed off the Ayrshire growth deal. One of the proposals of that deal is for a national energy research demonstrator project at Cumnock. The leader of East Ayrshire Council today highlighted the need to tackle fuel poverty, and hopefully that will make a difference in our area.

I am lucky that I have never had the dilemma of not being able to turn on the heating, or faced the awful choice of what to cut out to turn it on, but as my hon. Friends have demonstrated, too many people do face the awful choice of heating or eating, which is simply not good enough. I am sure that all hon. Members present have dealt with constituents who are in that predicament, or who try to get by by heating only a couple of rooms. Heating only a couple of rooms invariably leads to dampness in the rooms that are not being heated, which obviously exacerbates health problems, including mental health problems, as my hon. Friend the Member for Linlithgow and East Falkirk highlighted. That has a personal cost as well as a cost to the NHS, which has been estimated at between £1.4 billion and £2.2 billion a year in England. If we tackle the problem, we will improve people’s health and wellbeing and cut costs to the NHS. Sadly, National Energy Action estimates that 10,000 people a year die earlier than they should owing to fuel poverty, so we need to tackle that scourge of society.

As has been pointed out, the four nations measure fuel poverty slightly differently, but there is no doubt that Scotland appears to have a higher rate. Some 24% of Scotland’s population are classed as fuel-poor. That is partly due to the fact that about 15% of homes are off the gas grid and have to pay more to heat their homes.

Within that cohort, in the highlands of Scotland, many customers pay about £400 a year more to heat their homes because they are on restricted meters. They pay a surcharge of between 2p and 4p per unit of electricity used. I highlight that to the Minister. Does he think it is fair that people in the highlands have to pay a surcharge while exporting electricity to the rest of the UK? I hope that that can be addressed. We need a better regulatory framework for off-grid heating, to control pricing for people who have to buy oil and gas. I hope that he will take that away and look at it.

It has also been highlighted that covid-19 has had an impact. People losing their jobs or working at home is exacerbating fuel poverty. Energy Action Scotland estimates that fuel poverty in Scotland could increase by 5% owing to the pandemic. Again, that illustrates the need for action.

I welcome the action taken by the Scottish Government to deliver their new child winter heating allowance. Those payments of £200 a year for those eligible start next month and are automatically paid, rather than people having to claim for them, so everybody will get them in full. The UK Government could look at that, along with the request from my hon. Friend the Member for Linlithgow and East Falkirk for an emergency coronavirus energy grant, to which I hope the Minister will respond.

We also need the UK Government to commit to keeping the £20 uplift for universal credit. That additional money has been a lifeline to many, but those on legacy benefits need a similar increase. That is not the responsibility of the Minister’s Department, but I hope he can speak to the Chancellor about that.

As was highlighted, the Scottish Government have brought forward groundbreaking legislation to tackle fuel poverty. We need to know when the UK Government will bring forward their fuel poverty legislation and strategy. We wait with bated breath for the energy White Paper. The Minister said recently, in a written answer, that he is still planning to publish it in the autumn, but I suggest that in Scotland it is already winter, rather than autumn, so hopefully we will see it soon.

One of the most important factors, apart from income and alleviating fuel poverty, is clearly energy efficiency measures. As we have heard, the Scottish Government have led the way on that. I want to focus a wee bit more on the details of energy efficiency—hopefully without repeating too much of what my colleagues have said. Obviously, it is a no-brainer that greater energy efficiency measures can assist in reducing carbon emissions at the point of use, as well as the demand in energy generation, so that also has an effect on reducing emissions further. Clearly, it will assist in reducing fuel poverty levels and it can be part of a green industrial revolution.

I welcome the 10-point plan and the commitment to making £1 billion available next year to make new, and existing, homes and public buildings more efficient. However, while I welcome that, it does feel like a wee bit of a rehash of previous announcements. We remind the Minister that the Conservative manifesto gave a figure of £9.2 billion, so we actually need to see plans for the rest of that money. I also ask the Minister to consider asking the Chancellor to remove VAT on energy efficiency home improvements, because that makes it more cost-effective for those that can only just about afford to install such measures.

Back to the 10-point plan: I welcome the proposals for installing 600,000 heat pumps every year by 2028. Obviously, we need to see how that is going to come forward in terms of an action plan and delivery programme. I request the Minister to look at tackling first those that are off the gas grid, and to make the heat pumps more efficient. To transform people’s lives, the plan needs to align with the installation of energy efficiency measures. Hopefully the programme will be co-ordinated in that way—providing energy efficiency and the installation of new heat pumps.

I do welcome those proposals, but I still think that we need more direct UK Government investment in energy efficiency; again, that comes back to following the lead of the Scottish Government. It is not just the SNP that has said that, but energy companies, third sector organisations and the cross-party Business, Energy and Industrial Strategy Committee in its 2019 report, “Energy efficiency: building towards net zero”. A key point from that report was:

“We note that Scotland’s investment of four times more than England cannot be explained by a less efficient dwelling stock: the latest housing survey data demonstrates that homes in Scotland actually have greater insulation levels than in England. For example, in 2017, 49 per cent of homes in England had insulated walls, compared to 60 per cent of homes in Scotland.”


“that Scotland has made much faster progress in improving the energy efficiency of its fuel poor homes than England, where in some bands, progress has stalled.”

On that, statistics show relative success—44% of Scottish homes were rated as Energy Performance Certificate Band C or better in 2018, compared with just 34% in England and 28% in Wales. In Scotland, the proportion of properties in the lowest EPC bands of E,F or G has more than halved since 2010, reducing from 27% to 12%. In England the figure is still at 16%, and unfortunately in Wales it is even higher, at 20%, although there is a caveat that the Scottish figures are measured slightly differently. No wonder the BEIS Committee concluded:

“The Government appears indifferent towards how public per capita spend in household energy efficiency in England compares to other parts of the UK” and

“the governments of the devolved nations treat energy efficiency as a much higher priority than the UK Government.”

That “indifferent” comment is particularly damning. I would like to hear what the Minister has to say about that. I know that £1 billion has been announced, but we need to see the rest of that £9 billion commitment.

The Committee on Climate Change first confirmed that policies were not in place to deliver the UK’s ambitions in energy efficiency to improve homes to at least EPC band C. The CCC stated that regulations for the private rented sector prioritise costs for landlords over the costs for renters, and that minimum standards for social housing were required. By contrast, it observed that the Scottish Government were demonstrating how an effective policy package for energy efficiency improvements in buildings might be delivered. They have actually set out a comprehensive framework of standards, backed by legislation. When will the UK Government put in place a proper framework that covers the private rented sector, social housing minimum standards and owner-occupiers, as the Scottish Government have done?

We know our long-term energy efficiency and investment programme will create jobs that allow the programme to deliver the best value, avoiding spikes in cost, as part of a green industrial revolution. Some 27 million homes need their heating systems decarbonised, so it is critical that they are as energy efficient as possible. That is why it would be good to see a long-term Government programme that looked at energy efficiency as a national infrastructure project. Maybe that could be addressed when the national infrastructure plan is published.

My hon. Friend the Member for Linlithgow and East Falkirk mentioned the energy company obligation scheme. The committee on fuel poverty states that those measures do not actually help those who most need help, which confirms the need for direct, targeted investment. We do not want another failure like the green deal scheme, which has put more people into fuel poverty rather than helping them. I know that the Minister has acknowledged that appeals for mis-selling by Home Energy and Lifestyle Management have taken too long, but his Department needs to look at and resolve that matter.

Our net zero commitments will be built in to the next investment period for the transmission grid upgrades. ECO and smart meter costs are all being added to consumer bills. What will that mean for energy users of the future? Will the Government start to consider general taxation as a way to create some of that investment in our energy system?

Everybody will be pleased to hear that I am going to conclude my remarks, but I have a few comments from the BEIS Committee report. The Committee stated that the UK Government must not only match Scottish levels of funding but create a joined-up strategy, and that the

“weight of stakeholder evidence suggests that Scotland designating energy efficiency as a national infrastructure priority has helped to improve its policy impact, making energy efficiency policy better designed and funded, longer-term, as well as more comprehensively governed and targeted, than in England.”

I ask the Minister to reflect on that and, I hope, to bring forward similar plans for the rest of the UK.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Business, Energy and Industrial Strategy) 2:12, 19 November 2020

It is a pleasure to serve with you in the Chair, Ms Rees. I congratulate the hon. Members for Linlithgow and East Falkirk (Martyn Day) and for Ayr, Carrick and Cumnock (Allan Dorans) on securing the debate, and thank the Backbench Business Committee for granting it.

As all hon. Members have said, the scale of fuel poverty, which is present in every part of the UK, is staggering. I say that as a Member representing a constituency less than 10 miles away in which 5,500 households are in fuel poverty—this problem affects every part of the UK. The point about methodology and the consequent difficulties in making comparisons across the four nations was made, but the headline estimated rates show approximately one in 10 households in England and Wales are fuel poor, one in five in Northern Ireland, and one in four in Scotland. Those figures should be a source of shame for each nation. We have heard about the negative impacts that fuel poverty has on health, mental health, and morbidity.

The debate is timely as this issue affects millions across the country. Older people bear the brunt of it, but families—particularly single-parent families—and increasing numbers of younger people are also affected, and the issue has been exacerbated by the coronavirus pandemic. The impact has been felt not just because of sharp reductions in income, job losses, and people being furloughed or having to manage on some form of financial support from the state, but, as has been mentioned, because more time at home as the weather turns colder means much higher bills. In the context of the near standstill on the installation of smart meters and of the distinct lack of progress on energy efficiency, there is concern that this winter could see even higher numbers of deaths linked to cold homes.

That more can and should be done to address fuel poverty is, in my view, beyond dispute. A number of schemes already aim to tackle the problem, but they operate with varying degrees of effectiveness, and more attention needs to be paid to making them work better and over a long time. In the short term, we really need clarity on how those schemes will operate in the months and years ahead.

The warm home discount scheme was rightly extended by the Government last month, but we still have no idea about what that means for the amount of the discount or whether coverage will be extended to customers who sign up with smaller energy providers, for example. We need urgent clarity on how that scheme will work going forward.

In its last iteration, the energy companies obligation, which the hon. Member for Linlithgow and East Falkirk referred to, focused almost exclusively on low-income and vulnerable households. We know that it can make a contribution to reducing fuel poverty through energy efficiency measures, and hence lower bills for at-risk households. However, the ECO is now scheduled to run only to 2022. We need urgent confirmation from the Government that it will be extended beyond that date, and that the cuts made to its overall funding at the time when its focus was revised will be restored.

Beyond the targeted schemes that exist, the best way in the long term to combat fuel poverty is to design it out—to systematically insulate and make more energy-efficient the homes in which those in fuel poverty live, which are largely, it has to be said, in the private and social rented sectors. In most European countries, not just those with more temperate climates, the concept of fuel poverty is largely alien because the underlying efficiency of their housing stock is such that bills are entirely manageable by the vast majority of households. That is not the case across the UK, where we still have some of the worst insulated and least energy-efficient housing stock in Europe.

As the Scottish National party spokesperson mentioned, the manifesto on which Conservative Members stood in the last general election contained a commitment to spend more than £9 billion on uprating energy efficiency in homes, including a £2.5 billion home upgrade grant scheme and a £3.8 billion social housing discount fund. We have yet to see any sign of either measure or, I would argue, any real commitment to rapidly overhauling and upgrading the UK’s housing stock.

Although the amount allocated to the recent green homes grant is welcome, as an emergency measure lasting only for this financial year, and with some real questions about how effectively it can be delivered over that period, there is a real risk that it will ultimately have very little effect. Current statutory energy efficiency commitments require all fuel-poor homes in England to be levelled up to the energy efficiency standards of a current new-build home. At present, the Government are a very long way away from meeting those commitments, and we need urgent action to get us back on track.

So far I have focused on general issues relating to fuel poverty, but the title of the debate invites us to pay particular attention to the role of the energy price cap. The Opposition very much welcomed the price cap when it was introduced in January last year. After all, it was an idea—as the Minister may recall, labelled a semi-Marxist proposal by his party—that we put forward in our prospectus in the 2015 general election.

There was a clear need for a cap to address the issue of companies overcharging consumers, manipulating the goodwill of loyal customers and exploiting so-called sticky customers, many of whom are among the most vulnerable in the population. There is no doubt in my mind that the price cap has saved the poorest households considerable sums of money. It is estimated that the amount is in the order of £75 to £100 for those households on the default price tariffs.

However, as hon. Members will know, and as has been mentioned, the cap was introduced only as a temporary measure until such time as it could be proven that conditions for effective competition in the market existed. Those conditions clearly still do not yet exist. We were pleased that the cap has been extended for a further year after Ofgem reported as much to the Government, but issues of concern remain. The hon. Member for Linlithgow and East Falkirk spoke about the really important one of pre-payment meters.

We know that people on pre-payment meters are often fuel-poor customers. The energy price cap has folded into it the previously existing pre-payment meter price cap, which will lapse at the end of this year. Although protection for those who access their energy in that way will continue to some extent through the default tariff price cap, I hope the Minister agrees that we have to ensure that they are afforded long-term protection when the cap as a whole is lifted, as it inevitably will be.

This has been a good and important debate, albeit an under-subscribed one for the reasons that the SNP spokesperson mentioned. There is a huge amount of interest in this problem, as there should be given its scale. The Opposition urge the Government to devise a more comprehensive strategy on fuel poverty—one that addresses price, efficiency and problems of coverage and access, as well as the root causes. I hope that the Minister can provide the House with some reassurance that his Department is at least thinking along those lines.

Photo of Kwasi Kwarteng Kwasi Kwarteng The Minister of State, Department for Business, Energy and Industrial Strategy 2:19, 19 November 2020

It is a pleasure to speak under your chairmanship, Ms Rees, in this excellent debate on a really important issue. I cannot think of a more important issue that the House could debate; very few are more important and more relevant to people’s lives than fuel poverty. I congratulate Martyn Day on securing this important debate.

The challenges of fuel poverty and the affordability of energy for households are a huge concern for everybody—not just for members of Opposition parties, but for the Government. I particularly share the concerns about fuel poverty relating to health issues, both physical and mental, and the difficulties people are experiencing now because of the coronavirus pandemic. Obviously, my view of what the Government have been doing and of the importance with which we regard these issues will be slightly different from that of Opposition Members, but I can assure the House that the Government take the issue of fuel poverty extremely seriously.

As the hon. Gentleman mentioned, fuel poverty is a devolved matter, with England, Wales, Northern Ireland and Scotland all having their own fuel poverty targets, their own policies and in many cases their own definitions. However, we all absolutely share the view that fuel poverty is a critical issue.

It is not a new issue. In 2015, we published a fuel poverty strategy for England, which set out the Government’s approach to tackling fuel poverty then. The hon. Gentleman is quite right to say that we should publish a new fuel poverty strategy. We had wanted to publish it at the end of this year, but we are very hopeful that we can get it out early next year, and it is absolutely critical that we do so.

We are also committed to ensuring that there is appropriate scrutiny, so I am very happy to spend some time dealing with some of the issues raised in the debate. Obviously, I cannot deal with every single issue that has been touched on. We have talked about power generation, fuel poverty and the nature of the devolved settlement—it has been a wide-ranging debate—and I will try to deal with some of the issues. It is vital that we work together to tackle this really important problem.

Matthew Pennycook was good enough to mention the warm home discount, which was not referred to in any of the speeches by SNP Members. Of course, the warm home discount that he was good enough to mention is a critical part of the Government’s fight against fuel poverty. It provides financial assistance to more than 3 million low-income and vulnerable households each winter, and each one of those households benefits to the tune of £140 a year roughly, which represents £3.5 billion of public money and is a significant contribution.[This section has been corrected on 16 December 2020, column 2MC — read correction] It does not abolish the problem but it is a significant contribution, and I think that any fair-minded participant in this debate would have acknowledged that. I am grateful to the hon. Gentleman for doing so.

We have already consulted on extending the scheme until March 2022, recognising that it offers vital support to people in this country, and we are considering how a version of the scheme, or even the scheme itself, can perhaps be extended beyond 2022. These are matters of grave consideration.

Members mentioned the energy company obligation and that, too, is a scheme that has helped people in fuel poverty to improve the energy efficiency of their homes. It is another great GB-wide scheme, which is worth £640 million a year, and it has made an impact in improving the energy efficiency of homes across the country. Since it began in 2013, under—dare I say it?—this Government, nearly 2.8 million energy efficiency measures have been installed in over 2.1 million homes. Again, that is making an impact. The ECO has always been focused on supporting low-income and vulnerable households, providing improvements to give a long-term benefit to those households. Again, we are planning to consult on proposed changes to the scheme in 2021; we want to see how any future scheme can contribute to meeting actual targets.

Another form of assistance and another scheme, which Members were good enough to refer to, is the green homes grant. It was launched only in September and is a £2 billion programme to improve the energy efficiency of homes in England. Other attendant fuel poverty schemes are available in Scotland, Wales and Northern Ireland. I remind the House that the green homes grant offers low-income, vulnerable and fuel-poor households up to £10,000 for the installation of energy-efficient and low-carbon heating measures in their homes. There is also a local authority delivery element that considers households of all tenors and of all descriptions within a household income of under £30,000. Local authorities will shortly set out detailed eligibility criteria for that.

Matthew Pennycook suggested that there would not be time to fully implement the green homes grant. We are looking at that, and there is some flexibility in the system. I look forward to making the case that we should perhaps extend it, and there may already have been an announcement in that respect.

[Siobhain McDonagh in the Chair]

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Energy and Climate Change)

The Minister will be aware some hon. Members have also raised concerns that people in many constituencies have been unable to get the free quotes required from approved suppliers to progress. Will the Government address that as well?

Photo of Kwasi Kwarteng Kwasi Kwarteng The Minister of State, Department for Business, Energy and Industrial Strategy

Absolutely. I suggested that there was flexibility in the scheme. One of the reasons that there would be flexibility is that we are trying to increase the number of installers who have the trust mark accreditation, so that they can do the work. It is a good scheme, and it goes some way towards meeting the manifesto commitment mentioned with respect to the £9.2 billion. There is clearly more work to be done and I fully accept that, but we have made a start. It would be irresponsible to say that the Government are “indifferent” to the problem, as was suggested by the Business, Energy and Industrial Strategy Committee. We are not “indifferent” to this important issue, though there may be disagreements as to how best to tackle it. It would be wrong to suggest that we are “indifferent” to that critical and hugely important problem.

The energy price cap was mentioned, and that opens up a whole new avenue of debate. Clearly that has had a role in not only helping people in straitened circumstances, but in helping industry. It has meant that the industry can, overall, be more productive and efficient. That obviously has the effect of driving down costs and thereby driving down prices. We are committed to ensuring fair energy prices for consumers, and that is why we introduced the price cap on default energy tariffs in 2019. The hon. Member for Greenwich and Woolwich mentioned that it was part of the Labour manifesto many years ago before he even got into the House. I think it was in 2013—the election was in 2015. Clearly, however, there was an issue and the Government accepted that. We introduced the requisite legislation. It is extraordinary that we are being criticised for adopting the policy suggested by the Opposition with which we have, over time, agreed. That shows that the Government do listen to ideas, from whichever quarter those ideas may arise.

The default price cap today protects around 11 million consumers, and a further 4 million households are protected by the prepayment meter price cap from 2021 when that is introduced. It is a big intervention in the way the energy market works and shows that we have a non-ideological approach to the issue. It also shows the Government’s determination to support hard-pressed energy consumers.

In my concluding remarks, I will talk specifically about the covid-19 response. I and the Government are fully aware that the covid-19 pandemic poses unprecedented and unusual problems with respect to fuel poverty. I was struck by the suggestion from the hon. Member for Kilmarnock and Loudon that fuel bills had risen by 37% or maybe it was his colleague the hon. Member for Linlithgow and East Falkirk. I fully accept that it is a huge increase.

From the outset of the crisis the Government recognised that the covid-19 pandemic would have a huge impact on household incomes and would lead to more straitened circumstances. That is why the Department for Business, Energy and Industrial Strategy acted swiftly to secure an agreement with energy suppliers to support consumers impacted by coronavirus. In fact, one of the first calls that I made was to try to organise a response, and the suppliers understood the difficult circumstances that we were in. We managed to reach an agreement as early as March, which provided real support for those who needed help the most.

The energy companies have responded reasonably well. There is a broad understanding in the sector about the nature of the problems. We have done a huge amount. People talked about poverty in general, and the Government have spent unprecedented amounts to protect jobs and incomes. We have extended the coronavirus job retention scheme until the end of March, which has been welcomed across the country. We have also increased the third self-employed grant and provided an uplift to universal credit, which was mentioned. I am happy to say that we have responded to the concerns by providing an uplift to universal credit.

We have also increased the upfront guarantee of funding for the devolved Administrations from £14 billion to £16 billion on top of the spring Budget 2020 funding. Despite all of the support and the unprecedented level of intervention, it is a sad fact that many households will struggle with their energy bills this winter. We are absolutely focused on that and I speak to energy suppliers all the time about how best we can meet the challenges. From 15 December this year, new rules will require energy companies to identify self-disconnecting prepayment meter customers, people who are confronted often with the very harsh dilemma that was pointed out and choose to take themselves out of the prepayment meter scheme. We require energy companies to offer them support to stay on supply and to offer emergency and family-friendly hours and credit to all prepayment meter customers. That is a world where we are driving change to meet the very problem that the hon. Member for Linlithgow and East Falkirk so ably identified.

In the spirit of cross-party co-operation, I hope I have always extended a warm hand to Members to discuss the issues. We have had an excellent debate. Like the hon. Member for Linlithgow and East Falkirk, I regret the fact that more right hon. and hon. Members could not participate today, but I am sure the question will be revisited soon. I will be very happy to attend a further debate if that is what Members want and also to meet individual Members on a face-to-face basis to discuss these really important issues.

Question put and agreed to.


That this House
has considered fuel poverty and energy price caps.

Photo of Siobhain McDonagh Siobhain McDonagh Labour, Mitcham and Morden

I will suspend the sitting until 3 pm.

Sitting suspended.