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POLICE (NORTHERN IRELAND) BILL [MONEY]
Queen's recommendation having been signified--
Motion made, and Question put forthwith, pursuant to Standing Order No. 52 (Money resolutions and ways and means resolutions in connection with bills),
- That, for the purposes of any Act resulting from the Police (Northern Ireland) Bill, it is expedient to authorise the payment out of money provided by Parliament of--
(a) any expenditure incurred by the Secretary of State under the Act; and
(b) any increase attributable to the Act in the sums payable out of money so provided under any other enactment.--[Mr. Kevin Hughes.]
Question agreed to.
WELSH GRAND COMMITTEE
- That the Welsh Grand Committee shall meet on Tuesday 20th June at half-past Ten o'clock and between Four o'clock and Six o'clock at Westminster to take questions under Standing Order No. 103 (Welsh Grand Committee (questions for oral answer)), and to consider the matter of Social Exclusion in Wales, under Standing Order No. 107 (Welsh Grand Committee (matters relating exclusively to Wales))--[Mr. Kevin Hughes.]
INTERNATIONAL DEVELOPMENT
- That Mr. Tony Colman be added to the International Development Committee.--[Mr. John McWilliam, on behalf of the Committee of Selection.]
PETITION
Langage Energy Park
10.30 pm
Mrs. Linda Gilroy (Plymouth, Sutton): I have a petition signed by 5,000 people from my constituency and surrounding constituencies in Devon and Cornwall.
- The Petition of the Residents of Plymouth and the South West
Declares that we support the development of the Langage Energy Park as it will provide a major boost to the region including much needed jobs, reliable energy supplies and a reduction in energy prices.
The petitioners therefore ask that the House of Commons
Urge the Secretary of State for Trade and Industry to take steps to grant approval to allow Langage Energy Park to proceed.
And the petitioners remain etc.
Utilities Regulation
Motion made, and Question proposed, That this House do now adjourn.--[Mr. Kevin Hughes.]
10.31 pm
Mr. Hilary Benn (Leeds, Central): I am grateful for the opportunity to raise the issue of fairness in gas and electricity prices. Although I want to speak principally about pre-payment meters, I am equally concerned about the problems that people experience with debt and fuel poverty. Fuel poverty has been defined as the situation experienced by households that must spend 10 per cent. or more of their income to keep their homes adequately warm. There are between 4 million and 5 million such households in England, of which about 1 million have to spend 20 per cent. or more of their income every week on energy.
Let me begin, however, by paying tribute to the steps that the Government have taken to reduce the cost of lighting our homes and keeping them warm. The reduction in VAT on domestic fuel and on the supply and installation of energy-saving measures, the introduction of the winter fuel payment for pensioners and the new home energy efficiency scheme are all examples of practical action that directly addresses the issue of fuel poverty.
This is a Government who have shown that they are serious about doing something, but there is one area in which more action is needed. I am thinking of people with pre-payment meters who are charged more for their gas and electricity than those paying by other means. Because those on low incomes are more likely to have pre-payment meters, the poor are burdened with the highest gas and electricity bills, both in absolute terms and as a proportion of their income. To put it simply, that cannot be right if we want to tackle fuel poverty.
There has been a huge increase in the number of pre-payment meters in recent years. It rose from just under 2 million in 1991 to just over 5 million in 1998. The total extra cost of gas and electricity to pre-payment meter users is now an even bigger problem than it was a decade ago. Part of the reason for the increase has been the use of pre-payment meters to deal with problems of debt. It is quite common for people in arrears to be moved to a pre-payment meter system as a way of clearing that debt, although it is the most expensive way of paying for gas and electricity.
The Office of Gas and Electricity Markets has looked at what has happened to prices since 1990. Prices have, of course, fallen for all customers and in the case of all payment methods, but the evidence indicates that
- the differential between direct debit and pre-payment meter prices has widened somewhat.
Let us imagine a street with a gas pipe and an electricity cable. Over a year, exactly the same amount of gas and electricity is supplied to the person living at No. 21--who pays bills by direct debit--and to the person living at No. 23, who has a pre-payment meter. However, national figures tell us that the person at No. 23 pays, on average, 20 per cent. more for gas and 6 per cent. more for electricity than his or her neighbour. To make matters worse, the person at No. 23 is much more likely than the person at No. 21 to be on a low income.
How on earth can that be? It is, of course, because the utility companies charge different amounts for their product depending on the customer's payment method. Direct debit enjoys the lowest prices, followed by standard quarterly credit, whereas pre-payment meters face the highest charges.
Is there a justification for that set of circumstances? We are told that supplying a pre-payment meter customer is more costly than supplying a direct debit one, and there is some truth in that. However, when Ofgem examined the matter in relation to electricity, it found--in a very interesting study--that, although there were some additional costs, there were also savings to the supplier. Its conclusion was that the cost of a pre-payment meter customer
- might reasonably be of the same order
The aspect of the matter that I find hardest to fathom is that many companies give a special discount to those whom they describe as "prompt payers"--those who settle their bills quickly. I cannot imagine a more prompt payment method than paying for all the gas and electricity that one uses before one has taken even a single therm or kilowatt out of the supply, which is exactly what pre-payment customers do. However, for the privilege, they are forced to pay the highest prices. The practice is, in the jargon, counter-intuitive, although other people might describe it as a rip-off.
There is an even more fundamental argument about charging people according to what the companies describe as their "customer characteristics". Let us consider the most obvious factor that makes it more costly to supply and service some customers than other customers--the matter of where customers live. Maintaining a supply will be more expensive in a remote rural location than in a town. However, rural customers are not charged more because of that, and one can imagine the outcry if anyone tried to charge them more on that basis.
Why should some customers face a higher charge because of another characteristic--not where they live, but how they choose to pay their bill--particularly when it bears hardest on those who are poorest? It is perfectly possible to cross-subsidise to even out costs when it suits the companies to do so, and that is what should happen in this case.
The other justification sometimes offered by suppliers is to argue that not all pre-payment meter users are people on low incomes. That is also true. However, there are a lot of poor pre-payment meter users. Ofgem, in its own consultation document on pre-payment meters, which it issued last October, said clearly:
- pre-payment meter usage is concentrated amongst less well off households.
There is one final way in which low-income pre-payment meter customers are disadvantaged, in that the cheapest gas and electricity--for those paying by
direct debit--is denied to those who do not have a bank or building society account. Therefore, once again, it is the poor who lose out.The British Bankers Association estimates that between 6 and 9 per cent. of the population--3 million people--do not have access to a bank account. The national right to fuel campaign reports that research done for "Competition Monitor" found that 30 per cent. of pre-payment meter users did not have a bank account. It is, of course, an issue not only for the energy companies--it goes to the heart of financial exclusion in our society. However, could we please have action so that no longer are people without bank accounts denied access to the cheapest and easiest way of keeping their homes warm and lit?
I should like to make it clear that I am not opposed to pre-payment meters in principle--far from it. Many consumers find such meters a convenient and controllable way of paying for their gas and electricity, although the meters do not in themselves solve the problem of fuel poverty, as they can still result in self-disconnection when people have literally run out of money. It is clear, however, that the practice of overcharging needs to end. There are many who share that concern, such as the Gas Consumers Council; the national right to fuel campaign; the Trade and Industry Select Committee, which has examined the matter in detail; and the Public Accounts Committee, which has said that it is time that pre-payment meter customers benefited from the liberalised gas market.
So what action is needed? First, we need action by the suppliers, some of which have a better record than others. However, despite competition, pre-payment meter customers are still getting a raw deal. Part of the reason for that is to be found in the impact of competition. Established companies are afraid to even out their collection costs across their own customers for fear that that might result in new entrants to the market cherry- picking their most valuable customers--those who pay by direct debit.
Having said that, British Gas at least charges pre-payment meter users the same as standard quarterly credit customers, and according to the Gas Consumers Council it has the lowest charges for pre-payment meters of any of the gas suppliers. In the light of competition, I wonder why it is that all the other gas suppliers are charging their pre-payment meter customers so much more.
I am aware, of course, of the recent launch by TXU of its StayWarm scheme, which is being trialled in Yorkshire. It is aimed specifically at people on low incomes. In return for a regular agreed payment, the customer can have as much energy as he needs without having to pay anything extra or worry about bills. Let us have more innovation of that sort.
For example, given that customers without bank accounts are made to pay higher prices, why cannot the banks and the utility companies get together jointly to market a product that makes banking available to low-income customers and enables them to pay the lowest prices for their gas and electricity? What about some further innovation in pre-payment meter technology to bring down costs?
Secondly, we need action by the regulator. The regulator now has to have regard to the draft statutory social and environmental guidance, which was issued in February. Under the Utilities Bill, he has an explicit duty to
- protect the interests of consumers . . . wherever appropriate . . .
- individuals with low incomes.
Ofgem has taken some action in announcing that the price differential for electricity pre-payment meters should be capped at £15 per annum, but why should there be a differential at all? However, the overcharging for gas is much greater. In its recent document on meter liberalisation, Ofgem has proposed that the annual surcharge levied by Transco on suppliers for operating PPMs should increase by 50 per cent., from £10 to £15. Unless that is offset by reductions elsewhere on the Transco charge, that could further increase the price differential and so add to the cost disadvantage that PPM customers already bear.
In preparing for the debate, I learned quickly that the issues of regulation are highly complex. However, I am sure that where there is a will there is a way to sort out this problem. Yorkshire Electricity, for example, with which I have been in correspondence, has suggested that the cost of pre-payment meters could be shared across all suppliers through the introduction of a social levy.
Finally, we need action by Government. An important and significant step has been taken to put the consumer at the heart of regulation through the Utilities Bill. Clauses 68 and 97 give the Secretary of State the power to make an order on price levels in cases where in his opinion members of any group of customers are being treated less favourably than other customers.
That is exactly what is happening, and if Ofgem will not act I sincerely hope that my right hon. Friend the Minister will use the powers that are available to her. In particular, it would be helpful to know how long Ofgem will be given to sort out the matter before my right hon. Friend steps in to introduce a scheme.
In conclusion, this is an issue of fairness. People who are poor should not have to pay more than others to heat and light their homes. I represent many people who work hard to get by on low incomes. In my opinion, we should not tolerate for one moment longer a system which penalises them in practice because they are poor.
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