Examination of Witnesses (Questions 540-544)
DEPARTMENT OF
TRADE AND
INDUSTRY
1 FEBRUARY 2005
Q540 Chairman: We have seen and we have
had representations from some of the power companies and they
have made it quite clear that they have got trust funds, they
have got assistance and they have got initiatives. Is it energywatch's
responsibility or is it your responsibility to try to establish
what is best practice here, to try to get a gold standard to which
they can all aspire, because at the moment it is rather a free-market
philanthropic approach? Nothing new has come out of the Treasury
since September/October time about fuel poverty, as I recall.
I do not think there has been anything in the way of family benefits.
There has been the increase, I know, for the over-80s but there
has been nothing else which has come out. Is it lack of money
or lack of effort, or do we have to wait on the Budget?
Mr O'Brien: The Chancellor always
decides the issues around spending. It is the case that the responsibility
for ensuring that we deal with these issues of fuel poverty in
the end rests with the Government. We have the target of dealing
with the issues around fuel poverty; we want to see that implemented.
It is the case that energywatch is one of the mechanisms for dealing
with that. It is the case that the benefits system, work done
by DWP, and so on, is part of the process, but also it is the
case that we expect the producers to come up with various schemes,
which I think need to go more than in the range of mild philanthropy,
they need seriously to help those who are in fuel poverty. It
will be only by a combination of factors and also being able to
identify—and I think it is one of the problems we have at
the moment—successfully where the fuel-poor are and access
the benefits for them, make sure they are easily available. I
think there is quite a lot of work that we have been doing in
that area, certainly since October/September, when it was clear
that these prices were going up and that it would have an impact
on fuel poverty and it needed to be addressed in a new way. That
is why we held the seminar, that is why we held the dinner back
in December and that is why we are taking forward the working
parties and the various initiatives we have undertaken over the
last few months. Also, my colleague, Nigel Griffiths, has been
in contact with other ministerial colleagues to ensure that they
are aware that their departments are being looked to also, not
just DWP but also Health and other departments, to play their
part in dealing with these issues.
Q541 Chairman: When do you think these
working parties will bear fruit?
Mr O'Brien: Certainly I hope we
will get some results from those by the end of next month and
I am hoping that we will get some practical benefits feeding in
to people during the course of this year. How extensive they are;
we are already identifying that we could see an increase of 200,000
vulnerable households in England and we are concerned about that,
let us make no mistake about it. The issue of fuel poverty is
one we take very seriously. This Government was elected with a
commitment to social justice, and reducing poverty is a key component
of that commitment to social justice and it is one that I and
my colleagues in Government take extremely seriously indeed. I
left the producers, I think, and the various companies, in no
doubt that, yes, we want to see the market work, yes, we want
to see the right kind of regulation, yes, we want to work with
them, but, in the end, this is a Labour Government that wants
to ensure that we reduce poverty and to make sure that we do not
have a situation where, as a result of increasing prices, significant
groups of people and families are put in a disadvantageous position.
Q542 Chairman: The sorts of things that
you are hinting at I imagine would have resource implications,
which means that you require revenue. Some of us have been promoting
consideration of the idea of a windfall profits tax, because,
obviously, while a number of people have been impoverished by
the price rises, there are a few who have made rather a lot of
money; how much has yet to be established, but the fact that they
have made it, I think, is beyond peradventure. I know that there
is increased corporation tax, but increased corporation tax was
not introduced on the assumption that people doing nothing more
than they are doing at the present moment, would make phenomenal
profits in a very short time through no other reason than their
ability to walk and breathe. How would you view that as an approach
to the issue, getting revenue from the people who have benefited?
Mr O'Brien: It is the case that
we are getting substantial foreign investment into the UK, into
our infrastructure, into UK Continental Shelf, because companies
are seeing the UK as a place where they can make significant profits,
where the economy is stable, where the Chancellor's tax regime
encourages them to come and invest here. Any decision on windfall
taxes, or whatever, is always one for the Chancellor and, as a
DTI Minister, I am not going to transgress on the Chancellor's
decisions on finance and the Budget, and you would not expect
me to do so. I know that one of the issues we will be very concerned
about, and the Chancellor will too, is that we create the right
kind of atmosphere for companies to invest in UKCS, in particular,
to come here and believe they can make a good profit and do well,
to pay their taxes, and in the case of the UKCS, as I have said
already, about 50% of their profit is in taxes, it is a marginal
rate, and to ensure that they exploit, for the benefit of our
economy, every last drop of oil and gas in the North Sea. Also,
by the way, to get companies coming to invest, because they are
doing that, in our domestic distribution infrastructure, in both
electricity and gas, we want that foreign investment in there
too. If we are to do that then, to some extent, we need to give
them predictability, give them stability and the ability to plan
ahead for their investments. In return, we expect them to pay
their taxes properly and operate in a way which recognises that
they have social responsibility in the UK. I have to say, my experience
of many of these companies is that they are very conscious of
our corporate social responsibility agenda. It is not just a matter
of responding in a philanthropic way to requests from Ministers
but also recognising that if they are to avoid the sort of criticism
of excess profits which you identify one good way of doing that
is by making sure they are seen to be out there reducing the level
of fuel poverty in this country and making sure that those who
are paying higher prices and are poor are assisted in some way.
To some extent, that will mitigate the sort of criticism which
you have identified. Certainly I think they understand that, they
understand the politics of this, if you like, and I hope very
much that we will see recognition of that corporate social responsibility
agenda in a broader sense, both from the generators and the producers,
in the coming year.
Q543 Chairman: We will just have to wait
and see. The evidence we have is that the generators and people
who are selling gas in the domestic market seem to be aware of
that, but some of the oil majors whom you are so delighted to
have here had set their budgets for the 12 months we are living
through before the price spikes came along and they have not done
anything about it. Maybe the message from here tonight is that
you should try a wee bit harder and squeeze them, because they
are big horses and they do not frighten that easily?
Mr O'Brien: I hear what you say,
Mr Chairman. I think many of those majors, as we have seen in
the last week, indeed are making substantial profits and I would
hope that they would recognise that it is in their interests as
well as the interests of everyone else for them to ensure that
they recognise the corporate social responsibility agenda as well.
Q544 Chairman: Thank you very much, Minister.
By way of a commercial, our Report on disconnections is being
published next week, so we will be interested to see your response
to some of what maybe Ofgem would call the micro problems related
to this sorry practice?
Mr O'Brien: The social justice
problem is an important one, nonetheless, for a Labour Government.
Chairman: Thank you very much.
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