Charles
Hendry: Is not Ofgem already addressing that? It says that
if someone contacts a company to ask about the tariff, the company is
required to tell them the best tariff available at that time. Has not
the hon. Gentleman’s proposal already been
addressed?
Steve
Webb: I do not think that it has, for several reasons.
First, Ofgem presumes that the consumer will make the initial contact.
Let me give the hon. Gentleman a brief example to show the situation.
When I was interviewed today for a radio programme, I was asked,
“What can consumers do about difficulties with energy
bills?” I said, “The first thing to do is to ring the
energy company and ask about its prices,” and the interviewer
asked, “Don’t you go to the council for a grant or
something?” There
is an understanding is that such things are out there and that people
have a right to them, but do they have a right to a social tariff, or
is it discretionary? There is an awful lot of consumer ignorance. Many
people would not necessarily think of approaching the company, whereas
the Government could put a coloured piece of paper in their hand that
gave them the phone numbers for the big six companies and, perhaps, a
dedicated phone number to ring to get the best price. It could say that
they have a right to a social tariff, although I am not sure whether
they do. We have to clarify this for consumers. Even I am slightly hazy
as to whether this is a begging bowl. I just discovered that a
company—I shall not name it—is turning away people who
ask for the social tariff. I do not think that the Ofgem proposal is a
solution to the
problem. Clearly,
the Commission’s proposal that income transfers are all that we
can do is not adequate. Much more could be done on the price front, and
I have suggested some ways of achieving that. However, there is one
other
aspect to what the Commission says. It rightly talks about energy
efficiency as a response to higher oil prices. We are faced with
volatile oil prices, but in the long term, high prices could be a
feature of the world in which we live. As such, the Commission suggests
that we need an emphasis on energy efficiency, and that is absolutely
right, so may I ask the Minister one final set of questions on that
front? There
are disparate home energy efficiency schemes. We have spoken about Warm
Front, which, as far as I am aware, is largely focused on the
individual, with individuals making contact and applying for grants. We
then have the carbon emissions reduction target, which is not energy
efficiency as such, but is on similar territory. That scheme depends on
how a company proposes to deliver the programme, and there will be
variation among different companies. The Government have also spoken
about another programme costing £900 million-odd over three
years, which is linked to CERT, but involves different companies with
different obligations. I believe that that programme is more
neighbourhood-focused, which I absolutely support. The Government also
spend tens of millions of pounds on neighbourhood programmes that were
in place before that was
announced. Does
the Minister accept that there is now a case for amalgamating or
rationalising those things? There is a danger that they overlap or
contradict each other, or give extra weight to some groups and none to
others. For example, a company that wants to achieve energy efficiency
through CERTs will, in some cases, get credits for non-vulnerable
households, whereas access to Warm Front will be for vulnerable
households, and some CERT credits are bigger for vulnerable households.
Those who benefit from neighbourhood programmes will presumably, first,
be vulnerable, but will include non-vulnerable customers. In some
cases, credit will be given for certain sorts of insulation, whereas
other things might be better for the household, but will not deliver
the same carbon savings.
Can we cohere
all those things? Serious money is going into CERT, although it will
presumably be up for renewal very shortly. Surely we need, as the
Commission says, to make sure that the energy efficiency response to
high oil prices is coherent. We should not have a plethora of schemes,
some of which might be a short-term response to adverse headlines and
people saying that we have to do something. Instead of having
negotiations with energy bosses in smoke-filled rooms to get a deal, is
there not a case for standing back, looking at all the different
programmes and seeing whether we can put them into a more coherent
package that will achieve our goal for social tariffs of protecting the
most vulnerable households from high energy prices and, fundamentally,
our climate change and energy efficiency goals? We must not waste the
precious commodity that we are discussing
today. 5.56
pm
Mr.
O'Brien: Let me deal with the points that have been
raised, starting with those raised by the hon. Member for Northavon,
many of whose earlier points I agreed with. The new Department of
Energy and Climate Change has three key objectives, the first of which
is to ensure that we have energy security, which will come through
diversity of supply. The second is to ensure that energy is provided to
the consumer at an affordable
level. The third is to ensure that we do all that while dealing with
climate change issues and without causing further damage to the
atmosphere by emitting too much carbon. The context in which the new
Department will operate falls within that broad
agenda. The
hon. Gentleman is right to say that we need to reduce the amount of
carbon that we emit. There is clearly tension between the need to
reduce the oil price, which has been hurting the economy, and the need
to ensure that we do not emit too much carbon, because the lower the
oil price is, the more people will use oil and the more carbon they
will emit. I entirely accept that that tension is there; the problem is
how to resolve the issue. I am not sure that the document really gets
to grips with it, and, to that extent, we can be critical of the
EU’s approach because there are various ways in which we could
do
that. On
reducing energy consumption, we have a substantial fuel package and an
insulation package, which will ensure that people can reduce the amount
of energy that they need, and therefore their bills, as well as
reducing—we hope—the amount of carbon-emitting generation
that this country needs. That is why we are focusing on wind turbines,
other renewables such as wave and tidal power, and microgeneration, and
why we have indicated that we will introduce feed-in tariffs for
microgeneration and the lower-scale development of renewables. Those
are significant changes to how we view energy
policy. The
hon. Gentleman is right that high oil prices are a wake-up call to us
all. There is an enormous opportunity for business to invest in
renewables. Interestingly, two weeks ago it was announced that Masdar
from Abu Dhabi will use oil money to invest in the London array of wind
turbines. That is a significant investment, and the conversations that
my right hon. Friend the Prime Minister has had in the middle east over
the weekend suggest that the middle eastern countries that are rich
with oil money are interested in investing in renewables as part of the
diversification of their energy portfolios. They see the way that the
world is going and want to bring some diversity to how they protect
their investments, which is
welcome. On
the reduction of our energy use, the Government recently tried to give
a boost to electric cars. They may seem remote and long-term, but they
are not. They are potentially quite a strong market, albeit in a number
of years. There is a big agenda for reducing our carbon
footprint—not just individually, but for society more
generally. The
hon. Gentleman asked about social tariffs and how the changes made in
the Pensions Act 2007 are being taken through. Passing a pensions Bill
enabled us to make that particular change, so we had to focus the
changes on pensioners. However, we are considering including provisions
for poor people in the wider community—either disabled people or
those on very low incomes—in the social welfare Bill that we are
looking to bring forward next Session. I hope that that Bill will
provide a new opportunity for the Government to make further
changes. The
hon. Gentleman speculated on various ways in which we could get a
better price or get the energy companies to provide social tariffs for
people on low incomes. During the initial negotiations with the various
energy companies, I suggested that the Department for
Work and Pensions would be prepared to provide a voucher for people on
pension credit. We could do that now without having to wait for any
legislation. A voucher could be given to each person on pension credit
so that they could provide it to their own energy company, which would
either put them on a social tariff or give them a
reduction. That
negotiation did not meet with the applause of the energy companies,
which felt that it might be somewhat costly for them. There was a long
negotiation about how much money we could get from them as a group, and
we ended up with £225 million for the social tariff. They
decided that they wanted to implement that strategy in their own ways.
They say that they will hit the target, but they want to do it in
competition. It appears from the relevant legislation that they are
entitled to do that, and Ofgem has accepted that that is how they
should do it. [Interruption.] I see that the hon. Gentleman
shares in the eye-rolling that I am tempted to do, but that is what
Ofgem feels is the best way to deal with the social
tariff. That
agenda is developing, and we still have some distance to go to get the
social tariff accepted more broadly. We have already discussed that, so
I shall not repeat
it. The
hon. Gentleman also talked about the various schemes and seemed a bit
confused about the variety, but I am not sure that there is any great
confusion. There is the winter fuel payment that pensioners get and are
pleased to get, which is straightforward. There is the carbon emissions
reduction target programme, which has been ongoing. Building on that is
the announcement by the Prime Minister in September of a wider-based
insulation package, which will bring in not just the suppliers but the
generators, who will make a contribution and provide us with some extra
funding. That will create an additional opportunity for people to get
half the cost of their insulation
paid. Alternatively,
if someone is on a very low income and they have not already got
insulation in their home under the Warm Front scheme, they can get it
for free. All that fits quite neatly together. I am not sure there is
any problem with that. If people want to get insulation, they will be
able to do so. All those projects are about how to get insulation and
Warm Front is a key way to get the package in—particularly in
England and, indeed, Wales. However, it does not apply in quite the
same way in Scotland. We have also increased the cold weather payments
that are paid only periodically during a cold snap. All those measures
are part of a larger
package. The
hon. Gentleman tried to suggest that there are ways in which we could
deal with the matter more systematically. If the Government were
responsible for the whole package of measures, we could. However, the
Government are carrying out only some of them, not all. Therefore, we
are reliant on companies under the legislation that privatised them and
enabled them to compete. That means things are not always done to a
standard format, which is how Ofgem feels the legislation ought to
work. As I have said, this agenda still has some distance to run and we
will have to see how it
develops. I
would like to deal with the points made by hon. Member for Wealden more
generally—particularly those about fuel poverty. We have had an
increase in the efficiency obligation of energy companies, which has
meant that there is a standard offer to all households in relation to
increased energy efficiency measures. There
is a new community energy saving obligation and we have spent more on
the Warm Front programme to provide central heating for low-income
households. There
is a joint Government and business money saving information campaign
and there has been an increase in cold weather payments for the winter
of 2008-09. From the day of the Prime Minister’s announcement,
every household in the country has been able to claim up to 50 per
cent. off loft and cavity wall insulation and a range of other energy
saving devices, such as low-energy light bulbs, real-time displays and
saver
plugs. Some
2 million households on lower incomes can benefit from the measures
being offered for free. Households will be offered energy audits to
identify how they can make their homes more efficient. In addition,
retailers including B&Q, Tesco, Marks and Spencer, John Lewis and
others are joining the campaign by providing discounts on energy saving
equipment. All those things have been done to deal with some of the
issues around fuel poverty.
I have
already mentioned the £50 extra for people between 60 and 80 and
the £100 extra in winter fuel payments for people over 80. Those
are significant changes amounting to a large programme that builds on
the £20 billion that is spent on fuel poverty benefits and
programmes. I
am interested to hear that the hon. Member for Wealden, who speaks for
the Opposition, is suggesting that we should have done a lot more. I
would be interested to know what more he is suggesting had to be done.
Is he suggesting that the EU should not deal with this? Looking at the
document, he seems to suggest that the EU competence would be beyond
that which should be undertaken to deal with fuel poverty. I imagine he
would consider that a subsidiary obligation on the Government, and I
would accept that. However, we need to dissect the proposals he has
made to do that as a subsidiary obligation as part of the overall
examination of what we could do. I do not think that the EU could do
the things that the Opposition have suggested. I certainly think that
the Government would have to be careful about adopting what the
Opposition have suggested.
I have tried
to put the document in context so I can say a brief word about the
Opposition’s proposals. Their suggestion is that there should be
a fuel stabiliser, which would mean, as they put it in their
document: “Under
a Fair Fuel Stabiliser, when fuel prices go up, fuel duty would fall.
And when fuel prices go down, fuel duty would rise... If...
oil prices had fallen below the $84 forecast in the Budget, then fuel
duty would have risen.”
Well, the oil price has
fallen; it is about $64 a barrel. Therefore, we need to ask the
Opposition what they propose and by how much the price of
people’s petrol should
rise. The
basis on which the Opposition suggested the change was that the
Government would get a great tax benefit from the high oil prices. That
is what they said would happen. However, a reading of the EU document
and of anything that we have seen from either the Opposition or the
Government does not suggest that we will see that great
windfall. Let
me say why the high fuel prices did not mean any tax windfall at all
for the Government. It is a schoolboy error to suggest that such an
increase would have taken
place. The assumption behind it is that high prices mean that the
Government get lots more tax. However, fuel duty is levied at a fixed
rate per litre. As fuel prices rise, people use less fuel, by and
large, so fuel duty revenues fall, and the Government do not benefit
from that. Also, as fuel prices rise, that increases business transport
costs, which affects company profits, so corporation tax revenues fall
as oil prices
rise. Rising
oil prices also push up inflation, and most tax allowances and benefits
are linked to inflation, so the Government end up paying more for
those, too. The Government get some more income from VAT, but that is
offset against the reduction in consumption as companies use less oil,
so by and large the effect on Government income is
neutral. If
we analyse where we would have been had we imposed the cut in duty
suggested by the Opposition, we see that that would have cost the
Government some £1.5 billion. That £1.5 billion would
have had to be recovered. In fact, over a year, the figure would have
been in the region of £2.5 billion. It is important that the
hon. Member for Wealden understands the significant amount that would
have had to be recovered. If he had had his way and made the changes
with what the Opposition call the fair fuel stabiliser, he would now
have to say to consumers that the price per litre would again have to
go significantly above £1. It was a schoolboy error to think
that high prices could not become low prices. We have seen that they
have become low prices rather faster than the Opposition
suggested. The
Opposition need to come clean about how much extra tax per litre they
would have imposed on the average consumer. We think it would have been
about 5p a litre. That would not have helped fuel poverty at all. It
would not have helped people who were having to heat their homes or
fill their cars, or the transport industry. All those people would have
been damaged by the Opposition’s proposal had we accepted
it. The
hon. Member for Wealden also asked about the EU competence in relation
to these matters. It is primarily in terms of creating a more open and
liberal market. That is certainly what we want it to do. He talked
about gas price rises. The price of gas has fallen by 22 per cent.
recently. We have not seen that fed through into retail prices yet for
the reasons that I have already given—I will not repeat
them—but we need to ensure that it is fed
through. The
hon. Gentleman also mentioned Warm Front and people waiting a long
time. That wait varies in different parts of the country and in some
parts it is quite short. Indeed, with the companies putting in their
own insulation and the extra funding going into Warm Front, some of the
delays, which are happening in only parts of the country, will be
speeded up and dealt with. This winter, we are anxious to ensure that
we get people properly insulated as quickly as possible, so that that
affects their bills this winter. Over a number of years, the funding
that we have put into Warm Front has ensured that people already have
insulation and many of them are already getting the benefits from
it. Mr.
Denis Murphy (Wansbeck) (Lab): Does my hon. and learned
Friend agree that although some 12 months ago Warm Front was a huge
benefit to quite a number of people—in my area we do not have a
long waiting
list—we are finding that the £200, which someone who was
either unwaged or on benefits had to pay towards a boiler, now
translates to more than £1,000? We need to revisit the whole
scheme
now.
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