Higher Oil Prices

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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.
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.
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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