Westminster Hall
Tuesday 8 January 2008
[Sir Nicholas Winterton in the Chair]
Fuel Poverty
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Blizzard.]
9.30 am
Sir Nicholas Winterton (in the Chair): May I welcome all Members to this first sitting in Westminster Hall following the all too short Christmas recess?
Mark Lazarowicz (Edinburgh, North and Leith) (Lab/Co-op): May I return the compliments of the season to you, Sir Nicholas, and, indeed, to fellow Members?
The debate that I have been fortunate enough to secure is topical in many ways, not only because of the recent snow and cold spells that at least some of us have experienced, which reminded us that we still have winter in the UK, but because of the announcement by some energy suppliers of sharp increases in prices for gas and electricity. Those announcements have made the debate one of even greater urgency.
Although the media spotlight inevitably falls on these questions at this time of the year, it is not an issue that has just appeared on the political radar in Parliament. The all-party group on debt and personal finance, which I chair, had a joint meeting with the all-party group on poverty at which parliamentarians met grass-roots representatives, experts from the voluntary sector, fuel companies and industry regulators to discuss fuel poverty. We published a joint report following that seminar, and much of my speech will draw on its recommendations. The report is available on my website, for those who wish to pursue it in more detail.
No one can be certain exactly where energy prices will go in the future. There have been falls as well as increases in recent years, and there are questions about how far recent increases are due genuinely to world energy prices, or to opportunism by some energy suppliers. Some colleagues might wish to expand on that subject later in the debate. It is, however, pretty clear that whatever else happens, the long-run trend in energy prices will be upward due to market trends, growing demand, some diminishing energy sources and Government policies that are designed to reduce energy use and develop certain energy sources. For many householders, rising energy prices will inevitably lead to more fuel poverty, and if price increases on the scale of those that have been announced recently are repeated generally, as looks likely, many more thousands will surely be dragged into fuel poverty unless something is done about it.
I shall outline some areas in which the Government, the regulator and energy companies can do more to deal with the problem of fuel poverty, but I shall also give the Government credit for what they have done to tackle the problem so far. Indeed, the UK was the first country in the world to recognise that fuel poverty was a specific issue, and measures such as the winter fuel
payment, central heating programmes and the energy efficiency commitment have all played an important role in tackling fuel poverty. Some 4 million people have been taken out of fuel poverty since 1996, but the reduction has slowed since 2004, when energy price increases started to hit. They have begun to undo much previous good work, and the recent increases will throw many more into fuel poverty if action is not taken.
David Taylor (North-West Leicestershire) (Lab/Co-op): I congratulate my hon. Friend on securing this important debate at this time, following the announcement by npower, one of the most voracious suppliers. The number of people in fuel poverty has more than stopped going down—it has doubled since 2003, despite the Government’s best and heroic endeavours, to which we pay tribute. Does my hon. Friend agree that Ofgem—he referred to it by implication a moment ago—should be given reserve powers to evaluate the so-called social tariffs, which many suppliers offer, to ensure a decent minimum standard and not just a voluntary, penny-pinching level? I put that point to the Minister just before the recess at Business, Enterprise and Regulatory Reform questions. Does my hon. Friend agree that that is an option for Ofgem’s terms of reference?
Mark Lazarowicz: I certainly agree with my hon. Friend that Ofgem, and indeed the Government, must do more to make social tariffs a wider reality. If I have the opportunity, I shall refer to that subject in more detail in a few minutes.
My hon. Friend points out that the trend for the number of people in fuel poverty, having been on the downward slope for several years, is going up again quite rapidly. That is why we need new measures to launch a new attack on fuel poverty. I shall suggest some ways in which we can do so, and I shall draw on the recommendations of a report to which I referred. I thank all those who contributed to the ideas that I shall outline.
Bob Spink (Castle Point) (Con): The hon. Gentleman has secured a very important and timely debate, but the question is not only about introducing more measures. Does he agree that the measures that have already been introduced, such as the excellent Warm Front, need fine tuning? The Warm Front measure is dysfunctional in one particular way. Sometimes, when a boiler needs changing, a Warm Front endorsed contractor must be sent to my constituency from London, of all places, and the work can cost £2,500 to £2,700. That requires a top-up from the individual, but they cannot afford the top-up, so they do not get the work done. However, a good, local contractor could do the work for £1,200 or £1,500. Does the hon. Gentleman think that there should be more flexibility to select good, local contractors who can do such work?
Mark Lazarowicz:
I do not know the details of the situation in the hon. Gentleman’s constituency, but Warm Front and parallel schemes in Scotland and Northern Ireland have been extremely important. They need to develop and evolve, however, and they need to be funded to reflect changes in the market and local conditions. Without committing myself on the hon. Gentleman’s specific point, I think that he makes a
good comment about the need to make the most of those schemes and to make them as effective as possible.
John Barrett (Edinburgh, West) (LD): I congratulate the hon. Gentleman on securing the debate. He is a fellow Edinburgh MP, and we are both well aware of such measures in a city that can sometimes be very nippy. Does he agree that one group that is often badly hit by fuel poverty is the disabled? Will he pay particular attention to pressing the Minister on what can be done to help that group?
Mark Lazarowicz: If the hon. Gentleman will wait a minute or so, he might hear my answer to his question.
I shall turn to the recommendations that I want to put to the Minister and hon. Members. The winter fuel payment has been extremely important in helping many millions of pensioners to meet the cost of fuel bills over the winter months, but we must do more to examine ways of ensuring that payment increases take account of the increases in energy costs, because it will be important for many pensioners. In addition, there is a strong case for extending payments to other key vulnerable groups living on very low incomes. That might include households in which there are people with disabilities. People with long-term sickness who are on lower incomes should also be considered for winter fuel payments. There are cost restrictions, and the line must be drawn somewhere, but in many cases those groups are arguably in a worse situation than that of many pensioners. Those groups certainly deserve at least the same winter fuel payment, and I urge the Minister to consider that possibility.
Stewart Hosie (Dundee, East) (SNP): I congratulate the hon. Gentleman on securing the debate. He makes the point that there are cost implications. Does he think that when prices spike and increase dramatically, the Government should consider using at least the VAT windfall to resource the measures that he would like, whether that means additional winter fuel payments, or more help with the insulation of existing and old properties?
Mark Lazarowicz: That is obviously a possibility. The hon. Gentleman has also pre-empted a point on which I shall expand later.
The resource implications of a general increase in the winter fuel payment must be considered, but I strongly believe that there ought to be such an increase. Because it is a universal payment, an increase in line with those in energy costs would have substantial implications for the Government. In addition, the nature of energy prices is that they go down sometimes instead of up, and there could be all sorts of difficulties if winter fuel payments went up one year and down another.
One suggestion that we floated in our report, and that I suggest the Department should investigate, is an additional substantial winter fuel payment to go specifically towards fuel costs. It would effectively be a fuel voucher, paid in addition to the winter fuel payment to defined vulnerable groups—perhaps to all pensioners on pension credit or to other vulnerable households. It would rise
in line with energy prices, if they rose beyond certain thresholds, and could be funded by a levy on energy suppliers or payments from them. When prices go up, energy suppliers tend to make more profit, so it seems fair that they should contribute to meeting the energy costs of those who are the most vulnerable. Such a scheme would not produce an extra cost to the Government, but would ensure a direct additional payment to those in particularly vulnerable situations that would be related directly to energy cost increases imposed by suppliers.
Mr. Russell Brown (Dumfries and Galloway) (Lab): I, too, congratulate my hon. Friend on securing the debate. I am listening to what he is saying and I understand where he is coming from. I applaud the concept of additional financial support being given in some manner to vulnerable groups, but I am conscious that that might be seen by some power companies as an opportunity to push prices up and generate further profit off the backs of taxpayers and vulnerable groups.
Mark Lazarowicz: I have written in my notes that there could be some drawbacks to such a scheme. I recognise that, but it would certainly be worth while to carry out research into the feasibility of a link between price increases and payments being made by the energy companies bringing them about.
The second matter on which I wish to make some suggestions is payment methods for domestic energy consumers. It is often said that the energy market in the UK is among the most competitive in the world, which is almost certainly the case. Unfortunately, those on low incomes often do not seem to receive many benefits from such competition. In fact, many low-income customers pay more for their energy supplies than other consumers. That can arise because they do not have access or the ability to commit themselves to direct debit payments, or because they prefer, or are forced, to use prepayment meters.
The gap between the energy prices paid by direct debit customers and those paying by prepayment methods, cash or cheque, has increased significantly in the past few years. Energywatch released figures last month showing that prepayment meter customers were paying an average of £195 a year more than customers who could access cheaper online tariffs. In the most extreme cases, consumers found themselves paying as much as £304 extra each year. Prepayment meter users are also three times more likely to be fuel poor, and last year alone 366,000 prepayment meters were installed by companies to recover energy debt, thus effectively barring consumers from switching to cheaper suppliers and payment methods.
It is vital that Ofgem and the Government address the gap between the prices paid by direct debit customers and those paid by customers using prepayment methods. It is not enough for the regulator to suggest that a solution for prepayment meter users is to switch supplier to take advantage of cheaper deals, because many are prevented from doing so as they are locked into a debt to their supplier. We must move away from the situation that the poorer someone is, the more they pay for their energy.
Dr. Alan Whitehead (Southampton, Test) (Lab):
Does my hon. Friend accept that not all energy companies operate an enormous tariff difference?
Some—unfortunately a minority—have equalised the tariffs for prepayment meters and direct debits. Does he agree that all companies could do that if they wished? As he says, the question is how those companies can be regulated so that they do so and follow the example of the companies that already have.
Mark Lazarowicz: Indeed, and I put on record my recognition that some companies have done that, which shows that others could and should do the same.
I turn to a third matter: the social tariffs that my hon. Friend the Member for North-West Leicestershire (David Taylor) mentioned. An important feature of the energy market for domestic consumers is that a range of social tariffs is available to vulnerable customers, offering different benefits to various groups of consumers who might have difficulty in paying their energy bills. Such tariffs could play an important role in ensuring that there is a much more focused attack on fuel poverty, but I suggest that social tariffs are currently of only limited benefit and that much more use could be made of them.
The Government have previously indicated—in the energy White Paper, I believe—that they were considering taking powers in the forthcoming energy Bill to introduce mandatory minimum standards for social tariffs. I ask them to follow up that commitment by including such a measure in the Bill. They instructed Ofgem to examine suppliers’ packages of support for low-income consumers and report back. Ofgem’s report stated that the suppliers were making efforts to provide support to their fuel-poor customers, but it did not rank those measures or consider their effectiveness. That missed the point. There is no framework of standards for what constitutes a social tariff, which has resulted in a confusing situation for customers and those who advise people in vulnerable positions. That has allowed suppliers to attach the term “social tariff” to any product from rebates to existing tariffs, and in some cases the social tariff is more expensive than the normal tariff, which clearly should not be the case.
Dr. Ian Gibson (Norwich, North) (Lab): Are not the real politics of the situation shown in the fact that a statistic called “excess winter death figures” is being counted? I do not believe many statistics, but that one I do. Is it not a scandal that, in this day and age, people are dying of cold-related illnesses? Would any of the measures that my hon. Friend suggests make any difference?
Mark Lazarowicz: My hon. Friend makes an important point that goes to the heart of the debate and shows why we need a package of measures that will make a difference now, this winter, not just in years to come. It also shows why we need to ensure that social tariffs perform the job that they are meant to do. In my view and that of many people involved in the debate, particularly in the advice sector, and others working on behalf of consumers, there needs to be a minimum standard and a mandatory basic framework for social tariffs to ensure that all suppliers offer social tariffs in such a way that consumers can make use of them to a much greater extent than has so far been the case. I hope that the Government will address the matter of ensuring a wider take-up of social tariffs in the energy Bill.
Mr. Roger Williams (Brecon and Radnorshire) (LD): One group of customers who tend to be fuel poor is those who do not have the facility of mains gas and depend on liquefied petroleum gas and heating oil, which tend to be more expensive, calorie for calorie, than mains gas. Some communities, particularly ex-mining villages in my constituency, find that they cannot secure mains gas. Would not one way in which the Government could act to eliminate fuel poverty be to encourage companies to supply mains gas to more communities?
Mark Lazarowicz: I am not in a position to comment on the hon. Gentleman’s constituency, but there is clearly a problem in rural constituencies that needs to be addressed. There is also a problem in very urban areas with particular types of housing in which it is difficult to provide adequate heating.
Mr. David Drew (Stroud) (Lab/Co-op): The figure offered to communities for joining up is so ridiculously high that it is a great disincentive. Does my hon. Friend agree that the Government could do something to help with that problem?
Mark Lazarowicz: As I do not have a particularly rural constituency, I cannot comment on my hon. Friend’s suggestion. No doubt the Minister will wish to comment on that either now or in the future.
I return to energy efficiency. As well as taking measures to help people meet the rising costs of energy, long-term measures to improve energy efficiency and warm up the homes of the oldest and most vulnerable are crucial to solving this problem and will help to ensure that people can live in decent conditions. The creation of energy-efficient homes is important for domestic consumers and can also play a role in tackling the growing problem of climate change. The continuation and extension of grant schemes to assist with the cost of creating energy-efficient homes is crucial, but much more could be done. I do not have time to develop all those ideas now, but energy companies and regulators need to work harder to provide information about the benefits and grant schemes available to customers. That information should be presented in a simple and understandable format. Much is being done, but much more could be done by some energy suppliers in particular. There are specific problems in rural areas and certain types of urban housing that need particular attention and a focused approach.
Susan Kramer (Richmond Park) (LD): The hon. Gentleman mentioned the elderly and most vulnerable, but should not families with young children also be high on the priority list for home efficiency schemes? At least 750,000 children live in fuel-poor households.
Mark Lazarowicz: There is certainly a strong case for that. In my comments, I used the term “the oldest and most vulnerable”. There is a case for such an extension, but I also accept that a line has to be drawn somewhere. People with young children can be in a very difficult situation if they live in housing that is not properly heated or is energy-inefficient.
More could be done, using the energy efficiency commitment and its successor, to ensure that schemes are operated in an integrated manner to provide energy
advice locally. Scottish and Southern Energy, and other companies, have made an interesting proposal to develop a single fuel poverty scheme, bringing together both the central heating programmes and the social aspects of energy efficiency commitments. Such proposals are worth investigating.
Finally, on energy conservation, a major effort must be made to improve the take-up of such schemes among private landlords to benefit their tenants. The full opportunity of taking up such energy efficiency and conservation measures has not yet been developed in that area in the way that it has for people living in various types of social housing.
I could say much more, but I want to allow my colleagues to contribute to the debate. Although I have taken quite a few interventions, I do not want to take up any more time on this important subject today. I conclude by noting that fuel poverty is not just about budgets and incomes. As my hon. Friend the Member for Norwich, North (Dr. Gibson) pointed out, it is a matter of life and death for the many people who are forced to live in cold and damp conditions in their homes. Hundreds of thousands more will suffer as a result of recent increases in gas and electricity prices unless something is done about this issue now. The Government set themselves an ambitious target to eradicate fuel poverty by 2010, and I know that my hon. Friend the Minister has been closely associated with that noble vision, both as a Member of Parliament and before he was elected. The difficulties being encountered in reaching that target should not lead us to lower our ambitions. Instead, we should redouble our efforts to ensure that we reach it and that that noble vision becomes a reality.
Sir Nicholas Winterton (in the Chair): Order. Before I call the next speaker, I make a plea. Clearly, many Members want to contribute to this important debate, but I want the Minister to have adequate time to reply, as it is important that the Government put their position on this subject clearly and fully.
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