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8 Jan 2008 : Column 7WH—continued

9.55 am

Mr. Don Touhig (Islwyn) (Lab/Co-op): I congratulate my hon. Friend the Member for Edinburgh, North and Leith (Mark Lazarowicz) on securing the debate. Fuel poverty is linked to deprivation: unaffordable fuel prices combined with poor housing stock, often characterised by inadequate insulation and inefficient heating systems, make life a misery for millions of people in our country. The latest figures show that more than 4 million households across Britain cannot afford to keep warm at a reasonable cost. I am proud that the Government have made great strides in tackling this problem with measures such as the winter fuel payment, but that is becoming increasingly futile, given that the energy companies seem intent on record-breaking price increases.

It is deplorable that, as we greeted the new year, npower, which makes billions of pounds in profit, announced another increase in customer bills. That move, so soon after Christmas, will cause only heartache and misery for millions of people, and I thought it rather cynical to slip out that announcement when most
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of the country was on holiday, celebrating Christmas and the new year. The average npower customer will now pay more than £1,000 a year for their energy, but many who use prepayment meters will pay even more, as my hon. Friend noted in his opening remarks. I join those who roundly condemn that move, and I am glad that my right hon. Friend the Chancellor has decided to take up this issue and meet the energy regulator. I hope that he will do his absolute best to ensure that the regulator finds ways to intervene in this matter, so that we can have the excessive fuel price increases dramatically reduced.

The impact of such price rises on fuel-poor consumers, many of whom are in low-income households, will be devastating and are likely to push thousands more people, including many pensioners, into fuel poverty. Many people who are fuel poor do not necessarily know that they are. That may seem an extraordinary statement, but many simply accept the difficulties that they are living in. I can illustrate that point rather markedly. Ahead of this debate, I contacted the secretary of the National Old Age Pensioners Association of Wales—I happen to be the association’s president—to ask for examples of how the new fuel prices will impact on pensioners. He did not have any examples, but thought that the majority of his members simply accept that rising fuel prices are a fact of life and said that, when they get cold, they will slip on an extra pullover or heat only one room. That should not be happening in Britain in this century.

Many pensioners in Wales have illnesses such as heart disease and diabetes, and many who are ex-miners have lung diseases. They often have high fuel bills because of their health problems and need to keep their homes at much higher temperatures than other people. That problem is even worse in older and poorly insulated houses. In Wales, older people bear the brunt of increases in fuel prices. Some 50 per cent. of the population there are pensioners, 20 per cent. of the population do not have access to mains gas and 250,000 households live in fuel poverty. Some 43 per cent. of fuel-poor households in Wales are pensioner households and almost 31 per cent. of those pensioners are single—often widows and widowers—and desperately trying to make ends meet. Those pensioners face a double whammy, because electricity prices in Wales are 10 per cent. higher than in England.

A report produced by Help the Aged in 2005 found that 1.5 million inadequately insulated homes across Britain are occupied by someone over 65 who cannot afford the heating costs.

Ms Katy Clark (North Ayrshire and Arran) (Lab): My right hon. Friend spoke about his constituents in Wales. Is he aware of the geographical differences in fuel costs that are caused not just by the prices that the fuel companies charge, but by the cost of heating a home? It is said that it costs 68 per cent. more to heat a home in the north of Scotland than in the south of England, because of climate differences. Does he believe that that must be taken into account?

Mr. Touhig: My hon. Friend makes an important point. There are such differences across the United Kingdom, and we must address them. The quality of life of so many people is affected by the difficulties that she mentions.


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The Help the Aged report found that 22 per cent. of households with someone over 75 had no central heating at all. We take central heating for granted. When we get up in the morning, the heating is on and the house is comfortable, but many people do not have what we consider to be normal. That cannot be acceptable today.

The worst thing is that help is available. There is the Warm Front scheme in England and, in Wales, the new home energy efficiency scheme offers grants to older home owners and those living in rented accommodation and in receipt of benefits. Because of the previous Labour Administration, Scotland has done even better: it has a scheme that provides pensioners with new heating and insulation facilities regardless of whether they claim benefits. That is good, and perhaps the energy companies, which are making billions of pounds, might consider using some of their profits to help roll out such a scheme across the United Kingdom.

Help the Aged estimates that £800 million will be spent on Warm Front and home energy projects up to this year. However, it maintains that that is still not enough and that we must consider the whole of Britain if we are to make real progress.

Dr. Brian Iddon (Bolton, South-East) (Lab): Is not one of the most important things about schemes such as Warm Front the fact that we can link benefit entitlement checks to them? My right hon. Friend may like to know that, in my constituency, where nearly £6 million pounds has been invested by the Warm Front scheme, the average weekly income of the clients who have benefited has increased by £13 a week, which is fairly significant.

Mr. Touhig: My hon. Friend makes an important point. We can see the benefits of actively intervening to tackle such problems.

Of course, it is all very well to have schemes—I commend the work that the Government are doing—but if people do not know about or participate in them, they are very much a waste of time. We must get the message across.

One important way to combat fuel poverty is to increase the income of many of those who are at risk of falling into the fuel poverty trap. My hon. Friend the Member for Edinburgh, North and Leith spoke about social tariffs. Like him, I hope that the energy Bill will include some positive proposals that will result in greater benefit to those who are in danger of falling into the fuel poverty trap.

I have no doubt that the winter fuel payment has had a significant impact on fuel poverty, but the decision taken in the 2005 pre-Budget report to keep fuel payments at the present level for the duration of this Parliament needs to be revisited if the regulator does not have sufficient powers to intervene to prevent the massive increases that the fuel companies are demanding. It is clear that the winter fuel payment has not gone up in line with rising fuel prices. Indeed, figures show that, between 2005 and 2007, the percentage of total fuel bills met by winter fuel payment fell from 36 to 34 per cent. The Government must address that issue.

We should consider ways of increasing winter fuel payments and, as other Members suggested, perhaps even widening the access to other vulnerable groups
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such as the disabled and, possibly, the terminally ill. With energy companies seemingly increasing their prices at will, we are faced with the difficulty that people will fall into fuel poverty as soon as energy prices rise. The great socialist James Maxton said that poverty is man-made and therefore open to change. Fuel poverty is man-made. It is up to us to do something about the situation and change it.

10.5 am

Mr. Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): A happy new year to you, Sir Nicholas. It is a pleasure to follow my right hon. Friend the Member for Islwyn (Mr. Touhig). Many of the things that he said and that my hon. Friend the Member for Edinburgh, North and Leith (Mark Lazarowicz) said in his excellent speech are accepted overwhelmingly in the House.

I congratulate my hon. Friend on introducing the debate, which could not be more timely. I am sure that he will not mind if I recall that just about a year ago, on 23 January last year, I initiated a similar debate in which several points that have been made today were made, and rightly so. The difference was the atmosphere in which the debate took place, which was not like the one today. At that time, wholesale prices had gone down but the energy companies simply refused to pass the decreases on to consumers. Today, at the first hint of an increase in wholesale prices—and the message is there—the prices charged by some companies have gone up, and there is no evidence to suggest that other companies will not follow exactly that line. The House is entitled to be impatient.

I wish to thank the various consumer groups, including Energywatch, which campaigned strongly on the issue. Last year, in due course, we did secure a reduction. It did not really reflect the reduction on wholesale prices, but it was a reduction. We had high hopes that all our worries about the impact on constituents who are elderly, on low pay or in ill health would be addressed. My hon. Friend rightly referred to the Government’s admirable policies. We welcome not just tax credits, pension credits and other benefits but the specific payments for heating, which I understand amounted to some £2 billion last winter. We encourage the Government to recognise their social responsibilities, and I believe that they are doing so. However, there is another point that ought to be made.

Bob Spink: Will the right hon. Gentleman give way?

Mr. Clarke: Yes, but as many people wish to speak, may I ask the House to allow me to accept just one intervention?

Bob Spink: I am grateful, and I shall be very quick. Before the right hon. Gentleman moves away from the issue of honest pricing by energy companies, is he aware that many of those companies forward-buy their energy at fixed costs? Therefore, perhaps it is time to extend Ofgem’s remit so that it can ensure that there is no improper profiteering.

Mr. Clarke: I am grateful to the hon. Gentleman. If time allows, I intend to discuss Ofgem’s remit, which is of crucial importance.


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The fact is that the recent price increases impact strongly not just on the quality of life of most of our constituents—certainly some of the most vulnerable in my constituency—but on other things as well. They undermine social obligations to consumers, and they noticeably undermine the Government’s income and inflation policies—I am pleased that the Chancellor has been active on that matter. The increases do not demonstrate a commitment to the most vulnerable individuals. When we raised this issue last year, the chief executive of one of the most prosperous energy companies wrote to Members of Parliament, including myself, and said, notwithstanding his company’s huge profits—the company was later sold to the Spaniards—that we had a responsibility to ensure that all the benefits were taken up and that we should have a better programme for house building.

We genuinely accept our responsibilities, but that does not mean that any Government should be seen to subsidise energy companies. The companies seem to take the view that fluctuations in energy prices should be dealt with purely by consumers, and that shareholders and profits have no role at all. I am not prepared to accept that concept, and believe that we are entitled to express our views because of the impact on our constituents. I want to raise the very important issue of disabled children and their families, which was mentioned by the hon. Member for Edinburgh, West (John Barrett). I am grateful to the Every Disabled Child Matters consortium for providing information on disabled children, which it obtained from a survey conducted by Contact a Family. It concluded that two thirds of families with disabled children struggle to pay their fuel bills each winter. One family of every 10 families with disabled children has had its gas and electricity supply cut off. Just imagine what that means. In addition to the problem of having disabled children, families have to sit in the dark and the cold—that is not acceptable in the new millennium. There is not a single Member of Parliament who would accept that and not say that the companies have a responsibility. They would say so, too, to the regulators.

In the debate that I mentioned earlier, we spent some time considering the issues and the role of the Office of Gas and Electricity Markets. I have had a meeting with the regulator and also exchanged correspondence with him. Ofgem has considerable powers which, for whatever reason, it has not yet chosen to exercise. I urge it to do so now. What is being done to make the energy market more competitive, and to introduce longer contracts? Just look at what is happening in Europe. Ten years ago, a family in Glasgow or in my constituency enjoyed reasonably low energy prices. People in Berlin paid somewhat more. However, because of the long-term contracts that have been introduced elsewhere in Europe, there has not been much difference in the long-term prices in Berlin. Our constituents, on the other hand, have had to deal with the problem of fluctuating prices being passed on to them, and they are uncertain about how to budget for the forthcoming year.

Last year, we had very high hopes of the European Commissioner for Competition, who said that she would not accept the absence of competition elsewhere in Europe. Markets appear to be closed to us. Competitors can invade our markets when prices happen to be low. The result is that there is not an even playing field in
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Europe. Europe should be more involved in such issues, and I say so with the respect that the Minister knows that I have for him. I am disappointed that Ofgem is not to the fore, using its powers and working with the institutions that exist, both to show that there is genuine competition and accountability and to produce a transparency that does not seem to exist in the energy industry.

As regards the increase in wholesale prices, which we are told is at the heart of our problems, how much of that increase impacts on the prices that have been imposed? I have it on good authority that some people believe that about 40 per cent. of energy company costs apply to fuel prices. If that is the case, I cannot see why there is an average 17 per cent. increase. There are regional variations that are very worrying. In addition to the point made about the north of Scotland by my hon. Friend the Member for North Ayrshire and Arran (Ms Clark), I gather that the increase in London and the east Midlands is about 24 per cent. It is very difficult for the Government to argue—I understand where they are coming from—in favour of an anti-inflation policy, when public sector workers who have been asked to accept limited wage increases face rising prices, particularly for energy.

I want to conclude by indicating the strength of feeling in constituencies such as mine, where people have worked hard in the mines, the steel industry, and engineering. As my right hon. Friend the Member for Islwyn suggested, when we look at the impact on people’s health, particularly elderly people, the need for heat, warm water, and proper supplies of well-cooked food is something that we as hon. Members and the Government must support. It is fine if companies introduce social tariffs, but what is profoundly unacceptable is that, despite the Government’s support, which I welcome, the energy companies think that the obligation to prevent fuel poverty rests with the Government alone. I do not accept that. I hope that when it comes to issues such as social tariffs, the companies will accept that they have a responsibility. The idea that in Britain, with the prosperity that we have otherwise enjoyed, there are people who have to choose between heating and eating is profoundly repugnant, and we believe that something should be done.

10.17 am

Dr. Alan Whitehead (Southampton, Test) (Lab): I congratulate my hon. Friend the Member for Edinburgh, North and Leith (Mark Lazarowicz) on obtaining this debate. It is not only important, but topical given the recent announcements on fuel price increases, which are, to say the least, swingeing. It is extremely likely that the announcements by npower will be followed by rises from all the other utilities and that they will herald long-term high energy costs.

Against such a background, this Government’s very good progress on reducing fuel poverty has effectively been reversed, at least in terms of the number of people who are in fuel poverty, using the definition of 10 per cent. of household income spent on fuel. Some 6.5 million people suffered fuel poverty in 1996. That figure was reduced to 2 million by 2004, partly because of lower fuel costs over that period. However, since 2004, that trend has been reversed by rising fuel prices.


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Even before the most recent announcements, the number of people in fuel poverty had risen in England by about 1.6 million, in addition to those who were in fuel poverty in 2004, simply because of the rise in fuel prices. That figure has fallen following changes to Government policy on benefits and entitlements, which have led to income improvements, and 300,000 people have been taken out of fuel poverty. However, only 100,000 people have been taken out of fuel poverty as a result of energy efficiency improvements, and the recent substantial fuel price increases will stretch the figures much further.

The current estimate is that about 40,000 more people will fall into fuel poverty for each 1 per cent. increase in the price of fuel. Heroic though our efforts have been, we will, in many instances, almost inevitably be fighting a losing battle if we attempt to combat fuel poverty largely by giving those in fuel poverty additional resources to pay the bills that the energy companies put through their letter boxes; this is a sort of caucus race, in which everyone goes round and round, and some get small prizes, but there are no winners in the end.

As hon. Members have said, it is important that benefits and winter fuel payments rise in line with additional fuel costs, but it is almost impossible for the Government to align increases in benefits and other arrangements in that way, given the variability of proposed fuel increases. Therefore, as hon. Members have suggested, other methods will be necessary in the next phase of the battle on fuel poverty to ensure that we take people out of fuel poverty and meet the ambitious targets that have been set. That raises the issue of what happens with winter fuel payments, as well as the central question of how we can give people the wherewithal to fight fuel poverty by making their houses energy efficient, which will make their bills lower and ensure that their houses are proofed against future price increases.

The recently announced carbon emissions reduction target programme, which will oblige energy suppliers to make provision for carbon reduction in households, will perhaps be worth £1.5 billion over the next three years, and the recently announced uprating in pension credit will also make a considerable difference. However, the programme that can and will make the most significant difference is the specifically targeted Warm Front programme, under which grants to undertake energy efficiency measures are made available to households that are overwhelmingly in, or are likely to be in, fuel poverty. However, the problem is that, although the overall amount that will go into energy efficiency over the next few years is increasing, 25 per cent. less will be spent on the Warm Front programme over that period under the comprehensive spending review. That raises the question of whether we have got the right mix of measures to deal with fuel poverty over the next few years.

Mention has been made of people with prepayment meters paying vastly over the odds, and I had the good fortune to obtain an Adjournment debate on that issue, to which the Minister gave a very positive rejoinder. In that respect, it is important for us to consider the issue of how we give people the wherewithal to avoid paying an additional penalty, over and above any other increase in their energy costs, as a result of the choices that they make—or, in some instances, have to make—when choosing their energy supplier.


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