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8 Jan 2008 : Column 13WH—continued

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Another important issue, about which we have perhaps heard less than we should have, is the suggestion that energy companies should be increasingly regulated differently and enjoined to change from providing as much energy as possible—by and large, they make money by supplying households with as much energy as possible and charging for it—to co-operating with households, in particular, to provide as little energy as possible under longer term contracts, which hon. Members have mentioned.

Under such contracts, investments could be made in household energy efficiency and in methods of producing energy, such as microgeneration, which companies could provide as part of the contract, and the savings would be shared between the householder and the energy companies, which would take them in the form of profits. I hope that changing utility companies to energy service companies in that way will feature prominently in the forthcoming energy Bill. In conjunction with other measures, such an initiative could make a great difference to the way in which we target the energy efficiency of buildings and people’s ability to become players in the market and to pay the energy bills that companies lay on them.

On the Warm Front programme, it would be possible to make up the shortfall in financing over the next few years simply be considering whether the winter fuel payment should be paid universally or whether it might be targeted, for example, away from the highest level of taxpayers, who, as a general rule, are less in need of the winter fuel payment than many others across the spectrum.

The issue, therefore, is not necessarily whether the resources are available, but whether we have struck the right balance between paying people to compete in the market and ensuring that homes are genuinely warmly insulated and that people are genuinely able to resist price increases because of the circumstances in their homes.

Sir Nicholas Winterton (in the Chair): Before I call the last speaker before the winding-up speeches, may I ask the Opposition spokesmen to keep their remarks as brief as possible to allow the Minister a full 12 or 13 minutes to reply to the debate?

10.28 am

Mr. John Grogan (Selby) (Lab): What better way to start the new year and blow away the cobwebs than to take part in an Adjournment debate under your chairmanship, Sir Nicholas. It is also a great pleasure to follow four such thoughtful and, at times, passionate contributions.

The Government have massively ambitious targets on fuel poverty. The former Prime Minister said that we are

and we aim to abolish fuel poverty by 2016. Nothing is more miserable for an MP than meeting elderly people who cannot get out of bed because of the fear of getting cold during the day, and nothing is more depressing than meeting young people who cannot find a quiet, warm room in which to do their homework.

I am lucky enough to have half a degree in economics—I should stress that I have a full degree in total, but the other half is in history—and I can recognise an oligopoly
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when I see one. Some of my colleagues have, if anything, been too kind to Ofgem, because what we are talking about here is an oligopoly. Ofgem has considerable powers, but all the economic studies over the past year have clearly shown that prices have been very sticky indeed, with retail prices not following wholesale prices. However, Ofgem has not done its job. Thank God for Energywatch; it will meet its demise this year, and we will miss it, because it has kept the spotlight on fuel poverty and campaigned on social tariffs.

In the brief time available, I want to support my colleagues. We need cheering up on the Labour Back Benches as we go into the new year; I do not think that that is a secret. The Minister is the man to do that, by committing himself today to a minimum scheme for social tariffs in the energy Bill. That is, incidentally, also in the best traditions of one-nation Toryism, so I hope that it will receive Opposition support.

Let us name and shame, even if Ofgem will not. Let us praise British Gas and EDF Energy for their social tariff schemes, and let us shame npower. No one has said exactly how much it has increased gas prices—it has done so by 17.2 per cent. The increase in electricity prices is 12 per cent.

said a letter in The Sun. The Sun got it right on that occasion. David Threlfall, the npower retail chief executive, should really take a look at himself. Surely he does not want to be the coming year’s Scrooge of the energy industry, as he was for the previous year. It is not good enough for npower to sponsor cricket and supply green energy to Wembley stadium and to say that it is exercising corporate social responsibility. It must follow the other responsible energy companies that have introduced social tariffs. I hope that the Minister can give us assurances about that.

10.31 am

Steve Webb (Northavon) (LD): I join other hon. Members in congratulating the hon. Member for Edinburgh, North and Leith (Mark Lazarowicz) not only on securing the debate and making a thoughtful contribution, but on his track record on the issues in question. We have heard some very well-informed and thoughtful contributions. I could not help thinking that, in the sequence of points made by the hon. Member for Edinburgh, North and Leith, he saved the most important until last, in that energy efficiency must, as the hon. Member for Southampton, Test (Dr. Whitehead) said, lie at the heart of the matter. I speak as the newly appointed Liberal Democrat spokesman on environment and energy. The interests of both the planet and individuals point in the same direction: we must tackle energy efficiency, rather than simply pay more money to people to pay more money to fuel companies, so that they can create hot air that will go through badly insulated lofts, walls, windows and doors. If we can make long-term changes to the housing stock, so that not just this winter, but every winter, people pay less because their houses are properly insulated, that will be the infamous win-win situation for the elderly, the vulnerable and the planet.

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I was interested to hear the hon. Member for Southampton, Test say that only a tiny amount of the action on fuel poverty has been about energy efficiency, and I was disturbed to hear his figures about the Warm Front scheme, with lower amounts to be spent in real terms than are spent under the current programme. The Minister has been described as heroic—and I have great admiration and respect for him—but heroic Government efforts would mean that they would hit their target of abolishing fuel poverty by 2016 and abolish it for the vulnerable by 2010, rather than missing it by a million, with a doubling of fuel poverty in the past few years.

Labour Members are understandably cautious—there has been much coded criticism of the Government, but no explicit criticism. I think that they are struggling, because many of them would like a world in which the utility companies are publicly owned, and in which the objectives that we have discussed could be achieved directly by Government. We moved to a situation in which the utility companies were publicly regulated, and now we have, essentially, a free market. Many of the contributions to the debate reflect the frustrations that we all feel when something with a clear social cost and implications is left to the free market. The problem with fuel poverty is what happens when Governments do not do enough to intervene in the free market. Who sets the rules for Ofgem?

Dr. Iddon Will the hon. Gentleman give way?

Steve Webb: I have only a few minutes, so I hope that the hon. Gentleman will forgive me if I do not do so. Ofgem’s rules are set by the Government. If it is not doing enough, why do the Government not make it do more, as that is where the buck stops? How do we ensure that more effective help is given to vulnerable groups? The Minister’s experience goes back a long way, especially in matters of social policy, and he will remember that at the start of the 1980s there was something called certificated housing benefit. In other words, people on income support, or supplementary benefit, as it then was, received a certificate that entitled them to have their rent and rates paid in full. The problem in the fuel market is that the utility companies often do not know who are the right people to allow on to the social tariffs. British Gas, in its briefing to hon. Members, talked about

However, the Government know who those people are, so why do not they ensure that individuals whom they believe to be vulnerable to fuel poverty have a certificate or an equivalent document, whether they are vulnerable pensioners, severely disabled people, or, as mentioned by my hon. Friend the Member for Richmond Park (Susan Kramer), families with young children? Why do the Government not ensure that those people have a voucher or certificate to give them the power to choose the best provider of insulation, home efficiency or whatever is relevant, rather than expecting the private companies, which have been deregulated and sold, to go round Britain trying to find out which of their customers are eligible? It is nonsense. The Government have the information, and they should use it to the benefit of those individuals.

The root problem—and I think that the hon. Member for Southampton, Test hinted at this—is that the business of energy companies is to sell as much as they possibly
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can. We should oblige them to adopt a goal of selling less energy. Their goals and incentives, over time, should be the emission of less carbon, the selling of less energy and the wasting of less fuel. However, at the moment, if I buy a new flat screen multi-whatever digital high definition telly, and use lots more energy, that is great news for the electricity company, because my electricity bill shoots up. The incentives are all wrong. We will get action only when the incentives for the private companies that have rightly been criticised by the right hon. Members for Islwyn (Mr. Touhig) and for Coatbridge, Chryston and Bellshill (Mr. Clarke)—the wrong incentives of selling us more and more to make more and more money—become instead the incentives of delivering energy more and more efficiently. A cap is needed—there has been talk about capping emissions—and if there were a cap on the emissions that energy companies could generate, they would have a strong incentive when selling to customers to ensure that those customers used energy more and more efficiently. Until we turn things around, and adopt a new way of thinking about energy supply, we shall not get the right incentive structure.

We have heard that the npower increase averages 15 per cent. or so across gas and electricity, and if it is mirrored by other suppliers it will add 500,000 to the fuel poverty figures. We have heard that the number of households in fuel poverty go beyond the figure of 4 million a year or two ago. It is not just a question of our missing the target: we are going in completely the wrong direction, and the scale and scope of the Government response is wholly inadequate. The new energy Bill must include firm action on social tariffs, and it is worrying that the Government have gone rather quiet on that. Leaving the matter to the companies and expecting poor and vulnerable households to shop around and choose between all the different social tariffs is not good enough. As an ordinary hon. Member trying to deal with constituents, I am baffled by the range of tariffs, schemes, grants and initiatives run by the Government, let alone those run by the companies. National Energy Action has said that although some social tariffs are genuinely advantageous,

because of course different suppliers operate predominantly in different areas—

I agree that that is the case.

The strength of feeling in the debate, particularly in the brief but excellent speech of the hon. Member for Selby (Mr. Grogan), is right. The situation is scandalous. Leaving things to the market is not good enough. Leaving things to different initiatives by individual companies is not good enough. The Government have the levers of power in the market, and they should use them.

10.38 am

Charles Hendry (Wealden) (Con): I, too, want to begin by congratulating the hon. Member for Edinburgh, North and Leith (Mark Lazarowicz) on securing the debate, and by paying tribute to him for the huge amount of work that he has done in this context over many years. Linked to that, I add my tribute to those that Energywatch has received this morning for its
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work. I also congratulate the hon. Member for Northavon (Steve Webb) on securing his position and on the way in which he has mastered his brief.

We have had a very good debate, but it is clear that we are heading in the wrong direction, as the hon. Member for Northavon said. The problem is getting worse. There were 1 million households in fuel poverty in 2003 and now, according to Ofgem, there are about 4 million. The Government have been strangely quiet about that. When the figures were falling they trumpeted them, but the last Government figures that we had related to 2005. We cannot obtain from the Government, in spite of parliamentary questions, more up-to-date information about the number of households that are affected. We must go to other organisations, such as Ofgem, and we end up with an absurd situation of shifting targets, which become meaningless.

The Government’s original commitment was to eliminate fuel poverty in every vulnerable home by 2010, but now the policy is simply to ameliorate the situation. There is an absurd commitment in the recently published fifth annual report on the fuel poverty strategy to eliminate fuel poverty in England and Scotland by November 2016. It is absurd, because the report gives a date of 22 November 2016. That is almost nine years away; perhaps the Minister can tell us whether it will be in the morning or the afternoon. Why do not we shift away from meaningless targets towards more concrete action?

What we have seen—and this is the real reason for change—an increase in fuel prices. When fuel prices fall, more people are taken out of fuel poverty; when they rise, inevitably more people are drawn into fuel poverty. Labour Members cannot have it both ways. When the numbers fall, they claim that it is a massive credit and triumph for Government policies but then, when wholesale fuel prices rise, they say that it is the fault of the energy companies. The right hon. Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) said that at the first hint of an increase in wholesale prices, the companies put consumer prices up. I wonder what newspapers he has been reading. He talked about the “first hint”, but oil prices have reached $100 a barrel as a result of a gradual increase over a long period. The price of coal has doubled in the past year from $60 to $120 a tonne, and gas prices have gone up by 60 per cent. Those are real increases and they are reflected elsewhere. The right hon. Gentleman asked us to look at what is happening in Europe, but if he did so, he would see that in Germany, Spain and France, there have been applications, some of which have been approved, for fuel price increases of 10 per cent. We are talking about a global phenomenon, and the right hon. Gentleman does not strengthen his argument by misinterpreting the facts.

Government policies have made the situation worse. We heard that the Warm Front budget has been cut from £350 million a year to £300 million. That was done deliberately to attract as little notice as possible in the run-up to Christmas. We heard that the overall budget over three years has been cut from a little more than £1 billion to £810 million. In addition, as we heard, the Warm Front scheme has failed many people because of the way in which it was set up. My hon. Friend the Member for Castle Point (Bob Spink) rightly highlighted the fact that a scheme in which only approved contractors can be used ends up with a grant being given, but
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because the approved contractor quotes much more than the grant is worth, the individual concerned must either must top it up or go without it, whereas a local contractor could do the job at a much lower price. Those are practical problems that I hope the Minister will address.

The Government have changed other policies and made the situation worse. Fuel companies used to visit vulnerable customers accompanied by an official from the Department for Work and Pensions. The company could tell people how they could improve their fuel efficiency and reduce their tariff. The DWP official could tell them which additional benefits they might be entitled to. The DWP stopped that scheme without explanation—indeed, it will not give an explanation—so will the Minister tell us why it did so? The change means that people who are entitled to additional benefits are missing out because that useful and valuable approach was dropped.

Will the Minister tell us, too, what is the total contribution to fuel price increases resulting from Government measures to tackle climate change and increase energy efficiency? Will he confirm that renewable obligation certificates, carbon emissions reduction targets, and the EU emissions trading scheme have added about £70 per £1,000 of fuel bills to customers? We are all keen to see efforts made in that direction, but is it not the case that some households have been pushed into fuel poverty as a direct result of those additional costs on their fuel bills?

In the course of the debate, we have focused a great deal on Ofgem’s role and the work it does to tackle fuel poverty. We should recognise, that in its current duties, tackling fuel poverty is a secondary duty, not a primary duty. I hope that the energy Bill will lead to a review of Ofgem’s duties so that we can decide whether tackling fuel poverty should be a primary duty. We should recognise, too, that Ofgem has taken important steps, in particular through its work with citizens advice bureaux, to help to tackle fuel poverty. It sends out 100,000 letters a year to vulnerable customers to tell them what are the cheapest tariffs offered by energy suppliers in their area. Ofgem has managed to secure the power companies’ agreement that they will not disconnect vulnerable customers. An enormous amount of work has been done, but I share the concerns expressed, in particular by the hon. Member for Southampton, Test (Dr. Whitehead), who speaks with expertise on these subjects, about prepayment meters. Much more needs to be done. Some companies have addressed the issue, but others, including companies such as npower, have failed to do so, and should be called to account.

Will the Minister tell us the outcome of the discussions between the Chancellor of the Exchequer and Alistair Buchanan of Ofgem following yesterday’s press announcement that he was to be summoned to a meeting? I imagine that that meeting has taken place, or at least that a date has been set. Perhaps it has not—I hope that it was not simply a media stunt that the Government could use to get themselves off the hook. What is the outcome and, specifically, what will the Chancellor ask Ofgem to do to address the problems?

The solution to the problems is clear. First, we need to make sure that more is done to encourage customers to swap providers. The price increases in the past couple
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of weeks are very concerning. However, they have been made by a few companies, not by the majority, so the reality is that changing supplier remains the best defence against increasing prices. Secondly—this point was made by the hon. Members for Northavon and for Southampton, Test—on energy efficiency, only 40 per cent. of houses in this country are properly insulated. Many of the worst insulated houses are occupied by people most trapped in fuel poverty. Unless we do more to address those issues, we will not address the whole problem. The Government have done some things, such as introduce winter fuel payments, but they have also introduced measures in the past year or so that have exacerbated the problems of fuel poverty. Hon. Members have highlighted those issues in the debate, and I hope that the Minister will assure us that the Government will take action to address those matters.

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