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5 Feb 2008 : Column 183WH—continued

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Lembit Öpik: On a point of order, Mr. Amess. I wish to apologise to the House and to Robert Plant for my dreadful pun.

Mr. Wright: This has been a good-natured debate, but there are some serious points to make.

I wish to cover three broad themes that came out in the debate. The first is about decent homes—where we have come from, what we have achieved in the past decade and where we are going in order to hit the 2010 target. The second theme that I shall address at some length deals with serious points about engagement with tenants and the concerns expressed by my hon. Friend the Member for Keighley about standards as well as broader governance issues in Bradford. She made an important point about a particular estate, to which I shall respond later. The third theme is about the future. We spent the past month on the Housing and Regeneration Bill and, in particular, the last couple of sittings, talking about Oftenant and the establishment of a new social housing regulator, the fundamental objective of which is to raise standards for all social housing tenants and to ensure that they have decent homes. I shall talk more about those objectives, as I did in Committee on clause 86.

Grant Shapps: I am most grateful to the Minister, who was always generous with his acceptance of interventions in Committee. For hon. Members who were not in the Committee, will he explain why it is that, although he says that all tenants will benefit from Oftenant, those in council housing will not?

Mr. Wright: If the hon. Gentleman looks at Hansard tomorrow morning he will notice that I did not say that—I hope. I said that tenants of all social housing—

Grant Shapps: Dancing on a pin.

Mr. Wright: I am not dancing on a pin. Our intention is clear. We want tenants of local authority homes brought under Oftenant, but there are practical difficulties, rather than ideological concerns. Those are being looked at now and we anticipate that it will take about two years before they are resolved. We need to consider how to align the regulator’s work with the comprehensive area assessments. We also need to consider funding. All those difficulties need to be encountered before we move to a single domain regulator. However, we definitely aim to achieve that policy objective within two years.

On the subject of decent homes, we have a massive social asset in social housing. There are about 4 million social homes, they are valued together at about £400 billion, and they are an important national, collective asset. Everybody recognises that in the years before 1997, there was disgraceful neglect and chronic under-investment. Indeed, my hon. Friend the Member for Islington, North was in the House when it happened, and he has been most eloquent on the subject. I should happily take an intervention from the hon. Member for Welwyn Hatfield, who speaks for the Conservatives, if he would like to apologise for the chronic under-investment that took place under the Thatcher and Major Administrations.

Grant Shapps: I am most grateful to the Minister, because my intervention may give him an opportunity to explain, as he did to the Public Bill Committee, how right to buy gave him and his family the opportunity to
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move through the different types of housing that were available. I think that the Committee Hansard shows that he thanked Margaret Thatcher for the opportunity that right to buy gave his family.

Mr. Wright: The hon. Gentleman taunts me. I do not want to rehash the arguments from the Housing and Regeneration Bill, but he knows that I said that one reason why I am in the Labour party is because Mrs. Thatcher absolutely decimated Hartlepool and the north-east. It was a disgraceful chapter in my town’s history, which I do not want to go anywhere near again, so I certainly did not thank Mrs. Thatcher.

There was chronic under-investment before 1997, and that has been a task for this Government. Indeed, I do not think that the Government receive the recognition that they should for their investment to achieve decent homes. Prior to 1997, we estimated that £19 billion of repairs and maintenance was needed to bring homes up to a decent standard, so we set a target that by 2010, all social homes would meet minimum standards of decency, and that 70 per cent. of vulnerable households in the private sector would have decent homes. It must be said—I have seen it in my own patch and elsewhere—that the target, with its specific deadline, has galvanised massive improvement in the social housing stock, and it has been done in innovative and transformational ways.

Let me recount to the Chamber a little tale. I used to work in Newcastle, a city with which the hon. Member for Montgomeryshire has a long association. I worked in the centre but travelled out to Walkergate, which is a good, traditional north-east community. When I was there in the mid-1990s, it had—how shall I put it?—not been invested in for quite some time. We have discussed registered social landlords, large-scale voluntary transfers and arm’s length management organisations such as Your Homes Newcastle, and I travelled up there last summer to have a look around and see what has been done on investment. I must say that, on the improvements to tenants’ homes, Your Homes Newcastle has been absolutely fantastic, revolutionising the way in which tenants live, with decent homes, new kitchens, energy efficiency and central heating systems. We should shout from the rooftops—the decent rooftops that we have put in place—what we have done.

Lembit Öpik: Obviously, the Liberal Democrat administration up there is partly responsible for that. However, does the Minister agree that there is nothing in Newcastle that cannot be repeated in other places, as long as they have the will, the intent and the strategic planning to make it happen?

Mr. Wright: Funding is important, too, and the Government have unlocked a load of funding to ensure that we have decent homes. Since 1997, we have also increased the funding available to councils to help to deal with the issue. My hon. Friend the Member for Great Grimsby sometimes says that, on council investment, we have turned off the taps, but I say to him gently that that is simply not true. This year, council spending per home is about £1,100, compared with about £800 in 1997, so there has been a 30 per cent. increase in real terms. On top of that, we have also made £3.7 billion available for ALMOs, such as Your Homes Newcastle, to deliver improvements to council housing stock, and
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we will have made available £2.7 billion in private finance initiative credits for PFI schemes by March this year.

Mrs. Cryer: I would like a definite response to my questions. The trust has told us that £45,000 needs to be spent on each house on that estate, but it says that it will not do so because it is not worth spending, so it needs to build new houses to replace them. At the same time, however, the Housing Corporation says that it is not worth spending money on the estate to build new houses. What will happen to the tenants in the meantime and for the foreseeable future? Will they continue to live in that substandard housing? What will be done for them?

Mr. Wright: My hon. Friend passionately argues her case for her constituents, but if she will forgive me, I shall mention just a couple more statistics and then come on to that precise point.

More than £20 billion of public money has been put into improving social housing standards since 1997, and as a result of levering in private sector money, a total of £40 billion will have been invested by the end of 2010. On our achievements, since 2001, we have put in 518,000 new kitchens, 440,000 new bathrooms and 910,000 new central heating systems, which, with reference to the comments of my hon. Friend the Member for Islington, North, helps precisely with energy efficiency. That issue is important. I woke up to hear my hon. Friend the Minister for Energy on the “Today” programme this morning talking about energy prices. At a time of increasing energy prices, it is vital that we address the issue by ensuring that people stay warm and that there is environmental friendliness.

Jeremy Corbyn: I understand that point, and I welcome the Government’s suggestion for better energy efficiency. Will the Minister go further, however, and specifically encourage—indeed, require—new developments to include self-generation through photovoltaic cells or heating cells, so that there is lower use of grid electricity in such homes?

Mr. Wright: My hon. Friend makes an important point. He knows about the target—the most ambitious target anywhere in the developed world—for all homes built from 2016 onwards to be zero-carbon homes, and we have a clear road map on how we reach it. There are provisions in the Housing and Regeneration Bill to ensure that the code for sustainable homes is made mandatory through an assessment, which, like the decent homes standard, will help to galvanise improvements in efficiency.

I shall now pick up on the important points that my hon. Friend the Member for Keighley raised. She mentioned her concerns about the ballot, which I understand, but I shall make two points about it. Tenants voted 62.2 per cent. in favour of stock transfer, from a turnout of 65.5 per cent., which was higher than some local council elections, and higher than the turnout in the 2005 general election. I looked into her concern that if tenants did not vote, that was classed as a yes vote, and I have minutes from Bradford city council, which suggest that that is not true. The point was made clear on the ballot paper, and the minutes say:

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I hope that that reassures my hon. Friend.

My hon. Friend also mentioned the importance of governance and democratic accountability. In keeping with best practice from the Housing Corporation, when the council’s stock was transferred through the LSVT system to Bradford Community Housing Trust, there was the traditional one-third representation: one-third tenants, one-third councillors, and one-third independent members. I understand that the RSL is restructuring its board and governance procedures, but that activity will put greater emphasis on tenants, who will hold a majority on the board. That will be important in raising housing standards in the organisation, so again, I hope that my hon. Friend takes some reassurance from that point.

My hon. Friend mentioned important points about the Woodhouse estate, and I would very much like to come up to see it, if she will invite me. I have similar issues in my area, and I understand her concerns. The Woodhouse estate has been examined closely, and it is not considered cost-effective to repair some houses. She rightly said that Bradford Community Housing Trust carried out an options appraisal, and its preferred approach is to decant, demolish and rebuild. I understand, and I shall ensure, that the trust has met local residents to discuss that preferred option, but meetings have been poorly attended.

Mr. David Amess (in the Chair): Order. We must move on to the next debate.

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Energy Regulations (Consumer Prices)

11 am

Dr. Vincent Cable (Twickenham) (LD): I have been lucky in recent weeks with Mr. Speaker’s roulette wheel—this is the second major debate that I have secured since the new year. It is topical, and the matter has been discussed in the House. Debate on the Energy Bill has been concerned primarily with the mix of suppliers and particularly the role of nuclear energy, but it has touched on fuel poverty. There was a debate here in Westminster Hall on fuel poverty on 8 January, secured by the hon. Member for Edinburgh, North and Leith (Mark Lazarowicz). Many of the right points were made, and since then the fuel poverty advisory group has delivered its report and there have been important discussions about the matter. I hope to add value by advancing some of the arguments made.

I wish to raise three matters. The first, and biggest, is whether energy prices are overwhelmingly driven by increased costs or whether there is an element of a breakdown in competition, unfair competition or monopoly profit. That is an important point that we have not properly pursued, although the Chancellor intervened with Ofgem. The debate presents an opportunity to pursue it in detail. I notice that the hon. Member for Selby (Mr. Grogan) is here. He will probably speak for himself, but he has tabled a motion in the past few days recommending a move towards the Competition Commission. I shall argue that he is right that that needs to happen, and I shall make the argument for that step by step.

The second matter that I wish to touch on is whether the Government could do something about costs and prices directly or indirectly through the European Union. I shall briefly mention gas storage, liquefied natural gas terminals and access to the European Union market. Thirdly, and finally, I shall return to something that has been discussed here often—fuel poverty and the role of the social tariff.

The context of the debate is substantial increases in domestic energy prices—I shall be talking about domestic energy, not transport. Four of the big six producers have increased their prices in January, and E.ON is thought to be following fairly soon. There has been a 17 per cent. increase in the price of gas and a 12 per cent. increase in the price of electricity. In a five-year period, there has been an 85 per cent. increase in the price of gas and a 63 per cent. increase in the price of electricity. Combined bills have gone up by 76 per cent. over that five-year period, and in the past few days we have crossed the psychological threshold of an average household energy bill being more than £1,000.

Associated with that are various symptoms of hardship. There were an estimated 420,000 additional cases of fuel poverty in January alone, based on the conventional definition of spending more than 10 per cent. of income on fuel. Worryingly, there has also been a rise in disconnections. Many of us thought that that problem had been solved by Government intervention some years ago, but disconnections have almost doubled in the past two years as a result of stress on prices.

The conventional explanation for the rise in prices is that it is linked to cost. That is clearly a major factor—it would be unreasonable to suggest otherwise. There have
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been big increases in international prices of oil, gas and coal. Gas is particularly important in the UK electricity sector, and prices are determined in a peculiar way at the end of the interconnector, linked with oil prices in Europe after a time lag of three to six months. External factors such as rising world prices are clearly a major influence. As the Minister has recently reminded us, there are additional factors such as the fact that we are opting for strong environmental policies, which impose on producers costs that are inevitably passed on. We must understand that. As he has pointed out, the annual cost of the renewable energy obligation is about £1 billion a year, and in addition there are the costs of energy efficiency undertakings. That all adds to costs.

The big question I want to pose is whether that is a satisfactory explanation. Is that all there is, or is there more to it? Some 80 per cent. of the public believe that they are being ripped off by the energy companies, according to a YouGov survey in the past few weeks. Is that right, and a fair assessment? Clearly the Chancellor of the Exchequer is worried that there is something else involved, otherwise he would not have approached Ofgem. I want to go through the argument about whether there has been a failure of competition policy that needs action.

The first point in the argument is that there is good research. A body called Cornwall Energy Associates carried out a meticulous, detailed study commissioned by Unison, the trade union, on the period 2003 to 2006. It tried to explain the increase in electricity and gas prices in that period and concluded that gas prices were pretty well determined by cost increases and were not a particular problem. On household budgets as a whole, it found that only 72 per cent. of the increase could be explained by cost increases and that there was a big unexplained differential.

The study meticulously went through all the contributory factors and concluded that the only plausible explanation was an increase in margins by the integrated energy companies that supply electricity. The study did not take a dogmatic, ideological view about that and stated that it was partly understandable, because profit margins had been very low in 2003 and it was understandable to try to rebuild them. However, the key conclusion was that as a result of their dominance in the market, the energy producers were able to push up their prices faster than their costs. There did not seem to be any other obvious explanation.

David Taylor (North-West Leicestershire) (Lab/Co-op): The hon. Gentleman will know that so far, Ofgem has rebutted and brushed away the concerns that people have raised. He is a distinguished economist of some standing. Does he agree that a market that is served by just six main suppliers is rather more likely to be oligopolistic than one served by the 20 suppliers that we had immediately just after so-called energy liberalisation?

Dr. Cable: The hon. Gentleman is right, and anticipates what I am going on to say. There has been a fundamental change in the market in the 20 years since privatisation. Initially there were two electricity generators, one integrated gas producer and a lot of regional monopolies. We then had a proliferation of competitors, but the industry has since consolidated and in the past 10 years has moved from 20 competitors to six vertically integrated companies.

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The question is whether that matters and why. It matters because it has a major impact on new companies trying to enter the industry. I have had correspondence from a company called BizzEnergy, which is a specialist producer trying to sell wholesale energy supplies to small-scale business. In its letter to me and the attached note—the Minister probably has it, because the company has campaigned actively—it states:

It concludes:

BizzEnergy is not the only company that is making that point. British Energy, which is the big nuclear energy company, has made a similar point about the dominating influence of the six integrated companies and their distorting effect. I do not wish to open the argument about nuclear power, but that is clearly testimony to the working of the market.

Mr. Jim Devine (Livingston) (Lab): I congratulate the hon. Gentleman on securing the debate. Does he agree that it is a remarkable coincidence that the six major companies have managed to increase their costs relatively similarly? The increases have all been about eight, nine or 10 times the rate of inflation. At a time when we are capping public sector worker pay, should we not consider capping those increases?

Dr. Cable: I agree with the spirit of the hon. Gentleman’s intervention, although it is not strictly true: it is interesting that one of the six, Scottish and Southern, has not yet increased its prices. It argues that profits have accrued in the industry through the issue of emissions trading licences, and it is using them to hold down its prices. However, the spirit of the hon. Gentleman’s question is right.

The next element in the argument is that the industry, supported by Ofgem, argues that we do not need to worry about any of that or those six producers, because consumers switch suppliers, which eats away at any profit margins that arise. They argue that 50 per cent. of households have switched suppliers and that households can make mark-ups of up to £100. They say, “It is a good market, so why should we worry about it?” However, when we probe a little further, it is clear that the supposedly competitive retail market does not work as it is supposed to. Half of households have never switched—mine is one of them—perhaps because of conservatism or age. For the 6 million households with pre-payment meters, it is often, indeed invariably, impossible to switch because they are locked into a debt repayment arrangement with their supplier, so they cannot exercise that choice.

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