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I want to make a simple set of propositions to the Minister, because I think we are in danger—I say this with respect to the hon. Member for Billericay—of buying into a system that has begun to be so complex that we think it will be sufficient to simplify a bit of it. I should like to put to the Minister not a formulated party policy position, but some suggestions for her and the Government to consider in relation to Ofgem’s work. I have deduced that Ministers as a whole, as well as my party and others, think that the way in which the market was privatised was not, in the end, in consumers’ best interests. I have spoken to my right hon. Friends the Members for Gordon (Malcolm Bruce) and for Berwick-upon-Tweed (Sir Alan Beith), who were responsible for our policy when these matters were going through
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the House some years ago, and they predicted that it was not the right way to proceed with the industry, and I am confirmed in that view.

I am conscious that we have to have a competitive industry within the European Union, although I observe that whereas the French and others have penetrated the British market well, we have not done quite so well in penetrating the mainland European market, so there does not seem to be absolute equity of access. It is not the first time that that has been mentioned—[Interruption]—and I shall not get the hon. Member for Castle Point (Bob Spink) going on that. I am pro-European, but it appears that something is not quite right in that context. My background proposition is that we have not got the market quite right, and my proposal is that the Government should confirm that we will all have available to us, in the long term, a smart meter or super-smart meter, as they would move everybody to the cheapest tariff automatically without them having to worry about things. That is more or less the idea of the technology, but that will not happen tomorrow, as the meters must be put into everybody’s homes. The Italians installed them the most quickly—I am told that they did the whole of Italy within three years. I have taken advice from people who have thought about the technical aspect, including colleagues such as my hon. Friend the Member for Hazel Grove (Andrew Stunell), who worked in the architectural profession, local government and elsewhere before he came to the House. He made it clear that it would be far better to have a longer period for installation—not least so there is the capacity to do the work. In a sense, it is nonsense to train the people to do the job if there is only going to be a three-year programme around the country, so it might be better to have a six-year programme or something like that.

Let us assume that there will eventually be a super-smart meter option for everyone. Until then, we need something that helps people to make choices. The Government should think of a new way of giving people the discounted tariff, which exists for people on low incomes. I was at a dinner the other day with National Energy Action, Neighbourhood Energy and British Gas. British Gas told me that it has 300,000 people on the subsidised tariff rate. Until recently, the way for someone to receive the subsidised tariff was for them to tell British Gas that they are a pensioner, or on income support or the disability living allowance. I gather that, until recently, they did not have to prove that they were on any of those things; they just asserted that they were. That has changed and proof is now required.

We could have a simple system that ties in with the Department for Work and Pensions, so that pensioners and people on disability living allowance, income support or in receipt of child benefit can be given a subsidised rate. The reality is that the following groups of people are much more likely to use fuel than the rest of us: people with children—the more children someone has, the more the need is; people who are older, for example, past retirement age; people who are ill or disabled and are at home all day because they cannot work; and people who are out of work. A household full of healthy adults, whether it comprises a single person, a couple, students or other groups of people, should not expect subsidised rates for their fuel.

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I am not presenting a final formulated proposal, because we need to work the matter out through dialogue with Ministers and Ofgem, but we could have a very simple system that would make it as easy as possible to have, in principle, two types of rate: a normal rate and a cheaper rate for more vulnerable customers. Hon. Members are here because they want to tackle fuel poverty. Obviously, there is not a direct match between the types of people in fuel poverty and those categories because someone who lives in a hard-to-heat home has much greater difficulty than someone who lives in a less hard-to-heat home. If we pull into the categories people who have children under 18 at home—the state knows who they are—people of retirement age, and people who are on disability living allowance or on income support, we are likely to catch the individuals who do not have an income, about whom we are most concerned. That is my first proposition.

My second proposition is that, at the end of this exercise, it is important to ensure that the energy companies are required to publish publicly—twice a year before and after winter would be reasonable—a grid of the six suppliers with the six key comparators of information that people need in the local and national press. I hope that Ministers will be tough about that with Ofgem because they have hinted that if necessary they will take the powers to be tough and legislate or regulate. Publishing such information would mean that people could make a choice. Everyone would know that, for example, the weekend that the clocks go forward and the weekend that they go back, they would find in their local paper, library and elsewhere a table comparing the suppliers’ offers. I do not understand why that cannot happen and why the key facts and figures—for example, the per unit cost—cannot be made available.

Thirdly, in terms of the demand system, there is obviously an argument for having a cheaper purchase rate for those who purchase electricity at night when the demand is less. The other day, when I read the suppliers’ information—not just Scottish Power but British Gas and Electricité de France—I noticed that there is not even a consistent time period for the cheaper night-time rate. The time at which people clock on to the cheaper rate depends on the company, which is nonsense. I gather that the peak time for use of electricity and gas is understandably between 4 and 8 pm, so the cheaper rate could be available from 8pm to 8am, or from 8pm to 7am if demand starts earlier in the morning. It is obvious that there is a downtime at night when people use less energy, and it should be possible to have a system that allows people to take their feed then and be charged at a lower unit rate. That principle could apply generally across the UK so that everyone knows about it. If people have the systems that allow them to have storage heaters and so on, they will benefit from such a proposal.

My final proposition—I have thought about this quite a lot—is that there should be no differential price dependent upon the method of payment, with one exception. Whether someone pays by prepayment meter, direct debit, quarterly, weekly or monthly, they should be charged the same rate provided that they understand that if they do not pay within seven days of the date that they have agreed under whatever system they are using, there might be a slight penalty. Let us consider the proposal the other way round: there would be a
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discount for prompt payment—whoever someone is and whether or not they are on direct debit, prepayment or so on. The Liberal Democrats have argued that the suppliers wrongly penalise two groups of people, and that they should not do so. They penalise people who have to pay up front by pre-payment meters—that should not happen because they are often the poorest people—and they penalise people who do not pay by direct debit. That is one category. Suppliers also penalise the low user because the first unit purchased is charged at a higher cost than later units. If someone purchases only a small number of units, they pay relatively much more.

If we are going to deal with that inequality and ensure that no one is penalised for being a low user or because they use a payment method that they need for their own money management, we should have a requirement that says, no matter how someone pays, they will be charged the same price. Such a requirement would get rid of pages of this bumf and it would mean everyone would understand the system. The rate would be x per unit this year—the price would vary twice a year—and suppliers could apply to Ofgem or the Government for permission to vary their rates more than twice a year if the price of fuel went up or down significantly. Other issues would also have to be looked at—for example, the need to provide warnings about price increases a certain number of days before they happen—but my plea is for us to have a very simple system that is led by the needs of the consumer, not the needs of the supplier.

Mr. Baron: I have been listening to the hon. Gentleman with great interest. I totally agree that simplicity must be the overriding aim when we consider how to help the consumer. However, will he explain the differences between our proposals because, when smart meters are introduced, I question whether the technology will be advanced enough automatically to ensure that every single household is on the cheapest tariff. That is a debate for the future. In the interim, my proposal suggests that it is not beyond the wit of man for energy companies simply to state on energy bills whether the customer is on the cheapest tariff available given the pattern of energy use. The hon. Gentleman’s suggestion sounds a bit more complex than that. Will he perhaps guide us on his proposals?

Simon Hughes: The hon. Gentleman knows—and I hope that I have said so clearly—that I respect his work. Outside this Chamber, I am happy to have a continuing discussion with him about the matter. I think that our proposals are complementary. I absolutely do not dissent from his proposal that such information should be available on the front of someone’s bill because patterns of use are normally consistent and, therefore, it is entirely possible to draw such conclusions. Indeed, more and more bills give some description of usage over a longer time span.

I am seeking to deal with the second issue that arises from that, and which involves a quarterly bill that says, “You are not getting the cheapest supply available, given your pattern of use”. Of course, EDF Energy, Scottish Power and British Gas will not automatically tell customers where to go to get a cheaper option. Until we have smart meter automaticity, the customer
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will have to make that choice. I am trying to deal with the fact that because there are so many options available—the price is determined by payment method as well as other things—that is not sufficient of itself. However, I would absolutely support that additional information on the bill.

I shall make two final points, as I am conscious that the hon. Member for Wealden (Charles Hendry) will contribute, and that the Minister will then reply. Does the Minister agree that we should demand that energy companies show not just the amount of energy used in the payment period, as they already do, but the embedded carbon used? We could begin to educate people about the implications of their energy use in terms of the big climate change threat that faces us. The last principle is that we should seek to reward customers for energy efficiency and reducing energy usage. There should be an incentive to do so.

As a postscript, there are other things besides varying tariffs and payment options. Customers can get Nectar points and all kinds of other goodies. I believe that they can even get air miles with some companies, but I may be wrong about that—I do not mean to mislead people. The most important thing is that we should try to get a culture in which, of course, we deal with fuel poverty. That is a bad phrase: we are talking about a lack of warm homes, or homes that are inadequately heated, thereby leading to illness and sometimes death. Of course, we want to ensure that people are able to look after themselves and their families well, but we want to reduce energy use and harm to the climate from excess emissions. We should be helping everybody to achieve those things. There is a separate debate about how homes in Britain are insulated which we are all alive to, but it is for another place and time. That is an equal imperative.

It would be helpful if, when she replies, the Minister responded positively to the constructive suggestions from this side. I hope that she will support us by saying to Ofgem, when it has thought about what it might propose next but before it finalises its proposals, knowing that the Government are watching it closely and wanting it to be pretty tough with the industry, that we would value a short opportunity to respond to the consultation, so that we can get the most robust position possible under the present law. Perhaps before too long, we might change the law, whoever is in government, to have a much more consumer-focused system.

10.13 am

Charles Hendry (Wealden) (Con): I warmly welcome you to the Chair, Mr. Russell. I hope that your first experience of this exercise has not been too traumatic. I warmly congratulate the Minister on her promotion. As I mentioned in a debate yesterday, many of us have found working with her to be extremely productive and a congenial process. No one doubts her commitment to ending fuel poverty. She has worked in that area for many years, and we would be keen to work with her to try to find cross-party solutions that address some of the issues. I congratulate her on her appointment.

I gather that the hon. Member for Stafford (Mr. Kidney) has been appointed the Under-Secretary of State for
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Energy and Climate Change. We wish him well in that role. I understand that he will be unpaid and am slightly concerned about having someone holding such an important position as a part-time volunteer. Nevertheless, we congratulate him on his promotion to Minister.

I welcome the measures that my hon. Friend the Member for Billericay (Mr. Baron) proposed this morning. He has campaigned long and hard on these issues and has attracted significant support. The Secretary of State paid him the compliment of describing his idea as “ingenious”. I believe that is a way of saying that his idea is well worth exploring further—undoubtedly it is. The way in which he got non-governmental organisations to support him is also incredibly important. It shows that there is a strong sense in the world outside Westminster that the system does not work as well as it ought to. I congratulate him not just on his ten-minute Bill and his early-day motion, but on securing this important debate.

I welcomed the comments of the hon. Member for Castle Point (Bob Spink). His presence today shows his personal commitment, as did his interventions in the debate. I am concerned, however, that the issues we are discussing have not yet been properly addressed.

The hon. Member for North Southwark and Bermondsey (Simon Hughes) spoke about switching. I did, in fact, switch a few years ago, because I wanted to move to a green tariff. It became evident that it was not a cheaper tariff. The experience was straightforward. Several shadow Ministers went through the exercise. Disturbingly, one of my colleagues tried to switch his gas supply to an electricity supplier that did not provide gas, which, I imagine, had dramatic consequences for the safety of his household. Generally, several of us switched. The process was straightforward, but it did not put us on to a more favourable tariff. The hon. Gentleman was helpful when he read out from the booklet. Initially, it was as exciting as someone reading from a telephone directory, but it showed how completely baffling the tariffs are. No one could be expected to read through that booklet and understand at the end of the process which system would be better for them.

One of the things that became clear was that the more favourable tariffs are available only to those who have bank accounts. That is a matter of great concern. It is one of the reasons why we have suggested extending the remit of the Post Office card account to enable people who do not have a bank account but do have a Post Office card account to pay their utility bills, particularly their energy bills, using that account. It has been independently estimated that, if that were to happen, 4 million people without bank accounts could save about £100 a year on their utility bills.

The hon. Gentleman suggested that the only tariff distinction should be between those who pay on time and those who do not. He may have seen me grimace at that point. My concern is that those who do not pay on time are not necessarily those who can afford to but are lazy, but probably those who cannot afford to pay on time. They juggle different bills. They may have to pay their rent that week or do something else, and they simply have to put something off. It worries me greatly that the only people who might be subject to a higher tariff would be those who are probably finding it most difficult to pay. In any reforms, we must ensure that there are not perverse consequences which would actually move us in the wrong direction.

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Simon Hughes: I completely understand the issue. In a constituency such as mine, I am hugely sensitive to it. I was seeking to find a way to ensure that people did not abuse the system and fail to pay but not ever suffer the consequences, but also sort out the present situation in respect of people who pay in advance. The certainty of payment is an advantage to the company that receives the money. I am happy to continue the debate about how we deal with prompt payment as opposed to late payment but mitigate the consequences for those who are in difficulty.

Charles Hendry: I am grateful to the hon. Gentleman for that clarification. It highlights the importance of smart meters and our frustration that the smart meter programme is not moving forward faster. In Northern Ireland, 40 per cent. of households are now equipped with smart meters. It has a lower rate for prepayment customers than for mainstream consumers—because customers pay in advance, the company can be clear that bills will be paid. Smart meters can help to tackle some of the issues; I shall come back to that shortly, if I may.

It is clear to us that the debate on fuel poverty is moving in the wrong direction. We have had a revised interpretation of the law. When it was introduced, it stated that fuel poverty should be abolished by 2010 for vulnerable households, and by 2016 for all households. It was not clear at the time that the few words

would be attached to it. As we now move towards the 2010 deadline, it is evident that the numbers are getting worse rather than better, and that it is virtually impossible to meet the target. It has been disappointing to find that there has been a lot of wiggle room, which has enabled Ministers to get off what we thought was a legal hook.

Targets should not be introduced without a road map to explain how they will be reached. It sounded all well and good to introduce a target for eradicating fuel poverty, but nobody said where we needed to be by 2006, or by 2008, if we were to meet the target by 2010. So as we move closer towards that target, people could say whether or not we are moving in the right direction and ask what more needs to be done. This is a general problem that one has with targets in this area.

In tackling fuel poverty, we need to be clear about the different roles that could be played by Government and the energy companies. Many issues to do with fuel poverty need to be dealt with centrally by Government. Often, people who are fuel-poor are probably generally in poverty and do not just struggle to pay their electricity and gas bills: they struggle to pay all their bills, including food and phone bills. The solution to that is probably through Government giving more targeted support to the people who need it most.

The hon. Gentleman talked about having a separate system for people in vulnerable groups and mentioned families with children and people who are elderly or have disabilities. It is hard for an energy company to know who is in any of those categories at any time. For example, they do not know the situation of a marital break-up—whether there is one income or two or whether a child has moved away from home—or what has happened in terms of people’s financial circumstances. The one organisation that knows that is the Government, because they are charged with paying benefits to those
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vulnerable groups. Therefore, there is a distinct role for the Government in this regard. Sometimes we try to confuse the work of the energy companies and impose on them responsibilities that the Government are more equipped to tackle. There is a natural role for Government in this process, just as there is also a natural role for the energy companies.

Simon Hughes: Of course, the Government have the information, not the energy companies. A way of dealing with the issue would be to make the winter fuel payment payable before Christmas—when everybody uses it, and some people use it for things other than electricity bills—to all the people in all those vulnerable categories, possibly for six months or across the year as a top-up to the other payments that they receive, such as pension benefit and the rest. That could be entirely the responsibility of the Government and it would be there to subsidise and reduce the consumers’ bills.

Charles Hendry: Although there is a lot of ground worth exploring there, we would still have to decide whether a high-income family with one child should receive exactly the same benefit as a low-income family with four children. This issue is complex, but we probably agree fundamentally that Government can do some things better than companies. I find the prospect of the energy companies having to take legal action against their consumers to reclaim money that people have had because they did not advise the companies about a change in their circumstances too horrific to contemplate.

The companies should be doing much more to simplify tariffs. It is absurd that there are 4,000 tariffs out there. Although those have probably grown up for the best reasons in the world, it should be an important priority for the companies to go through them with a red pen, remove those that can be removed and move people on to a much smaller range of more readily understandable tariffs.

The companies should be giving much more information to their consumers on their bills, as my hon. Friend suggested directly, including when people call in and ask for advice. In the Select Committee on Energy and Climate Change, I asked the heads of the electricity companies whether they would make it an absolute policy that anybody phoning to ask about a specific tariff would be told which one was most favourable, if the one they were inquiring about was not. The head of Scottish and Southern Energy said that, yes, that would be its policy. I hope that other companies will follow suit, so that if anybody rings up and asks, “Is this a good move?”, they will be told, “Yes, but this one would be even better for you.” That sort of information is important. Of course, the companies should also be helping with energy efficiency. They should ensure that their social tariffs should always be their lowest ones. A social tariff should not be bettered by some alternative tariff. People should be clear that if they are entitled to a social tariff it is the best available.

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