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People commuting from Croydon to work in central London have experienced enormous fare increases under the Conservatives. Since London has had a Conservative Mayor, the cost of a single bus journey has increased by 56% and a zone one to six travel card costs £440 more a year. This year, it costs £313 more to travel from Croydon to central London than it did in 2010, when the Government were elected. That increase is way above the rate of inflation and even more above the rate of wage inflation.
Compare that with Labour-run Oldham council. Its leader, Councillor Jim McMahon, realised that high travel costs were a real barrier to accessing employment and leisure opportunities across the rest of Greater Manchester. The council worked with First Greater Manchester, the local bus operator, and negotiated a 28% reduction on weekly and daily bus fares for every Oldham resident. It worked up the business case to show how lower fares would increase journeys and overall profitability for the bus operator. The scheme is saving residents up to £260 a year on the cost of public transport and may now be extended right across Greater Manchester.
Let us also consider the soaring cost of energy. As many colleagues have said this afternoon, household bills have soared by £300 a year. The Government have failed to get a grip of the problem and to take action to curb what amounts to profiteering. Contrast that with Lambeth’s Labour-led council, which I am very familiar with. It worked with the community to set up a microgeneration co-operative called Brixton Solar Energy. It placed solar panels on the roof of a housing estate in Brixton, sold the surplus energy back to the national grid and used the profits to reduce the energy bills of neighbourhood residents. I am delighted to say that that success is now being extended to other estates in the area.
I have conducted my own research locally into the fees charged by letting agents in Croydon North. I have found that some charge up to £500 for handling deposits and some charge up to £500 more in additional administration charges. Newham’s Labour-run council is setting up a register of approved landlords and agents, so that its tenants know who is playing fair and who is not. What a shame that Tory councils such as the one in the area I represent are refusing to do the same.
3.53 pm
Andy Sawford (Corby) (Lab/Co-op): Any increase in employment is to be welcomed, but the real story of the labour market is a living standards crisis, with falling real wages and millions working harder for less. I know that from the experiences in my constituency. We have heard complacency from the Government today. They say that they have fixed the economy, but for ordinary families we know that things are getting harder, not easier. Ministers just sound out of touch when they ignore the fact that the number of people who are working part time because they cannot find a full-time job is at record level.
Real wages are falling: wages increased by 0.6% on the year to June, while the retail prices index increased by 3.3%, over five times the pace of wage growth. OBR forecasts show that, after inflation, wages are set to be
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£1,520 lower in 2015 than they were in 2010. That means that, as my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) told the Prime Minister today, ordinary working people will have lost, on average, £6,660 on this Government’s watch. That is a shameful record.
Underemployment is a massive and growing problem for millions of families already feeling the pinch from rising prices and falling wages. More than one in 10 people are now unable to work the hours they would like because this Government strangled the recovery for three years. Today we have heard complacent, boastful comments from the Government, delighted that there is, at last, a slight upturn in the economy. Let us not forget, though, that for three years, having inherited a growing economy, they flattened that growth and people across this country suffered for three years.
The Government and the Prime Minister are out of touch in not understanding that very many people not only work part time but often work on zero-hours contracts. They find themselves working through agencies and are often exploited. People in my constituency have told me about their experience of these zero-hours contracts—of turning up for work only to be told that there is no work that day, yet they might have arranged child care or had to pay considerable transport costs to get to work, or working for half a shift and then being told that they are no longer needed that day. That is no way for businesses to treat their employees, but it is also no way for a Government to behave when they turn a blind eye to the growth of that practice in our economy.
People have told me about not being able to get a mortgage, car finance or a bank overdraft, or even a rental agreement, because they cannot clearly demonstrate that they will have money coming in over the weeks and months ahead.
Charlie Elphicke: Will the hon. Gentleman give way?
Andy Sawford: No. I know that two of my colleagues want to speak, so I am going to push on.
Seventy per cent. of zero-hours contracts are for permanent jobs. How can it be right that someone in a permanent job is not given a permanent and proper contract of employment? More than 80% of people on zero-hours contracts are not looking for another job. They want to remain in employment, but they want it to be fair and secure. Resolution Foundation research shows that those employed on zero-hours contracts receive lower gross weekly pay and that workplaces utilising zero-hours contracts have a higher proportion of staff on low pay. In my constituency zero-hours contracts, combined with the very high number of people working through agencies, have created a two-tier work force, with permanent employees often being paid better and having security of employment while many other workers are being paid very low wages and exploited from week to week.
There is an argument that zero-hours contracts offer flexibility. Of course, casual employment has always been part of the labour market, including casual employment where there are no guaranteed hours. I have worked under those conditions and other people do so too. For example, Corby borough council employs lifeguards at the local swimming pool on such casual contracts; of course, it is seasonal work and there are
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changes in demand over the course of the year. When I talk about zero-hours exploitation, I do not mean all casual employment in the economy. The local Tories in Corby have got themselves into an extraordinary position, saying that my local council should end all casual employment. That is completely bizarre. It has been suggested that it is hypocritical of me, as a Co-op Member, to highlight this issue and campaign against zero-hours exploitation because across the country the 2% of workers the Co-op employs in its funeral business are mainly retained firefighters or semi-retired people. It is a ridiculous suggestion.
Most people understand that some casual employment works for some people, but the key is that it should be reciprocal and fair. That is why I have introduced a Bill that aims to tackle zero-hours exploitation. I want to see what legal changes we can make to help people, particularly by ending things such as exclusivity clauses in zero-hours contracts.
I am delighted that the shadow Business Secretary, my hon. Friend the Member for Streatham (Mr Umunna), has really taken a lead on this issue. Just a few weeks ago, he held a summit bringing together employers and people who are concerned about it. I welcome the support of many organisations in civil society—trade unions and organisations such as Citizens Advice—in trying to tackle it. However, it is not achieved only through legislation; this Government should act, and the Business Secretary’s review should have more resources put behind it. We should try, through public procurement, to encourage Government and local government to stop using zero-hours contracts as far as possible.
3.59 pm
Mr Iain McKenzie (Inverclyde) (Lab): It is an honour to contribute to this very important debate. We should take time to pause and reflect on what is really happening to the living standards of people up and down this country.
Since 2010 wages have fallen in real terms in just about every region of the UK. In Scotland wages are down some 6.4%, which is having an impact on living standards. Families are more than £800 worse off this year because of cuts to tax credits and benefits. Time has shown that the Government are increasingly incapable of making any positive changes to improve living standards for hard-pressed families.
Prices continue to rise faster than wages—that is, if people are fortunate enough to be employed and in receipt of a wage. We also continue to witness banks giving out bonuses while families across the UK are struggling. Is it therefore surprising that most people feel that nothing is changing for them? The Government are locked into a failing economic plan whereby, bizarrely, they ask millions of families and pensioners to pay more while millionaires are given a tax cut. My constituents find that to be an unacceptable economic approach in the face of their plummeting living standards.
Families, pensioners and businesses in my constituency continue to struggle. People tell me of their shock during their weekly trip to the supermarket on finding that they are putting less food in their basket but more money in the till. I witness more and more families having to go to greater lengths to keep within their budget, desperately shopping around to track down bargains for the most basic food items.
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Those who cannot make it from week to week have been forced to turn to food banks. Frighteningly, the number of people going to food banks continues to rise. Inverclyde now has two large food banks and starter packs for families trying to set up a home. Starter packs offer help to families and individuals with the most basic home furnishings, such as kitchen utensils. It is no use having food if there is nothing to cook it with or eat it off. Is it not a sign of living standards getting worse when not only is food an issue but people have to be given utensils to eat it?
Families are losing their tax credits. Families in Scotland are losing on average more than £500 a year, which they could have spent in the local economy on essentials such as food and clothing. That is hurting my local economy and many shops are closing down; in the last week alone, three have closed down in Greenock. My chamber of commerce has been pleading for an increased local spend to try to help save those local shops. The truth is that people are not spending as much as they used to, locally or elsewhere.
Scotland will lose £43 million a year from cuts to tax credits, which is an enormous amount to take out of the Scottish economy. The evidence is that people up and down this country are facing an unprecedented reduction in their living standards. The Government’s programme does little to help those most in need. It has been pain all the way, hurting people, families, pensioners and even the disabled. They are all finding it difficult to make ends meet.
Since the last election, average energy bills, as we have heard, have increased by about £300 per year, meaning that people are under severe pressure even to afford to heat their own home. If the Government do not take action, what is the alternative? Debt? I have spoken to two credit unions in my constituency and they warn that families face extreme difficulty in managing their finances, and they have seen an increase in the number of people coming to them just to budget from week to week. Unfortunately, many people do not turn to the credit unions but seek alternative loans, which only push them deeper into debt and trouble.
The Government need to help families immediately by taking measures that address the crisis of the falling standard of living and that stop the rip-off prices of fuel and power. This country needs a Government who are in touch with families during these hard times. The Government clearly need to make different choices and set different priorities. Families up and down the country are feeling the pain. Only today I have heard that unemployment in my constituency has increased and that the rate of non-working families is 25%. Clearly, we need employment and we need jobs.
If the Government do not change their priorities and stop handing tax cuts to millionaires, living standards will continue to fall for working people, young people, families, pensioners and even the disabled. In fact, living standards will fall for everyone apart from the Government’s favoured millionaires.
4.5 pm
Gemma Doyle (West Dunbartonshire) (Lab/Co-op):
This is probably the most relevant debate we could have when it comes to the issues that affect our constituents day in, day out. There is a living standards crisis in the UK today and it has been caused directly by the actions
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of this Government. I have no doubt that the Prime Minister and his Government are entirely out of touch with families up and down the country who are struggling to make their pay packets last until the end of the month.
Before the last general election, we were promised that a Conservative Government would improve people’s living standards and that people would not only see their incomes rise but their quality of life improve. That has not happened. In fact, the opposite is true. There are only two possible conclusions to be drawn. The first is that the Government—Conservatives and Liberal Democrats—have decided that they are happy to pursue policies that drive down living standards, and the second is that their policies are failing entirely.
The Minister should be in no doubt that the crisis is real. Every week, people in my constituency come to me to talk about rising energy bills, rail fares and fuel bills; cuts to tax credits and benefits; and the problems caused by low pay, underemployment and unemployment. I do not know what is in his postbag or in-tray, but that is what is in mine. He does not have to take my word for it, as the statistics speak for themselves. Since 2010, real wages in Scotland have fallen by an average of 6.4% or £1,420 a year, which is a huge sum. Statistics for the whole of the UK from the Office for National Statistics show that under this Prime Minister real wages have fallen for 35 consecutive months—longer than under any other Prime Minister since records began. What a shameful record that is.
Fiona O'Donnell: Will my hon. Friend give way?
Gemma Doyle: I will not at the moment.
In my constituency of West Dunbartonshire, between 2010 and 2012 average wages rose by just 0.6%, while inflation hit 8%. With the cost of essentials such as food and energy continuing to go up and up, one does not need a calculator to work out that the figures just do not add up. In recent months, the community of West Dunbartonshire has come together to launch a food share project. People are so appalled by the need for that in our area that they do not want to call it a food bank. They do not want it to be just a food bank, so as well as collecting donations and redistributing supplies, the group has wider aims, such as campaigning on poverty and poverty pay. I am delighted to say that Labour-led West Dunbartonshire council is a living wage employer. I very much hope that other local employers will follow suit. I intend to have discussions with local businesses about how they can work towards that.
Earlier in the summer, figures published by Citizens Advice showed that one in five families feel that they cannot afford to feed their children. Frankly, that should shame us all. Its advisers are seeing people who have nowhere else to turn. The chief executive of Citizens Advice Scotland, Margaret Lynch, has stated that it is no longer unusual for advisers to see people in their offices who do not have enough money to pay for food, never mind other bills such as rent and council tax.
I have had men and women bring their bills to my surgery. Some have lost their jobs and many have had their hours cut. They are desperate for more hours or
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for a job that will pay them enough to make ends meet. They have trimmed their outgoings to the bare essentials. They put their bills on the table in my office and ask, “What should I do?” It is difficult, but I give them the best advice I can. I tell them about the food bank, although I have to think twice about that, because it embarrasses people so much. It is a dreadful situation for people to be in, because they feel a huge responsibility towards their families, but it is not they who are failing, it is the Government who are failing them.
At the same time as that is going on in all our constituencies, the richest people in this country have had a tax cut. Conservative and Liberal Democrat MPs have decided that they want to give millionaires a tax cut, which beggars belief.
Andrew Griffiths (Burton) (Con): Will the hon. Lady give way?
Gemma Doyle: I will not, because I want to ensure that we have enough time for the Front Benchers to speak.
We have a living standards crisis in this country. The Government’s own figures show that things will continue to be extremely difficult for the foreseeable future. People are really struggling, and the Government have a moral responsibility to do something about it.
4.11 pm
Chris Leslie (Nottingham East) (Lab/Co-op): First, I commend my right hon. and hon. Friends for holding the Government to account on the cost of living crisis. My hon. Friend the Member for West Dunbartonshire (Gemma Doyle) made a powerful speech about the cases that Opposition Members see in our constituencies, with hard-pressed families struggling to make ends meet. She talked about not just the crisis that they face but the difficulty of even getting advice and support, including from the citizens advice bureau, as local authorities are scaling back their grants to voluntary organisations.
The crisis is exceptionally significant, so it is sad that there has been scant interest in the debate among Conservative Members and zero interest among Liberal Democrat Members, who have been completely absent from the debate for the past three hours. What better way could there be for hon. Members to see the complacency and lack of interest among Government Members in one of the most pressing and significant issues for our constituents?
We have had not just inaction from the Government for the past three years but policies that are actively making the cost of living worse for most people. Month after month, year after year, the Prime Minister and the Chancellor have presided over prices rising faster than wages. No other Prime Minister since records began has come close to the disaster in family living standards that the current Prime Minister and Chancellor have overseen. For 37 of the Prime Minister’s 38 months in office, real wages have shrunk in value. The pound in the pocket, the pound that someone has earned, does not go as far as it used to—it is diminished in value and worth less than it was before. No wonder people are working longer hours just to stand still.
Three years of suspended animation have created a treadmill economy in which millions are struggling just to stay where they are. My hon. Friends the Members
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for Wigan (Lisa Nandy) and for Inverclyde (Mr McKenzie) made that point exceptionally coherently. To listen to Government Members, however—those who took the trouble to take part this afternoon, possibly because reshuffle season is coming up—one would think that the way things are going is their idea of economic success.
Average hourly wages have fallen by 5.5% since the middle of 2010, but millionaires have never had it so good. Living standards for most people are falling, not rising, and as the Financial Times has pointed out, real wages have dropped back to their 2004 level.
Gavin Barwell: The hon. Gentleman said that millionaires had never had it so good. Will he remind us what the marginal rate of tax on millionaires was under the Labour Government, and how that compares with today?
Chris Leslie: For a moment during the hon. Gentleman’s speech earlier, I thought he was a little embarrassed about the cut in the top rate of tax from 50p to 45p, which happened in April. I was on the verge of intervening on him to ask whether he regretted voting to give priority to such a cut at a time when living standards are under the most stress. Does he regret doing that? Does he think it was the wrong thing to do?
Chris Leslie: I will give way to the hon. Gentleman one more time if he wants to say sorry to the House.
Gavin Barwell: The whole House will have noted that the hon. Gentleman is unable to answer the question, but I will set a good example and answer his question. I do not think very wealthy people need a tax cut in terms of living standards, but I think that when attracting wealthy people to locate to this country, high marginal rates of tax are a bad idea, and therefore I voted for change.
Chris Leslie: I said it was reshuffle season. We nearly got an apology; the hon. Gentleman does not think rich people need that tax cut, but he voted to give it to them anyway because he is that sort of generous guy. I say to him, and to other Members, that the Office for Budget Responsibility, which the Government created, predicts that by the next general election in 2015, annual incomes will be £1,520 lower than they were in 2010 in real terms. That is lower wages. Just think about that statistic for a moment. Five years of Conservative and Liberal Democrat administration will have left a legacy for working people in which they are actually worse off, and significantly so.
Kwasi Kwarteng: Will the hon. Gentleman give way?
Chris Leslie: I will give the hon. Gentleman another little statistic. If we add up the five years of the falling wages predicted by the OBR, a typical working person will have lost an amazing £6,660. Imagine the difference that could make to ordinary working people. It is the equivalent of a year and a half’s grocery bill for the average family; they could even have bought a small car for that amount. Those diminishing wages are in addition to the tax and benefit changes since 2010, which are costing families an average of £891 this year.
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Chris Leslie: I would like to make a little progress in the time I have left. That is what people have lost thanks to the Prime Minister. That is the scale of the cost of living crisis, and those are the costs of the Government’s failed economic policies.
Mr Russell Brown: Those sums of money would make a great difference to households, but it is not only that. It is about what those sums when multiplied would do in the economy. We are starving the economy of much-needed money to make it vibrant.
Chris Leslie: Of course my hon. Friend is right, and he understands that having that level of activity in the economy would have helped us get a better growth rate than we have had under the flatlining record of Government Members. Think of the different course the Government could have chosen. They could have tackled soaring energy bills with tougher regulation to pass on wholesale price cuts to ordinary customers, as my hon. Friend the Member for East Lothian (Fiona O’Donnell) suggested. They could tackle rip-off rail fares for commuters with an enforceable cap on train fare rises, they could protect tax credits for working people by reversing the millionaires tax cut, and they could cut income taxes with a new 10p starting rate to be paid for by a mansion tax on properties worth more than £2 million. However, they will not go that extra mile. Why? Because they do not understand the pressures that household budgets are under. After all, how could they? Government Members think that everything in the garden is rosy. They are either ignorant of the pressures on most households, or in their complacency they are ignoring the issue.
After three wasted years of a flatling economy, it is about time we had some economic growth. This growth, however, comes despite the Government’s economic policies, not because of them, and as everybody knows, growth is still falling short of what we ought to be seeing by now. Deficit reduction has stalled because the Government are borrowing more to pay for the costs of economic failure.
Kwasi Kwarteng: Will the hon. Gentleman give way on that point?
Chris Leslie: No, I will not give way but I will ask the hon. Gentleman what sort of economic recovery this is. So far, it has all the hallmarks of a recovery for the few, not the many. It is no wonder that the Prime Minister has abandoned the fiction that we are “all in this together.” The lucky minority of the already wealthy are doing very well thank you very much, but that is not much solace for everyone else who is working harder just to stand still. The Government have failed spectacularly to put in place conditions for a balanced recovery, and instead have fuelled a lopsided escalation in the cost of living, without a simultaneous focus on capacity or affordability, as my hon. Friend the Member for Coventry North West (Mr Robinson) said.
The Chancellor needs to act now to guard against escalating prices, inflation and interest rates, but he is not building broad-based growth in every region. He is not focusing on long-term, sustainable investment;
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he is putting short-term, debt-fuelled, business-as-usual economics first. His housing policy is all demand and no supply.
Business investment is thwarted by banks that are still not serving the real economy. How nice it is for bankers who can stave off their bonuses until the new tax year kicks in and pocket the Chancellor’s generous tax cut. No wonder there was a record-breaking bonus bonanza—bonuses soared by billions at the exact moment the Chancellor cut that 50p rate.
It is not looking like a recovery for ordinary people. It is a recovery for the rich, an unbalanced and narrow recovery, and a recovery for millionaires but not working millions. Times are tough, and, for most people, life is getting harder, with the cost of child care, the daily commute, the family shop, school uniform costs, the rent and the mortgage. People are taking on more hours if they can or, worse, joining the rise of the zero-hours economy. No wonder people are driven increasingly to payday lenders and extortionate credit. As my hon. Friends will have seen in the news yesterday, Wonga is lending as much to consumers as some of our major high street banks, such as Nationwide. Does that not say it all? It is not a recovery for those struggling to make ends meet; it is the Wonga recovery, benefiting those at the top at the expense of the majority.
Those are the consequences that flow from three years of economic stagnation. The cost-of-living crisis is felt in middle and lower-income households across the country. Enough is enough. We need action now to help ordinary taxpayers, commuters and householders to fight back against those rising prices. Ensuring that wages rise faster than prices should be a central objective for the Government. The Prime Minister and the Chancellor are out of touch. Working people up and down the country are out of pocket as a result. We cannot go on with this cost-of-living crisis year after year. Every day it becomes clearer, especially to ordinary working people in our constituencies, that we cannot afford this Government.
4.22 pm
The Exchequer Secretary to the Treasury (Mr David Gauke): I add my congratulations to those of my right hon. Friend the Financial Secretary to the shadow Chief Secretary, the hon. Member for Leeds West (Rachel Reeves), on the birth of her daughter earlier this year. I welcome her back.
I should also add a word of admiration not only for the hon. Lady, but for the shadow Financial Secretary, the hon. Member for Nottingham East (Chris Leslie). I admire them because, in their speeches today in a debate on the economy, they managed to ignore two points. First, they did not touch on any of the economic data that have emerged over the summer. We heard nothing about gross domestic product numbers, purchasing managers index surveys, employment numbers, CBI and British Chambers of Commerce forecasts or the OECD’s assessment yesterday. I appreciate that the Labour party has had a summer to forget—it has clearly forgotten.
Secondly, the hon. Lady and the hon. Gentleman managed to ignore the economic argument we have heard from them for the past three years that the
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Government are going too far and too fast. They argued that there was no way we would get growth while cutting the deficit, and that only by borrowing more would we have growth. They also had a five-point plan. As my hon. Friend the Member for Reading West (Alok Sharma) has pointed out, the flagship policy in the plan was a cut in VAT, which would be necessary to get the economy growing again, but that has disappeared from Labour’s platform. We have heard lengthy speeches from Labour Members on economic policy, but they have not talked about their economic policy.
Ian Mearns: The Minister refers to economic data from the summer months. We saw an increase in retail expenditure in the summer months, but is it any coincidence that, at a time when people have limited disposable income, household savings have decreased?
Mr Gauke: What is striking about the data we have seen is the encouraging, broad-based signs. The manufacturing numbers are very encouraging. Let us not say that the situation is about consumer spending only. There are encouraging signs in the economy, which was not reflected in the remarks of Labour Members.
Geraint Davies: The Minister will have heard my speech, so I will not recite it, but will he accept that there is a problem with the amount of lending to business by banks? Can he give any undertaking that the Bank of England will put pressure on banks to redirect the funds they have been given under the funding for lending scheme towards business rather than to household mortgages that are now out of the woods?
Mr Gauke: The fact that we have credibility in our fiscal policy means that the Governor of the Bank of England has been able to say what he has said about the greater certainty for interest rates, which is helpful for businesses. If we throw away that fiscal credibility, we will make life more difficult for businesses wanting to get credit.
We have talked about what the motion contains. It says that we should get more people into work: we agree with that. Over the year, employment has increased by 301,000, and unemployment has fallen by 49,000. In July, the claimant count fell, for the ninth consecutive month, to 1.44 million, the lowest level since February 2009. This is the result of a Government who have created the right tax and regulatory environment for businesses to flourish. The proposals from the Opposition would put all of that at risk.
We hear about bringing forward capital investment. We also recognise the need for infrastructure investment to spur the jobs and growth of the future, and that is why in June the Chief Secretary unveiled the biggest public housing programme for more than 20 years; the largest programme of rail investment since Victorian times; the greatest investment in our roads since the 1970s; fast online access for the whole country; and the unlocking of massive investment in cleaner energy to power our economy forward. We have increased expertise in Whitehall and we are working hard to deliver those projects as soon as possible.
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The cost of living is an important issue, and we recognise that times are tough for many people. But let us look at the difference between the parties. Whereas we have reduced income tax for 25 million people—we have increased the personal allowance—the previous Government doubled the rate of income tax on low-paid workers. This Government have ensured that we have credibility so that we have been able to keep mortgage rates low: the Opposition would lose our credibility. Council tax doubled under the previous Government: it has been frozen under us.
The previous Government raised fuel duty 12 times while in office and had plans to raise it six more times subsequently—the equivalent of 13p per litre—and we have frozen fuel duty. When we came to office, the UK had almost the highest child care costs in the world, and we will help families with child care. Energy bills soared under Labour. Between 1997 and 2010, the average domestic gas bill more than doubled. Electricity bills went up by more than 50% and Labour remains committed to an expensive 2030 decarbonisation target that will only add to energy bills, whereas this Government are forcing energy companies to put customers on the lowest tariff. When it comes to beer duty, Labour planned to raise the tax: we not only froze it, we cut it.
My hon. Friend the Member for West Worcestershire (Harriett Baldwin), in an excellent speech, asked how we ensure that we have the sustainable growth that we need. We need sustainable public finances—an argument that we have made consistently and that has been consistently opposed by the Opposition. We need a highly skilled work force, and that is why 500,000 apprenticeships have been undertaken under this Government. It is why we are undertaking ambitious educational reform. We need welfare reform, with a system that makes sure that work is rewarded—not something that we inherited from Labour. We need a competitive tax system that encourages investment in the United Kingdom, not one that drives it away. We need to deal with the regulatory burdens that prevent growth—we have undertaken planning reform, which will help to increase housing supply.
What do we get from the Opposition? We get a Labour party that presided over a squeeze in living standards from 2003; a Labour party that must accept some responsibility for the deepest recession in a century; a Labour party that doubled the rate of income tax on low-paid workers; a Labour party that planned for increase after increase in fuel duty; a Labour party that remains signed up to decarbonisation targets that would increase energy prices; a Labour party that has consistently set out an economic policy that would consist of more borrowing, an approach that would lead to higher mortgage rates and ultimately higher taxes; and a Labour party that has opposed our council tax freeze. For Opposition Members to lecture us on living standards is extraordinary. As President Obama might have said, it is the audacity of the hopeless.
If we want to help hard-working people—I think we all do—it is vital that we stick to the task. [Interruption.]
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. There are too many private conversations. I am struggling to hear the Minister.
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Mr Gauke: If we want to help hard-working people—I think we all genuinely do—it is vital that we stick to the task. [Interruption.] I know that we do. I am not sure the Opposition do, but I will give them the benefit of the doubt. We need to create a favourable environment for job creation. We need to maintain economic credibility by continuing to deal with the deficit, which enables us to keep mortgage rates lower. We need to reduce the tax burden on low-paid workers and we need to reform our welfare system to ensure that work pays. That, not borrowing and spending more—not more debt—is the answer, and that is the approach the Government will take.
The House divided:
Ayes 225, Noes 289.
Division No. 74]
[
4.32 pm
AYES
Abrahams, Debbie
Alexander, rh Mr Douglas
Alexander, Heidi
Ali, Rushanara
Allen, Mr Graham
Ashworth, Jonathan
Austin, Ian
Bailey, Mr Adrian
Bain, Mr William
Balls, rh Ed
Banks, Gordon
Barron, rh Mr Kevin
Beckett, rh Margaret
Begg, Dame Anne
Benn, rh Hilary
Benton, Mr Joe
Berger, Luciana
Betts, Mr Clive
Blears, rh Hazel
Blomfield, Paul
Blunkett, rh Mr David
Bradshaw, rh Mr Ben
Brennan, Kevin
Brown, Lyn
Brown, rh Mr Nicholas
Brown, Mr Russell
Bryant, Chris
Buck, Ms Karen
Burnham, rh Andy
Byrne, rh Mr Liam
Campbell, Mr Alan
Caton, Martin
Chapman, Jenny
Clark, Katy
Clarke, rh Mr Tom
Coaker, Vernon
Coffey, Ann
Cooper, rh Yvette
Corbyn, Jeremy
Creagh, Mary
Creasy, Stella
Cruddas, Jon
Cryer, John
Cunningham, Alex
Cunningham, Mr Jim
Cunningham, Sir Tony
Curran, Margaret
Dakin, Nic
Danczuk, Simon
Darling, rh Mr Alistair
David, Wayne
Davidson, Mr Ian
Davies, Geraint
De Piero, Gloria
Denham, rh Mr John
Dobbin, Jim
Dobson, rh Frank
Docherty, Thomas
Donaldson, rh Mr Jeffrey M.
Doran, Mr Frank
Doughty, Stephen
Doyle, Gemma
Dromey, Jack
Dugher, Michael
Durkan, Mark
Eagle, Ms Angela
Eagle, Maria
Edwards, Jonathan
Efford, Clive
Elliott, Julie
Esterson, Bill
Evans, Chris
Farrelly, Paul
Fitzpatrick, Jim
Flello, Robert
Flint, rh Caroline
Flynn, Paul
Fovargue, Yvonne
Francis, Dr Hywel
Gardiner, Barry
Gilmore, Sheila
Glass, Pat
Glindon, Mrs Mary
Godsiff, Mr Roger
Goggins, rh Paul
Goodman, Helen
Greatrex, Tom
Green, Kate
Greenwood, Lilian
Griffith, Nia
Gwynne, Andrew
Hain, rh Mr Peter
Hamilton, Mr David
Hanson, rh Mr David
Harman, rh Ms Harriet
Harris, Mr Tom
Havard, Mr Dai
Healey, rh John
Hillier, Meg
Hilling, Julie
Hood, Mr Jim
Hopkins, Kelvin
Hosie, Stewart
Howarth, rh Mr George
Hunt, Tristram
Irranca-Davies, Huw
James, Mrs Siân C.
Jamieson, Cathy
Jarvis, Dan
Johnson, rh Alan
Jones, Graham
Jones, Helen
Jones, Mr Kevan
Jones, Susan Elan
Keeley, Barbara
Kendall, Liz
Khan, rh Sadiq
Lammy, rh Mr David
Lavery, Ian
Lazarowicz, Mark
Leslie, Chris
Lewell-Buck, Mrs Emma
Long, Naomi
Love, Mr Andrew
Lucas, Caroline
Lucas, Ian
MacNeil, Mr Angus Brendan
Mactaggart, Fiona
Mahmood, Mr Khalid
Mahmood, Shabana
Malhotra, Seema
Mann, John
Marsden, Mr Gordon
McCabe, Steve
McClymont, Gregg
McCrea, Dr William
McDonagh, Siobhain
McDonnell, John
McFadden, rh Mr Pat
McGuire, rh Mrs Anne
McKechin, Ann
McKenzie, Mr Iain
McKinnell, Catherine
Meacher, rh Mr Michael
Meale, Sir Alan
Mearns, Ian
Miliband, rh Edward
Miller, Andrew
Moon, Mrs Madeleine
Morden, Jessica
Morrice, Graeme
(Livingston)
Morris, Grahame M.
(Easington)
Mudie, Mr George
Munn, Meg
Murphy, rh Mr Jim
Murphy, rh Paul
Murray, Ian
Nandy, Lisa
Nash, Pamela
O'Donnell, Fiona
Onwurah, Chi
Owen, Albert
Paisley, Ian
Perkins, Toby
Phillipson, Bridget
Pound, Stephen
Qureshi, Yasmin
Raynsford, rh Mr Nick
Reed, Mr Jamie
Reed, Mr Steve
Reeves, Rachel
Reynolds, Emma
Reynolds, Jonathan
Riordan, Mrs Linda
Ritchie, Ms Margaret
Robertson, Angus
Robertson, John
Robinson, Mr Geoffrey
Rotheram, Steve
Roy, Lindsay
Ruane, Chris
Ruddock, rh Dame Joan
Sarwar, Anas
Sawford, Andy
Seabeck, Alison
Shannon, Jim
Sharma, Mr Virendra
Sheerman, Mr Barry
Sheridan, Jim
Shuker, Gavin
Skinner, Mr Dennis
Slaughter, Mr Andy
Smith, rh Mr Andrew
Smith, Angela
Smith, Nick
Smith, Owen
Spellar, rh Mr John
Straw, rh Mr Jack
Stuart, Ms Gisela
Sutcliffe, Mr Gerry
Tami, Mark
Thomas, Mr Gareth
Thornberry, Emily
Timms, rh Stephen
Trickett, Jon
Turner, Karl
Twigg, Derek
Twigg, Stephen
Umunna, Mr Chuka
Vaz, rh Keith
Vaz, Valerie
Walley, Joan
Watts, Mr Dave
Weir, Mr Mike
Whiteford, Dr Eilidh
Whitehead, Dr Alan
Williamson, Chris
Wilson, Phil
Winnick, Mr David
Winterton, rh Ms Rosie
Wood, Mike
Woodcock, John
Woodward, rh Mr Shaun
Wright, David
Wright, Mr Iain
Tellers for the Ayes:
Tom Blenkinsop
and
Alison McGovern
NOES
Adams, Nigel
Afriyie, Adam
Aldous, Peter
Amess, Mr David
Andrew, Stuart
Arbuthnot, rh Mr James
Bacon, Mr Richard
Baker, Norman
Baker, Steve
Baldry, Sir Tony
Baldwin, Harriett
Barclay, Stephen
Barker, rh Gregory
Barwell, Gavin
Bebb, Guto
Bellingham, Mr Henry
Beresford, Sir Paul
Berry, Jake
Bingham, Andrew
Blackwood, Nicola
Blunt, Mr Crispin
Boles, Nick
Bone, Mr Peter
Bottomley, Sir Peter
Brady, Mr Graham
Brake, rh Tom
Bray, Angie
Brazier, Mr Julian
Bridgen, Andrew
Brine, Steve
Brooke, Annette
Browne, Mr Jeremy
Buckland, Mr Robert
Burley, Mr Aidan
Burns, rh Mr Simon
Burrowes, Mr David
Burstow, rh Paul
Burt, Alistair
Byles, Dan
Cable, rh Vince
Cairns, Alun
Campbell, rh Sir Menzies
Carmichael, rh Mr Alistair
Carmichael, Neil
Carswell, Mr Douglas
Cash, Mr William
Chishti, Rehman
Clark, rh Greg
Clarke, rh Mr Kenneth
Clifton-Brown, Geoffrey
Coffey, Dr Thérèse
Collins, Damian
Colvile, Oliver
Cox, Mr Geoffrey
Crouch, Tracey
Davey, rh Mr Edward
Davies, David T. C.
(Monmouth)
Davies, Glyn
Davies, Philip
Davis, rh Mr David
de Bois, Nick
Dinenage, Caroline
Djanogly, Mr Jonathan
Dorrell, rh Mr Stephen
Dorries, Nadine
Doyle-Price, Jackie
Drax, Richard
Duddridge, James
Duncan, rh Mr Alan
Duncan Smith, rh Mr Iain
Dunne, Mr Philip
Ellis, Michael
Ellison, Jane
Elphicke, Charlie
Eustice, George
Evans, Graham
Evans, Jonathan
Evennett, Mr David
Fabricant, Michael
Farron, Tim
Featherstone, Lynne
Field, Mark
Foster, rh Mr Don
Fox, rh Dr Liam
Francois, rh Mr Mark
Freeman, George
Freer, Mike
Fullbrook, Lorraine
Garnier, Sir Edward
Garnier, Mark
Gauke, Mr David
George, Andrew
Gibb, Mr Nick
Gilbert, Stephen
Glen, John
Goldsmith, Zac
Goodwill, Mr Robert
Gove, rh Michael
Graham, Richard
Grant, Mrs Helen
Gray, Mr James
Grayling, rh Chris
Green, rh Damian
Greening, rh Justine
Griffiths, Andrew
Gummer, Ben
Halfon, Robert
Hames, Duncan
Hammond, Stephen
Hancock, Matthew
Hands, Greg
Harper, Mr Mark
Harrington, Richard
Harris, Rebecca
Hart, Simon
Hayes, rh Mr John
Heald, Oliver
Heath, Mr David
Heaton-Harris, Chris
Henderson, Gordon
Hendry, Charles
Herbert, rh Nick
Hinds, Damian
Hoban, Mr Mark
Hollingbery, George
Hollobone, Mr Philip
Holloway, Mr Adam
Hopkins, Kris
Horwood, Martin
Howarth, Sir Gerald
Howell, John
Hughes, rh Simon
Hunt, rh Mr Jeremy
Huppert, Dr Julian
Hurd, Mr Nick
Jackson, Mr Stewart
James, Margot
Jenkin, Mr Bernard
Johnson, Gareth
Jones, Andrew
Jones, rh Mr David
Jones, Mr Marcus
Kawczynski, Daniel
Kelly, Chris
Kirby, Simon
Knight, rh Mr Greg
Kwarteng, Kwasi
Laing, Mrs Eleanor
Lamb, Norman
Lancaster, Mark
Lansley, rh Mr Andrew
Latham, Pauline
Leadsom, Andrea
Lee, Dr Phillip
Lefroy, Jeremy
Leigh, Sir Edward
Leslie, Charlotte
Letwin, rh Mr Oliver
Lewis, Brandon
Lewis, Dr Julian
Liddell-Grainger, Mr Ian
Lidington, rh Mr David
Lilley, rh Mr Peter
Lloyd, Stephen
Lord, Jonathan
Luff, Peter
Lumley, Karen
Macleod, Mary
Main, Mrs Anne
Maude, rh Mr Francis
May, rh Mrs Theresa
McCartney, Jason
McCartney, Karl
McIntosh, Miss Anne
McLoughlin, rh Mr Patrick
McPartland, Stephen
McVey, Esther
Menzies, Mark
Mercer, Patrick
Metcalfe, Stephen
Miller, rh Maria
Mills, Nigel
Milton, Anne
Mitchell, rh Mr Andrew
Mordaunt, Penny
Morgan, Nicky
Morris, Anne Marie
Morris, David
Morris, James
Mosley, Stephen
Mowat, David
Mulholland, Greg
Murray, Sheryll
Murrison, Dr Andrew
Newmark, Mr Brooks
Newton, Sarah
Nokes, Caroline
Norman, Jesse
Nuttall, Mr David
Offord, Dr Matthew
Ollerenshaw, Eric
Opperman, Guy
Parish, Neil
Patel, Priti
Paterson, rh Mr Owen
Pawsey, Mark
Penrose, John
Pickles, rh Mr Eric
Pincher, Christopher
Poulter, Dr Daniel
Prisk, Mr Mark
Pugh, John
Raab, Mr Dominic
Randall, rh Mr John
Reckless, Mark
Redwood, rh Mr John
Rees-Mogg, Jacob
Reevell, Simon
Reid, Mr Alan
Rifkind, rh Sir Malcolm
Robathan, rh Mr Andrew
Robertson, Mr Laurence
Rudd, Amber
Ruffley, Mr David
Russell, Sir Bob
Rutley, David
Sandys, Laura
Selous, Andrew
Sharma, Alok
Shelbrooke, Alec
Shepherd, Sir Richard
Simpson, Mr Keith
Skidmore, Chris
Smith, Miss Chloe
Smith, Henry
Smith, Julian
Soames, rh Nicholas
Soubry, Anna
Spelman, rh Mrs Caroline
Spencer, Mr Mark
Stanley, rh Sir John
Stephenson, Andrew
Stevenson, John
Stewart, Bob
Stewart, Rory
Streeter, Mr Gary
Stride, Mel
Stuart, Mr Graham
Stunell, rh Sir Andrew
Sturdy, Julian
Swales, Ian
Swayne, rh Mr Desmond
Swinson, Jo
Syms, Mr Robert
Tapsell, rh Sir Peter
Teather, Sarah
Thornton, Mike
Thurso, John
Timpson, Mr Edward
Tomlinson, Justin
Truss, Elizabeth
Turner, Mr Andrew
Tyrie, Mr Andrew
Uppal, Paul
Vaizey, Mr Edward
Vara, Mr Shailesh
Walker, Mr Charles
Walker, Mr Robin
Wallace, Mr Ben
Watkinson, Dame Angela
Weatherley, Mike
Webb, Steve
Wharton, James
Wheeler, Heather
White, Chris
Whittaker, Craig
Whittingdale, Mr John
Willetts, rh Mr David
Williams, Mr Mark
Williams, Roger
Williams, Stephen
Williamson, Gavin
Wilson, Mr Rob
Wilson, Sammy
Wollaston, Dr Sarah
Wright, Jeremy
Wright, Simon
Young, rh Sir George
Zahawi, Nadhim
Tellers for the Noes:
Karen Bradley
and
Jenny Willott
Question accordingly negatived.
4 Sep 2013 : Column 389
4 Sep 2013 : Column 390
4 Sep 2013 : Column 391
4 Sep 2013 : Column 392
4 Sep 2013 : Column 393
Energy Prices and Profits
4.45 pm
Caroline Flint (Don Valley) (Lab): I beg to move,
That this House recognises the importance of the energy industry to the security and prosperity of the UK economy; notes that the average household energy bill has increased by over £300 since the 2010 general election; further notes that the big six energy companies have had a £3.3 billion uplift in profits over the same period; welcomes the recent report on Energy Prices, Profits and Poverty from the Energy and Climate Change Committee (Fifth Report, HC 108) which found that Ofgem is failing consumers; regrets that the Government has halved support for people in fuel poverty, and that as of 20 August 2013 only 132 households had signed up for a Green Deal plan; further regrets the Prime Minister’s broken promise to legislate so that energy companies have to give the lowest tariff to their customers; and calls on the Government to bring forward amendments to the Energy Bill to make the energy market more competitive and transparent by requiring energy companies to pool the power they generate and to make it available to any retailer, to create a tough new energy watchdog with the power to force energy companies to pass on price cuts when wholesale costs fall, and to put all over-75 year olds on the cheapest tariff.
Earlier this afternoon, we heard from my hon. Friends the Members for Leeds West (Rachel Reeves) and for Nottingham East (Chris Leslie) about the full scale of the cost-of-living crisis unfolding in Britain. For 37 of the 38 months in which this Government have been in power, real wages have fallen. At the same time that people have seen their incomes squeezed, the cost of living has also increased sharply. In the last three years alone, the average household energy bill has increased by over £300. It is no wonder that Which? research has shown that 79% of people now worry about how to pay their energy bills. With nearly four in 10 people saying they are likely to have to cut back on their energy spending in the coming months, and with warnings of more price rises coming later this year, I make no apologies for returning to a topic that we have debated a number of times in the last couple of years.
As we know, energy companies claim that there is a whole raft of reasons why energy bills are going up—wholesale costs, network charges and social and environmental obligations. With all those extra costs, one might think that profit margins would have come down, but quite the opposite. It is now clear that, regardless of those costs, these companies have seen a substantial increase in their profits. We know that because since 2009, energy companies have been required to publish information on their financial performance, including their profits. The information shows that in 2009, Britain’s big six energy companies made just over £2.2 billion in profit. In 2012, by contrast, they made more than £3.7 billion in profit—an increase of nearly 70%. Overall, over the last three years, Britain’s big six energy companies have seen a huge profits uplift of more than £3.3 billion. If anything, this is likely to be an underestimate because it excludes their profits on trading and from gas storage.
Mr Peter Lilley (Hitchin and Harpenden) (Con): I noticed that, among the factors affecting energy bills, the right hon. Lady did not mention the cost of moving from lower-priced fossil fuels to very expensive renewables. That is the only item that is directly under the control of this House. Was it not somewhat disingenuous not to mention it?
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Caroline Flint: Actually, I mentioned “social and environmental obligations” in my opening statement, and part of those obligations mean moving to cleaner energy in the future. I think I have the support of Ministers in saying that if we stay stuck in the past in relation to fossil fuels, we will create an even bigger bill for the future. We need to move to cleaner, renewable energy and other low-carbon energy in order to achieve both security and fairer prices in the long term.
The Secretary of State for Energy and Climate Change (Mr Edward Davey): In the interests of consensus, does the right hon. Lady accept that it is essential and urgent for Britain to increase investment in renewables, low carbon and energy infrastructure generally, and does she accept that we need to invest about £110 billion over the next 10 years?
Caroline Flint: Yes, I do accept that, and in view of the Secretary of State’s comments, let me be absolutely clear about one thing. The opening words of the motion before us today rightly recognise
“the importance of the energy industry to the security and prosperity”
of the British economy. The companies that keep the hospitals warm, factories working and the lights on in 25 million homes are doing a pretty fundamental job for the British economy. They employ hundreds of thousands of people and create skilled apprenticeships right across the country. Over the next 10 years, we need these companies to invest in the UK—in new power stations, pipes and wires.
The idea, however, that the significant uplift in profits is all somehow to do with investment simply does not stack up. For one thing, if we look carefully at the profits and investment trends of the big six energy companies, as Bloomberg did last year, we see a very odd pattern emerge. The companies with the biggest profit margins have the lowest investment profiles, while the companies with the smallest margins are ploughing the most back in.
Moreover, at a time when the industry overall is enjoying unprecedented profits, we are not seeing anything like the investment that we need. Analysis by Bloomberg New Energy Finance shows that investment in clean energy has fallen by more than half since the last general election, and that under this Government just one new gas-fired power station, in Carrington in Manchester, is scheduled to open before the next election. Every other gas-fired power station that is coming on stream was commissioned, received planning permission and began to be constructed under the last Labour Government. In any case, the need for investment cannot mean allowing the energy market to fail consumers.
Mr John Redwood (Wokingham) (Con): Does the right hon. Lady not understand that if she backs the most expensive and least rewarding forms of energy investment, to the tune of £110 billion—which is what she wishes to do—profits of less than £4 billion a year will not pay for all that?
Caroline Flint:
The choice that we face is between moving to the energy market that is best suited to the future and continuing to incur the additional costs of the past. The Energy and Climate Change Committee
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has produced information about the cost of decarbonising our power sector, but has also drawn attention to the cost of not doing anything. I believe that the cost of staying stuck in the past would far exceed the cost of investing the amount that we need to invest in renewable and low-carbon energy for the future.
Mr Davey: Does the right hon. Lady accept that investors will need to make profits on their investments? The Bloomberg report aside, does she agree that investors in energy companies can make profits?
Caroline Flint: Of course I agree that those companies should make profits. I do not want to become involved in a back-and-forth question session because I know that other Members wish to speak, but the Secretary of State has not answered my question. Is he not worried about the fact that some of the companies with the largest profit margins are investing the smallest amounts, while those with the smallest profit margins seem to be investing more? The need for investment cannot mean allowing the energy market to fail consumers. Today I shall explain not just how the Government are going wrong, but how the position could be improved.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): Is my right hon. Friend as surprised as I am that none of the Members who have intervened so far have mentioned consumers? People such as my constituents have seen fuel poverty—extreme fuel poverty—double over the last 10 years. They have suffered attacks on their living standards and increases in gas and electricity prices, while the six big companies that the Government appear to be defending have made profits of £3.3 billion.
Caroline Flint: In fact, that £3.3 billion is over and above those companies’ profits. It is not just their profit base; it is the uplift on what I would describe as, in itself, a pretty healthy profit.
Sir Edward Leigh (Gainsborough) (Con): Will the right hon. Lady give way?
Caroline Flint: No. I am going to make some progress. I shall say more about consumers later, and there will be plenty of time for interventions then. Let me begin, however, by saying something about energy efficiency.
There is agreement on the fact that the best way in which to protect people from rising energy bills is to make their homes better insulated and more energy-efficient. The Government’s flagship programme is the green deal. It replaced the Warm Front programme, which helped more than 2 million families to insulate their homes under the last Labour Government.
Members may recall that the last Secretary of State said that the green deal would help to insulate 3.5 million homes. Clearly a great deal has happened since that statement, and it would be understandable if Members took those words with a pinch of salt. However, the Prime Minister told the House that the scheme would be “bigger and better” than any schemes that had preceded it. It would be groundbreaking, revolutionary, and the envy of countries all over the world. When it was launched earlier this year, the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker)
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told Radio 4 that he would be having sleepless nights if fewer than 10,000 people had signed up for it by the end of the year.
Eight months in, how many people have actually signed up for a green deal package? Has the number hit 8,000, or 4,000? Can the Minister look forward to a good night’s sleep before the end of the year? I am afraid not, because so far just 132 people have signed up. Therefore, almost five out of six hon. Members in this House do not have a single constituent who has signed up for the green deal. The saddest thing is that this was all so predictable. For the last three years my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger) and I have warned that interest rates of 8% or even 9% would put people off, that hidden charges would put people off, that penalty payments would put people off, but this Government are not good at listening.
The Secretary of State will no doubt claim that it is still early days, and I really wish that were the case. On the latest count over 58,000 people have had assessments. That shows that the public are interested in making their homes more energy-efficient, but the problem is that once they have had their assessment, 99% of people say they do not think it is a good deal and are not signing up.
The Minister of State, Department of Energy and Climate Change (Gregory Barker): There is absolutely no factual basis for that assertion. The latest DECC polling shows that over 70% of people who have had a green deal assessment have said they either have work in progress or intend to or are likely to have work done.
Caroline Flint: The facts speak for themselves. There were 58,000 assessments, but only 132 people have signed up. I am sure Government Members will do their best to defend the green deal this afternoon, but they might want to ask themselves why their constituents do not want it if it is such a fantastic scheme.
Alongside the green deal is the energy company obligation, which is a successor scheme to the obligations on the energy companies that we put in place. Again, in principle it has our support. However, when support for people in fuel poverty has been cut by half, the help that is available should be targeted where it is most needed, yet under ECO 60% of the funding could go to households who can already afford to pay, not to people in fuel poverty. When times are tough and money is in short supply, that is simply indefensible.
Mr Russell Brown (Dumfries and Galloway) (Lab): I spoke in the last debate. Some 41% of households in my constituency are in fuel poverty. What does my right hon. Friend have to say about what I believe is the sharp practice by some of the energy companies who want to increase customers’ monthly direct debit payments by 15%, 20% or 25%, with no real rhyme or reason, when there is no justification for that as their customers are not using that increased amount?
Caroline Flint:
Although some of the companies have reformed how they treat their customers, I am afraid that I receive information every day from members of the public including my own constituents—and also colleagues in this House who tell me about their experiences and those of their constituents—about what can only
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be described as sharp practices. Why should a customer who is paying a fair rate for their energy have to pay an uprated rate just to allow that money to sit in the coffers of the energy companies so they can benefit from any interest on it? That is just not fair and there is still a huge job of work to be done.
John Robertson (Glasgow North West) (Lab): Some 56% of people are saying they have cut back on their use of electricity and gas yet their bills are going up. They ask, “What is the point of the green deal, when it does not matter how much I save because prices are going up anyway?” No wonder nobody wants to know about the Government’s green deal.
Caroline Flint: My hon. Friend is right, and that lack of confidence and trust in the market and how it operates is at the heart of our motion.
I want to tackle this issue head-on by turning to the question of the retail energy market. It is nearly a year ago now that the Prime Minister promised to force the energy companies, by law, to put all their customers on the cheapest tariff. Let me remind the House of exactly what the Prime Minister said on 17 October last year:
“we will be legislating so that energy companies have to give the lowest tariff to their customers”.—[Official Report, 17 October 2012; Vol. 551, c. 316.]
He reaffirmed his proposal at Prime Minister’s questions earlier today, but the details show that it will not in fact apply to all customers; it will apply only to people on closed or dead tariffs, which is a tiny fraction of consumers as a whole.
Given the crucial difference between what the Prime Minister promised and what the proposals entail, it is reasonable to ask exactly how many people will benefit. Since then, I have asked one urgent question, six oral questions in the House and six written parliamentary questions to get to the bottom of this, but every time the Government have refused to answer.
This is meant to be their core offer to consumers, yet the Government cannot even tell me how many people will be moved to a better deal, when that will happen or how much they will expect to save. So I ask the Secretary of State again today: how many people will the energy companies be forced to move to the cheapest deal? Why is his Department so far refusing to answer my freedom of information request on this issue? Why has so much time and so many resources been wasted trying to shore up a policy announcement made off the cuff?
The sad thing is that there is agreement across the House and, to its credit, within industry that the proliferation of tariffs in the past few years has hindered, rather than helped, consumer choice and competition. Instead of focusing on that, the Department has wasted a year trying to dig the Prime Minister out of a policy hole entirely of his own making, creating unnecessary confusion for the public.
Mr Stewart Jackson (Peterborough) (Con):
Before the right hon. Lady gets too far along the road of critiquing the dysfunctional market, perhaps we ought to consider that the Labour Government inherited a dynamic and efficient market, geared to competition for
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consumers with 14 companies, and handed on to this Government an oligopoly of six companies, which she now criticises.
Caroline Flint: It is fascinating how figures can be used. The briefing that Energy UK gave Members on both sides of the House says that 17 companies are operating in the market. The problem is market share; the big six control 98% of the market. I do not call that competition, and we will not get it until we get a fairer sharing out of the market—that will make a real difference.
Barry Gardiner (Brent North) (Lab): In response to the previous intervention, would my right hon. Friend simply care to draw the House’s attention to the fact that the previous Labour Government had to reform the market not once, but twice, through NETA and BETTA—the new electricity trading arrangements and the British electricity trading and transmission arrangements? They did so to ensure that, in what had been a dysfunctional market, something better and more competitive was created. That created the big six, which now, through the change in circumstances, have reached a different stage in their genesis and need reform as well. The idea that the Labour Government inherited a well-functioning market is nonsense, and Government Members know it.
Caroline Flint: I absolutely agree with my hon. Friend. Just for the record, energy bills fell under my right hon. Friend the Leader of the Opposition. When he became Secretary of State for Energy and Climate Change the average bill was £1,215, and when he left it was £1,105. I am happy with that drop of more than £100, but since then there has been an increase of more than £300 in the past few years.
Alongside simpler tariffs, which we would all agree with, protections should be put in place for people less able or less inclined to switch. That is why our motion proposes to require the energy companies to put all those over the age of 75 on to the cheapest tariff. We know that the over-75s are the most likely to live in homes with poor energy efficiency and the most vulnerable to the cold weather, but the least likely to switch supplier, so they often pay more than they need to. That is sometimes simply because they do not have enough confidence to access the internet, where the information on the cheapest deals is available, or to operate an online account. I have discussed our proposal with suppliers, and they indicate that there is no reason why it cannot be done, so I hope that the Secretary of State will be able to give a more positive response than he has in the past.
Caroline Lucas (Brighton, Pavilion) (Green): Yesterday, Lord Stern dismissed claims that fracking could bring down the price of gas in the UK as “baseless economics”. Given the long list of experts explaining why shale gas will not help people who are struggling with high energy bills and will actually trash our climate commitments, will the right hon. Lady take this opportunity to rule out fracking in the UK under any future Labour Government?
Caroline Flint:
I have been clear that our approach to fracking and what it could offer must be evidence-led. In the past few years, I have been disappointed by the
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fact that, for all sorts of reasons, the Government have chosen to up the ante on what gas from such exploration can provide. We do not really know the exact cost-benefits of fracking for gas. We do not know how much is there and whether those benefits will be realised when we get it out of the ground. I am afraid that I shall have to disappoint the hon. Lady by not ruling it out, but our approach must be evidence-based and pragmatic. I certainly do not believe that we should be offering tax breaks, given everything that is going on in this country, for something that might not happen for 10 years, if it happens at all.
The Government have harmed the reasonable debate that we should be having about fracking by trying to polarise the use of the gas against that of renewables. That has been incredibly unfortunate as regards having a practical, reasonable and evidence-led debate. That is what we will lead on in trying to debate the issue, which is important for our country.
As I have said, we can simplify the tariffs. We can take our proposal to put all those who are over 75 on the cheapest tariff. But before we even get to tariffs, we must ensure that the prices that make up bills are set fairly and openly in a properly competitive environment. That is crucial because wholesale costs are the single biggest component of domestic energy bills and make up more than half the prices consumers pay.
If we do not have a competitive wholesale market putting a downward pressure on prices, people might be on the cheapest tariff but might still not be getting a fair deal. The Government seem to say that they agree that the market is not as transparent or competitive as it should be, but what are they doing about it? Not very much.
Mr Mike Weir (Angus) (SNP): Will the right hon. Lady give way?
Caroline Flint: I just want to make a little progress.
The Energy Bill takes broadly based back-stop powers to improve liquidity, but the Government cannot even say in what circumstances or in what way they would use those powers. I am sure that the Secretary of State will pray in aid Ofgem’s work on liquidity. In our previous exchanges, he has defended the regulator against my criticisms, but I hope that he has read the Select Committee’s report, “Energy Prices, Profits and Poverty”, which was published over the summer. Its conclusion is stark. The very first page of the report states:
“Ofgem is failing consumers by not taking all possible steps to improve transparency and openness in the energy market.”
I am afraid Ofgem’s proposals on wholesale market liquidity do not go anywhere near addressing the two main problems with the market.
The first problem is that the market is dominated by six companies that both generate power and retail it to consumers with a market share of 98%. As Which? pointed out in its report over the summer, the obvious problem with the structure is that it provides little incentive for companies to keep wholesale prices efficient if the effect of doing so is to reduce the overall profitability of the company. Why would the supply arm of an energy company try to drive down profits on the generation arm if the outcome was to reduce the amount of money the company as a whole was making? Although the
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companies are right to say, as they frequently do, that their retail profits are only 5%, which is pretty healthy, their profit margins on generation are much more substantial. Which? suggests in its report that last year they were about 19%.
Mr Davey: Will the right hon. Lady give way?
Caroline Flint: I have given way quite a lot and I want to make a bit of progress. I will see whether I have time later to take another intervention from the Secretary of State.
I have set out the first problem. The second problem is that if energy companies can source most or all of the power that they need for their customers from their power stations, there is much less need to trade in the open market. According to one estimate from the London Energy Brokers Association, average daily market traded volumes were just 6% of total generation. For those reasons, we have proposed the pool to which the motion refers. A pool would be a single mechanism bringing all generators and suppliers together to buy and sell all their power.
To put it simply, in a pool—or an open exchange, or whatever else we might call it—all generators will be required to sell all the power that they generate on to an open market, and all suppliers will have to buy it from there, too. That would do two very important things: it would put a break between generation and supply; and it would result in much greater volumes being traded openly. Indeed, that is one reason why the markets in other countries where there is a more exchange-based trading system, such as Nord Pool, are more liquid, more transparent and have more market participants. I believe that such a market would be more attractive to invest in, particularly for independent generators or companies wishing to enter the supply market.
Andrew Gwynne (Denton and Reddish) (Lab): Is my right hon. Friend aware of the recent report by the respected think-tank the Institute for Public Policy Research, which shows that the efficiency savings resulting from increased competition in the energy market could alone bring bills down by around £70?
Caroline Flint: That is absolutely right. I do not believe that the present situation encourages or incentivises efficiency within those companies. Importantly, it does not provide an open and transparent basis on which to judge the true cost of energy, which I think is vital if we are to move the debate on energy in this country forward.
Mr Davey: Today we have learnt that the right hon. Lady believes that we need investment in the energy sector and that investors will need profits. Given what she has just said, can she tell the House what level of profit she thinks is excessive and when she thinks profits become unfair to the consumer?
Caroline Flint:
I think that the difficult thing here is for the country to understand why the Secretary of State has set his face against opening up the market and making it more transparent. This is not about companies not making a profit; it is about creating more competition. Every time we discuss the price of energy, we will have various voices, including the Government’s, defending
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how the companies operate. I want to create a more open and transparent market, so that we can all judge what is a fair price and, alongside that, what are fair profits. It is not fair if people cannot get to the bottom of how energy is bought and sold. It cannot be right for the market to be rigged in such a way that the vast majority of energy is sold within a company and then sold on to us. Other countries do it differently, and I think that we can, too.
John Penrose (Weston-super-Mare) (Con): Does the shadow Secretary of State not accept that even if her proposals were to introduce extra transparency and potentially yield some of the benefits that she is claiming, those benefits would be unlikely to be passed on to consumers unless we also reform switching and the information available to consumers, so that more are willing to vote with their feet by moving their business elsewhere? It is not just the over-75s who are less likely to switch; the entire market is insufficiently informed or able to switch conveniently to have that kind of consumer pressure on producers.
Caroline Flint: I agree with the hon. Gentleman. We could look at lots of different policies to improve customer choice and the ability to move more flexibly between suppliers. My point is that, whatever we do to the retail side of the consumer offer, we must deal with how the market works. Even the best tariff that we have at the moment might still not be a good one, because of how the wholesale market works. When I met companies that are part of Nord Pool, they did not voice the concerns that the Secretary of State mentioned today about hampering investment. Actually, I am pleased to share with the House the fact that over the past 18 months I have seen some movement in a number of the energy companies in the UK as well. I think that they are beginning to realise that some openness and transparency in the market would serve them and the British public well.
Mr Mark Spencer (Sherwood) (Con): Will the right hon. Lady give way?
Caroline Flint: I will make some progress.
A pool or open exchange would have one other big advantage over the current market arrangements. The Energy Bill introduces contracts for difference to encourage investment in low-carbon sources of electricity. Those are essentially contracts with low-carbon electricity generators to pay a fixed price for the power that they produce. If the price that the generator receives in the market is less than the agreed strike price, consumers are liable to make up the difference. At the moment, with such little trading happening on the open market, there is no reliable way to work out what the market price actually is.
In August, the Secretary of State published more information on how contracts for difference will work, but what did it say on the question of how to work out market prices for baseload power? Let me quote from paragraph 15 of annex B of the draft operational framework, with which I am sure he is familiar. It states that
“indicating the precise source of prices, based on current price publications, in detail today would not be useful.”
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Actually, I think that knowing how many billions of pounds of consumers’ money will be allocated would be pretty useful, but without a pool, I simply do not see how the Government will work it out.
Caroline Flint: I am going to make some progress.
Alongside our proposals for a more competitive open energy market, the motion calls for a much tougher regulator than we have had in the past. As I said earlier, in its report the Select Committee echoed many of our criticisms of Ofgem over the past year. I do not intend to rehearse all those criticisms, as it could take some time, but I want to urge the House to support one important change. In a properly competitive market, cost reductions should be passed on as quickly and as fully as cost increases. At the moment, when wholesale costs increase, bills go up like a rocket, but when wholesale costs fall, bills fall like a feather, if at all. That is why our motion calls on the House to support the establishment of a tough new regulator with a statutory duty to monitor the relationship between the prices that energy companies pay for their energy and the bills that the public pay and the power to force the companies to cut prices when wholesale costs fall.
Why is this all so important to the public? Rather than never having had it so good, as the Government try to tell them, rising energy bills are one of the main reasons why they are finding it harder and harder to make ends meet. Even in better times, though, the public deserve a fair deal. This problem is not confined to the poorest. Millions of people are facing real hardship because of a cost-of-living crisis reinforced, I am afraid, by the Government’s complacency over soaring energy prices, incompetence in helping the public to insulate their homes and indifference to the plight of our oldest citizens paying over the odds for the energy that they use. Last year, there were 24,000 excess winter deaths in our country. Even on the Government’s revised definition, well over 2 million households are in fuel poverty, and the gap between their bills and what they can afford to pay is growing ever wider.
The Opposition’s job is to scrutinise the Government and hold them to account, but it is also to develop alternative ideas to tackle the challenges that the country and its people face. The risk, of course, is that the Government pinch them. Today I tell the House that, with the Energy Bill still going through Parliament, if our proposals can help to restore people’s faith in the energy market and get people a fairer deal, I gladly offer them up. I commend the motion to the House.
5.16 pm
The Secretary of State for Energy and Climate Change (Mr Edward Davey):
I am grateful to the Opposition for providing this opportunity for me to set out the action that the Government are taking to help people and businesses keep their buildings as warm as possible and their bills as low as possible. We need to help hard-pressed people and businesses as much as possible. I will spend some time setting out how the Government are doing far more than the previous Government in helping consumers with the cost of living, especially energy
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bills. The debate has already been very instructive. We have begun to explore Labour’s energy policy in more depth, and it has been found wanting. The right hon. Member for Don Valley (Caroline Flint) offered up her policy proposals and thinks that we may wish to take them. Let me tell the House that we shall not be doing so.
I asked the right hon. Lady whether she believes that we need more investment in the UK’s energy sector, and she said that she does. I asked whether she accepts that investors might wish to see a return on that investment—some profit—and she was commendably clear that she believes that profit is needed. But when I asked her what she thought excessive profit—unfair profit—was, there was no answer. Yet given her motion, her speech and her press release, one would be forgiven for thinking that she had a view on what prices were fair and what profit levels were right. The problem is that it is not clear whether she wants any more competition or regulation. At times, she seemed to be advocating a wholesale re-regulation of Britain’s energy markets, with price controls—perhaps profit controls. Is she advocating price and profit controls? We need to know. What exactly is Labour proposing? If she is not proposing those, as she sometimes appears to do, we need to know how she is planning to deal with the problems she raises. [Interruption.] I am coming to the issues in the motion. The problem is that they are so weak that we do not believe they are really what she is proposing.
Mr Tom Clarke: The right hon. Gentleman briefly mentioned regulation. Given Ofgem’s record, is that really the sort of regulation he wants? We have seen reductions in wholesale prices withheld from consumers for a very long time and yet increases passed on to them, and a failure to ensure effective competition within the market.
Mr Davey: I will discuss Ofgem in detail later, so I ask the right hon. Gentleman to be patient. I do not accept his party’s position on Ofgem and I will say why not in some detail later.
Gloria De Piero (Ashfield) (Lab): The Secretary of State has mentioned profit levels. Is it not clear that it is not possible to talk about profit levels without also talking about the need for a regulator with teeth? What is the Secretary of State going to do about that?
Mr Davey: Actually, when we talk about profit levels, we need to talk about competition. One of the core points of our policy is to increase competition, which the previous Government failed to do. Yes, regulation has a role, and I will discuss that, but competition has a much greater role.
Dr Alan Whitehead (Southampton, Test) (Lab): What proportion of the total investment that the departmental estimates claim will be needed for plants, transmission, grids and connections will come from the big six energy companies? Will it be most, some or a small proportion of it? Does the Secretary of State think that the big six may not be the only game in town as far as investment in our future energy supplies is concerned?
Mr Davey:
The hon. Gentleman makes a fair point in his usual informed way. The big six will be a big part of that investment profile, but as he will know, their balance
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sheets are weaker than they were in the past as a result of the recession, and there will be other investors. That means we will have to work harder to get that investment, but some of it will come from the big six.
Mr Spencer: The Opposition’s suggestion of an energy pool is an interesting one. Which party was in power in 2001 when the energy pool was abolished?
Mr Davey: My hon. Friend makes a very good point, which I will come to later. It was the Labour party.
The UK faces a huge challenge, which was made much worse by the failure of the Labour party when in government to even begin to tackle Britain’s energy and climate change problems—a lamentable Labour record, which I will return to shortly. The challenge that I as Secretary of State am tackling is the urgent need to attract massive investment while at the same time helping people with high energy bills. We are trying to attract that investment in a much more unfavourable economic and energy climate than Labour faced. The recession, and especially its impact on investors, has meant that people are less willing to invest, so we have to try harder to attract that essential investment.
We face global energy markets that are much tighter than they were during Labour’s time. International wholesale fossil fuel prices, which account for up to half of a typical household bill, have gone up by 50% over the past five years. The vast majority of countries are, like us, seeing energy bills go up, but unlike other countries whose recent Governments invested in energy, Britain faces another massive cost pressure on energy bills, all because Labour failed to invest. The synthetic anger and synthetic policies of the Opposition do not fool anybody.
Caroline Lucas: Will the Secretary of State give way?
Mr Davey: No. I want to make some more progress and then I will let the hon. Lady in.
We need a genuine debate. I pay tribute to the Energy and Climate Change Committee for its report “Energy Prices, Profits and Poverty”, which I welcomed on the day it was published. It is more balanced and informed than many contributions to this critical debate and we will respond formally to it soon. Essentially, the debate is about how to get the balance right between regulation and competition, the regulations we need and how we can boost competition.
To be fair to the right hon. Member for Don Valley, her motion and part of her speech covered those issues. Her problem is her party’s record and the inconsistent and, frankly, incoherent policies she seems to want to adopt. Let us consider her three-pronged policy package: abolishing Ofgem and replacing it with Ofgem 2; dropping Ofgem’s reforms of the wholesale market in favour of reintroducing a pool; and tackling, in some way, the big six.
It is a fascinating package, because it completely reverses some of the very few things Labour actually did on energy policy. You couldn’t make it up. Labour set up Ofgem in the first place in 1999. On Labour’s watch, Ofgem abolished retail price regulation. It gets worse for Labour because five years ago the Leader of the Opposition, when he did my job, said that he was strengthening Ofgem. If the Labour party wants to
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abolish Ofgem, which it set up and which was strengthened by the Leader of the Opposition, what on earth went wrong?
We are ensuring that Ofgem’s powers are increased. We have taken a far more measured approach to the independent regulator. We are ensuring that it and we are on the side of the consumer. We started with a review of Ofgem three years ago. We decided on some reforms and are implementing them. We are giving Ofgem tough powers to compensate consumers when an energy firm does something wrong—something that the Leader of the Opposition forgot to do when he was doing my job. Labour was not on the side of the consumer when it was in government. It is noteworthy how much tougher Ofgem has been since the coalition came to power in promoting competition in retail and wholesale markets, in which it has been strongly supported by us.
I will ask the right hon. Member for Don Valley another question—perhaps she will answer this one. Would she keep the tougher powers that we have given Ofgem? Given that it is improving competition in the wholesale and retail markets, would she abandon those reforms? I will give way to the hon. Member for Brent North (Barry Gardiner), because perhaps he will be able to answer.
Barry Gardiner: The Secretary of State knows full well that what he is saying is disingenuous. When Labour created the new electricity trading arrangements, we were moving from two major companies to six. When it created the British electricity trading and transmission arrangements, it expanded the transmission arrangements as well. When it introduced Ofgem, it was introducing a regulator into a competitive situation. He knows full well that in 2007 and 2008, when the Leader of the Opposition was the Secretary of State for Energy and Climate Change, energy prices were going down. It is in the last few years that they have rocketed by 41%. All the accusations that he has just made are phoney and he knows the reality.
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. The hon. Gentleman has been in this Chamber long enough to know that he should be asking a question rather than making a speech.
Mr Davey: I was not making phoney accusations, but giving the facts and the history. Labour may want to run away from its history, but we will hold it to its record.
Before I talk about the action that I and the Government are taking to help consumers, let me return to Labour’s three-point plan, having already demolished its first proposal to abolish Ofgem. The House might like to note that the abolition of Ofgem is not recommended by the Energy and Climate Change Committee.
Labour’s second proposal is to drop Ofgem’s long-awaited reforms of the wholesale energy market in favour of reintroducing the pool. It was Labour that abolished the pool just over 10 years ago, as my hon. Friend the Member for Sherwood (Mr Spencer) reminded the House, at an estimated cost of £1.4 billion. Labour said that is was not working—wait for it!—in the interests of
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consumers. Apparently things have changed. However, under the policies that Labour put in place after it abolished the pool, things have not got much better. Labour’s abolition of the pool produced the vertically integrated energy markets that we see today. Independent generators find it tough to get into the wholesale market because of the changes that Labour made. Independent suppliers do not find the wholesale market competitive enough to supply their customers. Electricity prices are therefore likely to be higher than they should be.
The Government and Ofgem want to fix Labour’s mistake. We do not want to reintroduce the pool, because that would be an expensive distraction and would not tackle the real problem, which is liquidity in the forward markets. We are going to tackle that with a well thought through package that is designed to drive competition to help consumers. Ofgem’s “secure and promote” proposals include the idea of a market maker and mandating the six vertically integrated companies—the big six—to publish the prices at which they will buy and sell up to two years in advance. That will help independent suppliers and large power producers.
As Secretary of State, I want to be sure that such reforms by the regulator work and have teeth, so that they drive competition. That was why I introduced into the Energy Bill reserve powers to act should Ofgem’s reforms not work. In other words, whereas Labour wants to go back to a failed policy that it got rid of itself, we are taking the tough measures needed to boost competition and help the consumer.
Albert Owen (Ynys Môn) (Lab): The Secretary of State said that he had improved and strengthened Ofgem. One issue that I have raised with him and his predecessor is extending its remit to cover customers who are not on the mains gas grid. Has he had a chance to look at that, and does he personally support giving it the strength to deal with those customers, as it does with those on mains gas? Yes or no?
Mr Davey: The hon. Gentleman asked that question when I appeared before the Energy and Climate Change Committee, and I told him then that I would examine the matter. I am afraid that we have not come to any conclusions—he only asked me a month or two ago—but I am happy to look at that. The Minister of State, my right hon. Friend the Member for Sevenoaks (Michael Fallon), is extremely concerned about the high prices paid by consumers who are off the gas grid, as I am. When we examine the research on fuel poverty, we see that some of the worst is among those customers, so this Government will do something about it where the last Government did not.
Dr Whitehead: Is the Secretary of State aware that at least one of the big six energy companies forward-trades for only one week in this country? Trading beyond one week ahead is taken out of this country. Will he explain the impact that his proposals will have on that trading arrangement, so that it is made wholly transparent?
Mr Davey:
Let me be clear that we have an independent regulator, which the Labour party tends to forget. I should say to my colleagues that under the EU third package on energy, we have to have an independent regulator. The proposals that have been made are Ofgem’s,
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but I am on the record as supporting them strongly. As I have explained, Ofgem has proposed a market maker system, whereby the six vertically integrated companies will be mandated to sell power in the forward markets in the UK.
What about the third element of Labour’s package? It is a bit vague, talking about tackling the big six. The House should know from what I have said that we are already doing that through competition. What did Labour do in office? In 1998, there were 14 firms in the electricity supply market retailing electricity to customers. By 2010 there were just six, as my hon. Friend the Member for Peterborough (Mr Jackson) said. Rather than promote competition to help consumers, Labour did the reverse, and it now promises to undo what it did. What a shambles the Opposition policy is, and what a shambles the last Labour Government were.
If Labour’s energy policy would really help consumers, will the right hon. Member for Don Valley tell the House by how much the average energy bill would fall under her party? She tells us that she is proposing radical changes, so what would the impact be for consumers? We published detailed analysis of the impact on people’s bills of our energy and climate change policies, and it showed our policies helping people by keeping their bills lower than they would have been. We need to know what the impact of her policies would be.
As I have made clear, we have policies to help hard-pressed consumers and to help improve competition in the retail electricity market, including policies with Ofgem to help consumers. On the supply side, we have deregulated to make it easier for smaller suppliers to enter the market. We now have our “offtake of last resort” mechanism through an amendment that I introduced into the Energy Bill in the other place, and we are supporting Ofgem’s reforms to the retail market to deliver tariff simplification and get a better deal for more consumers. Labour failed to do that even when pushed to do so in the House. The confusing array of tariffs—there were a huge number—got to such a point that it was hindering competition and hurting consumers, not helping them and driving competition. We are right to back Ofgem with more reserve powers so that we can ensure that vulnerable people are not left being fleeced on so-called dead tariffs, and so that people find it easier to choose and switch.
Caroline Flint: The Secretary of State talks about providing Ofgem with more powers. Does it not concern him that we and the Energy and Climate Change Committee have identified that it has not been using the powers that it already has? How the regulator sees its role in relation to the energy market is at the heart of the problem. Following the recent report, which was a forensic examination of how the market works, it disregarded the recommendations of the independent consultant, and the Select Committee says that it should reconsider the matter. A regulator not using the powers that it already has is worrying, and that is at the heart of some of the problems that we face.
Mr Davey:
On the Committee’s proposals about whether Ofgem should pursue the BDO recommendations on accounting transparency, the right hon. Lady will have to wait until we publish our response to the Committee.
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However, I disagree strongly with her that Ofgem is not using its powers. It is certainly using its powers under us, which is why we have the retail market review delivering the tariff simplification that Labour failed to introduce, and why we are seeing reform proposals for the wholesale market, which Labour failed to do.
Mr Davey: I will give way to the hon. Gentleman who is a distinguished member of the Energy and Climate Change Committee.
John Robertson: This reinvention of history is an absolute disgrace and you do this place no favours whatsoever. You have stated in front of the Committee that Ofgem is not doing the job it should be doing, and said that you were going to do something about it. We are still waiting.
Mr Davey: I always find the hon. Gentleman to be an interesting colleague when I come before the Committee, and with interesting questions. We will respond to the Committee’s report. Of course it is right for colleagues to have criticisms of Ofgem, but the question is what they are going to do about it. Do they want to spend lots of time abolishing the regulator completely, or do they want what we want, which is to make it stronger and give it tougher powers? We have a much better record. We have not just relied on the regulator. Through our collective switching pilot, which we will report on in the autumn, we are trying new ways to help get customers and consumers—especially the most vulnerable consumers—a better deal.
Andrew Gwynne: Will the right hon. Gentleman give way?
Mr Davey: No, I want to make some progress. Fuel poverty has been rightly mentioned, and ours is a comprehensive approach on which we have consulted fully and on which we will continue to work with all stakeholders. Having published our fuel poverty strategic framework, we are planning to publish our full fuel poverty strategy early next year, and it will be a marked improvement on the past for several reasons.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): Will the right hon. Gentleman give way?
Mr Davey: This will have to be the last intervention because I need to complete my remarks.
Luciana Berger: This House was anticipating the fuel poverty strategy by the end of this year. Will the Secretary of State confirm what he just said, which was that we should now expect it to be delayed into the new year?
Mr Davey: I said it would be published early in the new year. First, with our low-income, high-cost measure, and also by measuring the depth of fuel poverty—something never done by the previous Government—we will have a much better handle on this worrying and difficult problem. Secondly, by linking fuel poverty far more closely to the energy efficiency of homes of those in fuel poverty, we will target resources better and more effectively. Thirdly, I want to look at new ways to ensure fuel poverty is prioritised, for example by examining and emphasising links with poor health.
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To me the evidence is clear. If we beat fuel poverty, we can improve the health of hundreds of thousands of our citizens, and we will continue to give people direct help with their bills, whether through our warm home discount, the winter fuel allowance, or our higher cold weather payments. We want to get real help—money off—for the most vulnerable, and we want to do more for energy efficiency and help people save energy, save money and keep warm.
I am pleased with the huge and maintained demand for green deal assessments, with nearly 60,000 completed. I am also pleased to see how the supply chain continues to grow, and to hear about new schemes that new players continue to launch. Along with the success of the energy company obligation, with almost 150,000 installations completed, I believe the infant market of the green deal will grow and grow and bring the major change we want. With our emphasis on competition and helping vulnerable consumers directly, and with our energy efficiency policies, the coalition is delivering for people in difficult times. Labour failed to deliver in easy times.
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. I must reduce the time limit to six minutes to get everybody in.
5.39 pm
John Robertson (Glasgow North West) (Lab): It is a pleasure to be in the Chamber under your leadership, Mr Deputy Speaker. I apologise for using the dreaded “you” word earlier. Of course, I was not referring to you, but addressing the Secretary of State.
I have never been as disgusted by a contribution from a member of the Opposition as I have today—[Laughter.] I meant to say “member of the Government.” I do not think this is funny; it is a serious subject. We are talking about people’s lives. If hon. Members want to have a laugh, they can go somewhere else and do it.
The Secretary of State and the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker), know that the Secretary of State’s performance broke something the House used to have—hon. Members working together on energy. We know there are problems, many of which are outwith our control. The previous Government had the support of Her Majesty’s Opposition. He was not a member of that Government.
The Opposition have supported the Government in trying to move forward to ensure that the lights stay on and that people have the money to switch their lights and heating on, and to cook their food. However, come this winter, people in my constituency will have to decide whether to eat, heat or pay their rent. Government Members might think that is funny, but I do not. It is important and we should work together to ensure that people do not have to make such decisions, and to ensure that they can eat, heat and pay their rent. Sadly, I do not believe that will be the case.
The Government’s report—the Hills report—said that tens of thousands of people will die because of Government policy, no matter which party was in government. The
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fact is that the current Government asked for the report, but they have done virtually nothing about trying to relieve people’s problems in paying for their heating, eating and rent. I want to work with the Government to ensure that people do not have those problems, but on today’s performance, it would appear that the Government want to draw battle lines because there will be an election in a few years’ time. So be it. The Secretary of State’s performance today was a disgrace. He had no ideas. All he could talk about was what happened 10 years ago—he could not look forward to what his Government should be doing or ask the Opposition to help them to get there. He did not want to do it. I am sorry about that, but if we want to fight about where we are going, let’s do it.
I must tell the Secretary of State—he knows—that the Energy and Climate Change Committee’s report said that there was a lack of transparency in the Government and Ofgem. I do not necessarily want to get rid of Ofgem. It has a job to do, but I want it to be able to do its job without being frightened. I see a bullying tactic from the Secretary of State, which leads me to believe that there is a good reason why Ofgem has not been doing its job properly and not doing what it should be doing. It is too frightened of repercussions from the Government. I hope I am wrong, but I see something today that I did not think I would see from a Secretary of State. To treat my right hon. Friend the Member for Don Valley (Caroline Flint) as he did was, to say the very least, not gentlemanly. At least he could pay credit to the fact that the Opposition have put ideas forward. He might not like the ideas, but the fact is that ideas were put forward. If he wants to stymie them and ensure that we have a shouting match between Government and Opposition, he has drawn the battle lines.
Mr Alan Reid (Argyll and Bute) (LD): The hon. Gentleman is right that the Opposition should put forward ideas. One of their ideas in the motion is to reintroduce the pool, which Labour abolished in government. What is different about the arrangements Labour proposes from the ones it abolished 12 years ago?
John Robertson: That is a ludicrous question. Way back then, things were completely different. Prices for electricity and gas were so much lower than they are today. We have moved on. We talked about it back then, but nobody listened. We knew there would be a shortage in delivery of electricity and gas, and that we would run out of North sea gas and oil, but we did not look at how to go forward. We understood that we were not going to build any nuclear power stations, but we have gone back on that as well, because we have realised that we have to have a base load so that people can keep their lights on. If we do not do that, business will go down the tubes, people will not be able to heat their houses and we will have neglected the job that we were put here to do—to look after the people of this country.
It is important that we work together to make sure that we build these power stations. The hon. Member for Brighton, Pavilion (Caroline Lucas), who is no longer in her place, does not like nuclear power stations, and nor does the hon. Member for Angus (Mr Weir), but it is important that we have them. We must have a power base that ensures that we can keep the country running, with a security of supply that we can depend on.
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Charles Hendry (Wealden) (Con): Does the hon. Gentleman therefore regret the years from 1997 to 2007 when nuclear was off the agenda completely, and would we be in a better position if nuclear had been able to advance during that period?
John Robertson: The short answer is yes, I do regret it. But I also regret what happened before that, because in the 1980s and early 1990s we knew that we had to build new power stations, but we did not do a lot about it. We built some gas-powered stations, but we knew that we would run out of gas unless we went to the middle east or Africa to get it. The one issue that struck home with everyone was security of supply. When Tony Blair stood up and said that in this Chamber, people asked, “What has happened? He has changed his mind.” But he understood that something had happened in the world that meant that we had to ensure we had security of supply.
The hon. Gentleman did an excellent job as a Minister, but he will remember that it was support from him and his colleagues that helped us to get to where we are today. The Secretary of State would not be a Minister if it had not been for what happened in those days because there would not have been an Energy and Climate Change Department or Committee. We did that together, and we have to go forward together. I hate this fighting and having a go at each other—“Your policy was wrong, our policy is right.” That is a portrayal of history that I do not recognise. What was done at the time was right for the time. We have moved on and we need to make things better.
If the Secretary of State wants my support, he needs to have a better attitude. If he wants my help, he should at least listen to what we have to say. He does not have to follow it, but he should at least look as if he is listening.
5.47 pm
Mr Peter Lilley (Hitchin and Harpenden) (Con): It is a privilege to follow my colleague on the Select Committee, whose passion for the concerns of his constituents about their energy bills I share, both because my constituents also rate this the most important issue in their cost of living and because I had the privilege of visiting his constituency at his invitation and meeting many people there. Their incomes are lower—temperatures are lower too—and so it is even more important for him to get the costs down. That is why we have to address these issues objectively and honestly.
The motion is disgraceful in two respects. First, it does not mention the one item of energy bills that is within the control and discretion of the House—the additional costs that we impose on people through the switch from fossil fuels to renewables. It is the only factor that we directly control, but the Opposition ignore it. We know that the least costly renewable, onshore wind, is at least twice as expensive as fossil fuels in generating electricity. Offshore wind is three times as expensive. I suspect that photovoltaics are a multiple of that. Already, the cost of renewables adds 5% to gas bills, 14% to electricity bills and 9% overall. That is a lot and it is expected to rise, but people might be surprised that it is not even higher still, given that wind is so much more expensive than fossil fuels. The reason for that is that the figures hugely understate the extra costs that
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every household in the country is bearing because of the switch to renewables. I have a letter from the Secretary of State in which he acknowledges that only a third of the cost of renewables falls directly on households’ energy bills, while two thirds falls on the non-domestic sector. In other words, that two thirds leads to a rise in the cost of all the other products that we consume because of the rise in the cost of electricity.
Mr Davey: My right hon. Friend is not correct when he talks about 9% of bills resulting from support for renewables. The majority of that is made up of support for tackling fuel poverty, dealing with energy efficiency, the warm home discount and the carbon price floor. A much smaller part is due to support for renewables.
Mr Lilley: That is the total impact of Government policies. Whatever the figure is, my constituents and the constituents of the hon. Member for Glasgow North West (John Robertson) are paying it. Overall, if one third of the cost of renewables is falling on households directly, the other two thirds also falls on households. There is no such thing as industry in this case. All costs are borne by individuals: by consumers and employees, and by pensioners through the impact on the value of shares and profits that are held largely by pension funds. We should not allow the costs we are imposing on people to be ignored or understated.
The second disgraceful aspect of the Opposition motion is the pretence that the rise in energy bills we have experienced in recent years is largely or entirely due to a rise in profits. I wish that were true. If it were true that the rise in profits accounted for the 41% rise in gas prices and the 20% rise in electricity prices, undoubtedly those profits would be excessive and we could bring down profits and prices by greater competition or better regulation. Sadly, however, it is not true. Table 6 of the Select Committee’s report records that the average profit margin of the big six is 7.6%, which cannot account for the massive 20% and 41% increase in prices.
Caroline Flint: Will the right hon. Gentleman clarify what aspect of the profit margins he is basing those figures on?
Mr Lilley: That is the average of both generating profits and distributions profits. It is in table 6 of the report, which I am sure the right hon. Lady has read assiduously. She can check it if she wishes.
The right hon. Lady refused to answer a question about what a correct level of profit would be, but I cannot believe that she thinks profits are more than twice as high as they need to be. Even if we were to halve the profit level from 7.6% to 3.8%, the effect on prices would be very small compared with the huge increase we have seen. As we all know, the increase is largely the result of the increase in fuel prices, which is outside the control of Governments.
The suggestion that all energy companies have seen massive rises in profits is also dispelled by table 4, on page 27 of the report. Indeed, the Committee referred to the figure given in the Labour party’s motion of an increase in profits of £3 billion, which I think comes from Consumer Focus. The report states:
“Table 4, however, doesn’t appear to support this.”
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Table 4 shows what has happened to companies’ profit margins from 2007 to 2011. For EDF, the average profit margin was 15.7% and went down to 8.5%. For SSE, it went from 4.2% to just 0.8%. For British Gas Centrica, it has gone down from 7.3% to 5.6%. For Scottish Power, it has come down from 11% to 4.4%. For E.ON, it has come down from 6.8% to minus 2.2%. For npower, it has come down from 12.2% to minus 5.5%. Therefore, the idea that there is huge scope for us to bring down excess profits, and thereby prices, through regulation or improved competition is sadly not correct, and it is dishonest to pretend that it is.
David Mowat (Warrington South) (Con): I think we are using the term “profit” quite loosely, particularly the Opposition. What matters in judging the profitability or effectiveness of these companies is return on capital employed. That is how they measure themselves for the investments they make and the returns they get. I do not believe there is any evidence that the return on capital employed has increased in the last five or six years. If it had, those on the Opposition Front Bench would put that to the House.
Mr Lilley: My hon. Friend, as always, is absolutely correct. People would do well to note what he has said.
The most important issue to our constituents is the cost of living, and within the cost of living it is energy prices. Energy prices have largely been driven up by factors outside our control. The one factor within our control is the cost of renewables. We are hypocritical if we shed salt tears for our constituents while we, through the only area where we have discretion, are driving those costs up higher and are set to do so much further still in future.
5.56 pm
Albert Owen (Ynys Môn) (Lab): It is a pleasure to follow the right hon. Member for Hitchin and Harpenden (Mr Lilley), my colleague on the Select Committee on Energy and Climate Change with whom I have many discussions. I do not agree with him on many issues, but we have great discussions. His speech today was not an attack on our motion—I did not identify anything in the motion that he was referring to—but a critique of the Government, as well as previous Governments. I stand by social tariffs. It is right to help the poorest in our society, who are suffering. That is important. The Secretary of State was right in his intervention on the right hon. Gentleman to point out that he was not talking about just renewables; rather he was talking about many of the social tariffs that successive Governments have supported and that I think we should support into the future.
The right hon. Gentleman was right to point out that energy prices remain a big issue for all our constituents; they have risen by some 20% in real terms since 2007, while average bills have risen by a staggering £300 since 2010, as the motion says. The motion rightly refers to the Energy and Climate Change Committee report on prices, profits and poverty. The inquiry discovered the complexities of the current, vertically integrated system and found it difficult to establish the profits and losses on the companies’ balance sheets. It is not that the
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companies do not have small or large margins—the right hon. Gentleman referred to that—but that we do not have clarity. We cannot really see what profits are made in which parts of their businesses. That is why the report called for a simpler methodology agreed between the regulator and the energy companies, so that we can identify clearly what profits and losses are made by the companies.
David Mowat: The hon. Gentleman is right to ask for more transparency in the way that we judge this issue. One way of judging whether any market abuse is taking place is to look at the end price. I have a list from the EU Portal—this is from page 2 of 8—of gas prices in 27 European countries, which shows that the UK is the 26th most expensive. That does not imply that there is abusive behaviour here, or if there is, there is a lot more in other places.
Albert Owen: I am grateful to the hon. Gentleman; I am sticking to the report and the evidence base that we were given.
Our report identified—this is important—poor communications between the energy companies and the public. It is fair to say that some companies are now getting it, because of strong lobbying from consumer groups and the work done by the Select Committee in identifying the complexity of tariffs and how many there are.
John Robertson: Was not part of the problem the fact that we did not know how much profit was made on the generation side? It was estimated to be something like 20% of turnover, which, when added to the profits that everyone has been talking about, starts to become excessive. The other thing that was wrong was that the companies refused to turn over their books, so unless someone had a good degree in accountancy, they would not know where the money was spent.
Albert Owen: My hon. Friend is absolutely right; it was complex. I recall a conversation that I had with the new chief executive of E.ON, who has a master’s degree in mathematics. He told me—he has also said this in public—that he could not understand an E.ON bill because it was so complex. He has now taken steps to simplify the bills.
Energy markets are not delivering the low, stable prices that we were promised at the time of privatisation. The short-term profits that are said to have resulted from the privatisation of gas have meant long-term pain for many of our constituents, who have been paying higher prices for their gas and electricity in recent years. Switching is not an option for everyone, and it has not been taken up by the majority of people. We are paying high prices for our gas and electricity and the switching of tariffs is not working.
There is also mistrust between the public and the energy companies, as we have discussed in a number of debates. It remains a concern that prices are rising quickly, and that the price to the consumer goes up considerably when the global price of oil increases but does not go down nearly so quickly when the global price is reduced. I believe that there is consensus between the Government and the Opposition that we should examine that issue with the regulator, to establish how
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best to deal with it. Ofgem has done some good work on that already. However, I have to take issue with the Secretary of State’s comment that he was putting pressure on the regulator and that all the good results were coming from that Government pressure. When things do not work out quite so well for the consumer, the regulator is described as independent. The Secretary of State cannot have it both ways. The regulator is independent, and I believe that it needs more teeth. It also needs to use some of the powers that it already has.
In the time that I have left, I want to talk about the possibility of giving Ofgem a wider remit in regard to people who are not on mains gas, of whom there is a considerable number. I have been campaigning for them since about 2007, when gas prices became a real issue. The prices went up, but for those who are not on the grid, they went up considerably more. That has become a huge issue. The alternatives to mains gas are oil and other forms of gas.
Mr Spencer: Will the hon. Gentleman give way?
Albert Owen: I will not, if the hon. Gentleman does not mind. I do not have much time left, and I want to develop this important point. I have raised it with the Secretary of State and with the Ministers who have appeared before the Select Committee. They have always tried to push the subject away by saying that it is a matter for Ofgem. In the Select Committee, however, I have put questions to the chief executive of the regulator, and he says that it is a matter for the Government. It is time for us all to sit down and look at this together, because the rise in prices is causing great anxiety and hardship for many of our constituents.
I want to see the establishment of a champion for those customers who do not have mains gas or electricity, as well as for those who do. Those customers do not benefit from dual fuel deals. We can talk about an average price for a household, but they will be paying more. I would appreciate a straight response from the Secretary of State on this. A Back-Bench Committee and an all-party group have looked into it and made recommendations. I am sure that he has seen their report on the off grid, and I believe that we can work together to establish that champion.
I want to make a few more brief points. We talk about the domestic customers who have been severely hit by the uprating in prices, but businesses, including small businesses, are also affected. I would like businesses to be able to compare prices in the same way that domestic customers can. When small businesses are set up, they are hit by rates and start-up costs, and they then get hit by high energy bills. However, it is difficult for them to switch from one company to another. To be fair, the Government are looking at this issue and trying to do something to help, but I believe that if those businesses could use a price comparison—instead of receiving bespoke prices from each individual energy company, as they do at present—they would have a greater choice. Businesses are telling me loud and clear that excessively high energy bills are resulting in a lack of investment in their business.
My final point is on the cost and impact of the transmission of electricity and gas to the regions. The National Grid Company is a private, American-owned company that passes all its profits to shareholders.
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It passes any extra costs on to its customers via the generator. I would like to see National Grid acting in the British national interest, not in shareholders’ interests; I would like to see a not-for-profit organisation distributing our electricity. We could then have a bigger impact and reduce the transmission costs, which are considerable—about 16% of the energy prices that customers pay.
Another problem is that people pay more for gas and electricity on peripheries and in rural areas, yet many of those areas produce that gas and electricity, which is unfair. I would like us to help customers in these areas more by looking at the cost of the transmission and distribution of electricity and gas.
6.5 pm
Christopher Pincher (Tamworth) (Con): At risk of continuing the Select Committee love-in, may I also say that it is a great pleasure to follow the hon. Member for Ynys Môn (Albert Owen)—a fellow member of the Energy and Climate Change Committee? I am pleased to speak in this Opposition debate, which is important to our constituents.
Let me gently chide the right hon. Member for Don Valley (Caroline Flint) on her motion and her speech for revelling in past glories, without recognising the last Labour Government’s errors of omission and commission with respect to energy policy. If we look at energy policy in the long view, its impact on energy prices and the effect of those prices on fuel poverty, we will remember that between 2004 and 2009, fuel poverty effectively trebled as a direct consequence of the energy price increases—largely gas prices, which went up by 42% in the Blair years between 2003 and 2007, and by a whopping 74% by 2009. The Leader of the Opposition, who tabled today’s motion, should be somewhat embarrassed to remember that for some of that time he was Secretary of State for Energy and Climate Change, so that happened partly on his watch, as he watched and saw 2.8 million more people being trapped by the scourge of fuel poverty.
In the first decade of this century, Labour, with laudable intent, spent £25 billion on measures to alleviate fuel poverty, but those measures were swamped by the increase in energy prices—not a description that I chose to use, but one chosen by the Library. Labour’s solution, which was to spend more and more money to try to alleviate fuel poverty, was like sticking a plaster on a gaping wound, or like giving Angiers junior aspirin to a pneumonia patient: it dealt with the symptoms, not with the problem itself.
In line with a feeling of consensus, we certainly need to find some new solutions. There are more, but I shall mention four of them, some already mentioned today. The first is to deal with the complexity of energy bills; we all agree that they are far too complex. Many consumers—possibly the poorest and the least educated —do not feel confident about switching their bills. About 75% of consumers have not switched their energy provider in the past two years, while 55% have not even looked to try. We certainly need to make the bills much simpler, so that consumers become more confident about switching. Tariffs, too, need to be made simpler, and we need to ensure that people are put on the lowest tariff that is best for them. The Energy Bill commits to that, and the Prime Minister is committed to it. I am sure that it will happen.
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The hon. Member for Ynys Môn—I would like to call him my hon. Friend—mentioned the difficulties energy companies seem to have in communicating with their consumers. That is true. I am a consumer. Nine months ago, I inherited a supply from RWE npower, but I have still not received a bill. The company has been unable to put me on a direct debit, and it does not call back when it says it will, leading me to wonder what confidence I can have in being able to deal sensibly with that company. We need Ofgem to make sure that these companies deal clearly, transparently and effectively with their customers.
Mr Tom Clarke: Will the hon. Gentleman give way?
Christopher Pincher: I will, because giving way will earn me an extra minute.
Mr Clarke: I hope that my intervention will be helpful.
Some of what the hon. Gentleman has been saying is very relevant. Now that he has referred to the role of the regulator, let me ask him this. At a time when wholesale prices were falling rapidly but that fall in prices was not being passed on to the consumer, the best that Ofgem could say on Hogmanay—which is before new year’s eve—was that if the six companies continued to operate in the same way, they would have jam on their fingers. Does he think that that was enough?
Christopher Pincher: I can certainly tell the right hon. Gentleman that the Select Committee is concerned about Ofgem’s performance, and I think that the Government are as well. The Government must ensure that Ofgem acts more effectively to represent consumers.
The fourth way in which I think we can help consumers to pay less and can deal with fuel poverty is by reducing our over-reliance on imported gas and oil, and hence our exposure to the fluctuations in international hydrocarbon prices, which is one of the reasons why bills have gone up like rockets, causing so many consumers so much pain.
There is no easy solution to the problem of developing home-grown energy, much as its proponents may like to think that there is. Wind is not the solution in either the short or the long term, because it is intermittent. In the short term, nuclear is not the answer, because building it takes so long and is so costly. However, we could profit from proper exploration of the 200 trillion cubic feet of shale gas that is buried beneath our feet—some 60 years’ worth of supply according to the current trajectory—to help to reduce our exposure to international prices and the cost that that implies.
In the United States, which I realise is not a perfect mirror image of our country, the shale gas revolution has cut wholesale energy prices in half. Gas in the US now trades at a price five times lower than the price in Europe, and seven times lower than the price in Asia. That is of massive benefit to American industry. It gives it a competitive edge, so it can create more jobs and the people who become employed have the income with which to pay their power bills. It also reduces the cost to hard-pressed consumers. I therefore hope that we will pursue shale gas with a vengeance. I commend the Government for what they have already done in ending the moratorium, increasing the number of licences and—I
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hope, for only a short period—reducing the tax on start-ups, because this is one way in which we can ensure that energy costs are reduced.
I hope that the Government will take those four points on board, and I look forward to their being addressed by my right hon. Friend the Secretary of State in, probably, a very short time.
Mr Speaker: Order. I intend to call the first Front Bencher to wind-up at 6.40 pm. No fewer than seven Members are now seeking to catch my eye, as a consequence of which, I am afraid, in a bid to accommodate each and every one of them, it is necessary for me to reduce the speaking time limit to four minutes, with immediate effect.
6.13 pm
Sammy Wilson (East Antrim) (DUP): This is an important debate. Many of our constituents are affected by the increase in fuel bills and by fuel poverty, and businesses throughout the United Kingdom are affected by the fact that they are up against competition from those in countries with lower energy costs and are unable to compete with them. We have lost thousands of jobs as a result of high energy prices in the United Kingdom.
Some of the measures proposed in the motion are, of course, desirable. If we can redistribute the costs to help those who are in the greatest fuel poverty, we should of course do so. If an industry which is not totally competitive can be better regulated, that should of course happen—although regulation that is inconsistent or changes the rules too often will add to costs. A huge amount of investment is needed, but capital markets will not make money available for investment if the rules are continually changing, so we must be very careful when we talk about the degree of regulation that should be applied.
Like the right hon. Member for Hitchin and Harpenden (Mr Lilley), I want to make some comments about the element of our energy costs that is not dealt with in the motion. That part is the cost of decarbonising—as it is now called—our energy supply. Despite what people have said, it has added costs to the consumer and is going to continue to do so. We cannot be schizophrenic about this by on the one hand condemning the increase in energy prices and on the other hand supporting policies that are contributing to that.
Let us look at the costs. Because renewable energy is so expensive, there is a compulsion to purchase electricity under the renewables obligation at much higher prices than fossil fuels. The figures have been quoted today. Offshore wind is now the favoured option. It is three and a half times more expensive than gas, and that will probably change further, especially as gas prices will come down with fracking.
There are also the increased costs of distribution to link up all the diverse sources. The National Grid recently published a consultation document, “Demand Side Balancing Reserve and Supplemental Balancing Reserve”, in which it talks about linking into generators across the country which could lead to electricity being bought at 30 times the cost of that generated by gas. There is the question of all the back-up and infrastructure
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that will be required for when wind drops off, too. All those things need to be addressed, which means that many Members will have to tackle their prejudices on some of the issues around climate change and carbon in the atmosphere.
The question of what to do about the energy reserve that we still have under the ground has been dodged today as well. What will our attitude be towards fracking? It has changed the energy market in America. Can it do the same here? That will be fiercely debated from both sides of the House.
These issues need to be tackled, but they were not addressed in the motion, and it is therefore defective.