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Unsolicited Telephone Calls (Caller Line Identification)
Motion for leave to bring in a Bill (Standing Order No. 23)
1.39 pm
Alun Cairns (Vale of Glamorgan) (Con): I beg to move,
That leave be given to bring in a Bill to require disclosure of caller line identification by non-domestic callers; to require Ofcom to consider applications for exemption from such disclosure; to provide that telephone providers may not make a charge for providing caller line identification; and for connected purposes.
The aim of the Bill is to help to reduce nuisance calls. The issue is significant and should not be underestimated. My constituents in the Vale of Glamorgan and others across the country are fed up with the menace of nuisance calls. They are annoyed about receiving unsolicited telephone calls trying to sell them gas or electricity that they do not want, or financial services or holidays in which they have little interest. They do not want to claim for mis-sold payment protection insurance on a loan that they never had, nor do they want to sue the local authority for an accident that never occurred or buy a boiler from a company they have never heard of.
My constituents are subject to frequent telephone calls offering those services and more against their will. BT reported that it received 50,000 calls in one month to its nuisance call bureau, yet only a fraction of that number of complaints is made formally to Ofcom or to the Information Commissioner’s Office. I suggest that that is because of the difficulty of the process, and a large part of that is due to the problem of identifying the marketing organisation that makes the call. Enough is enough. Credit must be given to the consumer organisation, Which?, which was amongst the first to highlight the problem. The Under-Secretary of State for Culture, Media and Sport, the hon. Member for Wantage (Mr Vaizey), too, should take credit for taking significant steps to help to tackle the issue, leading to hefty fines for some companies levied by Ofcom and the Information Commissioner. More action needs to be taken, and legislation needs to be changed if that action is to occur. The Minister has made a commitment to publish a strategy document later this year, which shows the high priority that he gives to the issue.
The all-party group on nuisance calls published a report last week with 16 recommendations aimed at combating the problem. There were two key themes. The first focused on third-party consent, and my hon. Friend the Member for Edinburgh West (Mike Crockart), co-chair of the all-party group, sought to make progress on that with his private Bill last Friday. The second theme relates to caller identification, which is covered by my Bill. The measure will help people to take action against such calls. It will enable them to complain effectively when a nuisance is caused that could lead to fines and penalties, subject to Ofcom and ICO investigation. It will also allow people to choose whether or not to answer the phone. My constituents want to live in peace and answer the telephone to friends, family and others to whom they choose to talk.
Much of the difficulty derives from the fact that it is nearly impossible to tell who is calling, in spite of the fact that the caller ID facility is widely available. That is
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largely because marketing organisations choose to withhold their number. Legislation and guidance already exist to allow individuals to opt out of receiving marketing calls. Constituents can register with the Telephone Preference Service, effectively advising marketing companies that they are not permitted to call without prior consent. In theory, that should stop the vast majority of calls and allow complaints to be made against companies that break the code. However, it is almost impossible to complain about an organisation breaching the rules without knowing its identity. That is the position in which many constituents find themselves as a result of withheld numbers.
Under the code, the organisation should identify itself at the outset of a call. However, if a company breaks the rules by calling a TPS-registered number in the first instance they are highly unlikely to adhere to the condition that requires identification to the person answering the call, particularly if that person is irritated.
When the caller ID facility became available during the early ’90s a few organisations withheld their number. In general, that was limited to the police, medical organisations and charities such as those supporting victims of domestic violence. Now, however, a significant proportion of marketing organisations choose to withhold their number, making the choice of whether to answer the call almost impossible, but also making it extremely difficult to make a complaint to Ofcom or the ICO.
One of my constituents, Mr Haynes from Cowbridge, simply refuses to answer any call when the number is withheld in the expectation that it is a marketing call. As a result, he could well be ignoring calls from his local police station or GP practice. I have also found it difficult to contact him from the parliamentary estate, because the parliamentary system withholds the telephone number.
Requiring all non-domestic callers to display their numbers unless they have good reason not to do so, as in the examples I have already mentioned, will help people such as Mr Haynes and millions across the country to take action against those who call against the rules. In the Bill, I propose that Ofcom be required to consider applications for exemptions. The general rule should be that the organisation, whether public or private, would have to disclose their number unless there is a good reason why they should not do so. I have already mentioned the police and domestic violence charities, and there may well be others that need to be considered, but they should be seen as the exception rather than the general rule.
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The Bill requires telephone network operators to make the caller ID facility available free of charge. I was alarmed to hear some weeks ago that if a customer did not sign up to an annual contract two major UK telephone network operators would charge for adding that facility. That is simply unacceptable. It effectively charges a customer who has been plagued with nuisance calls to complain about breaches to the code. When the issue was scrutinised in the all-party group’s evidence session, one operator sought to excuse the policy, and suggested that it could have arisen as a result of additional energy costs in displaying caller ID. We rejected that absolutely, and we received widespread support for doing so, including from mobile operators that provide the facility free of charge. I was pleased to hear Ofcom’s strong response, and I hope that operators will reflect on its comments, as well as those by all parties present at the all-party group.
The Bill will make a significant difference to constituents across the country. It will allow responsible organisations that adhere to the respective codes to continue their work. It will put much of the control back in the hands of the receiver of the call. They can choose whether to answer it, and report breaches to the ICO or Ofcom. Of course, it may take time for the Bill to become law, but in the interim, I urge non-domestic callers to display their number voluntarily. It would be a simple action that would gain much respect from the public. In that vein, I appeal to network operators not to charge customers to use the caller ID facility and to review their policy. The impact of not doing so would be to charge customers to make a complaint about nuisance calls. Offering the facility would offer the network operator a marketing advantage.
The Bill is a small part of helping to combat the issue of nuisance calls, and I am pleased to have the support of Members from all parts of the House, It is a Bill that has little financial consequence, but which could have a significant benefit for many of our constituents. Many of those who are at home during the day, particularly the elderly and the most vulnerable, are plagued by nuisance calls. I urge hon. Members to support the Bill.
That Alun Cairns, Mike Crockart, Steve Brine, Fiona Bruce, Dr Julian Huppert, Steve Rotheram, Bob Stewart, Sir Andrew Stunell, Martin Vickers, Mr Mike Weir and Simon Wright present the Bill.
Alun Cairns accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 28 February 2014 and to be printed (Bill 126).
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Opposition Day
[10th allotted day]
Energy Price Freeze
Mr Speaker: I advise the House that no amendment has been selected.
1.50 pm
Caroline Flint (Don Valley) (Lab): I beg to move,
That this House calls on the Government to freeze electricity and gas prices for 20 months whilst legislation is introduced to ring-fence the generation businesses of the vertically integrated energy companies from their supply businesses, to require all electricity generators and suppliers to trade their power via an open exchange, to establish a tough new regulator with the power to force energy suppliers to pass on price cuts when wholesale costs fall, and to put all over-75-year-olds on the cheapest tariff.
At the heart of this debate is a question about whether we believe that people have been overcharged and let down by a regulator that has failed to do its job, and that to win back the trust of the British people we need to mend this broken market. Today we put before the House a motion that proposes two measures to provide real help now through a temporary 20-month price freeze and by putting all those over the age of 75 on the cheapest tariff, as well as deep structural reforms to the way that this market works for the future. These are the measures that we will take if we win the next election, but these are measures that this Government could take now, for which they would have our full support.
Albert Owen (Ynys Môn) (Lab): In those structural reforms, does my right hon. Friend consider that Ofgem, the regulator, would have responsibility for those who are not on the mains gas grid?
Caroline Flint: My hon. Friend coined the term “energy island” to describe his island constituency of Anglesey and I know he takes a keen interest. We have already said in the House and elsewhere that we believe that those who are off-grid should come under our new regulator. Of those people who are off-grid, only 10% rely on oil for both their heating and their light. The rest have oil for heating but rely on electricity, so our price freeze would have an impact on many off-grid customers as well.
Caroline Flint: I will make a little progress, then I will be happy to give way.
Charles Hendry (Wealden) (Con): Will the right hon. Lady give way?
Caroline Flint: I will make a little more progress.
At the outset I want to deal with a few of the myths that the Government have resorted to peddling in the absence of any credible policies of their own and because they are confused about how to respond to our proposals. The first myth is that the price freeze cannot or will not happen or that the idea is a con. Let me tell the House that there is only one situation in which this price freeze will not happen: if the Conservatives or Liberal Democrats
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win the next election. If we are elected, this price freeze will happen. The idea that a price freeze will not work if wholesale prices increase is complete and utter rubbish.
As the energy companies themselves admit, they are not buying today all the energy they need to supply their customers tomorrow. They buy their gas and electricity two, three or even four years before it is supplied, precisely in order to manage the risk of fluctuation in wholesale prices. The Secretary of State must know this, so the Government’s argument does not stand up.
The second myth is that companies will undermine the freeze either by hiking up their prices beforehand or by increasing them afterwards, but as I asked the Secretary of State at the last Energy and Climate Change questions, if companies collude to increase their prices beyond anything that can be justified before the next election, will he stop them? If he will not, let me be clear: we will take action. As for what happens after the price freeze ends, the reason it lasts for 20 months is that that is how long we think it will take to enact our reforms to overhaul this market. By that point, we will have a new regulator in place, with the power to force companies to cut their prices when wholesale costs fall, which will prevent the kind of mark-up and overcharging that we all know is happening. This price freeze will happen and it will work.
Duncan Hames (Chippenham) (LD): Does the right hon. Lady agree that it would be in the interests of bill payers for all Governments to have an objective of keeping the cost of capital in the industry as low as possible so that bill payers may get their energy as cheaply as it can be produced?
Caroline Flint: I do agree. It is sad that in recent times so many people who want to invest in energy have said that the capital costs are going up because of the dithering and indecisiveness of this Government towards investment in energy.
The third myth is that our proposals will deter investment. Nothing could be further from the truth. As EDF’s decision on Hinkley Point C shows, what matters for investors is long-term certainty on returns, not short-term gains based on overcharging. That is why we have supported the Energy Bill and given our backing to the framework of contracts for difference and the capacity market. And we will put right this Government’s failure to set a decarbonisation target, in order to give low-carbon investors the certainty they need to invest throughout this decade and the next.
Charles Hendry: Can the right hon. Lady name a single international investor who says that they are more likely to invest the billions of pounds we need in our energy infrastructure as a result of the policies that she is following? I know many who say they are less likely to invest, but can she name one who is more likely to?
Caroline Flint: What I hear from investors such as Siemens is their concern that the fact that the Government have not signed up to a decarbonisation target has affected their confidence in investing in our country. It is incredibly sad that the investment in renewable energy has halved in the past three to four years that this Government have been in charge.
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The Secretary of State for Energy and Climate Change (Mr Edward Davey): Can the right hon. Lady tell the House whether anyone has visited her or her right hon. Friend the Leader of the Opposition as an investor or a utility and said that because of the Government’s policies they are less likely to invest? Has anyone said that to her?
Caroline Flint: For the past month we have seen the Secretary of State and members of the Government standing up for the big six—[Hon. Members:“The big seven.”] —the big seven, rather than standing up for the consumers and businesses of this country, which are being ripped off. If we want a secure future in which investment can come forward, we need a little less bickering on the Government Benches about green levies and less fighting against what consumers want.
Andrew Gwynne (Denton and Reddish) (Lab): My right hon. Friend is right to debunk the myth about investment. Is she aware that under this Government we have dropped to seventh in the world in investment in clean energy technology?
Caroline Flint: Absolutely. Investment has halved from £7 billion to just over £3 billion. It is a shame that the consensus that we created in government has not been held together because of the fractious relationships on the Government Benches.
Caroline Flint: I will make some progress before I give way again.
What the Secretary of State has to understand is that markets work only with consent. We know that there are some on the Government Benches who want to turn concern about rising energy bills into opposition against renewable energy. Unless we reform this market and restore trust, those same people will continue to undermine public support for the investment we need.
Caroline Lucas (Brighton, Pavilion) (Green): I support the Opposition motion, as far as it goes, but does the right hon. Lady accept that without serious investment in energy efficiency, there will be no permanent end to fuel poverty? If so, can she explain why there is no mention of energy efficiency in her motion?
Caroline Flint: The hon. Lady is right. Energy efficiency is important, and I am sure that, like me, she is saddened by the attacks on those parts of the Bill that support energy efficiency measures for the most vulnerable and poor households in our country. It is interesting to see how the big six—[Hon. Members: “Seven.”]—the big seven have gone to Government saying, “Relieve us of this burden,” but they take out full-page adverts in national papers talking about how they have helped millions of people with their energy efficiency. They cannot have their cake and eat it. Labour will produce a Green Paper in 2014 with more detailed proposals on energy efficiency to make sure that we deal with both parts of the problem—market reform, prices and investment in renewable and clean energy, as well as how we help people keep bills down through energy efficiency.
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Toby Perkins (Chesterfield) (Lab): If there was any doubt about the extent to which the Government have got it wrong, the fact that they think an energy policy needs the approval of the big six before being credible tells us everything we need to know. Will my right hon. Friend confirm which of the energy companies are making the biggest profits, and are they therefore the biggest investors in future infrastructure?
Caroline Flint: Centrica, which owns British Gas, has passed on the largest share of profits to its shareholders but made the least amount of investment, but all the companies are making good profits.
What we have not seen is a market that encourages competition to the extent that the energy companies strive to compete with each other on price and to win the support of their customers. That is also what the motion is about, because the fourth myth is that our proposals will somehow undermine competition, but our market reform proposals would increase competition. They would level the playing field and enable independent generators and small suppliers to compete more effectively. Of course, no energy company, big or small, wants us to do something that reduces its profits, but suppliers such as the Co-op recognise that in order to restore trust the people need to see a clean break with the past. Smaller suppliers such as Ecotricity and Ovo, which might not necessarily like our price freeze, nevertheless say that it does not threaten their viability.
The fifth myth is that the problems we see in our energy market today can somehow all be laid at the door of the previous Administration, a Labour Administration who—the House might recall—introduced winter fuel payments, which the current Secretary of State described at the time as a gimmick, insulated over 2 million homes through Warm Front and lifted over 1.5 million people out of fuel poverty. Before Labour came to power, consumers could not even switch electricity supplier. As he knows, the restriction on suppliers also being generators was removed in 1993, under the previous Conservative Government, which led to the vertical integration we have seen over the past two decades. If the Secretary of State wants to compare records, I am happy to have that debate, but I think that the public would be better served if we all engaged in a proper debate on how to reform the market for the future.
The Secretary of State might not agree with our proposals, and that is his choice. He will have to account to the 47,550 bill payers in his constituency if he opposes our price freeze in the Lobby this evening. I believe that the public deserve a proper debate. The motion presents the House with clear proposals to restore people’s faith in the energy market and get them a fairer deal.
Steve Brine (Winchester) (Con): The right hon. Lady is being generous in giving way. She mentioned smaller suppliers. She will be aware of Utilita, one of the good small energy companies, which is based in my constituency. I wonder whether she is aware of the comments of its managing director, Bill Bullen, who wrote in The Times shortly after the Leader of the Opposition’s conference speech that with any price freeze
“the impact on smaller energy suppliers will be much harder felt and the level of competition in the market will drop.”
Is that now an Opposition policy intention?
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Caroline Flint: Small suppliers have told us on the record that the most important thing for their future viability and competition is openness, transparency and access, and that is what our proposals seek to do.
Let me deal with each of our proposals in turn. The first is to freeze gas and electricity prices for 20 months. We would do that—the Government could do this now—by legislating to give the Secretary of State the power to modify suppliers’ licences to stop them raising their prices. Over 20 months it would save the average household £120, the average small business £5,500 and the average medium-sized firm nearly £33,000.
Neil Carmichael (Stroud) (Con) rose—
Caroline Flint: I am not going to give way.
The reason that is needed is simple: the public have been overcharged. Figures we published yesterday revealed a large and growing gap between the costs that energy companies have paid on the wholesale market and the prices they have charged their customers. They confirm what the chief executive of Ovo said the week before last when he noted that wholesale prices had been broadly flat over the last two years and that companies could be facing higher wholesale costs only if they had bought energy from themselves and above the market price.
Those figures, which have been audited by the House of Commons Library, also confirm that the mark-up cannot be explained by any of the other excuses we keep hearing from the companies when they raise prices, be they network charges or policy costs, because more than half the increase in bills has gone straight to the energy companies, either in the form of higher profits or to pay for inefficiencies in their businesses.
Andrew Gwynne: My right hon. Friend will also be aware of the information Ofgem published this week showing that wholesale prices have increased by just 1.7%, while the average bill has increased by more than 9%. Is not that why Labour is absolutely right to call for a price freeze?
Caroline Flint: My hon. Friend is absolutely right. There is a growing chorus of voices saying that something is wrong in the market and in what we are being told about rising costs leading companies to increase bills. It just does not add up. Research by the Institute for Public Policy Research has shown that efficiency savings alone could knock £70 off the average bill. To correct the overcharging that has happened in the past and give consumers some badly needed respite for the future, we propose to freeze prices for 20 months.
Ian Lucas (Wrexham) (Lab): Is not there a good precedent for acting when there is a defect in the market? Did not the Conservative Government in 1981 impose a windfall tax on the banks when the market did not work and the banks themselves made a windfall?
Caroline Flint:
My hon. Friend is right. I think that the former Prime Minister, Margaret Thatcher, also imposed a windfall tax on oil and gas. The truth is that when the market is not working it is important for Governments to step in, because failing markets do not provide competition or the security that people want
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from the energy sector. We all agree that these things, whether energy or water, are essential to life and that we all need them. In that situation, people expect Governments to step in and ensure that the market is fit for purpose.
Nic Dakin (Scunthorpe) (Lab): Is not it interesting that the previous Conservative who won a general election, Sir John Major, recognises the need to do something, which is why he has urged a windfall tax on this occasion?
Caroline Flint: In his wide-ranging speech, the former Prime Minister expressed his concern about Governments being out of touch with the public, whether on energy or the cost of living. He suggested a windfall tax, but we want something that goes straight to consumers, which is why we think the price freeze is the right way ahead.
Caroline Flint: I will make some progress, because I am conscious of the time.
Vital though the price freeze is, it is not the only part of the package before the House today. There is widespread agreement that Britain’s energy market is neither as competitive nor as transparent as it should be. There are two connected reasons for that. The first is the vertically integrated structure of the big six energy companies. The principle underpinning privatisation was that supply companies would compete with each other to drive down generation costs and keep prices efficient, but today all the big six energy companies both generate and retail power. Collectively they supply over 98% of the retail market and account for 70% of electricity generation. The problem is that if suppliers are also generators, what incentive is there to keep wholesale costs down if the effect is to reduce the profits of the company as a whole? While energy companies often claim that their profit margins are only 5%, they omit to mention that their profits on generating electricity are, on average, closer to 20%.
The second connected problem is that if the big six can supply most of their customer base from their own power stations; there is little incentive to trade on the open market. It is not possible to determine what physical volumes of gas and electricity are traded within vertically integrated companies as that information is never disclosed, and the prices they charge themselves are never published, but according to the London Energy Brokers Association just 6% of energy is traded on the open market. That makes it difficult for independent generators to secure long-term deals to sell their output, which in turn inhibits future investment. At the same time, independent suppliers are prevented from expanding and new suppliers are deterred from entering the market because they find it difficult to access forward contracts that provide the volume and shape to meet their customers’ needs.
That is why the motion proposes two fundamental changes to the way in which the market works at the moment. First, it would force the big six energy companies to ring-fence their generation businesses from their supply businesses. This would counter the natural conflict of interest within vertically integrated companies and ensure that the interests of supply businesses are better aligned with those of their customers in enabling them to seek out the best possible prices. It would also prevent self-supply, which, in turn, should increase the
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volume of energy being traded openly and create a more competitive and transparent market. If the Secretary of State disagrees, will he explain how the public interest is served by allowing energy companies to generate energy and supply it to themselves at a price that is never disclosed, and in a way that makes it almost impossible for other players to get a foothold in the market? How does that help consumers, how does it help competition, and how does it increase transparency? If he does not disagree, why will he not back our proposal, or what is his alternative?
Mr Davey: I am listening very closely to the right hon. Lady, because she is, I think, putting before the House a new proposal on ring-fencing. For the sake of clarity, is that about splitting up the big six companies into new companies—a total break-up—or an accounting separation and self-supply restriction? Which is it? We need to know.
Caroline Flint: I have to say to the Secretary of State that I am very disappointed with that intervention. [Interruption.]
Mr Speaker: Order. Let the right hon. Lady be heard.
Caroline Flint: Beyond the customary theatrics that sometimes dominate debate in this House, for which we should all admit our responsibility from time to time, I would say that if one looks back over Hansard it is clear that for the past two years, whether at DECC questions, in Opposition day debates or in urgent questions, I have been putting forward measures to reform this market, including a break-up of the way in which the companies run their generation and retail sides. We have said in this House—I will obviously send this information to the Secretary of State—that we need to create, as we did with the networks, a separation in relation to the way in which the companies run things. That does not necessarily mean having two companies, but it does mean having two different legal entities. The Secretary of State is, in effect, saying, “Oh, it’s all right—it’s fine.” We have made this proposal time and again, and it has been reported in the press time and again. It is unfortunate that he lets himself down with that sort of intervention.
Albert Owen: The Secretary of State should read the transcript of last week’s Energy and Climate Change Committee meeting with the big six, at which the chief executive officer of E.ON, the only one who bothered to turn up, said that he had no problem with separating retail from generation.
Caroline Flint: We will be publishing a green paper that will expand further on our energy market reforms. Of course we welcome a discussion with the big six and others about how we take this forward, but we are very clear that we have to stop the cosy relationship between the generation and retail sides. It cannot be allowed to go on in the way it has.
Seema Malhotra (Feltham and Heston) (Lab/Co-op): Does my right hon. Friend agree that it is important to restate that this whole debate is about consumers? This is about the British public—ordinary families and businesses who need the best deal—and not about having a petty debate about whether a company is one legal entity or two legal entities.
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Caroline Flint: It is about recognising the problem and trying to find a solution. That is exactly what Labour has been doing and talking about, as is on the record in this House, for the past two years. The Government are not listening to consumers or to those who want to get access to the market because they are standing up for the big six.
Caroline Flint: I will give way to the Secretary of State again, although he will obviously have a right of reply.
Mr Davey: The right hon. Lady is telling us about these policies that she has. In forming them, did she read Ofgem’s final proposals on wholesale power market liquidity, which were published in June?
Caroline Flint: We have looked at, and debated in this House, the way in which Ofgem has been working in the past few years. We looked at the way in which it was working under the Labour Government when it did not use the powers we gave it. It is not fit for purpose and it needs a massive change. The sadness about Ofgem is that when it has produced reports on, for example, whether bills are going up when wholesale prices are not, it has done very little about the situation.
Caroline Flint: I will take one more intervention and then make some progress.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): I thank my right hon. Friend for kindly giving way; she is being very generous with her time. I imagine that she, like me, has gone to visit energy companies and has seen for herself that one, not far away from this building, has its generation department physically next door to all its displays and where it buys energy. Does she believe that that is the issue we now need to address, as stated in the motion?
Caroline Flint: My hon. Friend is right; she is talking about the trading floor in Victoria. It is interesting how closely the different parts of these organisations work together. In fact, some companies have welcomed the move to separate the generation and supply side, but we are not interested in a piecemeal approach with six different versions of what it should involve. That is why we need law that is consistent, transparent, and does the job.
At the moment, poor liquidity is recognised as the single biggest obstacle to improving competition in the energy market. If all electricity had to be traded via an open exchange, or a pool, that would create a level playing field that would enable any market participant to compete on price in order to retail power to the public. This would be different from the previous pool in two important respects. First, under the previous pool there were only two generators, who were therefore able to exert considerable influence on the market price and, indeed, to ratchet it up over time. Today, there are many more generators. Secondly, when the old pool was originally established in 1990, only generators were able to place bids, which again gave them excessive market
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power. Today, there is no reason why a two-way pool, with generators and suppliers both placing bids, could not be introduced. Indeed, if the Government look around the world, at the Nord pool in Scandinavia or the power exchanges in the United States, they will see plenty of examples of markets with more exchange-based trading of this kind that are more liquid, more transparent, and encourage greater competition.
Of course, we should do this in the most cost-effective way. Given the volumes that are already being traded on the day-ahead exchange, we would be open to creating a pool by requiring all generators and suppliers to trade 100% of their output on the N2EX exchange. If the Secretary of State does not agree, will he explain why he thinks that allowing these firms to do most of their trading in secret, behind closed doors, serves the public interest?
Mr Mike Weir (Angus) (SNP): I am listening very closely to the right hon. Lady, and I even agree with some of it, but I am genuinely confused about the idea of a pool and how it fits in with the Energy Bill’s contracts for difference, which guarantees a strike price for generators. I fail to see how putting all the energy into a pool will create competition, as the price has already been set, and if it goes above that, the company will have to pay back the difference, while if it goes below it, the taxpayer will have to pay.
Caroline Flint: That might be the price for the generator but it is not the retail price, and that is what is important in terms of competition and keeping pressure on. I am surprised that Scottish National party Members decided not to support the price freeze. They are on the side of the Prime Minister and the big six while my colleague Johann Lamont—Scotland’s Labour leader—and Scotland’s millions of energy consumers support the price freeze.
Mr Khalid Mahmood (Birmingham, Perry Barr) (Lab): Does my right hon. Friend agree that while Government Members bicker about the structure of the energy companies, my elderly and infirm constituents will be perhaps be dying this winter because of the energy price hikes under that lot over there?
Caroline Flint: What is happening to people now is very concerning. All the consumer organisations and those from the fuel poverty lobby are extremely worried about the choices that people are making between heating and eating. The idea of putting on another jumper is an insult to those people, many of whom are older and more vulnerable residents who are not online and are in the group that does not switch. Switching is not going to happen as a result of entreaties from the Government, and we need more action on that.
Caroline Flint: I will make some progress, because I want to get on to one of our other policies that could have an effect this winter.
A competitive, transparent energy market is our aim, but markets must have rules. The question is what those rules allow and what they encourage. Do they mend
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broken markets or do they allow some firms to take advantage at the expense of everybody else? The motion proposes two important changes to the rules.
First, we all think that there should be simpler and fewer tariffs, but we must also ensure that the market protects those who are less able to switch. The over-75s are the most likely to live in homes with poor energy efficiency and the most vulnerable to cold weather, but they are the least likely to switch supplier and the least able to access the cheapest deals, which are often online. As a result, they often pay more than they need to. The motion proposes that we make the energy companies put all over-75s on the cheapest tariff. The energy companies have told me that they can do that.
Secondly, the constant attacks on clean energy are short-sighted because investing in clean, home-grown energy and energy efficiency will improve our energy security, make us less reliant on imports and leave us less vulnerable to price shocks in world markets.
Duncan Hames: Will the right hon. Lady give way?
Caroline Flint: No, I will not give way.
We currently have the problem that when wholesale costs increase, bills go up like a rocket, but when wholesale costs fall, bills fall like a feather, if at all. In a properly competitive market, cost reductions would be passed on as quickly and as fully as cost increases. I urge the House to support the proposal in the motion to establish a new regulator with the power to force companies to cut prices when wholesale costs fall. I know that the president of the Liberal Democrats supports that proposal, because he said so to the audience and viewers of “Question Time” when I sat next to him on the panel a few weeks ago. I hope that the Secretary of State will confirm his party’s support for the proposal in his speech.
That is what real action looks like. That is what a Government who put the interests of ordinary people ahead of the energy companies would look like. What a contrast it is with this Government: a Government who pretend to put everyone on the cheapest tariff, even though 90% of people will see no benefit, but who refuse to put all over-75s on the lowest deal; a Government whose only answer is to tell people to shop around, even though switching levels have fallen to an all-time low, as people have lost faith with the market; and a Government who want to roll back the very measures that will insure us against rising prices in the future because they are too weak to stand up to the energy companies today.
Let us remember that 60% of the levies that the Government are rushing to blame were introduced by them. It was the Chancellor of the Exchequer who introduced the carbon floor price, which leaves British consumers and industry paying over and above what is paid by our European neighbours for energy. They talk about value for money, but it is they who designed the energy company obligation—a scheme that requires 53 pieces of information to be submitted for one measure to be installed. When they talk about moving policy costs from people’s bills to people’s taxes, let us remember that it was this Government who abolished Warm Front and now have the unenviable record of being the first Administration since the 1970s not to have a publicly funded energy efficiency scheme.
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Today’s motion might refer only to energy prices, but it is about much more than that. It is about who our country is run for. Is it a country that works for hard-working people or are we settling for a country where only a few at the top do well and everyone else struggles? The Opposition know that the first and last test of economic policy is whether living standards are rising for ordinary people. Today, the House faces a choice: a choice between whether it is people’s bills that will be frozen this winter or their homes; a choice between whether we reform broken markets or defend them; a choice between whether we stand up for the 60 million people who live in this country or the big six energy companies, for the 2.4 million businesses or the big six energy companies. The reality is that if we do not fix this broken market, nobody else is going to. Today, in this House, we have it within our power to provide real help now to millions of people who are facing the cost of living crisis and to reform the energy market to deliver fairer prices in the future. I commend the motion to the House.
Mr Speaker: Before I call the Secretary of State to reply for the Government, I remind the House that in consequence of the large number of Members who wish to speak, I have imposed an eight-minute limit on Back-Bench contributions.
2.24 pm
The Secretary of State for Energy and Climate Change (Mr Edward Davey): I have notified you, Mr Speaker, and the right hon. Member for Don Valley (Caroline Flint) that I will not be here for the final part of the debate. I apologise for that. The Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), will be summing up.
I want to make it clear at the start of my speech that the Government worry about rising electricity and gas bills all the time. As part of our economic strategy, we are working to bring down prices, get people into jobs and get the economy going. I will touch on that general point shortly.
I welcome this debate and hope that there will be many more debates like it, because we want to debate which party and which side of the House has the best policies to help people and to improve Britain’s energy market.
I regret the fact that we have lost the consensus on energy and climate change policy that we had until very recently, because consensus is vital. We need tens of billions of pounds of investment in new energy generation and networks. If we are to persuade investors, not just in the UK but around the world, to invest in the UK, they need to see that there is consensus on these issues. I hope that we will get back to that. I thought that we had got back to it when there were just eight votes against the Third Reading of the Energy Bill. All the major parties, including the nationalist parties, voted in favour of the Bill. All the Labour Front Benchers voted in favour of the Bill. I welcomed that at the time. I just wish that the consensus had not broken down so quickly.
Caroline Flint:
Will the Secretary of State acknowledge that in supporting the Energy Bill, we made it quite clear that it did not contain measures to tackle the problems in the broken market or the concerns of
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consumers? We made it clear that we reserved the right to continue to campaign for the measures that we have outlined today, which would fix the market and put consumers at the top of our concerns.
Mr Davey: We rejected the right hon. Lady’s arguments at that time and we reject them again today, as I shall set out. However, I am serious when I say that it is critical that we show investors around the world that there is consensus on these issues. I will try to rebuild that consensus in this debate and time and again afterwards, because I believe that that is in the national interest.
Charles Hendry: I completely agree with my right hon. Friend on the need for consensus. Does he agree that one of the outcomes of the consensus that there had been until recently was very low political risk when investing in the energy infrastructure of this country? As a direct result of what the Labour party has done, there is now political risk in this country, which pushes up the cost of borrowing and pushes up bills.
Mr Davey: My hon. Friend is right. What the Labour party has done has increased the cost of capital. Who loses as a result? The consumer. By recklessly proposing this irresponsible policy, the Labour party has shown that it is against the consumer.
David Mowat (Warrington South) (Con): The Secretary of State has made a valid point about the consensus on the Energy Bill. Is he aware that the Labour party amended the Energy Bill yesterday in a way that will ensure that coal stations are switched off more quickly, at an estimated average cost per consumer of £50? The Labour party then comes to this House and proposes this motion. What does he think about that?
Mr Davey: We are listening to their lordships House. I have to tell my hon. Friend that the argument is a little more complicated than what he has set out.
Consensus is critical, not just across the House, but within the coalition parties. I accept that there have been debates within the coalition, but we have come together and produced a coherent energy policy. I will aim to rebuild the consensus with the right hon. Member for Don Valley because, as I think she knows, that is in the national interest.
Ian Murray (Edinburgh South) (Lab): I am grateful to the right hon. Gentleman for giving way so early in his contribution. He talks about sending a message of consensus from this House to investors in the energy market in this country, but today he has the opportunity to send a message of consensus from this House to people who are struggling to heat their homes this winter. Will he take that opportunity?
Mr Davey:
I certainly will because I believe we have the best policies. There are two routes to rebuilding that crucial consensus. The first, which I would love to take, is to invite the right hon. Lady and the leader of the Labour party to discuss the issues with me so that we can try to reach out to Labour Members, explain why we think their policies are extremely damaging, and try to get the energy policy back on to that important political consensus. I fear, however, that that will not be possible. The noises we have heard from the Leader of
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the Opposition and the right hon. Lady suggest that they do not see the error of their ways, despite many people explaining it to them.
Mr Davey: I will give way to the hon. Lady but I then must make some progress.
Caroline Lucas: Will the Secretary of State accept that the green deal is not working, that zero-carbon homes are off the agenda and renewable energy is under attack, and that a late amendment to the Energy Bill in the other place shows that the Government are trying to scrap their legal duty to end fuel poverty altogether? Is he really surprised that the public do not believe his Government’s crocodile tears over rising energy bills when the Government’s own policies are making that worse?
Mr Davey: I completely reject everything the hon. Lady said. First, £31 billion has been invested in clean energy since 2010, and according to Ernst and Young we are now the fourth best place to invest in renewable energy—that is up, despite what the right hon. Member for Don Valley often says. More than 85,000 assessments have been made under the green deal, and more than 81% of those who have had green deal assessments have either had work done, are getting it done, or are considering having it done. That is much more of a success. The hon. Member for Brighton, Pavilion (Caroline Lucas) does her case no good by talking down the green deal.
Mr Davey: I will not give way as I want to make some progress. I have made it clear that I would like the Opposition to come and talk to us so that we can rebuild that national consensus, but I fear that that is not going to happen. Instead, we will have to expose Labour’s so-called policies for the fraud they are. I am going to do that in full today and, I hope, in future debates. I hope that when Labour Members hear the arguments against the policies of those on their Front Bench, they will reflect and realise how irresponsible and ineffective those policies are.
Mr Davey: I want to make some progress. I also want to talk about the context for this debate, which is the cost of living. When considering the cost of living, one tends to think about inflation and how the general price basket is affecting people, particularly the poorest in our land. We should be focused on getting inflation down robustly.
When we came to government, inflation was 3.4% and rising. We had to bring it down, and latest figures show that this month inflation is lower at 2.7%, and forecast to stay low. That is an achievement. In the context of the cost of living we have seen employment and growth go up, and unemployment, the deficit and inflation go down. That economic record will help people up and down the country because we are seeing the benefits of that. To give an example to the Labour party, in the past year alone, disposable incomes have grown.
Luciana Berger: Will the right hon. Gentleman give way?
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Mr Davey: I will not give way. Disposal incomes are now higher than in any year from 1997 to 2010. That is because of our income tax cuts for people on low and middle incomes, because we have taken action on fuel duty and frozen council tax—[Interruption.]
Madam Deputy Speaker (Dawn Primarolo): Order. The Secretary of State has indicated that he is not going to give way, which means that Members should not shout across the Chamber. It is becoming impossible to hear what the Secretary of State is saying.
Mr Davey: I was making the case that we have taken action to help people with the cost of living. Look at what has happened to gas and electricity prices. Under Labour gas bills doubled. In the previous Parliament, the average annual rise in gas prices was 12% per annum; in this Parliament it has been 10% per annum—far too high, but less than under the Labour Government. We could say the same about electricity prices. In the previous Parliament the average annual rise in electricity prices was 8% per annum; it is now 7% per annum—too high, but a better record than under Labour. According to recent Office for National Statistics figures for household spending on electricity and gas bills there was a 9% per annum rise in the previous Parliament; that is down to 6% in this Parliament. We want to do better, but we will not follow the record of the Labour party, which was dismal on prices and bills.
Steve Baker (Wycombe) (Con): Has the Secretary of State made an assessment of how much of the recent price rises are the result of the Labour party announcing its policies and causing people to look forward?
Mr Davey: I have not made that analysis, but I know that others have and are concerned that Labour’s policy will put up energy prices in many different ways.
I promised to analyse Labour’s policy and contrast it with the Government’s, and I will do that now. Let us start with Labour’s price freeze. The right hon. Member for Don Valley tried to say that the Government have put myths about. She tried to debunk those myths, but failed completely. We have made it clear that we believe that Labour’s policy is a complete con because prices could go up after the price freeze. The right hon. Lady’s answer to that is the amazing piece of legislation she is going to introduce, which will stop that. It will not, however, because the proposed legislation she described has no price regulation in it. If she is going to say that she will introduce full-scale price regulation, let her get to her feet now. If she is not, she simply cannot say that prices will not go up after her price freeze.
Harriett Baldwin (West Worcestershire) (Con): On that point, did not the Leader of the Opposition admit the day after the announcement of his policy that he could not guarantee that prices could be frozen if world energy prices rise?
Mr Davey: That is absolutely spot on. When he responded to that point, my right hon. Friend the Prime Minister made it clear that the Leader of the Opposition had sold the pass on their policy. If wholesale prices go up during the price freeze, they will not just hit consumers—we are worried that consumers will be fleeced by Labour’s policy—but they will also hit the competition and the small suppliers who are producing deals that people are already benefiting from.
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Caroline Flint: Does the Secretary of State believe that the big six companies are overcharging their customers?
Mr Davey: I believe that competition is the way to sort that out, and I thought the right hon. Lady was saying that in her speech. I thought the point of her speech was to say that the markets are not working, and that in order to tackle overcharging she wants the markets to work. Is she saying that that is not her position and that she will bring in profit caps and stop companies overcharging, or is it competition? Competition or regulation—let the right hon. Lady come to the Dispatch Box and tell us. She cannot.
Duncan Hames: Will my right hon. Friend give way?
Mr Davey: I will make some progress and then I will let my hon. Friend in.
Labour’s price freeze is a con. It damages competition and, as we have heard, it damages investment. That contrasts with what the Government are offering, which is direct help to the poorest in society, radical energy efficiency programmes, and a focus on competition that the Labour party never had. That direct help, the warm home discount—£135 off the bills of 2 million of the poorest people—was never offered by the Labour party. We are taking forward the winter fuel payment and we have tripled the cold weather payment. That is direct help to the poorest people, and we are proud of that.
Rehman Chishti (Gillingham and Rainham) (Con): Will the Secretary of State give way?
Mr Davey: I will make some progress and then I will give way.
On energy efficiency, the energy company obligation—which the hon. Member for Brighton, Pavilion said is not working—has already helped 216,000 households this year alone, and we expect many more people to benefit from that by the end of the year. I have explained how well the green deal is going with 85,000 assessments already made.
When the Government talk about switching, the Labour party pooh-pooh it, saying, “That’s not the way to do it. Switching isn’t so important.” However, let us look at the facts on switching. uSwitch shows that, between 1 November 2012 and 31 April 2013, people who switched any supplier for both gas and electricity saved an average of £294, which is far more than they would save from the energy freeze offered by Labour.
Nigel Adams (Selby and Ainsty) (Con): Does the Secretary of State agree with my constituent, Nick Jones, who wrote to me on Friday—I have never met or spoken to him—about the Prime Minister’s advice on switching? He saved £611 a year on his gas and electricity costs. He was prompted to look at his phone costs and saved a further £230. He said:
“I can only say a big thank you to the Prime Minister for his advice and giving me the confidence to take this step and make a saving of £841 per year to my family’s budget.”
Is not switching a better approach than trying to fix the market, which is the mad-cap scheme proposed by the Opposition?
Mr Davey:
My hon. Friend is absolutely spot on. As the uSwitch figures show, there are big savings to be made. Interestingly, the right hon. Member for Don
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Valley says that switching is not enough and talks down switching and the opportunity of millions of people in our country to make big savings. She should be ashamed.
We are pushing switching very, very hard. The evidence is that switching is growing fast, as described by my hon. Friend the Member for Selby and Ainsty (Nigel Adams). Let me give the House one further piece of evidence. First Utility has increased its customer numbers by 57% from the beginning of October. People are switching in larger numbers. They are moving away from Labour’s big six to the coalition’s competition.
Caroline Flint: The amounts that people have saved in the Secretary of State’s examples suggest that they were being overcharged in the first place. Does he agree that getting the best tariff and encouraging switching does not mean that people will get a good deal? The market is rigged.
Mr Davey: I am coming to the rigged market, but the market was rigged by the Labour Government. It is Labour’s big six and Labour’s market. We are changing and reforming it while Labour does nothing.
One thing that worries me about switching is that we need to ensure that it operates for the poorest in our country. The right hon. Lady and another hon. Member made the point that, sometimes, the fuel poor and many elderly people do not get the benefits of the market and are not helped by competition switching—the figures bear that out. We cannot just rely on switching; we need to ensure that it works for those people. That is why the Government have put so much money behind the Cheaper Energy Together scheme and collective switching, and why we are putting money behind the big energy saving network. We want to ensure that Age UK and the Citizens Advice Bureau go out into communities to offer advice to those people. That is how to ensure that the poorest in the land can get the best deals in our land.
Mr Khalid Mahmood: Is the Secretary of State aware that the poorest people cannot switch if they are in debt to the company they are with?
Mr Davey: Yes, I am aware of that. That is why we have raised the amount. Under Labour, it was about £100 or £150. With Ofgem, we have raised it to £500 to enable people to switch. I am afraid the hon. Gentleman is behind the times.
Duncan Hames: For those of us who want more competition, is not the problem that the price freeze and the forward purchase of energy, which the right hon. Member for Don Valley (Caroline Flint) has described, is much more difficult for the smaller suppliers than for the bigger ones? The price freeze will do nothing to support a competitive market when it comes to an end.
Mr Davey: My hon. Friend is absolutely right. We have seen a big growth in independent suppliers and competition, which did not happen under Labour. Labour Members now want to kill it. Having created the big six, they want to help them. We will not allow that to happen.
Mr Davey: I will give way to my hon. Friend the Member for Ipswich (Ben Gummer) and then make progress. I apologise to other colleagues.
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Ben Gummer (Ipswich) (Con): The Opposition missed something else in the debate. In my constituency, more than 400 jobs—[Interruption.] Will the right hon. Member for Don Valley (Caroline Flint) listen to my point? [Hon. Members: “Ooh!”] I find it surprising that we have to listen to childish noises from Opposition Members when we are debating such an important matter. More than 400 people in my constituency have jobs in independent energy companies that are challenging the big six. One of them challenges on business services, and the other provides to consumers. Those 400 jobs will go the minute the market is controlled by the Labour party. Do Labour Members not care about those jobs?
Mr Davey: My hon. Friend makes an excellent point. Our policies will work. We know that because they are working. We are getting the supplies and switching.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP) rose—
Mr Davey: I am going to make some progress. I have given way a lot and will not give way for a while yet.
On Labour’s pool and ring-fencing proposals, the Government contrast the policies of the right hon. Lady with our policies for greater transparency in the financial accounts of the big six and for Ofgem’s wholesale market reform “Secure and Promote”. Interestingly, when I asked her whether she had read that document, she said that she had not—[Interruption.] To be fair, let me correct the record: she did not answer the question. If she has read it, she can come to the Dispatch Box and tell us. She is not coming to the Dispatch Box, so we know that she has not read the document. Let me help the right hon. Lady. It would have been beneficial for the Opposition to have read the documents. They claim that Ofgem is appalling and is not doing any work on competition, but the document shows that it has done so.
Interestingly, the reason for the work is given at the beginning of the document. Ofgem produced the document because it wants to make more competitive markets to help the consumer. The right hon. Lady has not read the document. That is not very good. It is clear from her policies that she has not done so.
Rehman Chishti: Will the Secretary of State give way?
Mr Davey: No, I am not giving way.
The right hon. Lady talked about the pool and the exchange on which the electricity will be traded, but she has not noticed that the day-ahead market in Great Britain has boomed under this Government. In 2011, just 5% of final Great Britain demand for power was traded on the day-ahead exchange. In the past six months, more than 50% was traded. We have seen a big increase, but she did not even bother to mention it.
Dr Alan Whitehead (Southampton, Test) (Lab): Will the Secretary of State give way?
Mr Davey: No, I am not giving way.
Ofgem has looked at whether or not it should mandate 100%. It will ensure that there are new reporting requirements so it can check what is happening. It will say that, if the number does not improve and stays as it
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is, it will intervene. It is not intervening now—the right hon. Lady will not know this because she has not read the document—because the independent generators have not asked for it to do so. The independent generators say that the day-ahead market is not the problem for competition and that the day-ahead market is not the market in which there is room to drive down prices. They say that the problem is the forward markets—the month-ahead, six months-ahead, year-ahead and the two years-ahead markets.
Andrew Gwynne: Will the Secretary of State give way?
Mr Davey: No, I will not give way. I want to explain to the House why the document is so important, and why Ofgem’s policies, which the Government support—we have put reserve powers in the Energy Bill to push them through—are so important for competition and pushing prices down for consumers.
Independent generators need to know who will buy their electricity. The right hon. Lady is right that the big six can sell it to themselves, but independent generators cannot do so—they must sell it to someone else. That is a big risk for the independent generators, and they need to be able to cover it. Primarily, they do so at the moment through purchase power agreements or through bilateral trades, which are used mainly when selling to businesses. However, they say that they cannot guarantee those, so they must spend more, and that their capital costs increase because of those risks.
Independent generators face another risk. The question is not only whether they can sell energy, but whether they can buy it. If they have a contractual power purchase agreement and their generation capacity is not working for a particular month and they are unable to supply, they fail their contract. To be able to enter more contracts and expand their businesses, they therefore need to know that they can buy energy in the wholesale markets if their generating capacity is not working.
It is therefore essential that we have a liquid market for four months, six months and 24 months ahead. Guess what? The previous Government did nothing to enable that competition in generating markets. Interestingly, the policies the Opposition have proposed today will also do nothing about the real problem. The description that the right hon. Lady gave of her policies proves that point. If she had read the document, she would have seen on page 8 the analysis by Ofgem—working on all the contributions from the independent suppliers and all the people in the industry—is that the problem she has identified is no longer a problem. It has marked that problem “green”. The problems that we have identified, which we and Ofgem are fixing, are all marked “red”. She really needs to do her homework. There is no point the official Opposition coming to this House with ill-thought-through policies that will not work. Our policies will work for the consumer, push competition into the market and get prices down.
Neil Carmichael: Does my right hon. Friend agree that it is slightly surprising that the Opposition know so little about the big six, when one of their number—a shadow Minister in the other place—was actually director of government affairs for SSE? How does that stack up?
Mr Davey: It is true that the Labour party created the big six: it is Labour’s big six.
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Andrew Gwynne: In the Secretary of State’s wibbly-wobbly world, it sounds as though everything in the energy market is working perfectly well. Does he therefore agree with the chief executive of Centrica that a daily profit of £7.4 million is a modest return?
Mr Davey: Let me put it on the record that it is important that our energy companies make profits. I think we need reasonable profits for people to invest. I also know why it is important that companies make profits: the right hon. Lady agreed with me when I asked her, last time we debated this. I asked her whether energy companies should make profits and she agreed.
Mr Davey: Let me finish answering the hon. Member for Denton and Reddish (Andrew Gwynne). I am not satisfied with the energy markets that we inherited from the last Government. We want to make sure that competition is working. That is why we have already had the retail market review with Ofgem, which is now improving competition in the retail markets. It is why we have Ofgem’s latest proposals in “Secure and Promote”, which the Opposition have not read, to improve competition in the wholesale market. I am not satisfied with the markets at the moment, but our policies—with Ofgem’s help—are coming into place now.
We have had to run to make sure we turn round the markets we inherited, but I can tell the hon. Gentleman how quickly our policies are now coming in. The retail market review comes into effect, in terms of people’s bills, next month. Ofgem is still consulting with the industry, but expects to give a final response to its consultation this year. Then its proposals for a market maker, which will ensure transparency so there are none of the secret deals that the right hon. Lady keeps on about, will start happening in the first half of next year. We are producing the competition proposals and they are coming into force. People have not seen the benefits of them yet—I accept that—because we have been trying to turn round the rigged market that we inherited. We are now turning it round and people will begin to see the benefits over the years ahead.
Dr Whitehead: The Secretary of State has been waving a document around. Can he turn to the page in that document that discusses netting off between companies in the long-term market? Can he turn to the page in that document that discusses the question of creating trades at time of closure by companies? If he cannot do so, will he accept that the document is not quite the panacea for all the transparency issues that he thinks it is? Will he go away and review the things that the document does not say as well as what it does say about the transparency of the market?
Chris Ruane (Vale of Clwyd) (Lab): He knows his stuff!
Mr Davey: I agree that the hon. Member for Southampton, Test (Dr Whitehead) does know his stuff, unlike many of his colleagues.
Chris Ruane: Answer the question!
Mr Davey:
I am going to answer the question. When the hon. Member for Southampton, Test reads this paper, he will know that it is in a series of papers and other papers deal with those issues. The relevant
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paragraph—it does not deal with netting off, but it deals with the impact of netting off—is on page 7. The right hon. Member for Don Valley should like this, because we have some agreement on the need to make sure there is competition in the wholesale markets. It states:
“It could also encourage business models that reduce the need to trade in the wholesale market, such as vertical integration and long-term contracts. Poor liquidity therefore inhibits competition between incumbent players in the market.”
In other words, we need these proposals so that there is more competition in the forward markets so that new entrants can come in and the prices that the incumbents charge are more transparent—something that the right hon. Lady says that she wants to see.
Toby Perkins: I have heard the Secretary of State in this mood before. The last time was when he was defending the pub companies. A few months after he left that job, his party agreed that we were right and that he had been wrong all along. He is a tremendous defender of the vested interest. Can he tell me why any of the thousands of people in Chesterfield who happily signed our petition because they are so concerned about the cost of fuel should have any confidence, listening to him, that because he is doing this job things will be any different in the future? People are struggling, and he just does not have the answers.
Mr Davey: The hon. Gentleman cannot have been listening to the debate. It is clear that it is the Government who are standing up to vested interests, because we are bringing in competition against Labour’s big six. The problem for the Opposition is that they created the big six: we are the ones putting pressure on the big six.
Rehman Chishti: The Secretary of State will have heard the shadow Secretary of State say earlier that Ofgem is not fit for purpose. But when the Leader of the Opposition was Secretary of State for Energy and Climate Change, he said that Ofgem was fit for purpose. Does that not clearly show that the Opposition have no consistency, no vision and no strategy on these matters?
Mr Davey: My hon. Friend has been incredibly helpful because he anticipates what I am about to say about the third part of Labour’s policy package. It would abolish Ofgem, which it created and which the Leader of the Opposition reformed. It will replace it with Ofgem 2—a tough, new regulator. It is such a charade we could hardly make it up. We have been reforming Ofgem. We have given it powers that the right hon. Lady’s party failed to do in government. For example, if an energy company is found to have maltreated a customer the fines will go to the customer, not to the Chancellor of the Exchequer. That is one example of the new powers.
We have a new regime in the Energy Bill, with a strategy, policy and statement to make sure that Ofgem is doing the job that this House and the Government want, and we have now got new leadership at Ofgem. I look at the record—we are now tackling competition issues in the retail market and the wholesale market. It is true that under the last Government Ofgem was not as powerful or active as it should have been: we have reformed that.
We have gone further than that by now proposing to consult on criminal sanctions for manipulation of the energy markets. We are increasing the robustness of the
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regime by having an annual competition test. We have shown that we are not complacent. Although we have taken major measures to improve competition in the markets that we inherited, we want to go further year after year, because we believe in competition even though the Opposition do not.
Caroline Flint: The Secretary of State suggests that the Government have given powers to Ofgem to ensure that any redress goes to customers, but can he explain why recently, when Scottish Power were found guilty of mistreating their customers, of the £8.5 million fine only £1 million was to be shared among the 335,000 customers who were estimated to be victims of the company’s bad practices, while the rest was to be put towards the warm home discount? That does not sound to me like it is going to the customers who were victims of the company’s bad practices.
Mr Davey: I am surprised by that point, because the powers are in the Energy Bill and will take effect when it gets Royal Assent.
We need a big debate on energy and climate change, and I hope that we keep having the debate not just today, and not just in the House, but over the next year and across the country. There are difficult issues in the debate, such as the trilemma of making sure that we decarbonise, keep the lights on and do so in an affordable way. It is not only this country that has to face those challenges: they are being faced across the world and especially in other European countries that face the same rises in gas prices that we are struggling with.
The solutions are not easy. They are often complicated. I have been grateful for the right hon. Lady’s support during the passage of the Energy Bill—it may be qualified support, but it was support—but on this issue we obviously have a different set of policies. We agree that there are problems—not enough competition and people are struggling with bills—and we have to produce a solution for them. What we have heard from the official Opposition is irresponsible, ill-thought-through populist nonsense that will not assist a proper debate. Any analysis of the policies that are being served up soon reveals major flaws. I invite my right hon. and hon. Friends to reject the motion, and I invite the Opposition to think again and to act, for once, in the national interest.
3 pm
Anas Sarwar (Glasgow Central) (Lab): The Secretary of State spoke for just over 35 minutes. Nothing he said will have given any comfort to my constituents, or to anyone suffering as a result of the energy crisis. Perhaps he should reflect on what he has said and come back with something that will mean a lot more to people struggling with their household bills at this difficult time.
Toby Perkins: My hon. Friend will be aware that thousands of people in Chesterfield have signed a petition in favour of the policy we are debating today. After today, rather than send them a long letter, I will send them the Secretary of State’s speech, so they can see exactly what the Liberal Democrats think of the struggles they are facing.
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Anas Sarwar: Absolutely, although I imagine my hon. Friend’s constituents would fall asleep after five minutes rather than read the speech in its entirety.
As winter bites and the nights become colder, many of our constituents are again worrying about the cost of heating their home. Wholesale energy costs have increased by only 1.7% this year, but the average bills that Glaswegian families have had to pay have rocketed by more than 10%. According to Fuel Poverty Evidence Review, more than 800,000 Scottish households—almost 35% of Scots—are fuel-poor, and spend 10% or more of their household income on energy.
What my constituents know, what I know and what the entire country knows, with the apparent exception of both the Prime Minister and the First Minister of Scotland, is that the British energy market is broken. It is dominated by only six companies, which collectively supply 99% of British households and generate more than two thirds of the country’s electricity.
Mr MacNeil: According to figures from the House of Commons Library, last year UK electricity prices increased by 5.7% on average, while the EU average was a fall of 3.5%. In fact, the UK had the highest increase of all the G7 and EU countries, bar Japan. Last year, the UK had the third highest prices in this area. Eight years ago it was little better—the fifth highest in the EU. Why does the hon. Gentleman think that the UK consistently pays the highest energy prices in the developed world?
Anas Sarwar: The hon. Gentleman highlights the need to fix a broken market across the UK. The bizarre thing is that he wants to leave the UK, but stay in the UK energy market. That is against the interests of the people of Scotland. I will come on to the wider policy of the Scottish nationalists in a moment.
Given that we have had price hikes of more than £300 since the last election, and at the same time more than £7 billion of profits have gone to the shareholders of the big energy companies, does that not highlight the case for breaking the monopoly of the big six companies?
Duncan Hames: Will the hon. Gentleman give way?
Anas Sarwar: I am sorry, but I have given way twice already.
Last week, we saw the big six sit before the Select Committee on Energy and Climate Change and claim that prices in the past few years have been driven by wholesale costs, when it has already been demonstrated that that is not the case. That was confirmed by some of the smaller companies, one of which told the Committee:
“I can’t explain any of these price rises… I have been somewhat confused by looking at the explanations for the price rises that we’ve seen in the past three or four weeks.”
There have been billions of pounds’ worth of profit while pensioners in my constituency face the impossible choice of heating or eating this winter. What could be more indicative of a broken market than one that leaves our most vulnerable citizens unprotected at a time of greatest need, solely in the name of higher profits?
The problem is not simply the behaviour of the energy giants. My constituents are literally paying the price of being trapped between an uncaring, out-of-touch Tory-Government pursuing cuts and profit at any cost, and a distracted Scottish Government desperately trying to frame any and every problem as a reason for
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independence—two Governments more interested in electoral dividing lines and narrow ideology than in improving the lives of the Scottish people. They are choosing to stand up for the vested interests of the big six energy companies and boost their profits while Scottish families struggle to pay their bills. It is indeed a sad day when Governments become a cheerleader for the energy companies, instead of putting struggling people first.
Scots are now faced with a crippling combination of rising living costs and frozen wages that have created a cost of living crisis that both Governments are failing to address. Disappointingly, however, Alex Salmond wishes only to talk about the powers he wants rather than getting on and using the powers he has to make a difference. There is now an interesting coalition in the context of the constitutional debate in Scotland. We have a coalition of the Scottish National party, the Tories, the Liberal Democrats and the big six energy companies all standing up for their own interests, not the interests of the people of Scotland. The Prime Minister’s policy was not announced first by him: the first person to announce the Prime Minister’s policy on energy prices was the Deputy First Minister of Scotland, Nicola Sturgeon, at the SNP conference. She said that the SNP wanted to take the cost off the energy bill and instead put it on the tax bill, meaning that people who are working hard will continue to have to pay the price while big energy companies will get away scot-free. Those are the wrong priorities, and they are damaging.
What else have we heard from the nationalists? They want not just to let energy companies off meeting their responsibilities for renewables, but give them a massive tax cut. They want to cut corporation tax, which will mean that after independence they will have more, not less, profits. What is even more confusing is that they say—we have heard it already from the hon. Member for Na h-Eileanan an Iar (Mr MacNeil)—that the UK energy market is broken and that is why we need independence. Their policy, however, is to say, “Let’s break away from the United Kingdom, but let’s share the UK energy market.” That is not in the best interests of Scotland. Scotland makes up 8% of the UK population, yet one third of spending on renewables is spent in Scotland, so the whole of the UK is contributing, through their energy bills, to supporting the renewables industry. Do we honestly think that one third of renewables spending will continue to be spent in Scotland after independence? I do not think so. Independence would break the historic pooling of resources across the UK for the benefit of all.
Mr MacNeil: Is the hon. Gentleman aware of the purchase of renewable energy in the Republic of Ireland?
Anas Sarwar: Absolutely. We have not heard about Ireland for a long time. I am happy to consider the example of Ireland to show why we are better off in the UK. Corporation tax in Ireland is half the UK rate, but unemployment is double that in the UK. That shows us how working in partnership with our friends and neighbours in England, Wales and Northern Ireland benefits bill payers not just in Scotland, but across the UK.
I want to highlight a positive example in my constituency and my city of what a caring administration can do to help people who are struggling at this difficult time. The
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Labour-led council in Glasgow, which, despite facing more than £150 million in budget cuts from the Scottish Government, has again stepped up to protect Glasgow pensioners over the age of 80 by offering a £100 winter fuel payment to those struggling to meet the costs of energy this winter. That is a Labour council using its powers to protect the most vulnerable in our communities. It is not making excuses about why it cannot or will not act, and it is not looking to pass the buck or put the blame on to someone else. It is not pointing fingers, or using other people’s misery as a basis to promote a political agenda or independence. Instead, it is providing a lifeline to thousands and responding to the cost of living crisis affecting our constituents. I am proud that on the Labour Benches we are standing up for British consumers.
Under a Labour Government, we will not just break up the big six energy companies’ monopoly, but ensure fairness in the system and cut bills. For the people in my constituency, 38,549 households will have their bills cut if a Labour Government are returned at the next general election. We will save a typical household £120 and an average business £1,800, at a time when household budgets are being squeezed. Labour will not stand by but take action, as Glasgow city council has done, to help hard-pressed Scottish and UK families. We will put people first, while others continue to put their ideologies and political obsessions before the interests of the people of Scotland and the UK. We will tackle the cost of living crisis that is denied by the UK Government and the Scottish Government, despite official figures from the House of Commons Library that confirm that working people are £1,500 a year worse off under those Governments. Prices have risen faster than wages in 39 of the past 40 months, on both the First Minister’s and the Prime Minister’s watch; and chief executives have enjoyed pay increases averaging 7%, while public sector workers have had to endure real-terms pay cuts and worsening conditions. Tackling energy prices is crucial to easing the burdens on family incomes, which are symptomatic of a problem that these Governments are simply unable or unwilling to address.
As my right hon. Friend the Leader of the Opposition said yesterday, the Government have nothing to say about our plans for the living wage, the falling value of the minimum wage or zero-hours contracts. They are silent because they believe in a race to the bottom and they know these things create the low-wage, high-profit economy that they seek and fundamentally believe in. It is an economy where profits of £7 billion and tax cuts for the richest peacefully co-exist every single day with millions of people living in poverty. It is an economy that prioritises six large companies over the well-being of 60 million people.
The Opposition want real action to help British families: a price freeze while our broken energy market is fixed; a regulator that can cut unjustified price rises; a ring fence between the generation and supply businesses of the energy companies to ensure proper transparency and to force energy companies to trade the energy they produce in the open market; and a new simple tariff structure that people can understand. People in this country deserve action to help them during the winter months, not the damaging ideology of this Tory Government.
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3.11 pm
Charles Hendry (Wealden) (Con): I put on the record my entry in the Register of Members’ Financial Interests, including my presidency of National Energy Action, the country’s leading fuel poverty charity.
Anybody listening to the speech from the right hon. Member for Don Valley (Caroline Flint) will have been oblivious to the fact that this country faces an energy crunch. There is no doubt that it is coming. We can debate whether it will be in the latter part of this decade or in the middle of it, but clearly we need an enormous amount of new investment if we are to deliver the energy security we need. I make no apology, therefore, for starting my speech by talking about energy security. We cannot have affordability without security of supply.
Mr Brian H. Donohoe (Central Ayrshire) (Lab): Does the hon. Gentleman agree that nuclear power is part of the equation and that the Scottish Executive have made a grave error of judgment in ruling it out as a source of energy in Scotland?
Charles Hendry: I will not get involved in the private discussion between the Labour party and the Scottish National party, which seems to be creeping into this debate, but it is a matter of regret that new nuclear power plant will not be built in Scotland as well as England.
Without the necessary investment, we will see not the lights going out, as people sometimes say, but brown-outs, where major energy users are asked to come off line for a period, and a price spike, which will have very damaging consequences for businesses and consumers. We need huge investment, therefore, in a range of different sectors. As part of the solution, we need to reform the market to bring in more investment than we have seen for many years. The situation was bad under the last Labour Government, but it goes back much further. Although we recognise the need for others to enter the market, I am disturbed by part of this debate, because we cannot secure such investment without the big six. We need the big six alongside other players in the market, and were we to drive them away, it would be much more difficult to deliver the necessary security of supply.
Market reform is part of the process, but until recently, so has been political consensus. When the right hon. Lady reflects on her speech today, I hope she will consider its impact in the boardrooms in Spain, Germany, France and elsewhere around the world. They will be saying, “Is this a party that welcomes our involvement and future investment in the UK?” I can assure her that she is introducing a degree of political risk, making it more difficult to secure the investment we need if we are to deliver the affordability we want.
David Morris (Morecambe and Lunesdale) (Con): Is my hon. Friend aware that when the Leader of the Opposition announced the price freeze, £1 billion was wiped off the energy stock market overnight?
Charles Hendry:
That did happen, but it is actually worse than that, because to deliver the £100 billion-plus we need invested in our low-carbon sector, the companies investing need to borrow money, and the greater the political risk, the higher the interest on that
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borrowing. If the cost of borrowing increases by even 1%, the result will be a dead-weight cost of £1 billion a year on consumers’ energy bills—just to pay for Labour’s political risk.
David Mowat: Will my hon. Friend give way, quickly?
Charles Hendry: I will not, because we are all on a strict time limit.
Some of the projects that Labour says it cares about most will be hardest hit. Low-carbon projects are lumpier and require more investment upfront and so are most difficult to finance. I am talking about nuclear projects, renewables projects and in due course, I hope, carbon capture and storage. If companies looking to invest in those areas think that the terms under which they might invest could be changed retrospectively to their disadvantage, they will move away from the UK. We have to make this country more attractive to investment than elsewhere. If we do not, companies looking at international opportunities—
Albert Owen: Will the hon. Gentleman give way?
Charles Hendry: I will not. I know the hon. Gentleman’s enthusiasm for nuclear, and I want that nuclear power station built on Anglesey almost as much as he does. I care very strongly about that.
If we are to get the necessary investment, we must make a compelling case for why companies should come here, rather than go somewhere else.
We have heard reference to the decarbonisation target, but there is nothing in the motion about how that can be met. The measures in the motion would make it harder to get the investment we need to reach that target. Labour is going back to what it has done before, setting grandstanding, ambitious targets without putting in place the road map necessary to meet them. When we came into government, we had to put in place the renewables road map and the fuel poverty road map to address some of those challenges.
The motion is not only counter-productive, but shows breathtaking ignorance of the factors that have driven up prices. We know that prices in this country over recent years have been driven up more by the wholesale price of gas, which is beyond—I believe—even the control of the right hon. Lady and Governments of any colour. The International Energy Agency says that we are moving into a golden age of gas, but it warns us not to assume that it will be cheap, as countries such as Japan and Germany move from nuclear to gas and growth in China and India means a greater demand for gas there as well. Those will remain the issues really determining prices.
Labour’s policy is based on a deliberate falsehood about the causes of energy price increases and would be counter-productive, even if companies did not increase their prices to take account of it. It might play well with focus groups and work as a short-term political initiative, but it will do massive long-term damage to our ability to attract investment into the country, and in the process will do massive long-term damage to consumers, who will end up picking up the tab. That is especially unfortunate, because there are areas in the motion—for example, on transparency—where we could build on Ofgem’s work and deliver the common ground that many of us care passionately about.
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So what do we do? First, we need to have an honest debate about the factors driving up prices and to link that with an understanding of the long-term investment we need in this country and how we are going to secure it. As the Secretary of State said, we need once more to take politics out of energy policy, just as John Hutton and Malcolm Wicks did and as we tried to do in the early years of this Government. That is an important objective in its own right. We also need action now on the changes that Ofgem is proposing. These decisions should be taken by the regulator, not by politicians. One of the changes that we have made is to say that the Government should set the policy framework and that a robust regulator should then deal with how the market operates, rather than having politicians constantly wanting to be regulators as well as policy makers. We also need to focus on ease of switching, and we need to do more to ensure that people are on the best available tariff.
Finally, I want to talk about what we in the Government can do to reduce the impact on bills. We could take some of the extra charges off the bills. In this regard, I have some sympathy with the amendment tabled by the Scottish nationalists. There are two elements of our energy bills that are highly regressive. The charges are borne by consumers including those on the lowest incomes, but the benefits often go to those on much higher incomes. They relate to energy efficiency and to feed-in tariffs for microgeneration, and I hope that the Government’s review of those policies will look at what could be done to fund those areas out of general taxation. They are good, important policies that we should support, but the way in which they are paid for at the moment means that people on the lowest incomes are paying a disproportionate amount towards their delivery. The Government have rightly decided to review that matter, and I hope that that will offer some early relief for consumers.
This is an important debate. We need to get away from the simplistic measures proposed in the Opposition’s motion. We also need to take this opportunity to have a debate about this country’s long-term energy needs, and about how we are going to meet security of supply requirements in a low-carbon way and, above all, in a way that will keep energy affordable now and into the future.
3.21 pm
Mr Jim Hood (Lanark and Hamilton East) (Lab): The Secretary of State apologised to the House at the beginning of his speech, saying that he would not be here for the summing-up speeches, and the House accepted that. I was rather disappointed, however, that he did not comply with the long-held convention of the House by staying in his place to hear the following speaker from the Opposition Benches. That was disappointing, to say the least, and I feel obliged to comment on it.
I was once told that if someone stands by the side of a river and watches the logs go down, like the tide of mankind, they will see them float back again if they stand there long enough. I was reminded of that when I watched the energy company executives giving evidence to the Energy and Climate Change Committee last week. That exotic gathering of four had in its midst three representatives of the big six. Their evidence mimicked the three wise monkeys. They saw no evil in
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the hiking of energy prices, they did not hear the universal condemnation of their greed, and they spoke in glowing terms of their care and compassion while British consumers are suffering charges that have been fabricated by their rigging of the market.
I served on the Standing Committee of the Bill that privatised the electricity industry. I recall that the Secretary of State at the time was Mrs Thatcher’s favourite boy, Cecil Parkinson. He was followed by John Wakeham. I note that there is a private Member’s Bill relating to the legacy of Mrs Thatcher. Well, the things we are discussing today are her legacy. I remember another former Conservative Prime Minister, Harold Macmillan—by then the Earl of Stockton—accusing the Thatcher Government of selling the family silver. That is exactly what they did when they sold off the electricity, gas, coal and water industries, and we are in deep water today because of that legacy.
In my maiden speech, I recalled being a miner, and quoted Nye Bevan saying:
“This island is made mainly of coal and surrounded by fish. Only an organising genius could produce a shortage of coal and fish at the same time.”
The Tories, past and present, were and are such organising geniuses.
Ian Lavery (Wansbeck) (Lab): Is my hon. Friend and fellow former miner aware that it was announced on Tuesday that 48% of the UK’s energy is generated by coal?
Mr Hood: Yes. Indeed, half the world’s energy is produced by coal.
We are an island people and, in my younger life when I was a miner, we were self-sufficient in energy. It is thanks to Government failures that we now have to go cap in hand to the Russians for gas, to the Chinese for coal—they are now buying up coal all over the world—and the French for nuclear-generated electricity.
David Mowat: Will the hon. Gentleman give way?
Mr Hood: I feel compelled to give way to the hon. Gentleman, because he has been trying to intervene on many Members, and nobody has allowed him in.
David Mowat: I thank the hon. Gentleman for giving way, although the Secretary of State did, in his generosity, let me have a go. The hon. Gentleman makes a good point about coal. Over 50% of this country’s capacity comes from coal. Was he as surprised as I was to see that Labour had tabled an amendment to the Energy Bill yesterday whose effect would be to close down the existing coal stations more quickly than is already planned. Does that not seem odd?
Mr Hood:
I have been in this House a while now, and I have seen policies from both sides. There is too keen an opinion about being anti-coal. I know that the hon. Member for Brighton, Pavilion (Caroline Lucas) and the green movement, and some coalition Members, are anti-coal, but it is a fact of life that our energy would be a lot cheaper today if we had not closed down the Scottish mining industry. I attended an Adjournment debate today called by my hon. Friend the Member for Mansfield (Sir Alan Meale), in which he described how the few miners that are left had been deprived of their concessionary fuel. He talked about
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how pensioners, widows and disabled miners had lost out on their pension rights. This is all because there is no mining industry to support our people in retirement. That is quite shameful.
Since 2011, the cost of energy has risen at an average rate of 1.6% a year, but the big six have increased prices by an average of 10.4% a year. I have listened to those who defend that situation, including the Secretary of State, who was so illiberal that it was untrue. He was more Osborne-ite than Lib Dem. I also listened to the hon. Member for Wealden (Charles Hendry). They seem to justify not freezing energy prices and not correcting the rigged market because to do so would interfere with investment. If those who are taking us for a ride by rigging the markets are saying, “If you stop me rigging the market, I will not invest,” my response would be that Governments have to govern. We cannot be held hostage by those monopolies. The situation in Scotland in recent weeks, in which the Government were being held to ransom, should worry us all.
The truth is that my constituents are hurting, as are yours, Madam Deputy Speaker, and we need a Government who are on their side, not one who make excuses, support the bosses and the privileged few, reward the wealthy and punish the poor. That is not what this Parliament should be doing.
I am getting nostalgic as I recall another one of my favourite quotes—that it is “the duty of government to seek to improve the quality and standard of life of its poorest citizen. Any Government that doesn’t do that is immoral”. We need to revisit that quote. Everything we do in this place should be driven not by the need to punish the poor for their poverty, but by the need to help them and lift them out of their poverty. When Governments and Parliaments fail at doing that, it has to be examined.
Rehman Chishti: The hon. Gentleman provided a quote on how not helping the poor is immoral, and I agree with him; of course that is right. If, however, we look at what happened to fuel poverty under the previous Government, we find that it went up by 50% in the last five years of that Administration—from 2.5 million to 4.7 million people. Does the hon. Gentleman agree with me, therefore, that the conduct of the previous Government was immoral?
Mr Hood: I could give the hon. Gentleman the obvious answer, but I will give him the polite answer. I do not welcome comments like that from Government Members when they are three years into their own government but always want to talk about the previous Government, especially when prices have been rigged, increases have been imposed on working people and the poor have been punished. All I hear is a young ambitious Conservative Back Bencher who wants to get on to the Front Bench by talking about what happened years or generations ago. I invite the hon. Gentleman and his hon. and right hon. Friends to consider what I said earlier: it is his duty, my duty and our duty to seek to improve the quality of life of our poorest citizens. We are not doing that. When the Labour leader talks about freezing prices and sorting out this rigged market, it might not be a panacea, but it is a good start.
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3.31 pm
David Mowat (Warrington South) (Con): We all agree that there is a real problem here and that the real problem is energy bills and fuel poverty, not just for consumers, but for industry, too. We hear about energy-intensive industries closing all the time.
It is refreshing that we are here talking about reducing energy prices. In a lot of energy debates, I usually go through the Division Lobbies trying to stop the Opposition from increasing energy prices. We have divided, for example, on the decarbonisation target and on a perfectly respectable and reasonable proposal from the Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), to reduce the solar tariff from six times grid parity to four times grid parity. As I mentioned earlier, Labour tabled an amendment in the House of Lords last night that will increase bills. Let us agree, however, that we are on the same side, at least in terms of our objective—we want to decrease bills.
Before I explore that further, let me highlight an inconvenient truth that is at the heart of this debate. That inconvenient truth is comparability with other countries in the EU. I heard the shadow Secretary of State make two observations about other EU countries. I think she said that Spain already had a cap. That is true; she is right. Spain’s energy prices, however—for gas and electricity—are higher than ours. I do not think there is much point in having a cap if energy prices are higher than ours. The right hon. Lady also mentioned Scandinavia and its pool as a model for her pool. Again, if she looks at the gas and electricity prices in Denmark and Sweden, she will see that they are the highest in the EU—considerably higher than ours. We need to be careful, therefore, to look at these things in the round. [Interruption.] The shadow Secretary of State intervenes from a sedentary position; if she wants to intervene, I will be far more generous than she was.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab) The hon. Gentleman mentioned comparative prices and specifically mentioned Denmark. Is not one of the problems the fact that consumers here in Britain have to pay higher prices because much of the responsibility for conservation is being placed on those who purchase power—consumers—rather than on others whose main concern seems to be to deliver to their shareholders?
David Mowat: I am going to talk about progressive versus regressive ways of paying. Let me make the point again that among the 27 countries in the EU, our gas prices are the 26th highest. If a cartel is being operated, it is not a very good cartel. That is not to say that consumers are not in real difficulty now. One of the big issues, and one of the distinctive features of our energy market, is not so much the unit price as the fact that our housing stock is spectacularly poor in terms of energy insulation.
Mr Donohoe: The hon. Gentleman is right to say that the prices are lower, but can he explain why in the last few years the increase has been larger than in any other European country?
David Mowat:
No, I cannot, because I am not an expert on the market. I am merely trying to establish whether the absolute prices that we are paying vis-à-vis
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our European competitors indicate the existence of a cartel, as has been claimed on many occasions. That does not appear to me to be the case, but someone can always intervene on me—actually, they cannot, because that would be the third intervention and I would not be given extra time, but someone could always discuss the point with me in future.
The fact remains that we have the 26th highest gas prices out of 27 in Europe and we need to be clear about what problem we are trying to solve. The problem that we should be trying to solve is the problem of our housing stock, whose standards need to be raised to the level of the standards in the rest of Europe. Germany’s gas prices are 40% higher than ours, but its gas bills are lower than ours. Why? Because its housing is better insulated and better built.
I have five points to make. My first point is that whatever we decide to do on the basis of the various reviews, we should not reverse the thrust of our policy on insulation. We should not give up on the energy company obligation, the green deal and smart meters. I do not agree with the hon. Member for Brighton, Pavilion (Caroline Lucas) on many issues, but I do agree that far and away the most effective way of making progress on energy in general is to ensure that there is better conservation and more efficiency.
Secondly, we need to make the market work better—
Dr Whitehead: Will the hon. Gentleman give way?
David Mowat: No, I will not, because I have already given way twice.
I welcome the proposal for a competition review: it would clear the air. If there is indeed no cartel, surely everyone should welcome it. I also welcome the proposal for 24-hour switching, although, having reflected on why I might not switch as often as I should, I concluded that it was still too difficult. I have just moved house, and it took a long time for me to manage to speak to those guys on the phone. I suggest to Members on both Front Benches that we should introduce a fining system. If it takes more than 10 or 12 rings for any of the big six to answer the phone and transfer callers to someone who can deal with their query, that company should be fined. I bet that if we introduced such a system, we would find that the energy companies hired more people and dealt with calls more efficiently, and switching—whether in 24 hours or not—would be much easier.
Of course we need more new entrants to the market, but I have a further, serious criticism to make of the big six. They have described a margin of 4% or 5% as reasonable, which is an entirely spurious observation. I have no idea whether such a margin is reasonable, but the point is that we should evaluate them on the basis of their return on capital employed. A margin of 4% is a huge margin for a foreign exchange dealer and for a petrol retailer, but a very small margin for any other retailer. When someone asks if £7 million a day is too much profit or too little, that is a very hard question to answer. The big six are entitled to a reasonable return on their capital employed. We should focus on that, and they should focus on it too when they are telling us how reasonable they are.
Ian Lavery: Will the hon. Gentleman give way?
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David Mowat: I am sorry; I will not.
I understand that a former Prime Minister has suggested that, if we experienced a particularly cold winter and, as a consequence, the energy companies made more money than they had budgeted to make, a windfall tax might be an appropriate response. The companies could argue that something in the other direction should be provided in the event of a warm winter, but I agree with the former Prime Minister that if they make additional, incremental, supranormal profits over and above what they would have made in a normal winter, a windfall tax—or what a consultant would presumably describe as a profit-sharing mechanism—is fair enough.
There might need to be structural changes in the industry. If the market is not working, I agree with the Opposition that they are entitled to intervene. We have just intervened in the private pensions industry. I campaigned for that, and it was right. If this market is not working, they are right to intervene. My problem is that I have looked very hard but I genuinely find it difficult to see the evidence that the market is not working to the extent that they say. We must remember, too, that we need these guys to put £200 billion into our infrastructure in the next decade.
My third point is about what I consider to be our increasingly unilateral position on carbon emissions leadership. We need to have a grown-up discussion about this, and the House needs to understand that our carbon emissions are 20% lower than Germany’s per unit of GDP and per capita. We are not a high-carbon country, yet as we see Europe and Germany reining back—unabated building of coal-power stations and vetoing the emissions trading system and all that goes with that—it is not reasonable for us to be constrained by unilateral carbon leadership. If we are going to do that, we need to be honest about the cost. Frankly, too often people say some of these policies are cost-neutral or even cost-effective. They are not; there is a cost to them. It may be a price worth paying, and maybe we should pay it, but at least let us be honest.
My fourth point is about the balance between regressive and progressive taxes. I agree that putting all these charges on to bills is particularly regressive, and if the current review finds that certain parts should come into general taxation, I will support that.
My final point is that we should have more honesty in this debate. There is a cost to going green. It is not enough for those on the Front Benches to say that in 10 years’ time it will be seen to be more cost-effective to be doing this than not. That is quite unlikely; it is quite unlikely that we will discover we have to do these things for the sake of the planet, as opposed to burning coal, which would be much cheaper, and that there is no cost to it. There is a cost to this; we should take it on the chin and discuss things in that context.
The energy companies should stop talking about their 4% or 5% margins, which is a ridiculous concept, and start talking about what their return on capital is. I do not believe it is an unreasonable return, although I may be wrong, but at least let us be honest.
3.42 pm
Albert Owen (Ynys Môn) (Lab): It is a pleasure to be speaking for the first time under your chairmanship, Madam Deputy Speaker, and I congratulate you on your election to the post.
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I am very pleased that the former Energy Minister, the hon. Member for Wealden (Charles Hendry), is still in his place, because he is right that there was consensus between my good friend the late Malcolm Wicks and him, and they had a good working relationship. When he talks about political risk, however, he should not look across to this side of the Chamber. He should look within his own party and within the coalition, and see the debate within the coalition, which is causing divisions on energy policies today.
I am pleased this issue is high on the agenda. I have been banging on about energy prices for some time and I am glad it is now in the political mainstream. I am glad my party and party leader are leading on this issue, too, because I am afraid the Government are for ever in the wake on these issues. Only 18 months ago the Prime Minister had a summit in No. 10 Downing street. He was there for a few minutes—he was very busy—but he said he had sorted the energy companies out on prices. When I intervened on the then Energy Secretary, Chris Huhne, in a debate and asked him whether he had told the energy companies to hold their prices down, he replied, “No need, they’re already going to do it on their own,” but here we are today with rises in prices that people and business cannot afford.
Ian Lavery: My hon. Friend and I had the dubious pleasure of attending that Select Committee hearing last week, and comments about a modest return have been made here today, too. The Centrica boss said to the CBI yesterday that £2.7 billion was a modest return. That is £7.4 million per day, or £86 per second. Is that a modest return, or is it robbery?
Albert Owen: My hon. Friend will recall that I challenged the Centrica bosses. Indeed, I challenged the CEO of Centrica not to take his bonus this year, because his salary and bonus combined have gone up by 38% since 2008 while bills from his company have gone up by 36%. I am a customer of British Gas, although perhaps not for much longer. To be fair to the CEO, Sam Laidlaw, he has decided not to take his bonus this year. I hope that others will listen and follow suit, because it is immoral that these companies are saying, “We are making only a modest amount,” yet they are paying themselves more than a modest bonus out of their profit. They tell us that the internal market between generation and retail is working okay and that they are separate entities, but they pay their bonuses altogether as one company, and they take a huge amount in dividends for their shareholders.
Mr Jim Cunningham (Coventry South) (Lab): Like my hon. Friend, I have raised this issue over a long period. I thought two or three years ago that we should have had a proper investigation into whether there is a cartel. When I was on holiday in Cornwall a couple of years ago, five tankers were lined up for a couple of weeks. If someone is telling me that something is not going on in that market, I do not know what to say.
Albert Owen: I used to work on oil tankers and gas tankers, and I know that they stay at anchor for some time waiting for the prices to vary before they empty their cargo and get the price for it. That is an important issue.
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The energy market is flawed, as Government Members have actually agreed. The Secretary of State, who made an appalling speech and left quickly, did not tackle the issues at all and did not come up with any suggestions. He said that the Government were doing things for the consumer, but the reality is that the Select Committee and others have been lobbying hard for Ofgem, the regulator, to help the consumer. It is doing slightly more but not enough—and it is too late. It is a disgrace that the Secretary of State leaves so quickly after making so many interventions in this debate—he is not even prepared to sit there. The energy team has been reduced by half a Minister, as one of them is doing a job share with the Department for Business, Innovation and Skills, yet the Secretary of State cannot sit down there. Instead he has to get a Whip to sit on the Front Bench because the team has been depleted. Energy is at the top of people’s agenda, but it is way down at the bottom of this Government’s priorities.
The hon. Member for Warrington South (David Mowat) asked why, compared with Europe, we are paying less for our bills. One reason—I have told him this before and I hope he is listening—is that people in many other European countries pay VAT at 20% or more on their fuel and energy costs. I am sure that he is not suggesting that this country takes that approach so that we can make a comparison—
Albert Owen: I am not going to give way, as the hon. Gentleman has had a good number of interventions on that. VAT is one reason for the situation he describes.
For other things the hon. Gentleman has to look not to Europe but to his own Front-Bench team, because the ECO—energy company obligation—was introduced this January by the Government. The Prime Minister boasted that it was one of his flagships of the greenest Government ever and about how the green levies were going up, yet only last week he said he was going to change all that. The Prime Minister is making policy on the hoof—I will never accuse him of being consistent on anything and he is certainly not consistent on energy policy.
The Minister of State, Department of Energy and Climate Change (Gregory Barker): Will the hon. Gentleman give way?
Albert Owen: Yes, I will. I hope that the Minister will give way when he is winding up, too.
Gregory Barker: Of course I will. Can the hon. Gentleman give me one example of when any Government Member boasted about levies going up? We may have boasted about policies, but when did we boast about levies going up?
Albert Owen: The Prime Minister has said numerous times on the record—I will find this and send it to the Minister—that his Government are the greenest ever and are putting on extra green levies; when he compares our schemes with the Government’s schemes he boasts that these levies are actually increasing to help on that. That is exactly what the Prime Minister has done, and I am sorry that the Minister does not understand his own Prime Minister—it is complicated at times.
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Albert Owen: I will give way briefly, but I am cutting into my own time.
Toby Perkins: This is the quote that my hon. Friend was looking for. The Prime Minister told “The Politics Show”:
“I think green taxes as a whole need to go up”.
Albert Owen: There we are. I am sure that the Minister agrees with the Prime Minister on that, and I thank my hon. Friend. Another levy that this Government have introduced unilaterally and which has pushed prices up is the carbon floor price. It is an Osborne levy if ever there was one. Again, the Government boasted in the Budget about how they were using these levies to control companies and push up costs on business. Those who blame Europe should remember that this is in addition to the European emissions trading scheme, and that companies in Britain are paying more because of what this Government have done this year—the levy came into being in April. It is no use their blaming Europe, or previous Governments. They must take responsibility, because all our constituents are paying the price of this Government's energy policy. That is why we are having the debate today.
I want to mention small businesses, because they are suffering more than the domestic customer. Average rises for small businesses, which do not have the luxury of comparison sites on which they can switch easily, have been up to 20%. I hope that the Government—and, indeed, my right hon. Friend the Member for Don Valley (Caroline Flint)—will consider helping those businesses. They cannot absorb the cost, so they pass it on to the customers. That means that we pay for those rises.
I am a member of the Select Committee on Energy and Climate Change and we had a robust discussion with the energy companies last week. Let us be honest. We hear the Government talking about Labour’s big six, and the Prime Minister leads on that. They forget that in 1993, Sir John Major—that Marxist, who has been accused of being a red by many people for wanting to intervene in the market—set up the integrated system we have now and allowed the then big three to dominate the energy market. Let us not take any lessons about how the big six were set up. Flawed privatisation policies and the former Prime Minister’s interventions allowed the companies to be both generators and retailers. That is the situation. I know that it does not sit comfortably with the Conservative party, but it is a fact and I challenge the Minister to say otherwise.
We have talked about green levies and wholesale prices.
Gregory Barker: I promise the House that I will not make a habit of jumping up and down to intervene before I get the chance to wind up. Will the hon. Gentleman give a little of his speech to the 13 years in which the Labour party had the opportunity to shape energy policy? Will he defend what went on in those 13 years?
Albert Owen:
I am certainly happy to do that. I sat on the Committee that considered the Energy Bill in 2008, which helped many places. It even helped to set up the Hinkley Point agreement that we just reached. The Liberal Democrats voted against the Bill. The Energy
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Act 2010 gave more powers and responsibilities to the regulator to deal with prices. I remind the Minister that we did not get into office in 2010 and I wish that he would use those powers, which he and his party supported at the time. I am happy. We enacted the Climate Change Act 2008 and we set up the Nuclear Decommissioning Authority to deal with legacy waste in our country. We have a record of which we can be very proud.
We are in the Chamber today after three years of a Government under whom we have seen rocketing prices, and all they want to do is blame somebody else. It is time the Government stood up and were accountable for their actions. The Liberal Democrats are helping them—I am not just having a go at the Tories. We need to get consumer rights, which is why I was happy to hear my right hon. Friend the shadow Secretary of State say in response to an intervention I made earlier that under a Labour Government, a new regulator would look after customers who were not on the gas mains. Switching and the reduction for those on dual fuel do not apply to lots of constituents in this country, and we need to extend the reach. I am very pleased by that commitment, because I have been asking this Government to introduce such a provision—I have asked each Minister, and there have been quite a few—and they have refused to do so.
In this country, we need a party and a Parliament that stand up for the customer—for small businesses and individuals who, year after year, not as a spike but as a trend, are being ripped off by the energy companies. It is time for Parliament to act and today is an opportunity for us to do so. I am proud to support the motion tabled in the name of my right hon. Friend the shadow Secretary of State and my right hon. Friend the Leader of the Opposition. When we are in government, we will make the changes that the people of this country deserve.
3.54 pm
Tessa Munt (Wells) (LD): Labour's 20-month price freeze has hit the headlines and will prove superficially popular with the voters, but there are many reasons why it will not work, much as we all want to reduce people’s bills. It is a hopeless strategy to try to control the sales price of businesses that have volatile raw material costs, because prices will go up before the freeze as companies try to hedge against the risks of a Labour election win. In fact, that has probably already begun. Prices will go up again after the freeze as companies seek to recover any losses that they think they have sustained.
During any freeze prices will stay artificially high even if raw material costs go down. Having begun to take the drug of price fixing it would be hard to kick the habit after 20 months. Why not 24 or 30, or doing it again the following winter, or the one after that? The proposal risks further damage to the market as a result of uncertainty, which may well spread to other industries. There would be huge political pressure to freeze prices in other sectors, risking further chaos and a return to the situation facing us in the 1970s.