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As my hon. Friend the Member for Argyll and Bute (Brendan O’Hara) pointed out, more than 7,000 workers in the Scotch whisky industry are employed in rural communities such as Arran in my constituency, leading to considerable added value in both direct and indirect incomes. Further, it accounts for 21% of the food and drink exports of the whole of the UK.

I am here today to applaud the success of this industry and its huge contribution to the UK economy. I am delighted that my constituency can boast some of the finest whisky distilleries in the UK with the Arran distillery being one of the few remaining independent distilleries in Scotland and the only malt whisky distillery on Arran, home to an award-winning dram. It opened in 1995 at Lochranza, which is the perfect location for producing the perfect malt. It is home to the purest water in all Scotland, water that has been cleansed by granite and softened by peat as it slowly meanders from the mountain tops into nearby Loch na Davie. Arran also enjoys a warm microclimate. The atmosphere of sea breezes and clear mountain air with the warm flow of the gulf stream is ideal for the speedy maturation of single malts.

I have painted a rather poetic picture. As for my hon. Friends the Members for Argyll and Bute and for Ross, Skye and Lochaber (Ian Blackford), I will put their gas at a peep because the Arran distillery, despite what they have said about their own neck of the woods, is a patron of the Robert Burns World Federation and as such has created a Robert Burns single malt and Robert Burns blended whisky in honour of Scotland’s national poet. It is the only whisky distillery able to use the image and signature of Robert Burns on its packaging—a true accolade indeed. [Interruption.] Not for nothing does the island of Arran have a reputation for producing the highest-quality whisky, although I am sure that the whisky from the constituency of my hon. Friend the Member for Ross, Skye and Lochaber is quite nice, too.

I join my hon. Friends in urging the Government to make a cut in excise duty on spirits at the Budget next week to boost the Scotch whisky industry. The Government must make it clear that the whisky industry will not be viewed as a cash cow, as the oil industry has been for too many years. Failing to cut the excise duty in the Budget will risk holding back this vital industry and the revenues, jobs and tax receipts from which the whole of the UK benefits. We need to help to create the conditions for the growth of this industry in our home market and stimulate long-term investment. If we cut excise duty, the revenues will go up, not down. The current staggering and eye-watering 76% tax on a bottle of Scotch whisky is far too high. Consumers hand over almost £10 on each bottle of whisky that they buy. That is 51% more duty than beer drinkers and 27% more duty than wine drinkers. That is clearly unfair and unsustainable. The 76% duty is the fourth highest rate in Europe. A cut would at a stroke support not only the whisky industry, but farmers, local pubs, rural and island economies, responsible consumers, manufacturers, exporters and supply chains across the UK.

There is no denying that distilleries are a source of jobs in areas that, as has been pointed out, might otherwise find it hard to sustain them and they are strongly aligned with wider tourism activities in rural economies. In my own constituency, a visit to Isle of Arran Distillers Ltd is all part of the experience of visiting the island of Arran.

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The Scotch whisky industry is, rightly, a source of pride to all Scots, and no wonder, but it is also a huge success story that needs to be told more often. The question is not whether the UK Government can afford to cut excise duty on whisky. The question is whether the UK Government can afford not to make that cut? This is an iconic industry for both Scotland and the entire UK. It has a crucial role to play in the economic health of the UK, and that must be recognised. I urge the Minister today to support a cut in excise duty on whisky and recognise this jewel in the crown of Scotland’s —and the UK’s—industrial strength.

3.2 pm

Gavin Newlands (Paisley and Renfrewshire North) (SNP): It is a pleasure to serve under your chairmanship, Mrs Moon. I congratulate my hon. Friend the Member for Argyll and Bute (Brendan O’Hara) on securing the debate and providing us with an opportunity to discuss the significant contribution that the whisky industry makes to the national economy. I am well aware of the contribution that the industry makes to his constituency of Argyll and Bute, an area that I regularly visit for family trips, and my office manager, an Ileach, speaks often about the importance of the distilleries to the Islay economy. With eight distilleries on an island of 3,000 people, and another two being planned, soon there will be one distillery for every 300 residents. My office manager tells me that, from hazy memory, the Islay festival of malt and music is a very good time to be on the island.

Like Argyll and Bute, my constituency of Paisley and Renfrewshire North benefits greatly from having an active and successful whisky sector in the area. We have heard much, rightly, about areas of production, but there are equally important parts of the industry. Indeed, I recently visited the Chivas Regal bottling plant in my constituency and spoke with staff about the work that they do. The facility employs more than 500 staff, and it is where the company bottles most of its whisky portfolio, including brands such as Chivas Regal, the Glenlivet and Aberlour and the super-premium products such as Royal Salute. Chivas Regal is famous the world over—

Roger Mullin: Does my hon. Friend agree that in the aspect that he has mentioned—bottling—the whisky industry has led fantastic growth in productivity and innovation? The growth has been such that in Fife, the bottling plant in Leven now bottles not only malt whisky, but most of the company’s London gin.

Gavin Newlands: Indeed. I thank my hon. Friend for that intervention. The productivity leads to further investment, which I will come on to later.

The staff at the Paisley site are proud to distribute whisky to all corners of the world, including China, India and the United States. During my visit, I was grateful to be shown around the new north bottling hall, which was opened last year as part of a wider £40 million investment by Chivas Brothers and helps to highlight the positive future that the whisky industry has in Renfrewshire and across the UK.

However, it is not only Chivas that operates in my constituency. Diageo is also well represented, with facilities near Braehead and at Blythswood. Both are long-standing providers of many jobs in the constituency, and I look forward to visiting them in the near future—that was a

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plug. Chivas and Diageo are extremely important to the Renfrewshire economy and help to support more than 1,000 local jobs. The Scotch Whisky Association estimates that the Scotch whisky sector directly employs 10,800 people. I am very proud to say that about 10% of those jobs are based in my constituency. Back home in Renfrewshire, we probably do not realise or appreciate how important our constituency is to the wider success of whisky. The three plants based in my constituency are extremely important, both locally and nationally, and I would like to record my thanks to all those workers who contribute to the success of the “water of life”.

We cannot stress enough the importance of the whisky industry to Scotland. It is part of our DNA, and we are famous all over the world for being the home of whisky. According to the SWA, the whisky industry’s contribution to the UK’s GDP amounts to £5 billion and it helps to support 43,000 jobs across the UK. In 2013, more than 1.1 million visits were made to whisky distilleries, with many of the visitors coming from all over the world to sample some Scotch whisky and see how it is distilled. Scotch whisky can be and has been described as the star performer of the UK economy. When we look at the activity of the industry in overseas markets, it becomes clear why it is so important to our national economy. Last year, Scotland exported 99 million barrels of whisky, which, according to the Library, were worth almost £4 billion, with imports amounting to £200 million. Without the success of whisky, the UK’s trade deficit would be 11% higher than it is today.

Given the success and significance of whisky in the national economy, our call for a further reduction in spirit duty by 2%, which is supported by the SWA, is entirely legitimate. A 76% tax burden is entirely excessive and ultimately unsustainable. What is more, with less than 9% of the EU population, UK consumers pay 25% of all EU spirit duties. Indeed, revenue raised by spirit duty has gone up by more than £100 million in the last year, following the Chancellor’s 2% cut in last year’s Budget, so he does not have to look too far for the evidence.

The future is bright for the Scotch whisky sector. I see that at first hand in my own constituency with the investment that has been made in the plants in Renfrewshire. We should be proud that our whisky is famous the world over and attracts tourists all year round. Scottish whisky is one of the star performers of our national economy. It is vital to our local communities and vital to supporting local jobs, and we should do as much as we can to encourage its growth in any way we can. Slàinte!

Several hon. Members rose

Mrs Madeleine Moon (in the Chair): There are four speakers left. At 3.30 pm, I need to start calling the three Front Benchers, so please keep your eye on the time. I call Chris Law.

3.7 pm

Chris Law (Dundee West) (SNP): It is a pleasure to serve under your chairmanship, Mrs Moon. I commend my hon. Friend the Member for Argyll and Bute (Brendan O’Hara) for securing this important debate. Scotch whisky,

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as we know, is one of Scotland’s most recognisable, ubiquitous exports. We have heard a lot today about its valuable contribution, including to the Exchequer, to which I will turn at the end of my speech. It is also enshrined in our history, art, culture and science. In fact, the late Alexander Fleming, who discovered penicillin, gave the very scientific advice:

“A good gulp of hot whisky at bedtime—it’s not very scientific, but it helps.”

I want to turn my attention to the innovation, research and development that are vital to ensure that Scotland’s journey in the industry is a continuing success story. I will do that by sharing with hon. Members the stories of two local companies close to my constituency of Dundee, one of which is not known for producing whisky. They are indicative of the wider needs and aspirations of our industry, and they assist in leading the way to future progress.

One of the companies is just over the water from Dundee, in the county of Fife. The Eden Mill brewery and distillery is a small craft company that faces the same almost insurmountable challenges as many others starting out in whisky distillation. Eden Mill is the first of its kind in Scotland. In a few years, it has gone from one employee to 40 employees. It has a turnover of between £3.5 million and £4.5 million this year, and more than 15,000 people from more than 30 countries have visited it. Those are all the hallmarks of having great success ahead.

What makes the company unique, however, is its approach to making whisky. It is estimated that the average cost of starting up of an independent craft whisky distillery is £10 million. In order to begin laying down casks for whisky production, it began with the production of beer and now has its beers stocked nationally by Tesco, Sainsbury’s, Whole Foods Market and Aldi. In addition, it produces more than a dozen gins with a range of flavours. As we know, gin takes a much shorter time to produce than whisky and can generate much-needed cash flow while whisky, which takes more than three years to mature at a minimum, comes slowly to fruition. A little-known fact is that 70% of the gin produced in the UK is from Scotland, and the UK is the world’s largest gin exporter.

Eden Mill’s innovate business model has helped to at least stem the loss-making years of whisky production to some degree and has allowed affordable investment in whisky being laid down for future sale upon maturation. Small distilleries such as Eden Mill also add enormous value to local economies as tourist destinations, and they bring local sourcing of ingredients and high employment per litre of whisky produced compared with big distilleries.

I asked Paul Miller, one of the co-founders of Eden Mill, what more could be done to help grow our industry and whether there was value to his company in a duty reduction, for example. He said that in simple terms, duty and VAT were expected to be between £390,000 and £500,000 in the current year. A 2% reduction, for example, which I fully support, would allow Paul to create another job for a trainee distiller.

However, Paul added that the real opportunity could come from creating an environment for small, growing businesses to mirror the benefits that stimulated craft brewing back in 2001-02, when the sliding-scale tax on

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small breweries was introduced. That encouraged authentic small breweries to grow and was the catalyst for an entire industry. Paul pointed out that the US bourbon trail was a great example of such a move. The UK Government should focus their efforts on the impact of the limiting volume written into the EU derogated power. Changing that would be a major prize, a point not lost on those of us who point out the valuable contribution that Scotland and the rest of the UK make by being part of the European Union and not sitting on the sidelines, as we would in the event of an EU exit. The UK should focus on that now, while it is seeking a better position within Europe. If that happened, Eden Mill could reinvest more than £175,000 per annum in better infrastructure and a retail experience for visitors, and could ultimately create a better global brand. Imagine what that could do for the other 111 distilleries.

At the other end of production, but no less important, is my other neighbour, the James Hutton Institute, a world-leading scientific research organisation that is working to provide solutions to global challenges in food, energy and water security. As I speak, the James Hutton Institute and Dundee University have launched a campaign to set up the international barley hub, which will be the world’s leading centre for research into barley and its potential in a future where demands are ever increasing owing to production, reduced chemical use and climate change. Without vital support there are dangers ahead for our Scotch whisky industry.

The cost of developing and building the hub is £36 million, and it will create 3,400 highly skilled jobs and add £700 million in economic value. It will be financially sustainable by year seven. Let us not forget that 20% of our food and drink exports depend on that research. Increased exports of our precious whisky and greater consistency of barley for the whisky industry will be just two key benefits. Doing nothing, however, would mean the UK no longer leading in barley research. As researchers naturally follow investment, that would lead to a downward spiral in capability and viability. To return to the point that my hon. Friend the Member for Argyll and Bute made about £135 being generated per second, the Treasury could have the future of our research into barley, the essential ingredient in our dram, bought and paid for in less than three days.

There is no doubt that innovation, investment and a careful eye on the future of our industry have to be paramount. I make this simple plea to the UK Government: if the Chancellor is serious about expanding exports threefold by 2020, investment and a large pinch of serious industry advice from companies such as I have mentioned will go some way towards that. Doing nothing is simply not acceptable or desirable, especially given the world’s desire for our liquid gold. To reiterate the point that my hon. Friend made, the American writer Mark Twain was undoubtedly correct when he said:

“Too much of anything is bad, but too much good whiskey is barely enough.”

3.13 pm

Martin Docherty-Hughes (West Dunbartonshire) (SNP): It is always a pleasure to serve under your chairship, Mrs Moon. I thank my very close hon. Friend the Member for Argyll and Bute (Brendan O'Hara), who has a neighbouring constituency, for securing this debate.

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I have a long association with whisky, and not just as a drinker. In 1992, I was elected to the then Clydebank District Council for ward 3, Mountblow. The district of Mountblow is home to one of Scotland’s most lowland malts and the only triple distilled whisky; it has been producing the uisge beatha for nearly 200 years. The Auchentoshan distillery is found in the foothills of the Kilpatricks, in the old Auchentoshan estate. I was honoured to represent the area in 1992, and I am delighted and honoured to do so in this House as we debate the impact of whisky on the economy. For the record, that is “whisky”, without an e—that is just a note for Hansard.

In recent times my constituency has mourned the passing of Littlemill, which was dismantled in 1997, although thankfully its production was taken up by the vibrant Loch Lomond distillery, which produces Captain Haddock’s favourite tipple in Hergé’s “Tintin”—a truly European product. Whisky is a global product that will not be assisted by Members who favour Brexit. Loch Lomond marks the boundary between the lowlands and highlands of Scotland and has been at the heart of whisky production for centuries. Sadly, at least nine distilleries around the loch have been lost over the years, leaving Loch Lomond distillery to maintain the proud local tradition at that end of my constituency.

Auchentoshan is a true urban whisky, with an economic and social reach across my entire constituency and beyond. As hon. Members have said, that reach includes bottling, marketing, tourism, sales, printing, malt production and glass production. Each year the distillery of Auchentoshan alone uses 2,500 tonnes of malt, 12.7 tonnes of yeast and 12 million gallons of Scotland’s finest water drawn from the Kilpatricks, with more than 1 million litres of pure alcohol. That is bottled as five expressions of Auchentoshan, including my personal favourite, American Wood. In addition, it has produced its exceptional eight limited editions.

Auchentoshan and Loch Lomond distilleries play their part in supporting national production with 40,000 jobs, of which 10,800 are directly in the industry, and supplying salaries worth £1.4 billion to UK workers. I call on the Minister and the Government to play their part in supporting them. The average-priced bottle of Scotch whisky is subject to 76% tax, and there is no doubt that that is bad for business, bad for the industry and bad for consumers. I am sure the Minister will at least agree that a 2% cut in duty on whisky in this year’s Budget would be a welcome relief to the economy and a win-win for everyone.

The case for that is self-evident. From 2015 to January 2016, following the 2% cut in last year’s Budget, duty receipts from spirits went up by £102 million compared with the same period the previous year. Spirits were the driver behind a £190 million increase in alcohol revenue, which was of huge benefit to the economy. The evidence is clear. The UK Government’s rate of 76% on Scotch whisky is the fourth highest rate in Europe, and UK consumers currently pay 25% of all European Union spirit duties—more than consumers in Spain, Italy and Poland combined. It seems that at least in this case, the only drawback to being part of the European Union is the UK Government’s self-made taxation rates on spirits. Although Scotch whisky enjoys widespread popularity, a further cut in duty would be a welcome move for a product that remains one of the most highly taxed in the world.

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Investment in new distilleries and production at established sites is unprecedented. Those new distilleries need a home market that encourages growth and long-term investment. Support for the industry through a further cut in excise duty would help and support that.

One last challenge remains. Some whisky producers have a local GDP equal to that of small nations. That could and should be challenged through our Community Empowerment (Scotland) Bill. It is my hope that one day whisky production will act as a catalyst for local community ownership, with broader local production being in the hands of the communities of Scotland.

3.18 pm

Carol Monaghan (Glasgow North West) (SNP): It is a pleasure to serve under your chairmanship, Mrs Moon. I congratulate my hon. Friend the Member for Argyll and Bute (Brendan O'Hara) on securing this important debate.

I confess that uisge beatha, the water of life, would not have been my drink of choice in the past, but I have joined the all-party group on Scotch whisky. When I asked at one of the first meetings whether whisky was still mainly drunk by men, I was informed that some of the world’s most renowned tasters are in fact women, so I decided to do my bit for the industry and embark on some personal research. Since then, I have been practising. Hon. Members will be pleased to know that my taste for whisky is developing quite well, although it will no doubt cause a stramash among my colleagues to hear that I enjoy it quite a lot with Coke.

We have heard about the producers and the supply chain. A major employer in Drumchapel in my constituency is the Edrington whisky bottling plant, which bottles Macallan, Highland Park and the Famous Grouse, among others. The origins of the company stretch back to its 19th-century foundation by William Robertson in Glasgow. In the 1960s, Sir William Robertson’s sisters transferred their ownership of Edrington to the newly formed Robertson Trust and insisted that a percentage of the profits should go to good causes—a practice that continues to this day. Many worthy causes throughout the UK have benefited from grants from the trust.

I had the pleasure of visiting the Edrington bottling plant last summer, where the chief executive, Ian Curle, voiced some of the industry’s concerns regarding levels of duty. Although the debate is about whisky, other small producers would benefit from a reduction in duty. Along with my recent work on whisky, I had the pleasure of tasting a new local product, the Makar Glasgow gin, which is only two years old and would really be able to increase its outreach with a change in duty.

New whisky producers have come to the market, but how many more would there be if there were a more realistic taxation level? When we call for a reduction in the ridiculously high duty of 76%, it is about more than just finance. It is about our ambition for this key Scottish industry. Although I was told recently that to dilute my whisky with a mixer was an affront, I would argue that the real affront is the level of duty placed on whisky, which is stunting the growth of the industry in Scotland.

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3.22 pm

Michelle Thomson (Edinburgh West) (Ind): It is a pleasure to serve under your chairship, Mrs Moon. Hon. Members might wonder what on earth my link with whisky is, as the Member for Edinburgh West. Well, here you go. BenRiach Distillery Company, which is, in fact, based in Speyside was built by John Duff in 1898. The hon. Member for Argyll and Bute (Brendan O’Hara) will note that that was 10 years after the formation of Celtic Football Club. The distillery features a traditional floor and pagoda-style chimneys. It was a global whisky distiller of the year in 2015 and, more importantly, its head office is located in Edinburgh West.

Few people consider the wider picture around the supply chain. Bottlers, glass makers, ceramics, cereals, transport, energy suppliers, tourism and retailers all add value. There are spin-off businesses, such as Celtic Renewables, which makes biofuel capable of fuelling cars with the by-products of whisky production.

We have talked about the value of the industry to the economy of Scotland and the UK, and about the increase in the tax take with the tax cut in March 2015. I agree with what I suspect the Minister will say, which is that it is difficult to prove the so-called causality. However, from a business perspective, I believe that the tax cut gave businesses the confidence to invest. We cannot assume that a year-on-year tax cut will always result in this outcome, but we can reflect on the fundamental fairness of how the industry is treated compared with others, such as beer. The tax cut is also to be welcomed as we have seen a reverse in the trend of declining home figures.

There are new distilleries in Annandale, Arbikie, Ardnamurchan, Ballindalloch, Dalmunach, Eden Mill, Glasgow, Isle of Harris, and Kingsbarns—now, I would like the Minister to repeat those backwards, if he can. In fact, the finance director of the Glasgow Distillery is an old colleague of mine from the independence referendum. The new distilleries will initially focus on gin but, critically, we must emphasise the point about capital investments. It is about the creation of jobs and infrastructure. As I mentioned, the supply chain is of value to the wider economy, particularly to rural economies.

I am a member of the Select Committee on Business, Innovation and Skills, in which I recently questioned Ian Wright of the Food and Drink Federation. If the contribution of Scotch whisky to UK exports was underappreciated, he highlighted that the UK Government fail to appreciate the value of consumer goods in general and said that there needs to be a change of mindset on the issue. I agree with that.

Significant value is to be derived from increasing exports, especially looking at the massive potential of the emerging middle classes in the likes of India. The Scotch Whisky Association argues that taxing until the pips squeak sets a precedent for overseas markets. Indeed, Scotch faces a tariff of 150% in India. In reality, the economic picture is considerably more complex, with individual economies making decisions based on support for their own producers, not just on their perception of the high quality of Scotch, but the point is worthy of reflection.

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I am concerned about a potential British withdrawal from Europe because barriers to trade are considered unhelpful by industry. We should go for a trade agreement in India and stay in Europe; we can have both.

On a more serious note, my last point is about Scotland the brand, which whisky most encapsulates. There have been a number of attempts today to bottle the essence of Scotland the brand. The brand is shaped by authenticity and personality, and that cannot be truer than of Scotch whisky. Brand has equity, and we mentioned that when we talked about the small gin distilleries. Brand is the recognition and embodiment of key values, pleasures, value and perception, but it faces competition and we must ensure that the industry can compete.

I leave hon. Members with two brief thoughts about whisky. The first is from my personal favourite, Tommy Cooper:

“I’m on a whisky diet. I’ve lost three days already.”

And, finally, “Alcohol is your trouble,” said the judge to the drunk. “Alcohol alone is responsible for your present predicament.” The drunk looked pleased as he said “Thank you, judge. Everyone else says it’s my fault!”

3.27 pm

Rebecca Long Bailey (Salford and Eccles) (Lab): It is a pleasure to serve under your chairmanship, Mrs Moon, and it is a pleasure, as always, to debate opposite the Exchequer Secretary to the Treasury. I congratulate the hon. Member for Argyll and Bute (Brendan O’Hara) on securing the debate. In his opening speech, he eloquently explained why the Scotch whisky industry is so important to the Scottish and UK economies and why his constituency is the centre of the whisky universe.

I thank hon. Members for taking part in the debate, which I have really enjoyed. I feel as if I have had a bit of a history lesson. A few points that I was not aware of before include: that Talisker was Robert Louis Stevenson’s favourite drink; that Arran has the purest water in Scotland; and that Alexander Fleming’s advice was to drink whisky, which I now take as medical advice. Other fantastic things have been mentioned but I will not go into detail because we are pushed for time.

There was a consensus across all contributions that, beyond doubt, the Scottish whisky industry contributes significantly to the UK economy. A number of hon. Members raised points about excise duty. Of course, we all look forward to hearing what the Chancellor has to say about that next week and whether the Minister is willing to leak any information on that.

The Scotch Whisky Association, which supplied a very useful briefing in preparation for the debate, estimates that the industry added more than £3.3 billion directly to the UK economy and more than £5 billion indirectly in 2014. That makes the Scotch whisky industry arguably larger than the UK’s iron, steel, shipbuilding and computer industries, and about half the size of the UK’s pharmaceutical and aerospace industries in terms of gross value added. It is important to note that the industry just keeps growing. The 2014 figures mark an increase of 1.6% on the previous year’s estimates of GVA.

The contribution of the industry is equally impressive when one considers the number of people it employs. In Scotland, 10,800 people are directly employed in the

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industry, with salaries totalling almost £530 million. Across the whole of the UK, both directly and indirectly, the association estimates that 40,000 jobs are supported. Any industry that provides employment to so many should indeed be recognised as an important UK industry.

Nor is that significant only in Scotland. The impact on the wider UK supply chain is also important, as we have heard in many of the speeches today. Of the nearly £2 billion spent by the industry, 90% remains within the UK. The latest input-output data published by the Scottish Government, and industry estimates, show that about three quarters of the goods and services purchased outside Scotland are sourced from the rest of the UK, and that they are worth about £330 million to the suppliers. That is particularly significant in relation to capital expenditure worth about £140 million, much of it on items such as machinery and vehicles that support the wider industry.

Constituencies such as mine, with its history of manufacturing and other traditional industry, stand to benefit from the Scotch whisky trade, despite our distance from Scotland. We have heard Yorkshire’s point of view in the debate, and I think there is agreement on that point. Greater Manchester has a longstanding and proud brewing and distilling sector of its own—not to mention a blossoming boutique sector, in which I am becoming an expert. Whisky distilling, along with much of the drinks sector, is effectively a manufacturing industry itself, and the debate should be set within the wider one about the need for an industrial strategy.

One of Scotch whisky’s distinctions is that it is famous the world over, and is one of the largest contributors to UK exports. Scotch whisky exports were worth £3.9 billion in 2014—1.4% of total UK exports. That represents 80% of Scotland’s and 25% of the UK’s total food and drink exports. Scotch whisky’s trade surplus is the second highest for any goods exported from the UK, and it has been estimated that the UK’s overall trade deficit would be 16% higher without Scotch whisky exports. I think that that fact has also been alluded to today. However, it must be noted that, while the £3.9 billion is significant, that figure marked a decline of 7%—the largest since 1998.

It has been suggested by commentators that that fall in exports might be due to the political and economic situation in export markets. For example, David Frost, the Scotch Whisky Association’s chief executive, suggested that

“economic and political factors in some important markets held back exports in 2014 after a decade of strong growth”.

Similarly, the drinks analyst at the market intelligence firm Euromonitor has highlighted the fact that the

“fall in exports to Singapore was linked to Beijing’s clampdown on gift-giving”,

noting that direct exports to China fell by 23% to £39 million. He also said that Scotch was losing out to types of whisky like US bourbon, which are targeted at a younger market. Political volatility in Russia and Ukraine is also reported to be having an effect on exports of Scotch

“with the value of direct sales there down 95% from £25 million to £2 million in a single year”.

In that context, we would be interested to hear from the Minister what steps the Government are taking to ensure that our key export industries are able to cope with volatilities in the global market. What help are

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they giving the industry in its ambassadorial role abroad? For example, DEFRA’s Great British food unit was created to promote British food and drink—such as Yorkshire Tea, the hon. Member for Brigg and Goole (Andrew Percy) will be pleased to hear—across the world. Could the Minister confirm whether Scotch whisky is currently included in the Great British food unit and, if so, how the initiative has helped the industry?

It is important to highlight the wider context of UK manufacturing. Frankly, I am concerned that this Government’s industrial strategy is inadequate across the board, as the problems with the steel industry have illustrated all too starkly. That is why we have been calling for a proper industrial strategy, in the context of a wider economic policy focused on investment, not cuts. Scotch whisky is one industry that by its nature cannot be outsourced abroad but, in other ways, it will face many of the same challenges as we see across the UK in other manufacturing sectors.

The last time the Scotch whisky industry was discussed in Westminster Hall, the then Economic Secretary to the Treasury, now the Education Secretary, stated that Her Majesty’s Revenue and Customs would

“shortly be launching its spirit drinks verification scheme.”—[Official Report, 8 January 2014; Vol. 573, c. 138WH.]

The scheme was designed to preserve the industry’s reputation by requiring every business involved in the production of Scotch whisky to be verified as producing a genuine product. The introduction of the scheme was broadly welcomed at the time, but it might be useful for the Government to provide an update on its operation to date. Is the Minister satisfied that it has been implemented in full?

The UK should be proud of the Scotch whisky industry, which contributes enormously to employment and boosts UK exports at a time when the trade deficit remains large. I therefore hope that the Minister can respond to the issues that I and other hon. Members have raised, so that we can continue to back this important global industry.

3.35 pm

Calum Kerr (Berwickshire, Roxburgh and Selkirk) (SNP): I am delighted to get to sum up last. I know that my party likes to claim that we are the official Opposition—but I like this new order in Westminster Hall.

It is rare to have the opportunity to sum up with such a good-looking group of MPs. I do not know whether it is to do with the balance in the Chamber. The hon. Members for Salford and Eccles (Rebecca Long Bailey) and for Brigg and Goole (Andrew Percy) are very welcome to join the Celtic brotherhood—and the Minister too. [Interruption.] He has Celtic connections.

We have heard the benefit of an upbringing and affinity with the product we have been talking about, in the amazing lyrical literary references throughout the speeches.

Roger Mullin: I have another one. Does my hon. Friend agree with the great Norman MacCaig? I was sitting one time in Sandy Bell’s and said “Norman, would you like another dram?” and he said, “Roger, my family motto is ‘Excess is not enough.’”

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Calum Kerr: I thank my hon. Friend for that wonderful intervention. He is here all night, ladies and gentlemen.

It feels slightly superfluous to sum up in this debate; I do not know if anyone has not figured out by now, whether in the Public Gallery or anywhere in the Chamber, that Scotch whisky adds £5 billion to the UK economy. They should do a test, just to see. It has been repeated so much.

Ms Tasmina Ahmed-Sheikh (Ochil and South Perthshire) (SNP): I look forward to hearing what is clearly going to be an excellent summation of the debate from my hon. Friend.

On the point about investment, will my hon. Friend join me in welcoming the massive investment by Diageo in Scotland, particularly in my constituency, where there has been an investment of £10 million in a state-of-the-art cooperage, and £80 million in a new filling store, at Cambus; £30 million in a new warehouse at Blackgrange Bond; and £1.5 million to expand and upgrade the Diageo global archive? I encourage all Members to come and visit if they have not already done so.

Calum Kerr: I thank my hon. Friend for that wonderful intervention—and Diageo thanks her too. I agree that it plays a huge role in our industry—but a positive and constructive one—and is part of the success story.

As well as the £5 billion value that I mentioned, the trade deficit would be 11% higher without Scotch whisky; and there are 40,000 jobs. Every job supports a further 2.7 jobs in the broader economy. One point of particular importance, which has come up in a number of debates—not least in contributions by my hon. Friend the Member for Argyll and Bute (Brendan O'Hara)—is the importance of the industry to the rural economy, where there are fragile economies that people are leaving and where depopulation is a challenge. The industry is a success story in the rural economy.

Turnover in the industry has increased by 27% since 2008, and employment is up 6%. Salaries have risen too. Another challenge in the rural economy is low pay, but salaries in the Scotch whisky industry have risen by 12% and now average £47,000 a year. That is a great track record, and it demonstrates how important the industry is to our economy and country.

Whisky may be our national drink, but it is not a homogenous product, and as my hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) outlined—when he used the words “alluring” and “full-bodied” I thought he was talking about himself, but it turned out he was talking about one of the whiskies in his region—our malts are highly regional and wonderfully varied. Each area produces its own highly distinctive variations. It is sacrilegious to put Coca-Cola in them, though, and I fear that my hon. Friend the Member for Glasgow North West (Carol Monaghan) has done herself immense damage by what she said. Clearly, she is but a novice, and there is time yet. Perhaps the hon. Member for Brigg and Goole can help there, because he does frequent the bars, I am told. I think the different characteristics are what make Scotch whisky such a wonderful success story. I am with my hon. Friend the Member for Argyll and Bute in that Islay malts are my favourite. Their peaty, smoky nature is just fantastic.

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One region of Scotland does not have a distillery at present. As my hon. Friend said, the last time whisky was produced in the borders, legally at least, was in 1837, but times are changing. It shows the success that can be harnessed in all the regions of our country that no fewer than three distilleries are currently planned in the Scottish borders, most of which I represent. R&B Distillers is looking at a site in Peebles, and the Three Stills Company has a £10 million project for a fantastic distillery in the centre of the wonderful town of Hawick. Last week, I visited a new site just outside Jedburgh operated by Mossburn Distillers, which has fantastic and ambitious plans for new distilleries on the site. I witnessed the full scale of its ambition and how significant the operations could be. Taken together, the companies could invest £50 million in the borders economy and create more than 100 jobs. In the borders, the distilleries will of course reflect the history and landscape of the region, as well as making use of our fantastic borders barley and pure water. Indeed, Mossburn is considering names such as “the Borderer” and “the Teviot” for its whiskies. [Interruption.] It is a river.

Andrew Percy: It is not the Humber.

Calum Kerr: Thankfully not. Those wonderful titles pay tribute to the region’s rich heritage and will help to promote us as the whiskies are sold across the world. Of course, I am sure the distilleries will produce lighter, lowland-style whiskies, and I am sure I am not the only one looking forward to tasting them—they cannot come soon enough, but we will have to wait.

The companies behind the new borders distilleries are certainly entrepreneurial, and they have plans, beyond traditional distilleries, to produce other spirits, including gin. The sites have the potential to be highly popular attractions in their own right, and the visitor centres look fantastic. If I had £1 for every person who has offered to be a taster, particularly at the Hawick distillery’s gin lab, where people can make their own gin, I would be a rich man. I am taking names if anyone here wants to sign up. The sites will be fantastic tourist operations.

I visited Springbank in Campbelltown with a number of friends, and I was struck by the number of people who were there because of the distillery. I met one group from Sweden who had matching blazers, and another group from America had whisky-tasting ties. I am not suggesting that we all had to get into uniform, but it reinforced the huge way in which a distillery puts a town on the map, raises its profile globally, brings more investment and creates more jobs than just those directly involved in the distillery.

Margaret Ferrier: I congratulate Speyside Distillers in my constituency. Founded in 1770, it has just secured a £2.3 million funding package to help it grow its market in the far east. Does my hon. Friend agree that the Chancellor should seriously consider duty reduction in next week’s Budget so that all distillers can expand, grow and contribute to the UK economy?

Calum Kerr: I agree with my hon. Friend. If the Minister has missed that point, why not reinforce it? I am sure he agrees with us. I notice a lot of nodding, and I am sure it is in agreement that the reduction should be at least 2%.

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This is a hugely exciting situation, as is reflected in the energy and enthusiasm of the Members gathered here. Our export market is strong, and the hon. Member for Edinburgh West (Michelle Thomson) mentioned something that I wanted to highlight, too. The planned distillery in Hawick mentioned the duty in India. If we raise 76% in our own country, it puts us in a difficult position to argue for reduced duty elsewhere. Clearly, the Indian situation of 150% is unacceptable. I will be interested to hear the Minister’s comments on what we are doing about that.

We should also remember that the UK domestic market is the third biggest market by volume, with only France and the USA selling more. It still accounts for seven times more sales than China, so its importance to our producers is clear. We have already heard the case, so I will not reiterate how reducing duty is a win-win situation. By reducing duty, although there is not necessarily causality—good word—we might raise more money in total.

People often use the word “iconic” about whisky. I prefer to describe it another way. Whisky is literally the spirit of Scotland. It embraces all the very best aspects of our history and culture, and it is both romantic and emblematic. It uses our finest national ingredients and has strong green credentials. Of course, it is a product of very high quality and reputation. Just as the money it earns helps to bind together the UK economy, so its character and the joys of its depth and warmth bind Scots together as people. Whisky is one of Scotland’s great products and great successes. Now we need the Government to celebrate that success, to build on it and to work with the industry to grow this fantastic drink’s reach and prosperity. I urge the Minister to take that message away today. If he can secure the backing of his colleagues in Government, I am sure that is something to which we would all raise a glass.

3.46 pm

The Exchequer Secretary to the Treasury (Damian Hinds): It is a great pleasure to see you in the Chair, Mrs Moon. I congratulate the hon. Member for Argyll and Bute (Brendan O'Hara) on securing this important debate. I have sometimes wondered what it is like to be at the Scottish National party conference, and I need wonder no longer. I commend all colleagues, from the SNP and from the Conservative and Labour parties, for being here for this debate. I welcome all the contributions, including from the SNP spokesman, the hon. Member for Berwickshire, Roxburgh and Selkirk (Calum Kerr), fresh from his unexpected starring role at today’s Prime Minister’s questions—he was “Callum”. [Interruption.] I recall all his colleagues pointing at him. I also welcome the contribution of the hon. Member for Salford and Eccles (Rebecca Long Bailey), who as always made a thoughtful speech and some good points. During my remarks I will return to the points that have been raised.

This has been a good debate, which made me thirsty more than once, particularly when the hon. Member for North Ayrshire and Arran (Patricia Gibson) was speaking—and that was just when she was describing the water. Even the most enthusiastic champions of the spirits industry would stop short of calling whisky a daily necessity. [Interruption.] I may stand corrected but, according to the Wine and Spirit Trade Association, just over half of UK adults, the equivalent of 26 million

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people, drink spirits. Aside from that, the whisky industry makes a hard and important economic contribution to the UK economy. Every second, whisky exports earn this country £125—we will not quibble over £125 or £135. Scotch is solely responsible for a quarter of all UK food and drink exports. With Scotch present in some 200 markets worldwide, there is a good case to be made for calling it our most widely consumed export. Leading markets for Scotch whisky exports include France, the US and Spain. In Spain, exports increased by nearly 8% in volume between January and June 2015.

Martin Docherty-Hughes: On sales, France is the largest consumer of Scotch whisky by volume. Does the Minister agree with SNP Members that a Brexit would be both fundamentally difficult for the Scotch Whisky Association and would limit its ability because further trade agreements would be required for that volume of sales to continue?

Damian Hinds: The hon. Gentleman anticipates some of my later points. If he will forgive me, I will delay my response until then.

One of my favourite whisky-related export stats comes from Japan. It will be a matter of equal sadness and joy to the hon. Member for Argyll and Bute that, scandalously, the best whisky of 2015 award was won by a Japanese brand but that Japan increased the volume of its imports of Scotch whisky by 23% between January and June 2015. Clearly the consumers of Japan have very good taste. We should also acknowledge the wider British spirits industry. I am pleased to say that the main trade association reported that 140 million bottles of British gin are exported to foreign markets, which works out as a 37% increase in five years.

It is also important to bear in mind the very positive effects that the Scotch whisky industry has on employment; many hon. Members have already alluded to those effects. The Scotch Whisky Association estimates that the industry already supports over 40,000 jobs, including—importantly—7,000 in the rural economy. Of course, distilleries remain a key source of jobs in the Scottish rural economy, and are strongly aligned with wider tourism activities. Also, as we have already heard this afternoon, every job in the Scotch whisky industry supports 2.7 further jobs in the broader economy, and some of that benefit is spread throughout the UK.

In the constituency of the hon. Member for Argyll and Bute, Scotch whisky is definitely a traditional industry that remains a critical part of its heritage. A total of 14 distilleries are in operation in the constituency, including Bowmore, Ardbeg, Kilchoman, Glengyle, Springbank, Glen Scotia, Tobermory and Oban, and a few others that are less obviously uni-phonetical, so I hope that he will forgive me if I stop there. It goes without saying that we want to continue and wholeheartedly support this Great British success story.

Over recent weeks, I have had the opportunity to meet the hon. Gentleman and some of his colleagues who are sitting with him today in the all-party group on Scotch whisky, as well as representatives from the SWA, and the Wine and Spirit Trade Association, among others. I have taken on board the confidence that they have about the continued success of their industry, and I

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assure the hon. Gentleman that we are united in wanting to help the industry go from strength to strength.

Of course, it was precisely for that reason that my right hon. Friend the Chancellor announced in the Budget of March 2015 only the fourth duty cut in spirits history, the previous one having been in 1996. I strongly supported that decision. Since then, the trend in whisky production has been notable. Between 2014 and 2015, the volume of whisky cleared for sale in the UK increased by 2%. Increasing confidence from the Budget 2014 duty freeze, combined with demand for exports, has contributed to this significant turnaround from the decline in production that the industry had experienced between 2010 and 2014.

The encouraging news continues with the developing trend in small distilleries entering the market. From 2014, seven new whisky distilleries have opened, taking the total number of Scotch whisky distillers to 117. In addition, it is planned that a further 30 to 40 distilleries will enter the market in the coming years, which is a good thing for investment and jobs in Scotland.

I am pleased that the Scotch whisky industry remains dynamic. As has been mentioned, the £1.7 billion investment in its supply chain has helped to meet the demand from overseas markets, and supported jobs over the long term, which is particularly significant for our rural economies.

How can we as a Government continue to support the industry over the coming years? Hon. Members know that next week my right hon. Friend the Chancellor will deliver his Budget in the Chamber, and the hon. Member for Argyll and Bute and his colleagues know that it would clearly be wrong for me to anticipate that in any way whatsoever.

However, it is important to maintain our efforts in two particular areas. The first is the export market. Nine out of every 10 bottles of Scotch whisky sold are sold overseas, and I must remind hon. Members that, on that volume, no UK duty is paid. The hon. Member for Salford and Eccles rightly asked what export support could be given to continue the growth of this important industry. Through the efforts of UK Trade & Investment, we have seen some very strong success stories, all contributing to the 90% growth in exports that the Scotch whisky industry enjoyed between 2004 and 2014. Each second, 40 bottles of whisky are shipped overseas.

We have increased the budget and the remit of UKTI so that it can continue and even extend its promotion of British products worldwide and, importantly, negotiate with export markets for the right regulatory regime, to help people enjoy their dram wherever they may be in the world.

Distillers can now supply their product in countries including India, which can further open the door to other countries. Although Scotch whisky’s share of total spirits volume in India is only around 1%, the SWA expects that that would increase to 5% if there was full and fair market access. The UK supports a broad and ambitious free trade agreement with India. However, there are outstanding issues, including on spirits, that need to be addressed.

The Government are keen to restart negotiations on the free trade agreement and have made the case for that to the European Commission and in bilateral engagement

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with India. I am sure that most hon. Members here will agree that, as was mentioned earlier, in this endeavour we are better equipped as part of the world’s largest single market than we would be alone, even if my hon. Friend the Member for Brigg and Goole—and Saskatchewan—(Andrew Percy) may only agree with that comment for half the debate. He also reminded us of the importance and the number of other potential export growth markets around the world, including Canada.

Opening up more export markets is just one part of the Scotch whisky success story, and I hope that we see much more success in the coming years, as our expanded UKTI teams continue to make the case for Scotch whisky.

The second area that the Government can support is a little more nebulous, and the hon. Member for Edinburgh West (Michelle Thomson) referred to it. I think of it as protecting and enhancing the quality mark of genuine Scotch provenance. Scotch whisky is clearly an iconic product for Scotland and the UK, but with iconic products comes the risk of poor-quality imitations. To protect the integrity and the high reputation of the brand of Scotch whisky worldwide, we launched the spirits verification scheme, which the hon. Member for Salford and Eccles mentioned. This scheme sets standards on production and labelling for producers to sign up to, helping to identify non-compliant products and counterfeits, and making sure that people who buy Scotch whisky get exactly that.

The geographical indication for Scotch whisky is now recognised in the laws of nearly 100 countries, including the whole of the European Union, which is another reason for there to be continued optimism in the industry and continued worldwide recognition for Scotch. But why limit consumers to what they recognise as Scotch whisky from the front of a bottle? The hon. Member for Ross, Skye and Lochaber (Ian Blackford) mentioned the tourism opportunities, and that point was echoed by a number of other colleagues.

Producers are offering tours of their distilleries, opening up a whole new way to connect with thirsty tourists who are keen to understand the traditional side of their whisky—the pride and the passion that go into every bottle of Scotch. According to the SWA, collaborative efforts by the industry and VisitScotland have contributed to more than 1.5 million visits over the last year, with visitors spending more than £50 million at distilleries.

The other aspect of protecting and enhancing the brand of Scotch whisky is, of course, the health issue. Let me be clear about this—Scotch whisky, like all drinks, is perfectly capable of being enjoyed responsibly, and of course it is also capable of being misused. However, this Government firmly believe that the irresponsible actions of some should not be a barrier to the vast majority of people who enjoy a drink responsibly. That is why we will continue to combine efforts with the industry to raise awareness of the need for responsible drinking.

The Scotch Whisky Action Fund is an excellent example of what the industry can do. It is entering its third year of a five-year programme and is delivering £500,000 of

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funding to support community-based projects that are aimed at reducing alcohol-related harm in Scotland. I am confident that we will continue to strike the right balance between enabling responsible enjoyment of a traditional product, and dissuading irresponsible and harmful behaviour.

Let me turn very briefly to a couple of the other points that were made in the debate. It is not a new development that different countries choose to tax alcoholic beverages differently. Of course, countries choose their tax system, including the balance between direct and indirect taxes, to reflect their needs. When setting duty rates, the Government have to consider the wider fiscal picture. Total revenue from alcohol duty in 2015 was £10.7 billion, with revenue from spirits contributing around 30% of that. Just to give some perspective, £10.7 billion is the same as the entire budget for the Home Office.

I do not know of any EU country that has full duty equivalence among alcoholic drinks. In this country, of course, a typical serving of 25 ml of spirits has lower duty than other typical servings of drinks, for example a pint of beer or 175 ml of wine. As I have already said, the majority of Scotch does not have duty applied to it as it is for export. As I am sure hon. Members appreciate, any and all announcements on duty rates are made in the Budget.

The contribution of Scotch whisky to the UK economy is not least due to the tireless work of distillers who put in the hours and, in this case, the years to produce such a high-quality product. We want the industry to continue to succeed, both domestically and in ever widening markets overseas, promoting Scotland and the UK, and creating jobs and growth. Our programme for Government is based on creating long-term growth and security, and a successful and strong Scotch whisky industry is an integral part of that.

I thank the hon. Member for Argyll and Bute once again for bringing this important subject to Westminster Hall for debate today.

Mrs Madeleine Moon (in the Chair): I call Brendan O’Hara to speak again. I am afraid that you have only seconds left.

3.59 pm

Brendan O'Hara: Thank you, Mrs Moon, for your excellent chairing.

In the moments that are left to me, I thank the Minister for his reply. Without putting any pressure on him, I hope and feel that we have in him a real champion for the Scotch whisky industry, which does so much for the economy.

As I said earlier, Scotch whisky is liquid sunshine, so let us not put a cloud unnecessarily in front of that sun, and let us also push the Chancellor for a cut in duty on whisky in next week’s Budget.

Question put and agreed to.


That this House has considered the contribution of the Scotch whisky industry to the UK economy.

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Health and Safety Executive

[Andrew Percy in the Chair]

4 pm

Rosie Cooper (West Lancashire) (Lab): I beg to move,

That this House has considered the management of the Health and Safety Executive.

It is a pleasure to serve under your chairmanship, Mr Percy, in this debate, which aims to highlight serious concerns about the management, culture and practices of the Health and Safety Executive. The debate is built on the case of my constituent in West Lancashire, Linda Murray. She is a former Health and Safety Executive employee whose successful employment tribunal case highlights several issues, including a culture of bullying and the use of human resources practices to pursue personal vendettas; a culture of protection among senior managers; Health and Safety Executive staff providing misleading, disingenuous and even false information; reward instead of disciplinary action for inappropriate actions; the wasting of public resources without accountability; and the non-disclosure of information, amounting to secrecy, to hide failings.

It is not the first case in which I have been involved of senior executives in a public sector organisation creating a culture of bullying and fear using HR practices and disciplinary action to pursue individuals who would not bend to their will. It is not acceptable that those individuals can act in that manner as public servants. They are not running a family business with their own money: they operate in our name using taxpayers’ hard-earned money, and there should be greater scrutiny of their behaviour and consequences for inappropriate action.

On Wednesday 5 June 2013, Judge Reed, sitting at the Liverpool employment tribunal, confirmed that Linda Murray had been unfairly dismissed by the Health and Safety Executive on 18 July 2012. The hearing lasted only several hours before giving a verdict in favour of the former employee. Linda Murray was awarded the maximum statutory compensation of £85,000. That was in addition to the Health and Safety Executive’s legal fees, which were paid from the public purse. The bill ran into hundreds of thousands of pounds at a time when the organisation faced budget cuts and staff redundancies. It is unacceptable.

It is not only the monetary cost of the case that needs to be considered, but the personal and emotional cost paid by Linda Murray. Throughout the entire period she suffered stress-related ill health, requiring medication. She lost her financial security and her family suffered great distress. She had given 33 years’ service to the Health and Safety Executive. She was held in the highest regard by the HSE staff who worked for her, much as she was by the chemicals industry when she managed an operational inspection team in the north-west.

I appreciate that there is insufficient time in the debate to outline every detail of the case and the events leading to Linda Murray’s unfair dismissal, but I suggest that the Minister begins with the 200-page report compiled by Ian Travers and the findings of the employment tribunal for more details. Needless to say, if the whole situation had been handled differently it would not have been a major incident. Instead, it escalated out of control.

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To allow time for a post to be found for her, Linda approached HR about returning to her substantive grade 7 post six months prior to the conclusion of her temporary promotion as an interim grade 5 inspector. Mr Peter Baker was the senior manager tasked with finding that post. There was considerable uncertainty as people took voluntary redundancy—an option that Linda Murray did not want and could not afford. Time passed with no post being offered. Linda found the process upsetting. The general uncertainty was allied to her senior manager’s indifferent and sometimes hostile attitude towards her. In the end, she was given a position that amounted to a demotion, although she was told that it was a grade 7 post.

The whole episode led to a tense meeting between her and Mr Baker. Previously, Mrs Murray had provided challenge to and constructive criticism of Mr Baker. She expressed concerns about how decisions were being taken and the negative impact on her staff and the job they were employed to do. Following the meeting, Mrs Murray received notification of disciplinary action being taken against her. That resulted in a written warning, which was successfully appealed. The main grounds for the success of that appeal were that Peter Baker could not investigate the alleged misconduct when he was the sole person against whom the misconduct had allegedly been perpetrated.

Despite the appeal, Health and Safety Executive senior managers decided to run the disciplinary action again, and a senior crony then reinstated the written warning. A second separate investigation into Linda Murray was then pursued by senior managers, and that can be traced back to the period of her interim promotion. An underperforming staff member was put on her team, but no one told her about the performance issues. It reached a point where Mrs Murray and the staff member agreed that they could not work together. He was transferred to Mr Ian Travers’ team. Despite the transfer, the staff member continued to treat Mrs Murray with a great deal of contempt and disrespect. She requested that the staff member’s line manager, Mr Williams, speak to the person about their conduct, which he failed to do.

The acrimonious nature of a meeting between Mr Williams and Linda led to Linda being asked to meet with Ian Travers. Instead of dealing with the behaviour and conduct of the underperforming staff member, the two managers sought to deal with Linda Murray, claiming that she was bullying that member of staff. That led to Linda being forced off work with stress, and that situation was compounded by the hostility with which she was met by Ian Travers at her return to work interview. A suspension for 10 and a half weeks for insubordination was the outcome of that meeting. An example of that insubordination was asking for HR to attend the meeting with her. A 200-page report was produced and a dismissal for gross misconduct was the outcome.

From the outset of her dismissal, Mrs Murray was denied any measure of fairness or justice. Prior to her disciplinary meeting, she was not provided with the 60 questions that she would be asked. Those questions were overly long and loaded. She was refused the opportunity to interview some of the key witnesses in the case and staff were told that they did not have to provide written statements to her. Lies were told within the organisation to justify the disciplinary action. It was reported to

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Mrs Murray by a former colleague that a rumour was circulating that she had assaulted Ian Travers. She was never afforded the opportunity to put her side of the story. Such a culture of fear existed within the organisation that people were not prepared to speak out for fear of losing their jobs. It seems coincidental that the only senior officer to stand up for Linda Murray, her ex-husband, was subsequently investigated and subjected to disciplinary proceedings.

Mrs Murray pursued her case to a tribunal, knowing that she had been hounded out of the Health and Safety Executive for personal, not performance reasons. She understood the grounds of her dismissal were erroneous and a complete fabrication. She is a well-educated woman with a law degree. She had one successful career and has gone on to build a second one, but she admits that going through the tribunal process nearly broke her. She was unable to afford a lawyer to represent her as she was on jobseeker’s allowance, she had no access to legal aid, and her trade union, Prospect, refused to support her case, siding instead with the management. Linda Murray had to defend herself against the HSE’s legal team, which was publicly funded. We paid for it.

In the end, an independent arbiter, Judge Reed, was the person who finally listened to Mrs Murray. Although she paid a very heavy price, no action has ever been taken against the individuals who pursued a personal vendetta, including Ian Travers, who initiated the investigation and who reacted in a fit of personal pique having had his management capabilities questioned; Alf Williams, who I understand is a personal friend as well as a colleague of Ian Travers, and whose evidence provided a major contribution to the investigation; Philip White, who led the deeply flawed and oppressive investigation and who was heavily criticised by the employment tribunal judge; Eddie Morland, who rubber-stamped the outcome of the investigation; David Snowball, the senior operations manager who oversaw the investigation in conjunction with Peter Baker, and who took the decision to elevate the issue to the head of human resources, who I understand is now deceased; and Gordon MacDonald, a very senior official in the HSE who was asked personally by Linda Murray to intervene, which he had the authority to do, but who failed to act, allowing Mrs Murray to endure a tortuous experience.

As an organisation, the HSE does not seem to have learned from the experience either. It has refused to acknowledge the outcome of the case and has failed to take any action to restore Linda Murray’s reputation. Specifically, it has failed to address the rumour of assault being the grounds for her dismissal. Will the Minister give a commitment that the permanent secretary for the Department for Work and Pensions will personally ensure that this matter is investigated? Can he assure me that a conclusion will be reached within six months and a report produced that Mrs Murray and I can access?

The record should be set straight and Mrs Murray should get an apology, but for the Minister there are much wider questions. How does this happen in the Government’s name—or any Government’s name? Why is no action taken to investigate malpractice when a tribunal judge finds so heavily against an organisation or Government Department? What can he do to limit and, indeed, stop bullying in the workplace? Should fit and proper person tests be applied to the misuse of power? Then there is the cry from the taxpayer: how

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much have these failures across public services cost the taxpayer? How much of that money would have been better directed into public services?

I have presented the case of a single person. In a couple of weeks there will be an even bigger report from the health service along similar lines. We cannot allow this behaviour to continue and I look to the Minister for assurances that it will be rooted out.

4.13 pm

The Parliamentary Under-Secretary of State for Disabled People (Justin Tomlinson): It is a pleasure to serve under your chairmanship, Mr Percy. I thank the hon. Member for West Lancashire (Rosie Cooper) for raising this serious issue and giving me the opportunity to provide a response as the Minister responsible for the Health and Safety Executive. Neither I nor the board or senior management of the HSE are happy to hear of any distress felt by any member of staff working at the HSE. It strives to be a good employer and knows that its highly skilled staff are its most important asset.

I hope that the hon. Lady appreciates that it would not be appropriate for me to discuss matters relating to the individual case she outlined. However, I acknowledge the strength of the points she put forward and what she asked of me as a Minister. I am meeting with the HSE’s senior team next week and shall bring this matter up. I want to investigate the case further, and I will also ask the senior team to meet the hon. Lady to discuss it. The hon. Lady has put a case on the record very powerfully and I have listened to it, and I give an absolute commitment to look into it further. I will try to do that as quickly as possible. I thank her for putting the case; it is a credit to her work on such matters. It is particularly important that she is asking whether this is just a specific case or a wider issue. We will certainly want to look into that.

Nick Thomas-Symonds (Torfaen) (Lab): It is always a pleasure to serve under your chairmanship, Mr Percy. I congratulate my hon. Friend the Member for West Lancashire (Rosie Cooper) on securing this debate and on the way she made her case. On the broader management of the HSE, can the Minister reassure me that while of course it has its advisory role, its enforcement role is equally important?

Justin Tomlinson: I absolutely agree with that point.

Because I cannot discuss specific cases here, I shall set out the wider issues relating to the work that the HSE is doing. Nevertheless, I have made a firm commitment to look at that serious case, and it should be investigated further.

Rosie Cooper: Before the Minister deals with the generalities, may I say that there is a huge irony in the HSE being the subject of the comments I have made? Will he look at the overall picture, in which employees are bullied, but even when a case goes as far as a tribunal that finds in the employee’s favour, the system does not learn? The people who promulgate that behaviour are not held properly to account. The NHS has fit and proper person tests; what happens in other public services?

Justin Tomlinson: The hon. Lady’s point is absolutely understood, and we will take that forward.

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The HSE lies at the heart of a globally respected regulatory system and has been a catalyst for positive change in organisations ranging from the smallest micro-businesses right up to global players that manage major hazard facilities. It has helped Great Britain develop one of the best health and safety records in the world, and fatalities, injuries and ill health have all substantially reduced since it was formed in 1975. The 2014 review reflected the high esteem in which the HSE is held. There was widespread support from stakeholders for the organisation and for the professionalism and technical expertise of its staff. I have genuinely seen that at first hand when I have spoken to businesses at events. The previous Government accepted the review’s recommendation of confirming the HSE’s operating model and its status as an arm’s length body.

Last week, the HSE launched a new strategy for the health and safety system in Great Britain, aimed at helping the country to work well. Almost a thousand people from hundreds of organisations attended seven roadshows in seven cities to develop the new strategy, with 7 million more being reached through social media. The six themes outlined during the engagement with stakeholders attracted strong support, and now the strategy is setting a positive new direction for health and safety across England, Scotland and Wales. It will help each nation to work well, protecting lives and livelihoods and helping Great Britain become more prosperous.

The strategy will help to ensure that we maintain our world-class health and safety record while maximising the wider benefits that the system can bring. Such achievements and the future ambition are made possible by the dedication, professionalism and specialist expertise of the HSE’s staff and management. I have personally visited the HSE laboratory in Buxton and seen for myself the energy and innovation of the people there. Their work is directly helping industry to improve health and safety, both here in the UK and abroad, where a number of international contracts have been secured to provide advice and support.

The HSE is part of the wider civil service and, as such, offers modern employment terms that compare favourably with other large organisations. In line with the rest of the civil service, it is aligning its human resources policies with new, modernised terms and conditions. Its HR policies reflect good practice and are consistent with what is expected of a well managed modern employer. It has excellent retention rates and turnover is low compared with similar organisations. Excluding retirement, only 3% of staff leave each year. There is a high degree of loyalty, pride and commitment, which I genuinely saw on that visit to Buxton. Many staff enjoy long careers with the HSE, giving the organisation an impressive corporate memory. The civil service people survey results show that the majority of its staff say they are proud to work for the executive and regard it as a great place to work where staff are treated fairly and with respect.

Like any ambitious organisation, it has identified areas for improvement. Over the past year, under the leadership of the new chief executive, Dr Richard Judge,

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and with the active support of the internal management board, the HSE has set itself a challenging agenda to invest in its people and capability. I will raise the subject of the debate with those people and ask for further work to be done.

As a result of the actions I have described, the HSE’s overall engagement score is improving. It rose by 10% on the previous survey. Although it is currently just below the civil service average, the HSE’s goal is to ensure sustained improvement and performance above the civil service average. The programme of action is designed to get the HSE into the best shape to deliver its responsibilities, not only to continue to improve an already effective health and safety system but to anticipate the future and embrace new ways of working. The programme will respond to feedback from staff, including through the annual people survey.

We are not complacent, and it is important that there is ongoing improvement. The senior leadership team’s priority is to improve staff engagement and address leadership and management at all levels. In line with the rest of the civil service, a clear statement of values and expectations for those in leadership roles has been launched, against which all managers will be measured as part of their appraisals. A key element of that ongoing work is a structured leadership and management development programme, with an initial focus on new managers. That programme will eventually be targeted at all managers, equipping them to lead the HSE through change and to manage group and individual performance confidently.

In the most recent people survey, the rating for inclusion and fair treatment stood at 71%. That figure is increasing. However, about 11% of staff reported that they had experienced bullying and harassment in the previous 12 months—slightly above the civil service average of 10%. The HSE has a robust bullying, harassment and discrimination policy, which has recently been revised with its trade unions. It takes seriously any reports of bullying, harassment or discrimination, and any such cases are investigated independently of the line management involved.

My experience of the HSE is that it is a modern, effective regulator with a diverse workforce. It has a well deserved reputation for professionalism, expertise and dedication. I have seen at first hand the energy and commitment of its people, including its leadership team, and I am confident that it recognises the importance of engaging and managing its workforce effectively and has clear plans for driving further improvement.

The HSE has helped Great Britain to develop one of the best health and safety records in the world. It has done so as a result of the expertise, professionalism and dedication of its staff, and its future success will depend on their ongoing support and commitment. Its leadership and management team recognise that and are committed to ongoing improvement. I am confident that they have a clear plan of action to make the HSE an even better organisation.

The matter that has been raised will be taken seriously, and we will investigate it further. Once again, I thank the hon. Member for West Lancashire for taking the time to highlight it to me and the senior management team. We will endeavour to do what we can.

Question put and agreed to.

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UK Energy Market

4.24 pm

Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con): I beg to move,

That this House has considered competition in the UK energy market.

It is a pleasure to serve under your chairmanship for the first time, Mr Percy. Energy prices and the challenges facing the energy market—perhaps the failure of the energy market—are issues that have vexed consecutive Governments for many years. The challenges we face in tackling the behaviour of the big six energy companies were most recently illustrated by the debacle of the Age UK-E.ON energy tariff. Age UK offered its customers a tariff with E.ON—one of the big six companies—which was not the best deal on the market and cost them many hundreds of pounds more than they needed to pay. That is an example of the big six energy companies’ behaviour. I have a good impression of Age UK from my engagement with both the local organisation in Suffolk and the national charity, which campaigns for the needs of older people. That tariff is an example of one of the big six energy companies behaving poorly and not offering good value for money for customers.

An important review of the energy market will be published tomorrow, so this debate is timely. It gives us an opportunity to talk about the challenges we face in developing a sustainable energy market that serves customers and looks after the most vulnerable—people on fixed incomes, people in social housing, older people and people who are in fuel poverty.

The energy sector faces three sometimes conflicting pressures, which we often call the “energy trilemma”. First, since the liberalisation of the domestic gas and electricity markets at about the turn of the century, energy customers have grown accustomed to relatively cheap energy. More recently—particularly since the recession —many households have struggled with energy bills and the cost of heating their homes due to increases in energy prices.

Secondly, the UK’s future energy requirements are an increasingly pressing challenge. The Department of Energy and Climate Change—the Minister may talk about this later—estimates that electricity capacity in the UK will need to grow in the long term, as demand is likely to increase by between 30% and 100% by 2050.

Thirdly, and rightly, the UK committed to reducing its greenhouse gas emissions by at least 80% by 2050 under the Climate Change Act 2008. That Act, which set out steps towards the decarbonisation of the British economy, was underpinned by cross-party support. When it was enacted in 2008, the right hon. Member for Doncaster North (Edward Miliband) was the Energy Secretary, and the Prime Minister, who was then the leader of the Opposition, gave the support of Her Majesty’s Opposition to that important measure.

In short, energy must become low carbon while remaining affordable to consumers and attractive to investment and investors. That is the energy trilemma. It has perhaps been made slightly less challenging in recent months by the fall in the global oil price and the lower fuel costs for many customers. Certainly, the cost of kerosene—the fuel that many of my constituents use for home heating—is at a record low level.

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Since 2008, Governments and the energy regulator, Ofgem, have sought to reduce the barriers to effective competitiveness in the gas and electricity markets, particularly for supplies to domestic customers. Up until now, the main aims of the regulatory interventions have been to ensure that the wholesale and retail gas and electricity markets are competitive. For retail consumers, the aim has been to make tariffs simpler, clearer and fairer and to reduce the complexity that previously dogged pricing in the energy market. The various interventions culminated in 2014 when Ofgem requested that the Competition and Markets Authority conduct an energy market investigation. Referring the matter to the CMA was intended to secure a once-and-for-all investigation as to whether there were further barriers to competition in the energy market, because the CMA had the more extensive powers with which to address the issue of big, long-term structural barriers.

In the course of the CMA investigation to date, the authority has published a large volume of evidence on its website, including more than 100 submissions from interested parties and transcripts of 30 hearings with industry participants and other important groups. In the provisional findings, which were published on 7 July 2015, the CMA suggested a range of adverse effects on competition in the energy market, as well as areas that did not give rise to such effects. The key provisional CMA findings were that a range of problems is hindering competition in the market, including the extent to which consumers are engaged in it and the shortcomings of the regulatory framework to support active consumer engagement.

The CMA also found that customers are not taking advantage of switching suppliers. Dual-fuel customers could save an average of £160 a year by switching to a cheaper deal, again highlighting behaviour of the big six of which we are too well aware. Furthermore, about 70% of customers are on the default standard variable tariff, despite the presence of generally cheaper fixed-rate deals.

The CMA outlined that regulatory interventions designed to simplify prices, such as the four-tariff rule, are not having the desired effect. A lack of transparency is hampering trust in the sector and, as I am sure that Members in the Chamber today know, a good example of that is the scandal exposed by the Select Committee on Energy and Climate Change in the previous Parliament, under its then Chair, Tim Yeo. The price comparison websites were only advertising deals that they were sponsored to advertise, so some of the very best deals were not available to the people using the websites. Every step of the way, there has been a lack of pricing transparency, even on the part of the price comparison websites. The history of the big six energy companies is far from one of benefiting the consumer.

Competition in the wholesale gas and electricity generation markets can work well—according to the CMA provisional report—but the presence of vertically integrated firms does not necessarily have a detrimental impact on competition.

Julian Knight (Solihull) (Con): My hon. Friend is making an important contribution and I congratulate him on securing the debate. I understand about the failings in the aggregator and price comparison sites sector, which we need to be aware of, but competition in

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the energy market has made some progress. In 2010, 99% of the domestic market was shared by the big six, but we now have more than 30 providers and independent suppliers having 30% of households. Does he recognise that there has been progress, and that we just need more and at a quicker pace?

Dr Poulter: There has been progress, but it has been among empowered consumers. The most vulnerable consumers—such as people on fixed incomes, pensioners and those who live in the poorest housing, are unemployed, have mental illness and people who are sometimes the least able to advocate for themselves—might not even have engaged with the internet, which plays an important part in supporting consumer choice. Such lack of engagement is not true of all older people, but it is of some. Such consumers have not been engaged in the energy market and we have a duty to look after them, in particular those who live in fuel poverty. In that respect, there is ongoing market failure, and that needs to change.

May I develop my earlier point, which is key? As I am sure my hon. Friend is aware, this was picked up in the recent Which? report. Despite the CMA investigation and its provisional findings of last year, the behaviour of the big six energy companies seems to remain unchanged, profoundly uncompetitive and certainly not in the best interests of vulnerable consumers. Ahead of the final conclusions of the CMA’s investigation into the energy market, which I hope and understand will be published tomorrow, the latest Which? research has revealed that the recent price cuts announced by the big six energy companies are dwarfed by the savings that customers could be making by switching to an alternative provider.

Customers on the standard tariffs of the big six providers save only £30 a year from the recently announced cuts, which is a 5% reduction for those on a standard single-fuel gas tariff and only a 2.6% reduction for those on a standard dual-fuel deal—the cuts applied only to gas, not to electricity. The same customers, however, would save a massive £400 a year if they were to switch to the cheapest dual-fuel deal on the market, or £260 a year for the cheapest gas-only tariff. Clearly, there are still problems with and concerns about the behaviour of the big six energy companies, in spite of the provisional CMA report.

That is why a number of not-for-profit energy collectives such as the Big Deal have sprung up to support consumers to get better energy deals. According to Government estimates—I am sure the Minister will correct me if I am wrong—only 12% of customers switch their gas provider, with seven in 10, or 71% of gas customers stuck on standard tariffs and nine in 10, or 88% of households still with the big six. The forthcoming energy inquiry must therefore make it easier for customers to engage with the energy market and to switch to a better deal.

Consumers include the most vulnerable people who live in our constituencies, in particular the elderly, pensioners and people who live in social housing and private rented accommodation—frequently in some of the worst and least energy-efficient accommodation. They are the poorest consumers, often living in fuel poverty, and they are paying the biggest price for the failure of the energy market.

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David Mowat (Warrington South) (Con): I do not want to be an apologist for the big six, but there is something about the subject that I always find intriguing. We have heard mention of “market failure”—another term for a cartel, frankly—but why have the big six not been able to turn their cartel into profits? Yesterday, Npower announced the laying off of some 2,500 people and a loss of £100 million. Other members of the big six, according to the numbers, do not appear to be making massive profits either. Where does the money go?

Dr Poulter: I assume that the inflated energy tariffs are benefiting the shareholders in a number of those companies, because the companies are certainly not passing the reductions in their costs on to the consumer. If we want to restore trust in the energy market, they need to do so. Some of the most vulnerable consumers, the people least likely to switch, are losing out. Clearly there is exploitation in the big six market position, at the expense of vulnerable consumers.

David Mowat: My hon. Friend is of course right: we must have more switching—we are all behind that—and we must make the market work better. My point, however, is that shareholders do not appear to be benefiting. Npower lost £100 million in the UK, and others have not made a great deal of money out of the market. It would be useful for us to reconcile that—perhaps the three Front Benchers will help us later.

Dr Poulter: The Front Benchers can speculate why the benefits of the reductions in costs for the energy suppliers are not being passed on to consumers, because they are clearly not being. The money is going somewhere, but not to consumers’ pockets. If we genuinely want to have an energy market that has the trust of the public and protects those people who are perhaps not engaged with it effectively, something different needs to happen. The money is going somewhere, but not to the people to whom we want to see it going, and that is what a market mechanism is designed to do—to benefit the consumer.

Julian Knight: I was in conversation with Npower today, because it is a major employer in my constituency and I had concerns about the job losses that were announced. Npower told me that, in effect, the industry is running on a profit margin of about 4% to 5%; by comparison, Tesco and Sainsbury’s normally look at about double that figure. So a huge profit margin is not in place and perhaps where the disconnect—excuse the pun—comes in is in areas such as prepayment meters, where vulnerable groups are paying over the odds for their energy, compared with more everyday and active consumers.

Dr Poulter: My hon. Friend is right. Indeed, I have raised that point. You quite rightly kicked off the debate a little earlier than we had anticipated, Mr Percy, because the previous debate came to an early end, and in my opening remarks I alluded to exactly that point in relation to E.ON’s recent Age UK tariff, which was an uncompetitive deal compared with some provided by other big six energy providers—I give some of them credit in that respect. It was about £140 more expensive than the best big six deal at the time. That exploited the good will of Age UK and of its customers, who would have expected that Age UK would provide them with

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the best deal available, which it clearly was not. That has further damaged the reputation of the big six and how they can use their market position to the detriment of the customers they purport to serve.

Julian Knight: My point related more to prepayment meters, which are topped up at shops or other retailers, but people find that they go into emergency credit and end up paying far more for their energy. My hon. Friend is making some valuable points, but I wonder whether there is an acute difficulty only in small areas of the market, with overall profit margins being relatively low.

Dr Poulter: My hon. Friend is right to make that point about pre-payment meters. In that situation we are often dealing with some of the poorest energy consumers who can least afford to pay, but who pay a lot more for their energy as a result of those meters. I am sure the Minister will want to comment on that. Citizens Advice gave evidence to the Energy and Climate Change Committee on the importance of protecting vulnerable consumers and ensuring that they are not left behind by an energy market that benefits more informed, internet-savvy consumers. We need to protect those who by dint of social circumstance—they may not be very well off, or they may be in difficult circumstances—may not have the same opportunities as others to choose where they live. They may have to deal with pre-payment meters, which I am sure none of us would choose for ourselves. There is clearly a role for the Government in looking at how to protect vulnerable consumer groups.

Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP): The hon. Gentleman is making a fantastic speech. People on prepayment meters are the disguised self-disconnectors, which is a bad news story for those individuals but also for the country and for companies. That must be addressed, as the hon. Member for Solihull (Julian Knight) said.

Dr Poulter: I completely agree with the Chair of the Energy and Climate Change Committee; that is a good point well made. I hope we will have the opportunity to do that either through legislation or through cross-departmental work. This is an issue not just for the Department of Energy and Climate Change but for the Department for Communities and Local Government, which can implement much energy legislation that affects homes in the private rented sector. I am sure the Minister will want to take the issues forward with Ministers from that Department in some cross-Government working, because it is important that the energy market benefits the most vulnerable people in our constituencies.

Despite the CMA’s investigation and its provisional findings last year, the behaviour of the big six energy companies seems to remain broadly unchanged, profoundly uncompetitive and, as I outlined, certainly not in the interests of some of our most vulnerable constituents. Ahead of the conclusion of the CMA’s investigation into the energy market, numerous measures have been put in place that have not been in consumers’ best interests. I am aware that other Members wish to speak, so I will try to bring my remarks to a conclusion fairly soon, but it is worth highlighting where that review is and where it may lead us.

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The CMA’s provisional findings were a clear indictment of a market that in my view—this is not without a good amount of evidence—is failing consumers. They showed that energy suppliers were exploiting their unilateral market power to price tariffs above a level that could be justified by the costs at which they were buying energy. In the Which? annual energy supplier satisfaction survey, three of the big six suppliers failed to meet the overall average customer satisfaction score of 53%, and npower had the lowest score for the sixth year running, at 41%. I am sorry to highlight that to my hon. Friend the Member for Solihull (Julian Knight), given the point he made.

Ofgem’s latest complaints figures show that the big six received an eye-watering 5 million customer complaints last year. I am sure hon. Members agree that such flaws in the energy market demonstrate the need for radical reform and change. There is also concern about the level of detail that the CMA has provided to date on its potential remedies, which is seen as lacking. I hope that we will get clarity on that tomorrow when its final report is published. There may be merit in the safeguard tariff proposal, but not enough thought has been given to how it will interact with proposals to get more people switching.

Crucially, the CMA appears to have given little or no thought to the steps that will engage people in the energy market, particularly after the failure of Ofgem’s retail market review. At a time when people should be saving as much as £400 by switching from a big six standard tariff to one of the smaller suppliers’ cheapest tariffs, a rise in switching of just 15% is a drop in the ocean. That raises big questions about what can be done to get people to switch and save, and the CMA needs to deliver clear answers.

David Mowat: My hon. Friend mentioned npower, which got a very low customer satisfaction score, has lost 200,000 customers, I believe, and is having to make something like 2,000 to 2,500 people redundant. In that respect at least, there is an argument that the market is working.

Dr Poulter: The market may be reflecting the damage to npower’s reputation, with some loss of jobs. None of us would like to see job losses in our constituencies, but clearly there are lessons for npower to learn. However, it is only one of the big six energy companies. As a group, their behaviour has consistently been not customer-focused, as the Which? survey bears out, and they have not made improved energy tariffs available to customers, particularly vulnerable customers. I do not believe that that is a good or healthy market, which is why Ofgem referred the issue to the CMA in the first place.

Crucially, the CMA appears to have given little or no thought to how we can engage people in the energy market. There are sticky customers—vulnerable customers, older people and those in the private rented sector—who do not engage, and we need to see that change.

In their draft legislation, the Government are looking at developing greater price visibility, compelling offers and quicker switching. Those ideas have a lot of merit and will encourage greater engagement in the market by some, but I am not sure all, customers. There is a compelling case for the CMA inquiry ensuring that the presentation of pricing is more engaging for customers. In particular, the switching process needs to be improved—

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both the time limit and how it works. The Government are looking at that in the draft legislation, which is welcome. We know that customers will switch, but the challenge is getting them more engaged in the market.

Today’s energy market is failing customers. Millions of people, many of whom are vulnerable and living on fixed incomes, are being punished for loyalty to their energy supplier, paying hundreds of pounds more for their energy than they should. The big six are using that money to hook in new customers with loss-leading tariffs, which is a cynical and poor way to treat customers that destroys market competition at customers’ expense. That is one of the key reasons why the big six retain their market position. The situation is worsened by too many complex rules and regulations and a lack of pricing transparency.

The CMA has a unique opportunity to deliver a new regulatory model based on simplicity and common sense, underpinned by clear, strong and practical principles that protect vulnerable customers and those on fixed incomes. In a refreshed energy market, with the energy companies showing genuine corporate responsibility, there is an opportunity to put customers at the centre of a market that is meant to serve them. Those who profit from exploiting their customers should have no choice but to change or face much more stringent financial and other penalties from regulators.

I would like to see three changes to the energy market coming from the CMA review, and I would be grateful for the Minister’s comments on them. We need to see fair pricing—energy suppliers’ prices should reflect underlying costs, and suppliers should be stopped from overcharging loyal customers or running loss-leading tariffs that damage competition and drive smaller suppliers out of the market. Regulations should be based on clear principles, with the priority being to avoid customer harm and to protect vulnerable customers and those on fixed and lower incomes, particularly those in fuel poverty. That leads to the key third principle of energy market reform: we must protect the vulnerable. We need a regulated, annually set social tariff that stops the most vulnerable customers and those in fuel poverty being exploited by the big six.

If we do not achieve those things, the energy market will become a contradiction in terms. Consumers, particularly the most vulnerable, deserve better. I look forward to hearing from my hon. Friend the Minister.

4.51 pm

Chris Stephens (Glasgow South West) (SNP): It is a pleasure to serve under your chairmanship, Mr Percy. I have a sore throat, so you will be pleased to hear that I will not be shouting.

I want to touch briefly on the effects of the energy market in Glasgow. As the hon. Member for Central Suffolk and North Ipswich (Dr Poulter) said, it is easy to fall into the trap of assuming that everyone is online and knows which price comparison site is which. For the savvy and connected, it can be relatively easy to shop around, but in Glasgow, where half our residents have a home internet connection, the continued focus on online opportunities excludes hundreds of thousands of citizens.

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Poverty prevents many people from getting online, which in turn prevents them from shopping around and deepens the fuel poverty that they might seek to address. That block on the capacity of the financially and socially excluded reduces incentives for the big six to compete. Why compete for business from those customers when they are heavily handicapped in their choices, due to both the information available to them and the means by which they are able to choose?

There is no incentive for the energy companies to compete in the prepayment market; there is no market to speak of. Hundreds of thousands of customers who have moved into properties with prepayment meters are left with a choice of paying through the nose for their card meter or paying through the nose to get the meter replaced if they pass a credit check.

One constituent of mine was chased by one of the big six for an energy debt accrued on the prepayment meter in his flat. Given that he had moved in while the meter was in situ, there was no possible way for him to have run up a debt. Nevertheless, it was only when my office intervened that sense prevailed. How many other cases like that are out there, with debt recovery agencies chasing innocent victims for non-existent debts run up on a non-existent meter using non-existent energy?

Another constituent—a pensioner on a fixed income—attended my surgery to talk about his electricity costs. His last quarterly bill showed that three quarters of his spending was on standing charges. Although I understand that energy companies need to ensure that the maintenance of infrastructure is funded properly, it surely cannot be beyond their ken to ensure that vulnerable and poor customers such as my constituent do not find themselves afraid to turn the heating on for fear that their next bill will be unpayable.

Comparing costs per unit, per day and per month is just part of the problem. Qualification for the warm home discount scheme, for example, varies from company to company, with some enrolling only those mandated by the scheme and others extending entitlement to recipients of qualifying benefits. Navigating that minefield and finding the company that offers the best terms requires time, patience and, again, an internet connection. One hundred and forty pounds off the electricity bill may not seem a huge amount, but to someone on a means-tested benefit it is invaluable.

Competition in the energy market is not simply about who sells the cheapest kilowatt-hours or who gives the biggest discount on direct debit. A proper market serving the wider population requires that population to have equal access to information, so that they can make informed decisions. Sadly, the number of people still falling into fuel poverty means that far from the situation improving, it has in fact worsened over recent years.

4.55 pm

Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP): It is a pleasure to speak under your chairmanship, Mr Percy. I would first like to thank the hon. Member for Central Suffolk and North Ipswich (Dr Poulter) for securing this debate on such an important issue. His excellent speech covered all the key issues—the dominance of the big six, the lack of trust and transparency, loyalty to and by customers, fuel poverty and, of course, competition. I am delighted to see the general alignment

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across all parties on this subject, and I look to the Minister and the Government to address the serious issues raised.

The UK energy market is, without question, dominated by the big six suppliers. That market structure is detrimental to energy customers because companies within such structures are, by nature, subject to far less competition than those in competitive markets, and competition is key to keeping prices down. Ofgem itself has acknowledged that while there was no evidence that the big six were operating as a cartel—something that the hon. Member for Warrington South (David Mowat) spoke of—there was a possibility of tacit co-ordination between them.

Last summer, the Competition and Markets Authority found a range of problems hindering competition in the market. Two key factors were a lack of transparency and trust in the energy sector, as well as the fact that customers were not switching suppliers, which many Members have touched on. It is easy to see why many do not trust the energy sector. While energy companies have seen record profits, customers have seen their energy bills become even more expensive.

Between 2009 and 2012, during a global recession that saw millions struggle to find a stable income and keep food on the table and a roof over their families’ heads, retail profits of energy companies increased from £233 million to £1.1 billion. Ofgem has found no clear evidence that that increase in profits was due to increased efficiency by suppliers, meaning that the unprecedented growth in profits during a global recession could only be a result of charging customers more. Let us be clear: profit in itself is not a dirty word—it is vital to business and the economy. It is, however, the levels of profit that raise concern in this decade of austerity.

The CMA found last year that energy consumers were being collectively overcharged by £1.2 billion per year. Meanwhile, ScottishPower quadrupled its profits from £27 million to £114 million, and British Gas saw its profits rise 99% between 2014 and 2015—notably, at the same time as its parent company Centrica planned to cut 4,000 jobs. Just this week, Npower announced it would cut 2,400 jobs, as has been well covered in this debate.

Even after the most recent overcharging scandal, energy suppliers are still overcharging customers. In January, Ofgem found that despite wholesale costs—costs that make up half of a customer’s energy bill—falling by nearly one third over the past year, that decrease in cost has not been passed along to customers. How can we possibly expect consumers to trust these energy companies when they so regularly take advantage of customers to bolster their own profits?

Coupled with that lack of trust is a lack of transparency by energy companies in terms of the tariffs they are selling to customers. A huge number of tariffs are available, the abundance of which makes switching suppliers and choosing a new tariff complex and confusing. Moreover, the related benefits and charges of the tariffs available, such as introductory offers and exit fees, are presented in a variety of ways, making the options available even more difficult to understand.

While online comparison websites are a welcome tool for consumers to help navigate the complexity of the various tariffs available to them, the variety of tariff structures available means that even using those websites

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does not guarantee that a customer will select the cheapest tariff or instil confidence in the customer in their decision to switch suppliers. Moreover, as my hon. Friend the Member for Glasgow South West (Chris Stephens) said, the most vulnerable in society are often unable to utilise those online resources. That combined lack of trust and lack of transparency makes customers hesitant to switch. In turn, it gives incumbency advantages to suppliers, which is a politically correct way of saying that suppliers systematically overcharge and exploit their existing long-term customers.

Turning to fuel poverty, in any debate on the energy market, it would be remiss of me to fail to acknowledge the real-life impact on consumers of the fact that the energy market, at present, does not work in their best interests. That impact is most evident in the prevalence of fuel poverty among the most vulnerable in society. My hon. Friend spoke articulately—if somewhat quietly—about the very serious issues of high tariffs for those in fuel poverty and the lack of opportunity to switch, telling us distressing real-life stories of how vulnerable and not well-off customers suffer most under the present system.

In the last 10 years, under energy market regulation dictated from Westminster by successive new Labour and Tory Governments, the number of households living in fuel poverty in Scotland has risen by 10% to 40% of households—let me say that again: 40% of households in Scotland are living in fuel poverty. Fuel poverty means more than simply not being able to keep the heating on. Fuel poverty has been found to cause mental health problems in adolescents, as well as respiratory problems in children. It affects the educational attainment and the emotional wellbeing of children and means that household income, which could otherwise be used to purchase healthy, nutritious food, goes on paying energy bills.

The combination of mental and physical health problems, poor diet, emotional turmoil and diminished educational attainment caused by fuel poverty is a recipe for condemning people to the cycle of poverty. To me, and clearly to most Members speaking today, that is completely unacceptable. Why should so many suffer while energy companies systematically continue to overcharge customers and take advantage of the market failures in the energy market that this Tory Government continue to fail to address?

After considering the many contributions made by hon. Members, it is clear to me what needs to be done to address the critical issue of the UK energy market’s failure to benefit consumers. First and foremost, the systematic overcharging of customers must end, and the cost of energy bills must be reduced. The fact that this overcharging is so common is a clear indicator that the regulatory structure is not working at present.

More needs to be done to make switching suppliers easier. If customers had the confidence to switch suppliers, competition in the market would increase and, in turn, hopefully help to push down prices. That means addressing the two underlying reasons why customers are not switching suppliers—the lack of trust in the industry and the lack of clarity and transparency surrounding the different tariffs available to customers.

Finally, the growth of green energy provides a potential competitor to the big six energy providers, creating huge scope to help to push down prices for customers.

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However, barriers to entry and expansion remain for energy providers. Proactive steps must be taken to ensure that this growing sector, which provides energy that is both renewable and potentially cheaper than traditional sources, is able to compete against the dominance of the big six.

5.3 pm

Dr Alan Whitehead (Southampton, Test) (Lab): I congratulate the hon. Member for Central Suffolk and North Ipswich (Dr Poulter) on securing the debate, which is so timely, given that it is within 14 hours of the Competition and Markets Authority’s report on its findings coming out. Unfortunately, it is taking place 14 hours before the findings come out, but it is pretty closely targeted on the important development that we are about to witness. For this afternoon’s debate, we have the CMA’s provisional findings, which I guess will inform the report that will come out shortly. The hon. Gentleman directed his very thoughtful points about the whole question of competition in the energy market to a number of those.

This is a conundrum with many layers—exactly how competition works, how it can best work, how it can be better enhanced and how it can work for those customers who could benefit most from better competitive arrangements in the energy market. In many instances, those customers appear at present to be stuck in a non-competitive mode with energy companies. Energy companies almost regard those sticky customers as assets that they can use to make additional resources, as the hon. Gentleman mentioned, with which they can finance special offers and various other things, which, to some extent, rely on the knowledge that those sticky customers will remain with the company—perhaps that is part of the conundrum—apparently very much against their better economic interests and despite longer-term concerns. I will perhaps return to that thought in a moment.

The hon. Gentleman also made the very important point that we are discussing one part of that energy trilemma, in that we have embarked on—and I hope we will continue to be solidly embarked on—a process of decarbonisation of our energy system. Clearly, that has to be achieved, but under the circumstances of two additional imperatives: first, that there should be security of supply, among other things to make sure that the lights stay on, which is perhaps a rather important part of the customer experience of electricity prices and the market; and secondly, that prices should be fair, reasonable and equitable, as far as customers are concerned.

I am not sure that it would too far outside this debate just to reflect on the first part of that energy trilemma. I gently ask whether the Minister has any sort of plan B in the light of the difficulties that we are having with capacity, the recent reports concerning the possible development of Hinkley Point C power station and the apparent inability of the capacity market as it stands to develop any contracts for new long-term building, particularly of gas-fired power stations. Does she wish to share any thoughts with us on how that particular leg of the trilemma might best be supported over the next period? That seems relevant to the other two legs, and particularly to the leg that we are discussing this afternoon.

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As for the question of how prices can be as fair and competitive as possible to customers, we need perhaps refer to what is happening with the CMA. It was interesting last summer to see the CMA’s report on provisional remedies. As the hon. Member for Central Suffolk and North Ipswich outlined, it concluded that a number of features of the market gave rise to the finding of an AEC—an “adverse effect on competition”. The report stated that that arose through

“weak customer response, which, in turn, gives suppliers a position of unilateral market power concerning their inactive customer base”,

which they are able to exploit through their pricing policies or otherwise. That refers particularly to sticky customers, but I was slightly surprised at the brief consideration that the CMA’s interim report gave to a number of other factors that seemed to contribute to that, such as vertical integration in energy companies. That may not have a direct impact on competition, but it may have an indirect impact for a variety of complex reasons that may have a hand in the process.

Perhaps part of the answer to the conundrum that has been presented in this Chamber this afternoon about where the money goes when energy companies are apparently posting substantial losses is a better understanding of how vertical integration works. It is not just within the UK power generation and retail market. It has been suggested that companies that buy and sell to themselves create an opportunity to shift sums around considerably.

There is increasing vertical integration outside the UK. Some companies are reporting what is happening in the UK, but also in the context of what is happening outside the UK, such as company structures. The extent to which those companies are able to post profits or losses in particular countries in which they are working does not necessarily reflect entirely what is going on across the board in other countries of operation. That should be examined at least.

David Mowat: I am interested in the hon. Gentleman’s comments about vertical integration because the interim report looked at that and theory of harm 3a and 3b. My reading of it was that the CMA did not regard vertical integration as a major issue. I looked at it quite carefully.

On the point about moving profits around, which is the issue regarding vertical integration, the share price of Centrica, the owners of British Gas and the biggest player in all this, has gone down by around 40% in the last five or six years. I have no truck with these oil companies and big players, but if they are running a cartel, it is one of the worst I have ever seen.

Dr Whitehead: The hon. Gentleman makes an important point. This issue is like an onion. It has many layers that must be unpeeled before anyone can get anywhere need the essence of it. Part of the process is that some companies are losing customers with insurgent companies coming into the market, and some are setting up good companies and bad companies to bifurcate the process of where their investments go and where their profit centres are. That clouds the picture. Obviously, there is the effect of energy prices, particularly who has bought what, where and when, and what those prices now mean in terms of strategies that took place two, three or four years down the line.

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David Mowat: People can move profits around and have good companies and bad companies. What I am saying is that Centrica, which owns British Gas, has somehow turned the cartel that it is apparently operating —we will find out tomorrow so we are speculating—into a 40% reduction in its share price in the last five years. That is not a good performance in running a cartel.

Dr Whitehead: Indeed. As the hon. Gentleman underlines, that may be a factor of other processes at work in those companies and what investors think is their long-term security and future in the light of rapidly changing energy conditions. A whole series of factors is at work, and I hope that, in the report that the CMA will publish tomorrow, it has paid due attention to the complexity of those factors. I fear that some of that complexity was not fully reflected in its initial proposals.

A second complexity is transparency: who is buying what at what point round the curve, how companies are hedging their trading processes and whether they are trading with themselves and hedging advantageously compared with other companies down the line. One might argue that that is good practice or bad practice, but we do not know that because the market is not transparent at the moment.

Andrew Percy(in the Chair): Order. The hon. Gentleman should have had five minutes, although he is within his rights to take more as we have more time, but he will shortly have been speaking for 13 minutes, which will leave a similar time for the Minister. It would be courteous if he concluded shortly so that the Minister may have the appropriate time.

Dr Whitehead: I thank you for your guidance, Mr Percy. I fear I was somewhat swayed by expert fellow Members in the Chamber into going down paths that took me longer to explain and which I might otherwise not have been involved in. I, too, want to hear what the Minister has to say and I will conclude as soon as possible.

All I want to say further concerns the central issue that the hon. Member for Central Suffolk and North Ipswich raised. Why is it that 70% of the big six energy companies’ customers stick with those companies through thick and thin, regardless of what opportunities are thrown at them to switch? Some of the remedies that are likely to arise tomorrow may not address that issue as closely as they should. The idea of putting people on a temporary safeguard tariff while continuing to bombard them with suggestions that they switch works only when the latter process also works. If it continues not to work, those people move further from the market rather than closer to it.

Remedies that look at what people do—

Andrew Percy(in the Chair): Order. The hon. Gentleman has had substantially longer than the Minister will have, which is a discourtesy to her. Although it is in order for him to speak for longer than the allotted time, will he draw to a close within seconds and give the Minister the courtesy of responding?

Dr Whitehead: Indeed, Mr Percy.

What those people do should be a matter for considerable further examination and possible additional remedies. I hope that at the very least the CMA has provided in its report some additional arrangements that will work.

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5.18 pm

The Minister of State, Department of Energy and Climate Change (Andrea Leadsom): I congratulate my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) on securing this debate within such a short time of the CMA report coming out.

I want to reiterate that my Department puts consumers at the heart of everything we do. We are determined to be genuine consumer champions. Hon. Members will know that our priorities are to ensure that we have secure supply of energy and that we decarbonise at the very lowest cost to consumers. I remind hon. Members that we are determined to focus available support on the fuel-poor.

My hon. Friend was right to mention the appalling story of E.ON and Age UK selling poor deals to pensioners and it is right that Ofgem is looking carefully at that. He also mentioned the scandal during the last Parliament of price comparison websites not giving the best prices. That has been addressed in amendments to the voluntary code, but he was right to highlight that some of these issues are extremely serious and that we must always take steps to prevent them. I want to use this opportunity to reiterate to any energy companies listening to the debate that when wholesale prices go down, the Government expect them to pass those reductions directly to their customers.

The CMA, as hon. Members know, published its provisional findings last July. It is very clear that it found that retail competition is not working. It found that a lack of competition means that about 70% of households remain on their supplier’s most expensive energy tariff, despite the savings that they could make by moving to someone else. In fact, by switching from a standard tariff to the best fixed direct debit deal on the market, many people could save about £200 and some could save more, so again I will take this opportunity to say to anyone listening out there: please do shop around; it is really worth doing.

However, there is some good news to report. We have been working hard with Ofgem to improve competition, and the work is beginning to bear fruit. We now have 31 independent suppliers competing with the big six in the domestic retail market. That is up from just seven small suppliers in 2010. The independent suppliers are making inroads into the market share of the big six. They now have almost 15% of the dual fuel market; that is up from less than 1% in 2010. The Government have worked with the industry and Ofgem to halve the time that switching supplier takes from five weeks to 17 days. An increasing number of households are switching supplier. Ofgem recently reported a four-year high in the number of energy account switches; 6.1 million energy account switches took place last year. That is increasing competitive pressure on the big six, and prices are falling. We saw the price of the cheapest one-year fixed tariffs fall by more than £100 during 2015, and prices are continuing to fall. That is good news for consumers who shop around and switch tariffs and supplier.

Matthew Pennycook (Greenwich and Woolwich) (Lab): Will the Minister give way?

Andrea Leadsom: I will not give way at the moment. I want to get through part of my speech, as it has already been severely curtailed.

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It is a massive challenge to inject the sort of competition that we are seeing for fixed tariffs into the standard variable tariff segment of the market. That is the default tariff that most people are on. Despite the good news that all of the big six have announced price cuts to their standard variable tariffs this year, we want to see much more effort.

The Government, too, must do more, so we are working with Ofgem and the industry to move to 24-hour switching and we are continuing with our Power to Switch campaigns. In just one month of the Government-funded Power to Switch campaign last year, more than £38 million was saved by 130,000 households switching energy supplier. Of course, we have already committed to acting urgently on the CMA recommendations that we expect to see tomorrow.

Matthew Pennycook: Does the Minister think that there is any merit in looking at what more Ofgem can do to help new entrants better to understand the regulatory environment, as Ofcom does, I think, with the telecommunications sector?

Andrea Leadsom: Yes, the hon. Gentleman makes a good point. It is something that Ofgem is very aware of, but I will certainly take that point away and look at it again.

I want to address the point made by the hon. Member for Glasgow South West (Chris Stephens). He is absolutely right to say that prepayment meter customers are particularly ill served by competition. That has been picked up by the CMA. It is true to say that those customers have far less choice of tariffs. We had a very good debate about that quite recently in the main Chamber. However, we are beginning to see some improvement in competition, with some suppliers offering smart prepay tariffs. We are working with Ofgem to remove the barriers that those customers face in switching supplier. For example, Ofgem is working with suppliers to help customers who are on prepayment meters and in debt to switch supplier for a better tariff. The hon. Gentleman raised a very important point.

We are also starting to see some improvement in customer service. The latest Ofgem data showed that the six major suppliers received 1.5 million fewer customer complaints in 2015 compared with 2014, but with a total of just under 5 million complaints, they still have a long way to go. We are therefore working with Ofgem and the energy ombudsman to identify and then fix systemic issues to stamp out poor customer service. Ofgem carried out a review of the role of the ombudsman last year and recommended that it should carefully analyse the specific complaints and use that information to reduce the underlying causes of complaints. That work is ongoing and will be very important.

As well as working to improve competition, the Government have a range of programmes to help vulnerable and low-income consumers with their energy bills. We are supporting 2 million customers a year with the warm home discount. We have increased the level of the discount, and in 2014-15, more than 1.4 million of the poorest pensioners received £140 off their electricity bill, with more than 1.3 million of them receiving the discount automatically. We have confirmed that the

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warm home discount will be extended until 2020-21 at the current level of £320 million a year, and we will be consulting on proposals for 2016-17 shortly. It is the case that 600,000 low-income and vulnerable households, including families, also benefit from £140 off their bill. Altogether, a total of £1.1 billion of direct assistance has been provided to low-income and fuel-poor households since the scheme began.

The winter fuel payment, which went to about 12.5 million older people in 9 million households last winter, is a significant amount of help towards higher fuel bills in the winter, with households getting between £200 and £300.

Also, and vitally, the cold weather payment, which is paid to vulnerable people during periods of very cold weather, has been permanently increased to £25. Last winter, more than 400,000 payments were made, during the very coldest weeks of the year, at an estimated cost of £10.6 million.

A reformed domestic supplier obligation from April 2017 will improve the energy efficiency of well over 200,000 homes a year to deliver on our commitment to help 1 million more homes in this Parliament.

In response to the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) on fuel-poor households in Scotland, he will know that fuel poverty is a devolved issue. However, some of our schemes to help tackle fuel poverty are GB-wide. That includes the energy company obligation. The hon. Gentleman will be aware that with 35.3 households per 1,000 homes treated, Scotland receives the greatest share of ECO, followed by England, with 25.4 households per 1,000 homes and Wales with 21.9.

As well as supporting low-income and vulnerable consumers directly with their energy bills, we fund the big energy saving network. Again, I think that this addresses the point made by the hon. Member for Glasgow South West about the need particularly to help the extra vulnerable and the fuel-poor. Face-to-face help and advice through trusted organisations is one of the most effective ways to help vulnerable consumers to engage with the energy market. The big energy saving network reached more than 90,000 people in 2013-14 and about 130,000 in 2014-15, and we are well on track to reach a further 100,000 this winter. The programme has helped some of the hardest consumers to reach, with above average percentages of those with a disability, off the gas grid or without internet access—issues that a number of hon. Members pointed out—and about half of participants, 51%, have reported that they now spend less on heating their home as a direct result of being helped through the network.

My hon. Friend the Member for Central Suffolk and North Ipswich has made very good points, as have other hon. Members. This has been a lively and thoughtful debate, and we have covered a lot of ground. We already have work in train: rolling out smart meters, moving to next-day switching and continuing to help vulnerable and low-income households with their energy bills. We are committed to acting on the CMA’s recommendations. I therefore hope that my hon. Friend and others will leave the debate reassured that the Government are determined to make the energy market work in the interests of all consumers.

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5.28 pm

Dr Poulter: I thank the Minister, both other Front Benchers and all other hon. Members for their contributions. This has been a very productive debate, and we look forward to hearing tomorrow about the CMA’s findings, which I hope will benefit consumers.

Question put and agreed to.

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That this House has considered competition in the UK energy market.

5.29 pm

Sitting adjourned.