The Secretary of State for Energy and Climate Change (Mr Edward Davey)
With permission Mr Speaker, I would like to make a statement on the action the Government are taking to reduce the impact of Government policies on energy bills.
British households pay some of the lowest prices for gas and electricity in Europe, but that is no comfort to those who have seen energy bills rise considerably over the past 10 years. The latest round of price rises announced by the energy companies has been particularly unwelcome, coming ahead of what is likely to be a cold winter. In such circumstances, it is right that people ask whether these rises are justified and what the Government are doing to keep energy bills affordable now and in the long term.
The main driver of the energy price rises has been rising wholesale energy costs, and the need to upgrade energy infrastructure to ensure security of supply in the long term. Wholesale and network costs make up over two thirds of bills. Supplier costs and profits make up around a fifth. Energy companies need to be more open about these costs so that consumers can judge which suppliers are acting responsibly and keeping their costs down.
Working with Ofgem, the Government are making this possible by forcing the energy companies to open up their books and justify price rises to their customers. We are increasing competition in the market to bear down on prices and provide people with a proper choice of supplier, and as I announced in the annual energy statement, Ofgem, working with the competition authorities, will report annually on the state of competition in the market, looking in depth and across the energy sector at profits and prices, barriers to entry and consumer engagement. Ofgem’s reforms for competition in the retail market are already making it easier for people to understand their bills, work out where they can get the best deal, and switch providers easily.
But it is also right that the Government are open about their social and environmental policies, which make up just under a 10th of the average bill. Our policies provide for immediate help for the most vulnerable with direct cuts to bills, as well as long-term savings on bills through energy-efficiency programmes and support for low-carbon energy that boosts energy security and tackles climate change. For example, the warm home discount cuts the bills of 2 million vulnerable households by £135. The energy company obligation provides permanent long-term savings on bills, including to the most vulnerable, by helping people to upgrade their homes and making them easier and cheaper to keep warm.
Support for cleaner energy increases our energy security and boosts investment in our thriving renewable energy industry, with tens of thousands of green jobs being created, but unlike the winter fuel payment, which provides around 12.5 million pensioners with help with their bills, and cold weather payments, which last year provided over £146 million to cut bills for the most vulnerable, policies such as the renewables obligation, ECO and the warm home discount are paid for directly by consumers through their bills, rather than through general taxation. So it is right that Government keep these social and environmental obligations paid for by energy bill payers under continuous review, and where we can act to reduce their impact on bills, while maintaining the integrity of our policy, we will, but as we do this, we must act responsibly. We must ensure—[Interruption.] We must ensure that the changes we make maintain the support provided to the most vulnerable, maintain the investment in clean energy and do not have a negative impact on our carbon reduction ambitions.
In this spirit, the Government have reviewed the cost profile of social and environmental policies and I can today announce proposals that would reduce the average household bill next year by £50 on average. First, the Government will provide £300 million—[Interruption.]
Mr Speaker
Order. Let us have a bit of order in the House. The Secretary of State is doing his best to plough on—[Interruption.] No, he is doing his best to plough on through his statement. Let me say to the House that the opportunity to question the Secretary of State will arise, and that is what he would expect, but the Secretary of State is entitled to be heard courteously from start to finish.
Mr Davey
Thank you, Mr Speaker.
First, the Government will provide £300 million in both 2014 and 2015, £600 million in all, for a new rebate to all domestic electricity customers worth £12. Secondly, we propose to consult on remodelling the ECO so that it is easier and cheaper to deliver. The changes to the ECO would result in between £30 and £35 off average bills next year, although the precise reduction in individual households’ bills would depend on their energy supplier. The existing dedicated support in the ECO for low-income and vulnerable households—affordable warmth and the carbon saving community obligation—will both be maintained at current levels and extended from March 2015 until March 2017. The other element of the ECO, the carbon emissions reduction obligation, will also be extended by two years but reduced by 33%. These changes are subject to consultation, which will be carried out early in the new year. In addition to Government action, the electricity distribution network operators are willing to take voluntary action to reduce network costs in 2014-15, which would enable suppliers to pass on an average one-off £5 reduction in domestic electricity bills.
I have been clear from the start that support for low-carbon energy should not change, and it will not. The Government recognise that green energy investment incentives such as the renewables obligation, contracts for difference and feed-in tariffs are essential for investment in future home-grown clean energy generation. Without this low-carbon investment, energy security would be jeopardised as Britain would become ever more dependent on imported oil and gas, and energy bills in the future would be increasingly subject to high and volatile fossil fuel prices. The Government will also ensure that their overall approach will cut just as much carbon as planned. New measures, worth more than £540 million over three years, will boost energy efficiency even further by introducing new schemes for home-movers, landlords and public sector buildings.
In future, when people buy a new home, they could get up to £1,000 from the Government to spend on important energy-saving measures—equivalent to half the stamp duty on the average house—or up to £4,000 for particularly expensive measures. The scheme will be available to all people moving house, including those who do not pay stamp duty, helping around 60,000 homes a year over three years. The Government will also introduce a scheme to support private landlords in improving the energy efficiency of their properties, which will improve some 15,000 of the least energy-efficient rental properties each year for three years. Together, the home buyers and private rental schemes will be worth £450 million over three years. In addition, £90 million over three years will be spent on improving the energy efficiency of schools, hospitals and other public sector buildings.
The Government will deliver a significant boost to the green deal, increasing the funds available to local authorities this year through the green deal communities scheme from £20 million to £80 million, to help support “street-by-street” programmes for hard-to-treat homes in a cost-effective way. We will keep the green deal cashback scheme open, which will protect jobs in the energy efficiency industry before the new measures take effect.
All the major energy suppliers have confirmed that they will pass the benefits of this package on to their customers. The reduction in individual household bills will depend on the energy supplier: some companies have not yet announced price rises for 2014, or have limited their rise until the Government’s review of green levies concluded. Others have announced price rises and have indicated that they will reduce their customers’ bills as a result of these changes. Energy companies will now make final detailed decisions about how to apply these measures, but these cost reductions will ensure that average energy bills are lower in 2014 than they otherwise would have been—on average, by £50 per household. As the major energy companies have now confirmed, there will be no need for price rises in 2014, unless of course there is a major change in wholesale or network costs. Some have gone further, with commitments to hold prices down for longer.
Today’s announcement of cuts to energy bills is just part of the concerted action the Government are taking to help hard-working families, including through income tax cuts, the council tax freeze and the fuel duty freeze. This help for people with energy bills is being achieved while we maintain and extend support for the fuel-poor and continue to back green energy, and by boosting energy efficiency. I commend this statement to the House.
Caroline Flint (Don Valley) (Lab)
May I start by asking the Secretary of State a very simple question: does he accept that the sum total of everything he said in his statement today, which includes spending £600 million of taxpayers’ money and weakening the obligation on energy companies to deliver energy efficiency, is that the energy companies will still be allowed to put up people’s bills this winter? Does he really think that is a good deal for consumers?
The Secretary of State claimed that today’s announcement would lead to a £50 reduction in people’s bills. To be clear, will he confirm that if the average increase in energy bills this winter is £120, even if the companies do pass on the reductions from the cut in levies, the average household bill will actually be £70 higher than last winter? As I understand it, one supplier has announced that it will wait until March before passing on any price reduction, and another has made no commitment at all on reducing bills. What powers, if any, does the Secretary of State have to ensure that this reduction is passed on fully and immediately?
The Secretary of State will know that for the past two years we have said that the energy company obligation is bureaucratic, inefficient and poorly targeted. The scheme was designed and implemented under his Government. Indeed, the Prime Minister boasted in the House on 23 January that it was “bigger and better” than the schemes that had gone before it. When did the Secretary of State decide that the scheme needed to be cut? Was it this weekend? Could that explain why an impact assessment will not be published until next year? Will he also tell us how many fewer households will receive energy efficiency measures this year and next year than was originally planned under the scheme?
The Secretary of State wants to talk about the total number of households that will be helped, but if the scheme was meant to run for two years and will now run for four, does not that mean that half as many people will receive help in each year? Will he also tell us what discussions he has had with the insulation industry about the effect of this announcement, and what assessment he has made of any potential job losses in that industry?
As for the warm home discount, will the Secretary of State confirm that all he has actually done is move the cost from people’s bills to their taxes? Evidence that we published last month, and in our Green Paper last week, showed that increases in wholesale costs—which the Secretary State blamed in his statement for rising bills—cannot explain the price rises we have seen in the past two years, and neither can increases in network charges and policy costs.
Last month, the Secretary of State appeared to agree with our criticism of the way in which the energy companies had put up their prices, when he said that they were treating their customers like “cash cows”. In the light of that, will he confirm that there was not a single measure in the package that he announced today that will cost the energy companies a single penny? Hundreds of millions of pounds of taxpayers’ money is being spent, the energy companies are helping fewer households with energy efficiency, and people’s bills will still be higher this winter than last, yet the energy companies are still allowed to carry on overcharging people. Whatever the Secretary of State says today, if we genuinely want to get people’s bills down, nothing less than a price freeze and action to stop the energy companies overcharging will do.
Mr Davey
Members will notice that the right hon. Lady did not welcome this cut in energy bills for her constituents. Her constituents will want to know why she is not prepared to welcome it, and the constituents of every Labour Member who stands up to speak today will also want to know whether their Member of Parliament welcomes it.
We looked at the Opposition’s energy freeze proposal, and it was clear that it would not work. The energy companies would put up bills before it and afterwards. It was, and remains, a con. Worse than that, it would undermine competition and investment. Our proposals are real measures based on real facts, and they are going to help people across the country.
The right hon. Lady asked about the big six. We made it clear in our discussions that we expect them to pass on these cuts so that average bills go down by £50, and that is what will happen. She wants to know what we have said about the big six. We have pushed real competition measures. The big six were created by Labour. In 2000, there were 17 companies in the sector. By the time Labour left office, there were just six. The big six are Labour’s big six. This coalition has produced competition, which is really having an effect.
It was interesting to listen to the last Opposition day debate on this subject, in which the right hon. Lady revealed that she had not even read Ofgem’s proposals for competition in the wholesale market. That shows how much she is not on top of her brief. On the ECO, she has tried to suggest that we are cutting support for fuel poverty, but it is quite the reverse. As I made clear in my statement, we are not only maintaining support for the fuel poverty schemes within the ECO but extending them for two more years.
The right hon. Lady asked what had happened to the impact assessment. I have made it clear that we are going to consult, as she would expect. We will publish the impact assessment when we publish the consultation paper, as we would normally.
The right hon. Lady talks about the insulation industry. I am extremely concerned to ensure that it keeps people employed and keeps investing in people’s homes so that they can have permanently lower bills. Our proposal on the stamp duty—£1,000 off for people who move their homes, even if they do not pay stamp duty, to help the lowest-income home owners—will help the energy-efficiency industry, and it is welcoming it.
Finally, the right hon. Lady asked about shifting costs from bills to taxes. I would have thought she had spoken to the fuel poverty campaign groups, because it is they that have wanted this, as it is more progressive. So not only are our policies helping the fuel poor, but they are far more progressive than those we inherited from Labour.
Mr Tim Yeo (South Suffolk) (Con)
Does my right hon. Friend agree that an even bigger proportion of average fuel bills is accounted for by the transmission and distribution charges, and that further cuts in fuel bills could therefore be achieved if there was more pressure on the monopoly providers of transmission and distribution, such as the National Grid Company, whose prices are currently not subject to any competitive pressure or any market forces?
Mr Davey
My hon. Friend will have heard in my statement that the electricity distribution network operators will indeed be contributing £5 to this package next year. He will also know that Ofgem has called in the plans of the DNOs and the transmission distribution companies to look at them again, and it is for the independent regulator to scrutinise them with the care we expect.
Glenda Jackson (Hampstead and Kilburn) (Lab)
Despite the Secretary of State’s ploughing, he has markedly failed to deliver a straight furrow. Despite his criticism of the big six—they were the big six for the three years of his coalition Government and Labour’s big six for a week—there is not one penny coming from those companies to help reduce costs now, and this delay in the implementation of the ECO scheme means that there will be even bigger bills to be paid in the future.
Mr Davey
I am afraid that the hon. Lady is completely wrong. The ECO scheme remains—let us be clear about that. The affordable warmth component of the ECO not only maintains at its current level, but is extended for two years. Similarly, the carbon saving community obligation continues in force now and is extended. The only part of the ECO that is being cut at all—but it still remains—is the carbon emissions reduction obligation. She ought to welcome that, not least because the proposals published by the right hon. Member for Don Valley (Caroline Flint) suggest that the Labour party would get rid of that part of the ECO.
Tessa Munt (Wells) (LD)
Does the Secretary of State agree that moving towards general taxation means that the cost of the social and environmental measures he wishes to take will be borne by those who are better off, rather than by people with very low incomes and vulnerable households, whom we seek to help?
Mr Davey
My hon. Friend is absolutely right; moving some of the costs that were on the bill and having to be paid by all bill payers, no matter whether they pay tax or not, to taxation results in a more progressive system overall. One would have thought that the Labour party would welcome that.
Mr David Winnick (Walsall North) (Lab)
Does the Minister understand that an increasing number of people in this country are now terrified to use their heating because they are frightened of what their bills will be as a result of the very large increases? We are returning to the fuel poverty that existed under the last Labour Government—[Laughter.] I thought the Tories would cheer at that. It is because they do not want to recognise the fuel poverty that existed under the Tory Government, and it was the Labour Government who brought in the necessary measures to help so many people. This inadequate statement would not even have been made without the pressure from the Leader of the Opposition.
Mr Davey
It was the last Labour Government’s Energy and Climate Change Secretary who said that
“alarming people about energy issues is not a mature way to conduct politics”—[Official Report, 13 January 2010; Vol. 503, c. 773.]
If only he had kept to his word. This coalition Government have taken energy bills seriously, unlike the previous Government. They killed competition, whereas we are increasing it. They did not take the measures that we are taking, and they should be ashamed of their appalling record.
Mr Christopher Chope (Christchurch) (Con)
Why has the Secretary of State not taken the simple and straightforward option of abolishing VAT on household energy bills? That would deliver greater benefits to householders and be far less complex.
Lilian Greenwood (Nottingham South) (Lab)
Will the Secretary of State give me a personal guarantee that his hasty changes to the energy company obligation will not curtail or delay the ECO-funded Nottingham greener housing scheme, which is providing external wall insulation to the thousands of tenants and residents on Clifton estate who live in hard-to-treat solid wall houses? Will he meet me and representatives of the scheme to ensure that fuel-poor residents in hard-to-treat homes across Nottingham will be protected?
Mr Davey
As a lad of Nottingham and someone who has been on a visit with the hon. Lady to a number of homes that are benefiting from the ECO scheme, I agree with her. We must ensure that communities around the country are benefiting, which is why we have increased the money for the green deal communities from £20 million to £80 million. I am happy to look at the case that the hon. Lady has raised.
Sir Tony Baldry (Banbury) (Con)
Does my right hon. Friend agree that if the Government had not increased cold weather payments and the basic state pension and had not protected winter fuel payments, many vulnerable people would be even worse off when facing increasing energy bills?
Mr Davey
The hon. Gentleman is absolutely right. One of the first acts of this Government was to confirm the trebling of cold weather payments, so that people who were on low incomes had the money when they needed it. Under the triple lock, we have seen some of the biggest ever increases in the basic state pension, which has been greatly welcomed by pensioners up and down the country. By contrast, when Labour was in power, it oversaw an increase in the state pension in one year of just 75p.
Hywel Williams (Arfon) (PC)
How will these decisions help people in rural areas who depend on off-grid fuels?
Mrs Anne Main (St Albans) (Con)
Does my right hon. Friend agree that these problems have built up over many years and were not tackled by the previous Labour Government? He may also wish to know that in 2006, under the previous Government, fuel poverty in St Albans was at 6.4%, and it rose to a height of 13.7%. Does he agree that freezing energy for one year only would do nothing and that we need a sustained approach to cutting the number of taxes on people?
Mr Davey
My hon. Friend is right that fuel poverty rose to record levels under the previous Government. On their definition, the figures have come down under this Government. It is also interesting to note that the average increases in gas and electricity prices in the last Parliament under Labour were higher than the average annual increases in gas and electricity prices under this Government.
Derek Twigg (Halton) (Lab)
The fact is that many of my constituents will still struggle to afford to put on their heating, because this is an inadequate response to rising prices. I asked the Secretary of State in June whether he had raised with the energy companies the issue of profits. He said that he had not. Since then, in any other such meetings, has he raised any concerns about their level of profits?
Dr Phillip Lee (Bracknell) (Con)
In 2010, EDF sold its three English networks for £5.8 billion at a 27% premium on Ofgem’s value. In 2011, E.ON sold its networks at a 40% premium. Does the Secretary of State think that returns allowed on UK-regulated energy networks have been and are too generous? If so, is Ofgem fit for purpose.
Mr David Anderson (Blaydon) (Lab)
Is it not true that we were sold the privatisation of utilities on the supposed knowledge that there was a transfer of risk from the public sector to the private sector? What we have seen today is a transfer of risk from the billed utility customer to the taxpayer, so the same people are paying the same money through a different route while the companies get off scot-free and with a £600 million taxpayer bung.
Mr Davey
I do not recognise anything that the hon. Gentleman has just said. If he does not understand the difference between bill payers and tax payers, he needs to ask the fuel poverty lobby groups that are saying that people in his constituency on low incomes will benefit from this change, which moves some of the cost from bills to taxes. He really ought to talk to the fuel poverty lobby groups.
Mr Speaker
Order. The hon. Member for Blaydon (Mr Anderson) is now squawking like a parrot with indigestion. He must calm himself. He is normally a calm man and he aspires to statesmanship.
Mr David Heath (Somerton and Frome) (LD)
Last week during Energy questions, I pressed the Minister of State, Department of Energy and Climate Change, the right hon. Member for Sevenoaks (Michael Fallon), on the insulation of solid wall properties in rural areas, and he made some comforting remarks. Further to the Secretary of State’s answer to the hon. Member for Arfon (Hywel Williams), may I be assured that the programme to insulate solid wall properties in rural areas will not be slowed down by what he has announced today?
Mr Davey
I said that the rural sub-obligation would be improved to ensure that people are benefiting from it. We have some evidence that during the first year of the ECO it was not getting through to rural people, so reforming that would be a real benefit. It is true that there will almost certainly be fewer solid wall insulations done as a result of the changes. We have not hidden that, but we have ensured that there is a minimum floor to give the industry confidence. The measures we are proposing for the energy efficiency industry—the stamp duty incentive and the money for private sector landlords—will also help to ensure that the solid wall insulation industry continues to get support.
John Healey (Wentworth and Dearne) (Lab)
You may well be right that the Energy Secretary is doing his best, Mr Speaker, but it is simply not good enough. After today, people will still see their energy bills going up, so would they not be right to conclude that he and the Prime Minister are simply too weak and unwilling to stand up to the big energy companies?
Mr Davey
Not at all. People will look at the Labour party and see a party that is offering a con, a party that will undermine competition and reduce choice, meaning that they end up paying higher bills, and a party that is going against the national interest. We need to see investment in our energy industry to ensure that we keep the lights on. People around the country would not thank any Government who did not ensure that we had the investment for energy security.
Philip Davies (Shipley) (Con)
The Leader of the Opposition hiked up energy prices when he was Secretary of State for Energy and Climate Change and is now trying to claim credit for keeping them at that hiked-up level. Unfortunately, we have heard the same clap-trap from the Secretary of State today as we heard from the Leader of the Opposition when he was Secretary of State. My constituents want the Government to source the cheapest energy rather than the greenest energy. When is the Secretary of State going to start doing that?
Mr Davey
I am grateful to my hon. Friend for his contribution, as always, but I must say that the most secure and effective policy is a mixed diverse approach. The mixed diverse approach ensures energy security but as, over time, we see reductions in the cost of alternative energy, such as clean energy, it also becomes increasingly good value for money.
Fiona O’Donnell (East Lothian) (Lab)
That was like a bad sketch in “The Fast Show”, with the Secretary of State saying, “The consumer gives the energy companies £120. I will give them £600 million and they can give the consumer £50 back.” He repeatedly referred to the most vulnerable consumers. Many of those in my constituency are forced to use expensive prepayment cards; what is the Secretary of State doing to protect them?
Andrew Jones (Harrogate and Knaresborough) (Con)
Does my right hon. Friend not think that problems with the energy market, such as those relating to long-term generating capacity, built up over many years but had been ignored, including when the Leader of the Opposition was Secretary of State for Energy and Climate Change?
Mr Davey
My hon. Friend is absolutely right. One of the reasons why we have to increase investment so much over a relatively short time, which comes at a price, is the failure of the last Government to invest in energy infrastructure. People warned them, and warned the former Secretary of State for Energy and Climate Change, currently the Leader of the Opposition, to do something; he failed.
Bill Esterson (Sefton Central) (Lab)
The Secretary of State says that he is spreading the money for the energy company obligation over an extra two years. That delays measures that would help people to keep their bills down. Is not the truth that people in fuel poverty will pay higher bills for longer after this statement?
Mr Davey
Not only did I not say what the hon. Gentleman said I did, but that is not true. Fuel poverty programmes, such as the affordable warmth programme and the carbon saving community obligation, remain in place, remain at the same rate in each year, and are being continued for two more years, so this is more investment to tackle fuel poverty.
Christopher Pincher (Tamworth) (Con)
Within the next decade, we must invest £110 billion, probably more, in our energy infrastructure—the pipes, pylons and power stations—to keep our lights switched on. Does my right hon. Friend agree with energy experts and industry players that a freeze would jeopardise that investment, which would mean that the poor old taxpayers were even more hard-pressed because they would have to foot the bill?
Mr Davey
It would be worse than that: it would be the poor old consumers who did so, because the cost of capital would go up. There would also be a reduction in investment in green energy, which the Opposition claim to support, so the Opposition’s policy is both irresponsible and reckless.
Alex Cunningham (Stockton North) (Lab)
Around 100 people from my constituency, and hundreds more, face two extra hours on their working day after npower announced it was closing its Thornaby office, and that those people would therefore have further to travel. The company says that it is doing that, and sacking hundreds more and transferring the jobs to India, to help keep bills down. Has npower told the Secretary of State how much bills will come down by, at the expense of those lost and transferred jobs?
Mr Davey
This was discussed in a little more depth in oral questions to the Department of Energy and Climate Change last week. I made it clear that other Secretaries of State, particularly my right hon. Friend the Secretary of State for Business, Innovation and Skills, and I will look at what we can do to help people who are affected by npower’s redundancy package.
Mark Pritchard (The Wrekin) (Con)
I welcome the Energy Secretary’s announcement, and congratulate him on the robust defence that he has rightly made of the Government’s position. Further to an earlier question, may I ask him what more can be done for those in rural areas who rely on oil to heat their homes?
Mr Davey
The Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Sevenoaks (Michael Fallon), has been doing a huge amount of work on this. There will be a new code, or protocol, on working with industry to make sure that a lot of the policies that we have introduced, such as the “buy early” campaign, really help people who are off-grid in rural areas and who are dependent on fuel sources like oil.
Barbara Keeley (Worsley and Eccles South) (Lab)
The Energy Secretary talked about there being no need to alarm people, but I have never known a time when older people in my constituency were more alarmed, probably because of the £300 by which their bills have already gone up. Despite the cut to green energy levies, bills will still go up by £70, so those older people do not need alarming; they are already alarmed. Is it not time that the Secretary of State stood up to the energy companies and supported a price freeze?
Mr Davey
I was quoting the leader of the hon. Lady’s party when I talked about not alarming people; I was making it clear that he said one thing when he was in government and changed his mind in opposition. The hon. Lady, like many of her hon. Friends, failed to welcome the announcement of an average of £50 off household energy bills; she should welcome it, and welcome the fact that this Government, through our tough competition policies, are taking on the big six that Labour created.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
I welcome the positive response to the Select Committee on Energy and Climate Change’s recommendation that some of the costs of the levies be transferred to general taxation, as a fairer way of funding those levies. What is being done to assist people in switching, and to ensure that they realise that that is now meant to be simpler, and the best way for them to get the best deal?
Mr Davey
I am grateful for my hon. Friend’s welcome. He is quite right: we looked at what the Select Committee said on those issues, and considered it carefully. He is also right to say that switching is a really important part of the way to help people, because there are some good deals out there. In the annual energy statement, I talked about our ambition to improve and make switching easier, and we are already working with he industry to bring about quicker switching.
David Wright (Telford) (Lab)
The Secretary of State said that he wanted to make bills easier for the public to understand, but the public know that even after this reduction their bills will rise over Christmas and rise next year. Exactly what has he got out of the energy companies and, as we say in Telford, when are they going to dob some money in?
Mr Davey
The really important thing for the hon. Gentleman’s constituents is that the average energy bill in his constituency will go down by £50, compared with what it otherwise would have been. If we had listened to the Labour party and continued its policies, for example with the renewable heat incentive, bills would be £179 higher.
Robert Halfon (Harlow) (Con)
My constituents will see through the crocodile tears of Opposition Members, because they know that energy prices doubled under the previous Government. Is my right hon. Friend aware that EDF, the local energy company in my constituency, is offering customers significant decreases through fixed-term tariffs? It is also ensuring that customers know about other companies’ deals. Does that not show that increased competition is the best way to get energy prices down?
Mr Davey
My hon. Friend is absolutely right. When we came to power we found that there were far too few energy companies and that the big six had it all their own way. As a result of the measures we have taken, through deregulation and the retail market review, we are seeing independent suppliers come in and offer some really good deals. He mentioned making energy bills simpler, which will help people know their options and be able to choose to switch to lower prices and better deals.
Dr Alan Whitehead (Southampton, Test) (Lab)
Is there any part of his statement that the Secretary of State might wish to review in the light of what his own Minister of State, the right hon. Member for Bexhill and Battle (Gregory Barker), said yesterday, which was that the cuts in ECO will result in far less carbon being saved over the next period? Does he accept that ECO’s original intention, which was to cut bills by up to £400 for those who benefited from it permanently, is now seriously at risk as a result of what he has undertaken today?
Mr Davey
We approached the review with the intention of ensuring not only that we kept the support for the fuel-poor and the investment for green energy, but that it was carbon neutral. The package we have put together, not only with the energy efficiency investments we have announced today but with announcements that will be made in the autumn statement, will show that it is indeed carbon neutral.
Bob Stewart (Beckenham) (Con)
Would it be possible to tackle the problem of VAT on fuel by ignoring a European Union directive and saying that we are just not going to collect it?
Mr Jim Cunningham (Coventry South) (Lab)
We need to ask what the Secretary of State has been doing for the past three and a half years. He has blamed everybody but himself. When the issue first arose, he told people to wear pullovers. What he is offering people today is less than 90p a week off their energy bills. How does that square with the bedroom tax? It will affect a hell of a lot of poor people in this country. This must be one of the cruellest Governments we have ever had.
Mr Davey
I must say that the hon. Gentleman, to whom I normally listen with attention, is wrong on every point. For example, he did not draw attention to the fact that the warm home discount is delivering £130 directly off the bills of the 2 million lowest income households in our country, including over 1 million of the poorest pensioners, something that I thought he would welcome..
Guy Opperman (Hexham) (Con)
It is this Government who have introduced a code of practice for off-grid suppliers, raised the basic pension and increased cold weather payments in a multiple way. Does my right hon. Friend agree that this reduction will help the vulnerable and elderly, in particular, in my constituency?
Mr Davey
The hon. Gentleman is absolutely right. He is also right to put this announcement in the context of all the other things the Government are doing, whether it is the income tax cut that is taking some of our lowest paid out of income tax altogether, delivering a £700 tax cut for people on the basic rate of tax, the council tax freeze or the fuel duty freeze. These things are never admitted by Labour Members, but our constituents are benefiting from them every day in every way.
Nia Griffith (Llanelli) (Lab)
Many of my constituents who get their energy from SSE saw their prices rise on 15 November. They now understand that they will be paying more through taxation and probably will not see any money from the energy company until April at least. The question they will be asking is whether this Secretary of State ever actually asked any of the energy companies for a price freeze—and if not, why not?
Mr Philip Hollobone (Kettering) (Con)
The best way to cut electricity and gas bills would be to abolish VAT on them. Will the Secretary of State, as an enthusiast for the European Union, confirm that it is the European Union that prevents VAT from being removed? What efforts have he and the Chief Secretary to the Treasury made in Brussels to get a derogation from those restrictions?
Mr Davey
I am being tempted by my colleagues on the Back Benches. I hope they can cast their minds back to a former Conservative Government who wanted to put VAT at 17.5% on energy bills while my party campaigned against that. As I want to ensure that our coalition parties are working closely together, I respectfully repeat that that proposal would be against the law.
Chris Bryant (Rhondda) (Lab)
All one needs to know about this Government is summed up in the first few words of the Secretary of State’s statement when he said that this Government were taking action “to reduce the impact of Government policies on energy bills.” I want to increase the effect of Government policies on energy bills, because I want a Government who are going to stand up to the energy companies and make sure that we reduce bills. Why will the Government not do that?
Mr Davey
The hon. Gentleman shows his lack of understanding of the policy. It is very important that we have Government policies to tackle fuel poverty and boost energy efficiency, and I would have thought he would welcome that. We are combining those policies with our very strong policies on competition. I only wish that when Labour was in government it had pursued competition policies as rigorous as ours.
Dame Angela Watkinson (Hornchurch and Upminster) (Con)
Will my right hon. Friend describe to the House just how much control he has over global gas wholesale prices?
Mr Davey
My hon. Friend makes a very good point. Neither I nor my predecessor, nor the Leader of the Opposition when he was doing my job, has any control over international gas markets. That is why Labour’s policy of a price freeze makes no economic sense whatsoever. During that freeze we could find some small suppliers making serious losses or going out of business if wholesale prices went up. That would reduce competition and we would be back to the big six. Of course, that is what Labour wants, because it created the big six.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
Hundreds of people in Splott and Tremorfa in my constituency who suffer from some of the highest levels of fuel poverty and energy debt in Cardiff have signed a petition calling for a freeze in energy bills, but instead they will see their bills continue to rise. Is the Secretary of State just telling them to pipe down and settle for his announcement?
Mr David Nuttall (Bury North) (Con)
Does the Secretary of State agree that the best way to secure lower energy bills and more investment in the energy sector in the long term is for Government to cut corporation tax further, to cut the regulatory burden on companies, to increase competition, and to scrap altogether Government-imposed green and social levies on energy bills?
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
Is it not the case that this Minister and the Prime Minister only dare ask the big six to freeze energy prices, while the Leader of the Opposition will make the big six freeze energy prices?
Mr Davey
I am more impressed by what people do when they are in office. The Leader of the Opposition did nothing on competition when he was in office. He helped create the big six and he kept them in business. Frankly, we would like an apology from him and his party for the way they sucked up to the big six.
Andrew Bridgen (North West Leicestershire) (Con)
Does my right hon. Friend agree that, while it is right to take action to reduce energy bills, the only sustainable way to raise the living standards of hard-working families is by sticking to this Government’s long-term economic plans of deficit reduction and creating a responsible recovery?
Mr Davey
My hon. Friend hits the nail on the head. It is vital that we do everything we can on energy bills, as we have announced today, but it is equally vital that we make sure we run the economy in a sustainable way. When we came to power, inflation was 3.5% and rising; now it is 2% and falling. By tackling the cost of living and inflation, we are delivering real help to people. That is why disposable incomes for UK households are higher now than in any year between 1997 and 2010.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
I have been contacted by companies in my constituency that are very concerned about the chaotic way in which the Government’s latest policy has emerged. Will the Secretary of State tell us exactly how many additional replacement energy-efficient boilers will be installed in households as a result of today’s announcement?
Mr John Leech (Manchester, Withington) (LD)
I welcome any measures such as this that help families who are struggling with the increased cost of living, but in the longer term has my right hon. Friend considered a complete separation of the retail and wholesale markets and the impact that that would have on retail gas and electricity prices?
Mr Davey
My hon. Friend raises an interesting point. Certainly, we and, indeed, Ofgem have been looking at how we can reform the wholesale market in a way that deals with the problems. Ofgem’s suggested “secure and promote” reforms—which the Labour party appears not to have read—will ensure that we will have much greater competition in the wholesale market, which means that independent generators will be able challenge the big six and their vertically integrated model. There are, therefore, alternative models to ensure that we get competition working in the generation markets, which has not happened for far too long.
Toby Perkins (Chesterfield) (Lab)
More than 5,000 people in Chesterfield signed a petition urging the Government to freeze energy prices. They will be mystified as to why the Minister thinks it is a good idea to put money saved from energy bills on to the tax bill instead. In answer to the question asked by my hon. Friend the Member for Halton (Derek Twigg), the Secretary of State said that he had discussed profits and prices with the big six energy companies. Did he tell them that he thought that profits and prices were too high?
Mr Davey
We have actually gone further than the hon. Gentleman wants. We have asked Ofgem to do a full review of the financial transparency of the big six so that their customers, this House and the public can see where and how they are making their profits. That is exactly what the hon. Gentleman ought to be welcoming.
Mr Russell Brown (Dumfries and Galloway) (Lab)
The Secretary of State has been asked twice about rural areas such as mine, where many households are off the gas grid and use liquefied petroleum gas and heating oil. Not only that, but they are desperately low-income households. The Secretary of State’s statement gives nothing to those people, apart from telling them to continue to pay their tax, which will subsidise the energy companies.
Mr Davey
When I was asked that question on the two previous occasions mentioned by the hon. Gentleman, I replied that one of the components of the energy company obligation has not been working, namely the rural sub-obligation of the carbon saving community obligation. We are reforming that to try to make sure that it works better for rural areas. We are doing an awful lot for people in rural areas, not least through the renewable heat incentive, which will be launched next March or April. We have not announced the actual date, but it is designed to help people who are off the gas grid.
John Robertson (Glasgow North West) (Lab)
I do not know whether the Secretary of State is being conned by the big six or whether he thinks he is conning us, but I know one thing: the poor are the ones who will suffer more than anybody else. What is the Secretary of State doing to those energy companies that force prepaid meters on people who can hardly afford to pay their bills and who, because they are on a prepaid meter, get themselves cut off and who may then die as a result of poor weather? What does his statement do for those people?
Mr Davey
It is worth pointing out to the hon. Gentleman, first, that disconnections are at an historical low and, secondly, that he is wrong about the impact of the statement for the fuel-poor. It is actually very good news for the fuel-poor: not only are we maintaining the programmes as previously planned, but we are extending them for two additional years, which one would have thought the Labour party would welcome.
Huw Irranca-Davies (Ogmore) (Lab)
On energy efficiency, we know that contractors who sometimes literally bet their house on green deal installations have tragically been let down by this Government, with only just over 200 out of an anticipated 10,000. Precisely how many fewer solid wall external cladding insulations will there be next year because of the reforms that the Secretary of State has announced today?
Mr Davey
First, the hon. Gentleman is wrong about the green deal; he was referring to green deal finance plans. He talked about insulations, but an awful lot more have gone on because of the green deal, with the success of green deal assessments—more than 100,000 of them—even though they have not necessarily been financed by a green deal finance plan, so he is completely wrong.
One thing we have done to reassure the industry is to have a minimum of 25,000 solid wall insulations a year for the next four years. I hope and believe that there will be a lot more than that, but that will give the industry the reassurance and confidence that I think it needs.
Andrew Gwynne (Denton and Reddish) (Lab)
The Secretary of State has panicked because he knows that Labour’s two-year price freeze has struck a popular chord. Is not the inconvenient truth of his fix with the big six energy companies that consumers across Tameside and Stockport, as well as the rest of the country, will still pay much more in energy prices, and that his plans do absolutely nothing to reset the energy market, which Labour’s price freeze would allow?
Mr Davey
I am afraid that the hon. Gentleman is wrong on every count. This Government—working positively with the independent regulator, Ofgem—are delivering reforms to reset the failed market that we inherited from the last Government. It is a shame that not a single Labour Member has welcomed the average £50 cut that will help households.
Diana Johnson (Kingston upon Hull North) (Lab)
I listened to the Secretary of State announcing his policy of a £50 cut on Radio Humberside at 9 o’clock this morning. For people in Hull, will he confirm that they will still end up paying higher energy bills under his Government? The average bill is going up by £120 a year, so they will still pay £70 extra this year.
Mr Davey
The hon. Lady is right to say that electricity and gas prices have been going up for some time, but we do not have a magic wand to say to international gas markets, “No, the prices cannot go up.” If Labour Members have found a magic wand, perhaps they would like to lend it to us.
Kate Green (Stretford and Urmston) (Lab)
If the Secretary of State is so confident about the impact of his measures, why are the Government trying to water down the fuel poverty target?
Mr Davey
We are not trying to water down the target. We have had a two and a half year analysis and consultation, as I would have thought the hon. Lady would know. My predecessor commissioned Professor John Hills to do a detailed and independent study on fuel poverty, which was not done under the previous Government. If she looks at the proposals that we have come up with, having consulted widely, she will see that they have been welcomed by fuel poverty groups. Why? They have been welcomed because the proposals will ensure that our resources are much better targeted on people in real fuel poverty—in what I call deep fuel poverty. Again, I would have thought that the Labour party would welcome that; it is a shame that it is not doing so.
Paul Flynn (Newport West) (Lab)
Are not future rip-offs very likely, given the extraordinary deal on Hinkley Point nuclear power station which guarantees compensation to a French Government-owned company if British Government energy policy changes at any time over the next 35 years? Will the Secretary of State give us a promise of full transparency on the conditions of that extraordinary deal, so that we can know who is deciding it? Will it be decided by Parliament or by the Government in a private deal, in secret, with a nationalised company?
Mr Davey
I disagree with the hon. Gentleman’s analysis of the impact of the nuclear deal, and actually he is disagreeing with his own Front-Bench team, who welcomed the deal. We have said in the Energy Bill and I have said at the Dispatch Box that we will be transparent. When the final investment contract is signed, which we expect to happen halfway through next year, it will be published, making it the most open and transparent nuclear deal done by any Government in history, not just in this country but across the world. He ought to welcome that.
Kerry McCarthy (Bristol East) (Lab)
My constituents will take two things away from today’s statement. One is that they will still be paying much more for their fuel this winter, and the other is that the big six energy companies, despite a 75% rise in profits last year, will still be making more money. Why does the Secretary of State expect my constituents to share the pain, but the energy companies not to share the gain?
Mr Davey
I am afraid that the hon. Lady is mixing up two things. Today, following our detailed review of Government policy costs, we can announce that on average households will see their bills fall by £50, which she ought to welcome. Our policy for the big six and other energy companies is to have fierce, robust competition. One of the best ways to ensure that energy bills come down is to enable people in the retail markets to switch and to ensure that the big six face real competition in the generating market. It is competition that will push bills down in the long term.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
My hon. Friend the Member for Bristol East (Kerry McCarthy) is absolutely right. The profits of the big six energy companies rose by 75% last year, while average household costs increased by £100, yet the £50 cut in fuel bills will come at no cost to the energy companies. Why are the Government not prepared to stand up to these big companies?