The Prime Minister (Elizabeth Truss)
I beg to move,
That this House has considered UK Energy Costs.
Earlier this week—[Interruption.]
Mr Speaker
Order. Just one second, Prime Minister. We have started the debate, and I do not want to hear any more from that particular Bench. If I do, I will go and get that cup of tea early.
The Prime Minister
Earlier this week, I promised that I would deal with the soaring energy prices faced by families and businesses across the UK, and today I am delivering on that promise. This Government are moving immediately to introduce a new energy price guarantee that will give people certainty on energy bills, and will curb inflation and boost growth. The guarantee—which includes a temporary suspension of green levies—means that from 1 October a typical household will pay no more than £2,500 per year for each of the next two years, while we get the energy market back on track. It will save a typical household £1,000 a year, and it comes in addition to the £400 energy bills support scheme. It supersedes the Ofgem price cap, and has been agreed with energy retailers.
The Prime Minister
I will give way in a few minutes, when I have made some progress.
We will deliver this by securing the wholesale price for energy, while putting in place long-term measures to secure future supplies at more affordable rates. We are supporting the country through this winter and next, and tackling the root causes of high prices, so that we are never in this position again.
The Prime Minister
For those using heating oil, those living in park homes or those on heat networks, we will set up a fund—[Interruption.]
Mr Speaker
Order. I am sorry about this, Prime Minister. Can I just say that I do want a running commentary from Members giving me advice? I certainly do not need it.
I do not want to interrupt you, Prime Minister—it is up to you to give way when you feel it is appropriate—but I just want to let you know that the written ministerial statement has now been printed, and I hope it will be brought into the Chamber for everybody to see.
The Prime Minister
As I was saying, for those using heating oil, those living in park homes or those on heat networks, we will set up a fund so that all UK consumers can benefit from equivalent support.
Alan Brown
National Energy Action estimates that with the cap at the current level, 6.5 million households are in fuel poverty. If the level is raised to £2,500, how many more millions of people does the Prime Minister reckon will end up in fuel poverty?
The Prime Minister
We are taking action to help people on the lowest incomes through universal credit, and we are also supplying £400 through the energy bills support scheme.
Several hon. Members rose—
The Prime Minister
I would like to make some progress, and then I will take more interventions.
We will also support all businesses, charities and public sector organisations with their energy costs this winter, offering an equivalent guarantee for six months. After those six months, we will provide further support for vulnerable sectors, such as hospitality, including our local pubs. My right hon. Friend the Business Secretary will work with business to review where that should be targeted to ensure that those most in need get support. The review will be concluded within three months, giving businesses certainty. In the meantime, companies with the wherewithal need to be looking for ways to improve energy efficiency and increase direct energy generation.
Stephen Crabb (Preseli Pembrokeshire) (Con)
I am grateful to the Prime Minister for giving way and commend her on the speed with which she and her new team have really gripped the challenge that is facing the country. Does that not demonstrate that Conservative Governments do not stand by while millions of people on low incomes are struggling? I strongly support the measures she is announcing today.
The Prime Minister
My right hon. Friend is absolutely right. I recognise that people are struggling with their energy bills and that is why I have brought forward this debate as soon as possible to give people reassurance ahead of the winter that energy bills are going to be affordable.
We will bring forward emergency legislation to deliver the policy. My right hon. Friend the Chancellor of the Exchequer will set out the expected costs as part of his fiscal statement later this month. I can tell the House today that we will not give in to the Leader of the Opposition, who calls for this to be funded through a windfall tax. That would undermine the national interest by discouraging the very investment we need to secure home-grown energy supplies.
Several hon. Members rose—
The Prime Minister
If hon. Members will allow me to make a bit more progress, I may be able to answer their questions before they have asked them.
The Opposition need to understand—
Kevin Brennan (Cardiff West) (Lab)
On a point of order, Mr Speaker. Copies of the written ministerial statement have been made available to some Members, but there are not enough for everybody—[Interruption.] If I might finish my point of order: is it possible for sufficient copies to be made so that we can all see the statement?
Mr Speaker
As we both know, that is not a point of order, but it is certainly a clarification that the copies are now coming out. We are printing them as fast as possible to make sure that all Members have the ability to read them. It is with great disappointment that we are doing so, but that is a matter of fact.
The Prime Minister
Instead of taking the Opposition’s approach, we are taking an approach that is pro-growth, pro-business and pro the investment we need for our country’s energy security.
John Redwood (Wokingham) (Con)
Does the Prime Minister agree that we are too short of energy but have plenty of taxes, and that if we had an over-supply of taxes, as the Labour party wants, we would have less supply of the things we were taxing?
The Prime Minister
My right hon. Friend makes an extremely good point. The reality is that we cannot tax our way to growth. The policy that I am setting out today is all about helping people with their energy costs, as I promised, and making sure that we have the long-term energy supplies that we need for our country.
Richard Burgon (Leeds East) (Lab)
Just six months ago, households faced energy bills of £1,300. We are today being told that fixing prices at £2,500 is the best the Government can do. It is not, so why is the Prime Minister putting private energy profits ahead of people at this crucial time?
The Prime Minister
What we are doing is the important work to help people and businesses get through this winter and next winter while fixing Britain’s long-term energy supply.
Several hon. Members rose—
The Prime Minister
I have already given way on a number of occasions. I will give way later, and ask Members to hold off a bit longer.
This is the moment to be bold. We are facing a global energy crisis and there are no cost-free options. There will be a cost to this intervention.
Robert Halfon (Harlow) (Con)
I strongly welcome this package, which is a marked contrast to the meagre scraps offered by the Opposition. I also welcome my right hon. Friend’s confirmation that schools and colleges will be helped with their energy bills, as colleges face increases of 300%. Will she continue to bear down on fuel duty, because we know that motorists face extortionate bills when they fill up their car at the pumps?
The Prime Minister
I thank my right hon. Friend for his point. I am sure that the Chancellor of the Exchequer is listening intently to his point ahead of the fiscal statement later this month.
Several hon. Members rose—
The Prime Minister
I want to make some progress on explaining how we will defray the cost of this intervention, which I think might answer some hon. Members’ questions before they ask them.
We will defray the cost of this intervention by, first, ramping up supply. Following on from the successful vaccine taskforce, we have created a new energy supply taskforce under the leadership of Maddy McTernan. The taskforce is already negotiating new long-term energy contracts with domestic and international gas suppliers to bring down the cost of intervention immediately.
We are also accelerating all sources of domestic energy, including North sea oil and gas production. We will be launching a new licensing round, which we expect to lead to more than 100 new licences being awarded; and we will speed up our deployment of all clean and renewable technologies, including hydrogen, solar, carbon capture and storage, and wind, where we are already a world leader in offshore generation. Renewable and nuclear generators will move on to contracts for difference, to end the situation in which electricity prices are set by the marginal price of gas. This will mean that generators receive a fair price that reflects their cost of production, further bringing down the cost of this intervention.
Andrew Stephenson (Pendle) (Con)
I warmly welcome the immediate action announced by the Prime Minister on the cost of energy, which will help families in my Pendle constituency and right across the United Kingdom. Next week is nuclear week in Parliament, so will she join me in supporting the roll-out of small modular reactors championed by Rolls-Royce, which has two sites in my constituency? We need this technology now, so will she go further and faster in driving forward the nuclear programme in this country?
The Prime Minister
My hon. Friend is absolutely right that small modular reactors are a very important part of our energy mix. They are produced here in the United Kingdom. They will help to boost growth as well as boosting our energy security.
Several hon. Members rose—
The Prime Minister
I will take a few more interventions in a few minutes, but I ask Members please to let me make progress on my speech.
Secondly, today’s actions will deliver substantial benefits to our economy—boosting growth, which increases tax receipts, and giving certainty to business. This intervention is expected to curb inflation by up to five percentage points, bringing a reduction in the cost of servicing Government debt.
Thirdly, I am announcing today that, with the Bank of England, we will set up a new scheme worth up to £40 billion to ensure that firms operating in the wholesale energy market have the liquidity they need to manage price volatility. This will stabilise the market and decrease the likelihood of energy retailers needing our support, as they did last winter.
By increasing supply, boosting the economy and increasing liquidity in the market, we will significantly reduce the cost to Government of this intervention.
Steve Brine (Winchester) (Con)
It is very kind of the Prime Minister to give way to so many sensible Members.
Today is clearly a big intervention, and the Government are, as she promised, wrapping their arms around my constituents, as we did during the pandemic. Looking to the future, can she confirm that the plans are primarily about domestic supply rather than imported reliance and are therefore in line with the important commitments we made at COP26 in Glasgow and with our commitment to the path to net zero made in our manifesto three years ago?
The Prime Minister
I am completely committed to net zero by 2050 and I will be saying more about how we will be achieving that later in this speech.
As well as dealing with the immediate situation we face, we are also dealing with the root causes.
Ed Davey (Kingston and Surbiton) (LD)
I welcome the Prime Minister to her place and hope she will work with Opposition parties in the national interest. Will she confirm that her announcement today will still see the energy bills of struggling families rising by another £500 next month and that this winter they will be paying energy bills that are twice those they paid last winter?
The Prime Minister
At the same time as introducing the energy price guarantee, we are also providing families with £400 and providing extra support to the vulnerable. Vulnerable families will be receiving that extra support.
I want to move on to why we are in the situation we are in now. The fact is that energy policy over the past decades has not focused enough on securing supply. [Interruption.] I do not know why the right hon. Member for Doncaster North (Edward Miliband) is laughing, as he is partly responsible for this. There is no better example than nuclear, where the UK has not built a single new nuclear reactor in 25 years. This is not just about supply; the regulatory structures have failed, exposing the problems of a price cap applied to the retail but not the wholesale market. All of that has left us vulnerable to volatile global markets and malign actors in an increasingly geopolitical world. That is why Putin is exploiting this situation by weaponising energy supplies as part of his illegal war on Ukraine.
Sammy Wilson (East Antrim) (DUP)
Does the Prime Minister accept that with 150 years’ worth of gas under the ground in Great Britain it is absolute madness to turn our back on that resource at a time when people are facing huge energy bills? Will she also explain how she intends to deliver the support that she is talking about in Northern Ireland?
The Prime Minister
I do agree with the right hon. Gentleman and I am coming to the point about shale gas in a minute. I can assure him that this policy will apply in Northern Ireland and those benefits will be open to the people of Northern Ireland, as part of the United Kingdom.
As well as the action that I am announcing today, we will use these two years ahead of us to make sure that the United Kingdom is never in this situation again. I will be launching two reviews. The first is a review of energy regulation to fix the underlying problems. We want a new approach that will address supply and affordability for the long term. Secondly, we will conduct a review to ensure we deliver net zero by 2050 in a way that is pro-business and pro-growth. That review will be led by my right hon. Friend the Member for Kingswood (Chris Skidmore).
Alberto Costa (South Leicestershire) (Con)
First, on behalf of the people of South Leicestershire, may I welcome my right hon. Friend to her role? She mentions Putin. The measures she is announcing today are incredibly welcome for my constituents and all our constituents, in order to protect in particular the poorest and most vulnerable in society, but will she give an assurance today that her Government will continue to stand firm against the appalling and brutal actions of Putin and his thuggish regime? Will she tell the British people honestly that we are in for a difficult winter, notwithstanding the challenges that face us?
The Prime Minister
My hon. Friend is right: the reason we are in this difficult situation is Putin’s appalling war in Ukraine. But we do need to make sure that our energy supplies are more resilient and secure, so that we are never in this situation again and so that we cannot be subject to global energy prices and the actions of dictators.
We are delivering a stable environment that gives investors the confidence to back gas as part of our transition to net zero. It is vital that we take steps to increase our domestic energy supply.
Several hon. Members rose—
The Prime Minister
I will make a bit more progress and then I will give way.
We will end the moratorium on extracting our huge reserves of shale, which could get gas flowing as soon as six months from now where there is local support for it. We will launch Great British Nuclear later this month, putting us on a path to deliver up to a quarter of our electricity generation with nuclear by 2050.
Stephanie Peacock (Barnsley East) (Lab)
I am grateful to the Prime Minister for giving way. Last September, I asked the then Business Secretary, the right hon. Member for Spelthorne (Kwasi Kwarteng), why the Government signed off on the closure of the Rough gas storage facility. He dismissed it as not relevant and accused me of stoking panic and alarm. The Government are reportedly now reopening that facility. That does not suggest that the new Chancellor is a man of foresight and strategy, does it, Prime Minister?
The Prime Minister
We are in a very difficult situation and I am committed, as Prime Minister, to doing everything it takes to resolve the situation, to helping people with their energy bills and to making sure we have security of supply for the long term.
Several hon. Members rose—
The Prime Minister
I have taken a lot of interventions and need to make progress on the speech.
As a result of these steps on shale and nuclear, and the acceleration of renewables, I am today setting a new ambition for our country. Far from being dependent on the global energy market and the actions of malign actors, we will make sure that the UK is a net energy exporter by 2040. My right hon. Friend the Business Secretary will set out a plan in the next two months to make sure we achieve that.
I know that businesses and families are very concerned about how they will get through this winter. That is why I felt it was important to act urgently to provide immediate help and support, as well as to set out our plan for how we will secure the UK’s future energy supplies. This is part of my vision for rebuilding our economy. Secure energy supply is vital to growth and prosperity, yet it has been ignored for too long. I will end the UK’s short-termist approach to energy security and supply once and for all. That is what I promised on the steps of Downing Street. Today, we are acting decisively on that pledge. This will help us build a stronger, more resilient and more secure United Kingdom. I commend the motion to the House.
Several hon. Members rose—
Mr Robin Walker (Worcester) (Con)
I welcome the Prime Minister and indeed all her colleagues to their places on the Front Bench, and the rapid action that has been announced today. I wanted to see action for consumers in my constituency, but also for businesses, charities and the public sector, and I am delighted to hear all of that included in today’s statement. Over the summer, I have heard from hundreds of constituents about their concerns—people who are vulnerable, the elderly, students and people with illnesses and disabilities—about how they will not be able to turn down their heating in the upcoming winter. The action that has been announced today will be extremely welcome in all of those quarters, and the fact that there is a two-year cap in place is particularly welcome in my constituency.
I have also been hearing from businesses, and I have been very concerned about some of the costs facing pubs, hospitality businesses and manufacturers in my constituency. Indeed, as long ago as last year, I wrote to the then Business Secretary—now the Chancellor—about high-energy manufacturers such as aluminium extrusion businesses Superform and Aeromet in my constituency and about some of our largest manufacturers such as Worcester Bosch and Mazak in relation to the impact of energy costs on them, so I am delighted that today’s announcement also means help for businesses with energy. Of course, that help for businesses with energy is also, in the long term, help for consumers.
I look forward to hearing more about the urgent work going on to support the hospitality sector, which is so important in all our constituencies, and even retailers have been affected by these issues. Toys & Games of Worcester, a wonderful independent retailer in my constituency, expects its energy bills to go up by as much as 400% later this year. Following today’s intervention, I hope that will no longer happen and that that business can continue to thrive.
As a former schools Minister, I am delighted to hear of the help for schools. It is vital that we help them to address the challenges they face with energy pressures. On that front, the intervention is important, as it is for charities. In the last week I have visited my wonderful hospice in Worcester, St Richard’s, and this week I will be visiting the children’s hospice, which were both concerned about the impact of energy bills. We have seen correct interventions in all those spaces.
There is much to welcome in this statement: the new energy supply taskforce; speeding up the deployment of clean technologies, including, crucially, hydrogen; the reduction in inflation by up to five percentage points, and the new Bank of England scheme to support liquidity in the wholesale market; and the review to ensure that net zero can be met in a way that supports business and is pro-growth, which I am delighted to hear is taking place under my right hon. Friend—and sometime lookalike—the Member for Kingswood (Chris Skidmore). I welcome the statement, and I want to make sure that we go further. In particular, I urge Ministers to consider the opportunities provided by hydrogen in helping to ensure that gas central heating continues to be delivered to our constituents’ homes in a clean, low-cost and energy-efficient way.
The Secretary of State for Business, Energy and Industrial Strategy (Mr Jacob Rees-Mogg)
May I begin by adding my voice to those of other right hon. and hon. Members in wishing Her Majesty the Queen well from this House? It is a matter of the gravest concern to all of us when our sovereign is unwell.
I congratulate my right hon. Friend the Prime Minister not only on her appointment, but on the way she has chosen to meet this energy challenge: with immediate and decisive action. I thank her for introducing this debate, for ensuring that the contents of her speech were not leaked beforehand, which shows a proper respect for Parliament, and for seeing that her policy is robustly debated in this Chamber.
I thank the Chancellor, my predecessor at BEIS, for paving the way for this announcement. I look forward to working very closely with him to ensure that households and businesses are protected this winter and beyond. I also thank the right hon. Gentleman the shadow Business Secretary for his kind words about me in his opening comments. Indeed, we have had a friendly personal relationship over some years. I hope we can continue that while having, no doubt, some less friendly debates on these fundamental issues.
We need to understand why we are here. We are here because Vladimir Putin has weaponised energy supply as part of his barbarous attack in Ukraine. Last week, he turned off the main pipeline to Europe. It is a deliberate blackmail tactic against the west. Britain’s energy system must be strengthened and diversified to protect our homes and our businesses.
As we have heard over the course of this debate, our plan comes in two parts. First, we must get our constituents safely through this winter. We know how concerned people are about expensive energy bills. Some of the projected figures have been truly alarming and we are intervening to stave off an unprecedented crisis. It would be wrong to stand by as people struggle. I give the assurance to the hon. Member for St Albans (Daisy Cooper) that our plan for businesses will include care homes. That is fundamentally important. It would be madness to ignore other businesses too, as they see their bills spiral out of control.
The new energy price guarantee will ensure that bills are kept down, remaining at around £2,500 a year for the average consumer. This intervention reflects the severity of the situation we find ourselves in. The Government-funded support will take effect from 1 October, saving the average household around £1,000. That will be combined with the original support we announced.
I reassure the hon. Member for Kilmarnock and Loudoun (Alan Brown), who raised this question first, that we will act to help people on the lowest incomes. The Government have already announced a package of support that will see 8 million of the most vulnerable households receive £1,200 of one-off support to help with the cost of living, and all domestic electricity customers will receive £400.
We know that from biscuit makers to bars, businesses are worried about their bills. The Government’s price guarantee for businesses, which will be announced shortly, will bring down energy bills for the acute phase of the crisis. All businesses on variable contracts, whose fixed-price contract is coming to an end or that have agreed a fixed-price contract recently will be eligible to enter the new Government-guaranteed contract. That will apply to businesses of all sizes and include schools, nurseries and care homes, as well as manufacturers and retail. That is the short term.
Quite rightly, Opposition Members, particularly the Leader of the Opposition, asked who is going to pay for this. The energy bills guarantee is not a direct loan to customers or to energy suppliers. However, as the price stabilises in due course, the Government will need to consider when and how to recoup at least some of the cost of the scheme. The Opposition are all for taxation, Madam Deputy Speaker. That should not surprise you, as you know the inner workings of the Labour party better than most. None the less, all we get from the other side is tax, tax and tax again. It may be that we are at the highest rate of taxation in 70 years, but the answer is always more tax. It is their only answer to any question. Even the right hon. Member for Ross, Skye and Lochaber (Ian Blackford), the leader of the SNP, who used to be a very successful businessman, and therefore may know a thing or two about this, was advocating higher taxes. Now that he is a humble crofter, perhaps he thinks that is easier.
Ian Blackford
I am grateful to the right hon. Member—we go back a long way. He is, of course, right that I have a background in the City. No doubt he has read Shell’s quarterly figures, as I have done. Off the top of my head, the return on capital employed has gone up from 3% to 13%. By anyone’s definition, that is excess profit. It is right at times such as this that we take our share of that.
Mr Rees-Mogg
That is structurally wrong. Taxes need to be certain. If we are to encourage investment—and we need investment in this country—the tax policy has to be set for the long term. We cannot retrospectively pick people’s pocket; we need to tell them what the charge will be beforehand and keep it clear.
John Redwood
Would the Business Secretary like to remind the House that the Republic of Ireland deliberately chose much lower corporation tax rates than the rest of the advanced world and collects a far bigger proportion of its economy in taxes on business than we do?
Mr Rees-Mogg
My right hon. Friend will be glad to note that the Chancellor of the Exchequer, from a sedentary position, is agreeing with him. My right hon. Friend is a higher authority on this than I am, but we know that the cut in corporation tax led to an increase in receipts. Higher taxation is not the answer.
Looking at the long term, we must fix our broken energy system. We must have energy independence and become a net exporter of energy by 2040. We cannot be held captive by volatile global markets or malevolent states. We must tackle the root causes of the problems in our energy market by boosting domestic supply. We will invest in renewable energy with vim and vigour, accelerating the deployment of wind, solar and—particularly exciting, I think—hydrogen technologies. To reassure my right hon. Friend the Member for Pendle (Andrew Stephenson), we will invest in nuclear technologies, which also provide us with cheap and clean electricity.
I note that my hon. Friend the Member for Ynys Môn (Virginia Crosbie) said that her constituency is known as energy island. That is exactly what we need in this country. My hon. Friend the Member for Gloucester (Richard Graham) noted that not just Ynys Môn but the whole of the United Kingdom is energy island. We must use all the resources available to us, including tidal energy, as my right hon. Friend the Member for Maidenhead (Mrs May) said. This is a great opportunity.
Mr Rees-Mogg
I would love to give way, but time is very short.
We are fully committed to green growth and the green industrial revolution, and to net zero by 2050, but we have to get there, and to get there we are going to need oil and gas. We are therefore going to have a new oil and gas licensing round, which we hope to launch in October. I reassure the right hon. Member for East Antrim (Sammy Wilson) that we will work with communities and individuals to use shale gas as well, with the support of those who may be affected. The pause on extraction is being lifted through a written ministerial statement and will come into effect immediately. This will allow us to gather further data on seismic safety. It is fundamentally important, as any economist knows, that pricing is set at the margin. If you have more, it helps bring prices down. That is fundamental. It is not in any way contradictory to what we have said before. We will also have legislation to support people in Northern Ireland, which is fundamentally important. We must be one United Kingdom in how we do this.
I am very grateful for the many contributions that were made in the course of the debate, including by my hon. Friend the Member for Worcester (Mr Walker), my right hon. Friends the Members for Central Devon (Mel Stride), for Forest of Dean (Mr Harper) and for South Northamptonshire (Dame Andrea Leadsom), my hon. Friend the Member for Bolton West (Chris Green), my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb), my hon. Friends the Members for East Surrey (Claire Coutinho), for Watford (Dean Russell) and for Gloucester, my right hon. Friend the Member for Basingstoke (Dame Maria Miller), and my hon. Friends the Members for Ynys Môn, for Dudley South (Mike Wood) and for Sevenoaks (Laura Trott). I commend the motion on the Order Paper to the House.
Madam Deputy Speaker (Dame Rosie Winterton)
Before I put the Question, I am very sorry that all right hon. and hon. Members were not able to get in to speak in the debate. It was very oversubscribed. I remind Members that it is important to get back in good time for the wind-ups in order to hear the responses to what people have said.
Question put and agreed to.
Resolved,
That this House has considered UK Energy Costs.