Monday 17th October 2022
(2 years, 1 month ago)
Commons ChamberEnergy Prices Act 2022 View all Energy Prices Act 2022 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 17 October 2022 - (17 Oct 2022)
The Secretary of State for Business, Energy and Industrial Strategy (Mr Jacob Rees-Mogg)
I beg to move, That the Bill be now read a Second time.
I am glad that the House has agreed to the amended allocation of time motion—otherwise, I would have been in danger of filibustering my own motion. I am sure that hon. Members across the House agree with me about the urgency of this legislation. Nevertheless, I thank hon. Members for the speed with which the Bill is being considered. In particular, I thank Members of His Majesty’s official Opposition, and especially the right hon. Member for Doncaster North (Edward Miliband), for their constructive engagement.
The world is facing a global energy crisis, which has been exacerbated by Russia’s illegal invasion of Ukraine. The soaring cost of energy means that families and businesses across the United Kingdom are facing rising energy bills this winter. On 8 September, the Prime Minister announced an unprecedented package of assistance, which will support households, businesses, charities and public sector organisations across the UK with the increasing cost of energy. This decisive action will help deal with the rising cost of energy while reducing inflation and supporting economic growth. The Bill puts the assistance announced by the Prime Minister on a secure legislative footing. The legislation is crucial to providing immediate support to people and businesses.
The domestic scheme, the energy price guarantee that was announced, is already up and running. The Bill prioritises the legislative underpinnings of that scheme. The energy price guarantee will provide support to the end of March 2023 that will be equivalent to an annual bill of £2,500 for the typical household. The average unit price for dual-fuel customers on standard variable tariffs subject to Ofgem’s price cap paying by direct debit will be limited to 34p per kWh for electricity and 10.3p per kWh for gas, inclusive of VAT, from 1 October. It is important to emphasise that per-unit use.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
The Secretary of State will be aware that, in constituencies such as mine, a large number of homes are off the gas grid. The Government have come up with an alternative fuel payment of about £100 for those homes, but oil prices have nearly doubled. I know that changes to the whole policy have been announced by the Chancellor today, but will he commit to equivalent support for those off the gas grid?
Mr Rees-Mogg
I will come to that, but the intention is that the support should be equivalent to that for people on the grid.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Talking about an average household bill of £2,500, the Prime Minister said that the measures would stop people paying £6,000 on average, but the explanatory notes to the Bill estimate that the measures will save people from bills reaching £4,200. Given that the support will end in April, what can people who, after April, will not be receiving any support expect to pay for an average household bill?
Mr Rees-Mogg
The Bill is setting the immediate support, which will run until April. The Government are reviewing how to ensure that support is more targeted in future, but there is no question that there will be support, and the Bill provides the powers for that. It is important to emphasise that bills will still depend on usage. That is why I am grateful for the work of my hon. Friend the Member for Hexham (Guy Opperman), who has emphasised the advantages of a prudent use of energy benefiting all users.
Anna McMorrin (Cardiff North) (Lab)
The Secretary of State talks about energy usage and families not having bills of more than £2,500, but bills for large families with high usage will be far, far more. How can families have certainty? If the Government will not have a communications campaign on reducing energy usage—they have said that they are against that on principle—how do we get that message across to people up and down the country?
Mr Rees-Mogg
What we are doing is making it clear that it will depend on usage and that the figures are average figures. The £2,500, therefore, is for an average family and, obviously, not necessarily for all families. Larger families will have particular pressures, but I am coming on to the other support that remains which will help families. The price per unit of electricity and gas is part of the package, but it is of course combined, and we recognise the difficulties that families and businesses will face with higher prices.
Jim Shannon (Strangford) (DUP)
I thank the Secretary of State for bringing forward the proposals he is outlining. I am very concerned for those I refer to as the working poor, and I know the Secretary of State is as well. With the cumulative money that people have to pay, the working poor, in my opinion, seem to be the ones who are losing out. Can he give us some reassurance that that will not be the case?
Mr Rees-Mogg
Yes, I think I can give the hon. Gentleman the assurance he is asking for. That is why the scheme is as broad as it is. The effect of the price rises we were in danger of seeing was so great that it would have affected people who were not on benefits. They would have found that they were in fuel poverty without this assistance. That is why it is so encompassing. The support is being provided at the point in the year when 60% of consumption takes place.
The energy price guarantee comes in addition to the £400 of support provided by the energy bills support scheme for Great Britain, announced earlier this year.
Mr Rees-Mogg
I see the right hon. Gentleman is about to intervene. I will just say one thing, because I am coming on to a point about Northern Ireland on the energy bills support scheme. It will be extended to Northern Ireland to provide domestic consumers with the equivalent level of support being provided to households in Great Britain. This is very much a Unionist package.
Sammy Wilson
First of all, I give our thanks to the Secretary of State for the diligent way he has sought to address the problems in Northern Ireland. He points out that the package is coming at the point of the year where energy consumption is at its highest. In Northern Ireland, because of the difficulties of one electricity company, it may well be that the whole scheme will be held up until it is ready to give a discount on bills. Can he give us an assurance that, since 60% of consumers are with companies that could do it tomorrow, there will be no delay in waiting for the slowest to catch up before the benefits are made available?
Mr Rees-Mogg
The point of the Bill is to bring in support from 1 October. It has already been done in GB for domestic users and it will be retrospective for Northern Ireland. That is what the Bill is trying to achieve.
John Redwood (Wokingham) (Con)
The way out of this problem is far more domestic capacity, so that there is a bigger supply in due course. That requires investment. Can my right hon. Friend reassure us that although there will be temporary subsidies, price controls and surrogate windfall taxes, sufficient incentives and signals will be sent to industry that we really do need the investment and that it will be worthwhile?
Mr Rees-Mogg
Yes, indeed. This is a temporary measure. The legislation runs out; there are various sunset clauses that will affect it. We need more of our own supply. Some will be renewable, and some will be oil and gas. We need to ensure that cheap energy flows in this country for the good of the economy.
The legislation will enable the Government to provide support to consumers across the UK who are not on the main gas grid. This will benefit consumers who use alternative fuels to heat their homes, such as heating oil, as well as those who live on heat networks. Eligible households will receive a £100 payment this winter through alternative fuel payment powers, which are introduced under the Bill. The Government will be setting out the support available for non-domestic consumers on the same basis.
The important point on the £100 payment is that it is designed with reference to changes in the price of heating oil from September 2021 to September 2022 and aims to provide support which is equivalent to that received by people who heat their homes using mains gas. I know right hon. and hon. Members are interested in how those figures have been calculated, so I will place more information in the House of Commons Library detailing the basis of our calculation.
In addition, measures in the Bill will extend the energy bills support scheme to UK households that would otherwise miss out on the automatic £400 payment as they do not have a domestic electricity contract. That may be because they receive their energy through an intermediary with a commercial connection, or because they are otherwise off the electricity grid. The Bill will also ensure that in cases where intermediaries receive support from the schemes, they are required to pass it on to the end users as appropriate.
For example, the legislation will provide powers so that landlords are required to pass on support to tenants. His Majesty’s Government are taking action to provide equivalent support to heat network customers. This includes measures that will ensure heat network suppliers pass on the support they receive to their customers. In addition, the Bill provides for the appointment of an alternative dispute resolution body, which will handle complaints raised by consumers against their heat network if it has not passed through the benefit.
Let me turn to non-domestic schemes. As well as helping households, the Government are taking action to provide support to businesses, charities and public sector organisations through the energy bill relief scheme. We will provide support to non-domestic consumers as soon as possible to help businesses and other organisations with their energy bills this winter. The Bill is vital for the implementation of the scheme, which will provide a price reduction to ensure businesses are protected from excessively high bills. Initially, the price reduction will run for six months, covering energy use from 1 October. After three months, the Government will publish a review, which will consider how best to offer further support. It will focus in particular on non-domestic energy users who are most at risk to energy price increases. Additional support for those deemed eligible will begin immediately after the initial six-month support scheme.
In addition to those unprecedented support schemes, the Bill will contain measures that will allow us to protect consumers from paying excessively high prices for low-carbon electricity. The provisions will limit the effect of soaring global gas prices by breaking the link between gas prices and lower cost renewables. This will help to ease the pressure on consumer bills in the short term, while ensuring energy firms are not unduly gaining from the energy crisis. In addition, the Bill will enable the Government to offer a contract for difference to existing generators not already covered by the Government’s contract for difference scheme. This voluntary contract would grant generators longer-term revenue certainty and safeguard consumers from further price rises.
Taken as a whole, the Bill will ensure that families, businesses, charities, schools, hospitals, care homes and all users of energy, receive the urgent support they require owing to the rising costs of global energy prices. In addition, the legislation takes important steps to decouple the link between high gas and electricity prices, which will ensure consumers pay a fair price for their energy. I hope that Members, right hon. and hon. Members alike, will agree that this is a vital and timely piece of legislation.
Caroline Lucas (Brighton, Pavilion) (Green)
Will the Secretary of State give way?
Mr Rees-Mogg
I am within a moment of finishing, and I had better finish because time is so short.
This is a crucial package of measures that meets the challenges posed by sky-high global energy prices and Russia’s illegal invasion of Ukraine. Without the launch of the schemes I have outlined, many individuals and businesses would be left facing growing financial turmoil in the face of increasing energy costs. Now is the time to act and the Bill delivers the support that is required. I therefore commend the Bill to the House
Several hon. Members rose—
Madam Deputy Speaker (Dame Rosie Winterton)
Order. Colleagues will know that this debate has to finish at 7.30 pm. After the shadow Secretary of State has spoken, I will put on a three-minute time limit. We will then go to the SNP. I will try to get as many people in as possible, but we will not, realistically, be able to have wind-ups. I therefore suggest that people who do not get in perhaps prepare for what they might to like to contribute in Committee.
Edward Miliband (Doncaster North) (Lab)
Thank you, Madam Deputy Speaker. I will try to be as brief as I can to let as many people as possible speak in this debate.
Let me start by saying that Labour called for support for families and businesses in August through an energy price freeze, so we will support the passage of the Bill. I thank the Secretary of State for the conversations we have had on the Bill. This is an incredibly serious issue for families and businesses across the country.
I have to say, before I get into the detail, what a shambles this Government are. We are debating what they describe as their landmark Bill for a two-year price guarantee. It was published only last Wednesday and it has already been shredded by the Chancellor this morning. Last Wednesday, Members were in the House for Prime Minister’s questions. The Prime Minister went on and on about her decisive action of a two-year guarantee. She even derided the Opposition’s approach of a six-month freeze, seeking to spread to fear about what would happen in March, and now the Government have adopted our proposal. Never mind a vision; never mind a plan for the years ahead—this Government cannot even give us a plan for the coming week. They are truly in office but not in power. This matters, because families and businesses need to be able to plan.
I want to talk about the substantive action in the Bill and the way that the revenue to pay for it is raised, because there are important issues for the House. On the substantive action, there is a contrast with our six-month package. That was a real freeze, not a rise in bills, and £129 for millions of families across the country is significant. That even takes account of the £400. I worry about off-grid households, which we will talk about in Committee. I understand the basis of the Secretary of State’s argument. Our costed package provided £1,000 to help off-grid households. The Bill provides just a tenth of the support, and even with the Government’s measures, the University of York estimates that more than 10 million families will be in fuel poverty, so we will want to debate those issues during the Bill’s passage.
I will focus my remarks on the second set of issues relating to the way that funding for the Bill is provided, which is important. Our argument five weeks ago, when the Government announced their energy price guarantee, was that they should do everything they could to find some of the money for this intervention from the energy companies that are making enormous profits. Anyone who heard the Business Secretary’s dulcet tones on the radio last week will have heard him say that there is no windfall tax in the Bill. The right hon. Member for Wokingham (John Redwood) described it as a “surrogate windfall tax”, which is a new invention. However, page 3 of the Bill’s explanatory notes states:
“The Bill aims to do the following…Require certain generators currently receiving supernormal revenues to make a payment to a third party…for purposes of lowering the cost of electricity for consumers, or to meet expenditure incurred by the Secretary of State”.
Payments on the basis of windfalls received to lower the cost of electricity for consumers, or to meet expenditure incurred by the Secretary of State—it sounds like a windfall tax. It works like a windfall tax. It talks like a windfall tax. It is a windfall tax.
I want to hear during this debate that the Government will definitely use the powers to have a windfall tax that are in clause 16. That matters, because while we set out a clear plan for a windfall tax, the truth is that the Government, having resisted a windfall tax tooth and nail, have now taken the broadest and most ill-defined powers imaginable. Companies and the public have no idea from the Bill about the size of the levy, how much it will raise and how there will be fairness with the fossil fuel windfall tax that the previous Chancellor announced —to remind the House, that was four Chancellors ago, in May this year.
We will probe two issues that go to the question of whether we will raise sufficient resources from the windfall tax, or “surrogate windfall tax”, in the Bill. First, according to their press release, the Government will start the windfall tax on electricity generators only in 2023. Those months of delay matter, because it will mean billions in extraordinary profits being left—[Interruption.] I do not know why the Secretary of State is shaking his head. This is a very important point: that will leave billions of pounds of extraordinary profits with the companies, and it means that the British people will be forced to foot billions more of the bill for energy price support. If having a windfall tax is the right thing to do, why not have it from the date of the intervention in September? I am very happy to give way to the right hon. Gentleman so he can explain why he is not doing that.
Mr Rees-Mogg
I am very happy to explain. The right hon. Gentleman knows perfectly well that the energy companies have sold their electricity forward, and therefore the profit is not accruing on the prices at which they have sold it forward.
Edward Miliband
That would mean that there are no windfalls, so why is the Secretary of State having a special payment made by the energy companies anyway? That makes no sense at all. We will definitely want to probe that during the debate. How can it possibly all have been sold forward, as he says? So he is saying that the energy companies are currently making no windfalls. That does rather prompt the question: why are they going to have to make special payments, if it has all been sold forward and they are making no windfall profits?
Secondly, I want to talk about the question of the level playing field in what is happening to the fossil fuel companies and to the electricity generators. The previous Chancellor but one—I think that is right—introduced a super-deduction for fossil fuel companies as part of his windfall tax. That means that for every pound invested in oil and gas and fracking, companies get 91p back. But to be clear: that is not available to renewables, nuclear or other zero-carbon technology. That is an absurd tilting of the playing field towards fossil fuels and against investments in cheap, home-grown, clean power, and that is absolutely indefensible. It will not reduce bills. We will want to use the Bill as best we can, given the constraints of its scope, to debate the merits of that provision. I urge the House to support attempts to eliminate that preposterous loophole.
In the time I have left, let me deal with the wider questions about the Bill. We will continue to be in this position unless we learn the proper lessons from this crisis. Those lessons are not some extreme fringe idea that fracking, which will not lower bills, is somehow the answer to the problems that we face. The answer is a clean sprint for clean energy—for solar, wind, nuclear as part of that and energy efficiency all together.
The other day, the Secretary of State wrote an article in The Guardian, in which he said, “Dear Guardian reader”:
“I can assure Guardian readers that I am not a ‘green energy sceptic’.”
Let him prove it. He is for fracking, which will not lower bills and is dangerous. His colleague, the Secretary of State for Environment, Food and Rural Affairs, is seeking to block solar energy worth 34 GW—the equivalent of 10 nuclear power stations. That is not some whim of the DEFRA Secretary, but an instruction from the Prime Minister, who said that she does not like the look of solar panels. If the Business Secretary wants to convince people that he understands the stakes and what is necessary to get out of this crisis, he needs to make a proper sprint for green energy.
The other thing that the Business Secretary needs to do—we will again discuss this during the passage of the Bill, and I think he may agree with this—is set a timetable for the proper de-linking of electricity and gas prices. We suggest that we should set a two-year timetable in the Bill for that to happen.
Let me end by saying that the Bill is necessary, because we need support to be put on the statute book, but the truth about the Government is that they are lurching from U-turn to U-turn, and they cannot provide the country with the strategic direction that it needs to get out of the crisis. The truth is that, day by day, they are showing that they are out of ideas, out of time, and now, in the national interest, they should be out of power, too.
John Redwood (Wokingham) (Con)
I welcome the Government’s announcement today that this scheme should be time-limited to six months and that a different scheme should be developed against the possibility that energy prices remain very high for the months thereafter. I do not think that we can go on indefinitely at the rate of the cost of this particular scheme over the winter. If this continues, we need to target the support much more clearly on the many people and families in this country who could not afford the bills otherwise and leave those who have rather more money and are using rather more energy on luxuries to pay more of that for themselves. We have time to sort out a scheme that we can target better. I am sure that this Committee, and the dialogue that will continue, will make sure, through pressure from Back Benchers and Front Benchers, that we do not leave anybody out. It is very important that everybody has proper support one way or another so that they can afford their energy bills this winter and beyond.
I am also sure that the long-term solution is more domestic energy. We cannot carry on relying on unreliable imports, which can, at times, force our country to pay extreme prices on world markets to top up our gas or electricity because we do not have enough for ourselves. We are a fortunate country with many opportunities to produce fossil fuel and renewable energy. We have been a bit lax in recent years in not putting in enough investment, so I hope that the Secretary of State will look again at the incentives—as I am sure he will—and at the predictability of contracts and investment, so that Britain is a great place in which to invest for these purposes, and so we can exploit more of our energy and have more reliable supplies, even generating a surplus in some areas so that we can help Europe, which is very short of energy and does not have many of our natural advantages.
My concluding point is that we cannot go on for too long with a complex net of subsidies, price controls and interventions without damaging the marketplace more widely and sending the wrong signals, so I am glad that this measure will be short-term. We need a better system for the future so that there can be plenty of support for those on low incomes if energy prices remain high, but also much more investment to solve the underlying problem.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Obviously everybody in the House welcomes any measures that will help people with the cost of energy crisis, but it beggars belief that this emergency legislation is being rushed through Parliament today, yet at 11 o’clock this morning the Chancellor pulled the rug from under it by saying that the support package will be not for two years, but for only six months.
It was only last week that the Prime Minister’s robotic response to any question put to her was “Energy price guarantee for two years.” She stated that her measures would prevent households from paying more than £6,000 in energy costs in future. If the energy support package is to be pulled in April, what will the average future household bill look like? The Government say that they will bring in support to help the most vulnerable, but people need to know what their bills will look like. This is scaring millions of people, and the Government need to get a grip. When will we know what their support for the most vulnerable will look like? Will they give proper consideration to alternatives such as social tariffs?
The Secretary of State was very clear in spelling out that the so-called guarantee is just a price cap per unit of energy, and that £2,500 is just an estimate for an average household. It is just a pity that the Prime Minister did not understand that: when she was doing media rounds for the Tory party conference, she kept saying that households would not pay more than £2,500. Her rhetoric was dangerous and misleading. Unfortunately, some families might have the wrong impression of the household bills they will pay, because the Prime Minister did not understand her so-called flagship policy.
Even as we talk about limiting average bills to £2,500, we need to remember that just a year and a half ago the cap was set at £1,100, so energy bills for everybody are more than doubling. That is really difficult for people to deal with, and other costs are going up as well. Although the Government talk about an average bill of £2,500, it has been estimated that in Scotland the average household will pay £3,300, which is really difficult for people to manage. In Argyll and Bute, one of the most rural communities, the average dual fuel bill will be £4,400. Families are really struggling. National Energy Action estimates that 6.7 million households in Great Britain will be in fuel poverty even with the support package that the Government have announced, so we have really big concerns about what fuel poverty will look like when the package is lifted in April.
Off-grid homes in rural Scotland and in rural Great Britain will suffer even more and will have to pay much higher costs, as the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) pointed out in his intervention. The Secretary of State says that he will provide workings for the one-off £100 payment, but no matter what workings he provides, £100 will not be enough for people to deal with the increased cost of filling their oil or liquefied petroleum gas tanks.
Sammy Wilson
I do not know what calculations have been done in Scotland, but in Northern Ireland the regulator has estimated that to give equivalence, there would have to be a payment of £500 per consumer. There needs to be greater transparency about that.
Alan Brown
I have not seen that figure, but I agree that it seems more realistic. The reality is that the minimum delivery for a fuel tank costs £500 to £600, and completely filling a fuel tank costs £1,200. The cost per litre has gone up from about 30p to more than £1. It is a crippling cost, and there is no way that £100 will do anything to help people in the circumstances.
It is fair to say that it is effectively Scotland that is paying for the support packages. First, the oil and gas windfall tax was clearly about the revenues from the North sea, and now the new measures are being charged to Scotland’s renewables sector. At the time, we challenged the Government to consider that in investment tax write-offs for the oil and gas sector, investment in renewables should be part of the deductible policy. That was ignored.
Unless the detail of the cap revenue mechanism is examined properly, there is a risk that future investment in renewables will be put in jeopardy. Bizarrely, as the shadow Secretary of State, the right hon. Member for Doncaster North (Edward Miliband), said, we will incentivise people to invest in fossil fuels rather than renewables, which is certainly not the way to bring down bills. Another disparity between the Bill and the oil and gas profits levy is the time specified in the sunset clause: for the oil and gas profits levy, it is only two years. We need to ensure that we do not disincentivise investment in renewables.
The Bill gives too much power to Ministers, with not enough parliamentary scrutiny. At one time the Secretary of State was a so-called champion of parliamentary scrutiny, but now that he is in the Cabinet he seems quite happy to take on parallel powers for himself, including the ability to spend sums of up to £100 million without any approval from the House. Even beyond £100 million, if he feels that it is too difficult to get a resolution of the House, he can still justify spending that much. That is hardly parliamentary sovereignty.
We need to know much more about how the revenue caps will be set. What assessment has the Secretary of State made in respect of hedging? He touched on the fact that a lot of energy has been sold forward. How will the Government deal with that? How will they deal with multiple ownership structures? What discussions has he had with the sector?
We welcome support for consumers, but given the Chancellor’s announcements today, there is clearly not enough. There is too much uncertainty for business. There is too much power in the Secretary of State’s hands. I would like to think that he will agree to amendments in Committee that would return a bit of power to Parliament and to this House, because we know he really believes in that. However, this shambles shows yet again that to go forward, what the people of Scotland really need is independence, proper utilisation of oil and gas revenues, and investment in a truly green future.
John Penrose (Weston-super-Mare) (Con)
I have yet to hear a question to which, in the view of the hon. Member for Kilmarnock and Loudoun (Alan Brown), the answer is not more independence for Scotland.
I rise partly to support this very necessary—albeit nose-bleedingly expensive—measure, which is essential to making sure that people can afford to heat their home over the next few months. However, while I support the fundamental underlying principle and the humanity behind it, I must register some grave disquiet in relation to the hon. Gentleman’s point about Henry VIII powers in the Bill.
The concern is not just mine but from many in the industry. Nor is it just about the constitutional point, although that matters; the Secretary of State needs no lessons from anybody here on concerns about Henry VIII powers. Broadly speaking, clauses 13, 21 and 22 will give him the power to intervene and reach in, past Ofgem, with pretty much anything he likes and for pretty much as long as he likes, provided that he can persuade himself or a few other people that the emergency is continuing.
That means two things. First, it means that nobody will be willing to invest in our energy industry if there is a continuing risk that the rules of the game are likely to be changed and the goalposts of the industry moved on a political whim. Secondly, I struggle to think of a measure that will be welcomed more by socialists on the Opposition Benches. It will give them carte blanche, without having to do anything in Parliament, to renationalise anything they like in any future Parliament, unless we trim these powers substantially and impose a significant sunset clause on them. At the moment, we have a programme that is supposed to last for six months and then be subject to a Treasury-led review, but these powers carry on well beyond that. That seems too broad, unconstitutional and a danger to investment in the industry. I urge my right hon. Friend to think carefully and urgently to trim that feature of the Bill.
Finally, the one area in which there is no sunset clause —in which we are actually removing a sunset clause that already exists—is the energy price cap. It will no longer be subject to the sunset clause to which Parliament agreed when it was originally created. That means that legislation that has dramatically and demonstrably failed to do what it was originally supposed to, which was to kill off the loyalty penalty, will carry on like the undead. It will never die, yet it is the one thing that absolutely should. I hope that my right hon. Friend will think again about those important issues.
Barry Gardiner (Brent North) (Lab)
If it walks like a duck and quacks like a duck, it is a duck; and if it looks like a tax and takes money like a tax, it is a tax.
This Bill introduces another windfall tax, not on the oil and gas producers but on the renewables producers. It is in the form of a cap on the revenues that renewable and nuclear companies can make. The electricity price is set on the basis of the wholesale gas price, and when the gas price went up companies saw an increase in the price they were paid for the electricity that they produced, although they did not have to pay the increased gas prices to produce it. When the Minister for Climate, the right hon. Member for Beverley and Holderness (Graham Stuart), told the Select Committee the other day that this was not a windfall tax, his official tried to persuade us that it was simply a reframing of the regulations, but in fact the Government are trying to force those companies into a retrospective contract for difference, and they should be honest about it.
But look who benefits! The Government continue to allow the oil and gas companies to make excess profits from the global crisis, and also give them a way to claw back the windfall tax under the investment allowance scheme by claiming as a tax break 91p in every pound they invest in more production in the North sea. The Minister must explain why the Government are compensating these companies for the windfall tax, and also why the renewables companies—which are the ones we really need to incentivise to invest in more capacity—are being hit by this revenue cap, while not being given a similar investment allowance.
Before the temporary windfall tax the UK levied the lowest tax take from its oil and gas producers anywhere in the world, and even with the temporary windfall tax it still taxes a full 6% below the global average. If the UK taxed these companies even at the global average, it would recover an extra £13.4 billion for the Exchequer each year. The Committee on Climate Change wrote to the previous Chancellor—when he was the previous Secretary of State for Business, Energy and Industrial Strategy but one—saying that he should support a tighter limit on production with stringent tests and a presumption against exploration. He took no notice, and the measures in this Bill are the consequences of the Government’s now being forced to protect consumers and business from their past failure to invest in renewables.
Last year, energy prices meant that an average family was paying £1,100. After the windfall tax and the unfunded borrowing, that will now be limited to an average of £2,500. The cost would, for the two years, be £31 billion, but given the statement from—
Helen Morgan (North Shropshire) (LD)
I am most concerned about what is missing from the Bill, particularly the lack of support for those in rural areas who are off the gas grid and rely on heating oil or liquefied petroleum gas. As an off-grid homeowner, I can verify that the cost of heating oil has almost doubled since this time last year, meaning that the average off-grid household is spending £1,200 more than last year to heat itself. I am afraid that £100 will not go near helping those families who are struggling to make ends meet in rural Britain. Beyond that, the scheme is confusing. It is unclear how consumers will be able to prove that they are eligible and submit a request for the grant to be applied to their electricity bills.
However, it is not just rural off-grid households that are struggling, as I am sure a number of Members will testify this evening. Many on-grid users are also feeling the squeeze, given that £2,500 for an average household is still almost double what it was paying this time last year. Today Cornwall Energy predicted that next April bills would be more than £4,300, over 70% more than households are paying this year and more than 3.5 times more than they were paying last year. What will the Chancellor be saying to the millions of people who are worried about their energy bills next year, despite the Government’s promising them certainty. How will he help those who, while also dealing with spiralling mortgage costs, will struggle to make ends meet? The Government could have provided much more responsible assistance by extending the windfall tax on the oil and gas giants which continue to rake in extraordinary profits at the expense of British consumers, instead of botching a Budget and leaving taxpayers and mortgage holders to pay for this mess for years to come.
The Government have also failed to take any steps to encourage reductions in energy use. Last week’s flip-flopping on the most simplest of options, a public information campaign on energy efficiency, highlights just how chaotic the plan for this winter is. The Conservatives have scrapped energy efficiency schemes, despite UK homes being the least efficient in Europe, and have reduced the standards for new homes, which means that 1 million homes have been built since 2015 to lower standards than before. Insulating homes is an important, practical step that would have helped people to help themselves. Also missing is the certainty that is needed for businesses to plan for the future. Six months of assistance is welcome, but, as with the rest of this Bill, it does not go nearly far enough. If the Prime Minister wants to promote economic growth, she must recognise that stability and certainty are vital preconditions for businesses to invest. This assistance is too little, too late: many businesses have already closed, and many more do not see how they can operate beyond the winter.
The need for large-scale intervention to prevent many households from facing unimaginable difficulty this winter is beyond dispute, but the Government have made the choice—the wrong choice—to allow heating costs to double while refusing to properly tax the eye-watering profits of oil and gas companies.
Anna McMorrin (Cardiff North) (Lab)
It is good to be here, especially on the day on which our acting Prime Minister, the new Chancellor, took control of these chaotic finances following the mini-Budget. The results of this Government’s callous disregard for human lives will be felt—is already being felt—by households and businesses across the country. Businesses in my constituency, particularly pubs and restaurants, are writing to me; one that has had to use candlelight in the evenings has just received a bill for £24,000 and does not know how it is going to pay that bill.
This country is in desperate need of stability, but instead we have a Prime Minister who has dragged it through chaos and mayhem in just a few short weeks, making U-turns into a hobby. In the last few months, it has been predicted that 7 million homes will be in dire fuel poverty this winter. Professor Sinha of the Institute of Health Equity said there was “no doubt” that children would die this winter. That is how serious the situation is becoming, but we are not seeing adequate action from this Government. We are seeing support for new licences and new extraction for oil and gas companies, rather than the Government’s simply investing in home-grown cheaper renewables, which is what we needed to see throughout these 12 years of incompetence in the Government’s energy policy.
This crisis has been created by a Conservative party which is falling apart at the seams, and it must not be resolved by an increase in that party’s dependence on oil and gas. Last year, the Government made a pledge at COP26 to keep global warming below 1.5°, and they need to act on that. This is a human crisis, it is a crisis that we are seeing throughout the country, and it is a crisis that will not be resolved by the incompetence that we are seeing now.
Nadia Whittome (Nottingham East) (Lab)
This Government gambled with the markets and lost, and for what? To give their super-rich friends and donors massive tax cuts, and now working people are having to pay the price.
Just five days ago, the Prime Minister argued that pensioners would suffer if her plans for a two-year energy price guarantee did not go ahead. This morning, the Chancellor cancelled that guarantee, saying that it would be
“irresponsible to continue exposing public finances”
and that he would take
“whatever tough decisions are necessary”.
Why is it that those “tough decisions” are always paid for by working-class people and not by the wealthiest?
The United Kingdom is already one of the most unequal countries in the global north, second only to the United States in the G7, 3.9 million children live in poverty and many more are on the brink. Making the situation worse, not just in recent weeks but over the last 12 years—now that is irresponsible! The response to this crisis should be to tax the rich. If the Chancellor wants to balance the books, why does he not impose a windfall tax on the energy giants which are set to make up to £170 billion in excess profits over the next two years? Would it by any chance have something to do with the fact that the Conservative party has taken £1.3 million from fossil fuel interests since the last election? This is a Government who serve the energy corporations that are raking in massive profits and trashing our planet, and not the millions of people who cannot afford to pay their bills and rent or to buy food. We are in a rudderless boat that is sinking, the Prime Minister has no authority or credibility and, after yet another U-turn, only one thing is certain, and that is that this Government are finished.
Question put and agreed to.
Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, this day).
Further proceedings on the Bill stood postponed (Order, this day).
Energy Prices Bill (Money)
King’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Energy Prices Bill, it is expedient to authorise the payment out of money provided by Parliament of:
(1) any expenditure incurred under or by virtue of the Act by the Secretary of State or any other public authority, and
(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided—(Amanda Solloway).
Question agreed to.
Energy Prices Bill (Ways and Means)
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Energy Prices Bill, it is expedient to authorise—
(1) provisions by virtue of which persons concerned with the generation of electricity may be required to make payments or become liable to penalties;
(2) provisions by virtue of which electricity suppliers may be required to make additional payments or provide additional financial collateral under Chapter 2 of Part 2 of the Energy Act 2013;
(3) the payment of sums into the Consolidated Fund—(Amanda Solloway).
Question agreed to.