Anne McLaughlin (Glasgow North East) (SNP)
I beg to move,
That this House recognises that prepayment meter customers, who pay for their usage in advance, are not afforded the same rights when in energy debt as customers who pay in arrears, such as those who pay in direct debit; understands that a prepayment meter customer is automatically disconnected when they exceed just £10 of debt; acknowledges that, in contrast, those who pay in arrears are afforded time and support to resolve their debts before action is taken to disconnect; is deeply concerned that so called self-disconnection of prepayment meter customers will see the most vulnerable in our society left without heat, light and facilities to cook and wash over the coming winter; and strongly urges the Government to outlaw self-disconnection to ensure that the poorest and most vulnerable customers are not left without basic energy provision.
First, let me thank the Backbench Business Committee for agreeing to this debate, and for understanding the urgent nature of it and, thus, offering me a pre-Christmas date. It is urgent, because something needs to be done now, even if only on a temporary basis. It is urgent enough for me to say at the outset that I am not just trying to raise awareness today; I am asking the Minister to do something about this, preferably today. Perhaps he will be unable to do so because of procedure, but I hope he will at least resolve to listen closely and act urgently.
Anne McLaughlin
I see that the Minister is nodding and I thank him for that. I hope he is able to come back next week before Parliament goes into recess, before we are plunged into even colder temperatures than we are experiencing at the moment and before people start dying because they did not enjoy the same rights as the majority of people. I urge him to come back next week and tell us that he has decided to give everyone those rights and that he will do so by outlawing so-called “self-disconnection” for those on prepayment meters.
I am also calling on the energy suppliers to do the same. One of them surely will have the moral compass and backbone to lead the way and be the first to promise that nobody—none of its customers—will be subjected to self-disconnection simply because they are on a prepayment meter. I am calling on the big six, as those guys have the money—they have the billions—and they can do this. Those companies have to take responsibility, but we probably cannot wait for that and the Government need to compel them to do so.
The other thing I would like the Government to get on top of this side of Christmas is ensuring that everybody is accessing the energy bill discount of £66 a month. The consumer rights group Which? told me this morning that a reported £84 million of that money is not reaching half a million households—the ones who need it the most. That is happening for a variety of reasons. Every company has a different way to access this help, with some requiring people to go to the post office. With others, the help arrives by post and often the recipient thinks that this is junk mail or they are afraid to open the letter. That is what happens when someone is on a low income: they get scared of the letters coming through the door, so they bury their head in the sand. I know that the Secretary of State has written to these companies about this issue, but anything more that can be done must be done urgently.
Before I come on to the substance of the debate, may I also thank the many MPs, from all parties, who signed my debate application, both those who are here today and those who sent messages of support, as I very much appreciate it? More importantly, our constituents will appreciate seeing their MPs stand up and fight for them —I hate to say it, but in some cases they are fighting for these people’s lives.
I pay my gas and electricity bills by standing order. In common with those who pay by direct debit or pay when the bill comes in, I pay in arrears. Also in common with those who pay in arrears, if I stop paying my bills I can be disconnected by my energy provider but it is very much a final step—a last resort. That is not the case for those who pay by prepayment meter. Should they be unable to pay for gas or electricity, the first thing that happens is that they are disconnected from their supply. The minute they go over the £10 or, in some cases, £5 of emergency credit that is applied to each prepayment meter, their supply just stops and they are considered to have self-disconnected.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)
Let me begin by thanking the hon. Member for Glasgow North East (Anne McLaughlin) for the positive way in which she introduced this important and sensitive debate. Like her, I have always adopted the principle that we get more with sugar than we do with salt, so I do whatever I can to protect the customers about whom she is concerned, particularly those with prepayment meters. As she said, the problems among that cohort will become worse during the winter, notably the cost of living crisis and the cold weather—nowhere more than in Scotland, she said, although north Yorkshire also gets fairly cold at this time of year, as, indeed, do other parts of the country: my hon. Friend the Member for Gloucester (Richard Graham) mentioned parts of his own constituency where people are being affected.
The Government entirely share the hon. Lady’s concerns. It is of course important to bear in mind suggestions, such as those made in today’s debate, of ways in which to keep our rules and regulations and processes under review to ensure that these vulnerable people are protected. However, we are able to provide robust protections and financial support for people in those circumstances, and I shall say more about that shortly.
The problems of debt create great anxiety, and that is another element that requires consideration. At times in the past I have been in debt, both personally and in my business life, and I know how anxious it can make people and their families. For some years I co-chaired the all-party parliamentary group on poverty, whose aim was to reduce the impacts of poverty and which considered matters such as the poverty premium, which is relevant to the issue of prepayment meters.
Ours is not the only country that has these meters; they are used around the world, with the purpose of managing debt. The one thing that people in circumstances such as this need to be able to do is budget properly. I think it was acknowledged by the hon. Member for Glasgow North (Patrick Grady) that prepayment meters have a role in helping people to budget, and can reduce the chances of their getting into debt or their debt increasing, making their position even worse.
Catherine West
I think the whole House would accept that advice on debt and debt management is crucial, but when a student household is spending £12 for 20 minutes of hot water, which, extrapolated over 12 months, is £4,300—and that is not even a dual fuel bill; it is a single bill—there is a problem, and it has nothing to do with debt management.
Kevin Hollinrake
That is definitely an issue. We need to ensure that people have access to fair deals, and I shall say more about that in a moment.
As was acknowledged by the shadow Minister, the hon. Member for Southampton, Test (Dr Whitehead), one of the difficulties involved in not using a prepayment meter is the fact that the only alternative would be court action, which could potentially increase the debt and affect someone’s credit rating, which is the least desirable outcome.
Anne McLaughlin
The Minister seems to be arguing that if the energy companies have to take people to court, it will cost those people more than having their prepayment meters cut off. The point is that they will not be taken to court immediately. Someone like me can wait for a year while the energy company is trying to work out some plan. Energy companies are more likely to work with the person concerned to find a way for them to pay their bills than to take them to court straight away.
Kevin Hollinrake
The hon. Lady has raised an important point about people being treated equally. In these circumstances, people will often have been through the processes that she has described. They will have been on normal payment terms, and there will have been a debt recognition and reconciliation process that may have ended up with people either adopting a prepayment meter voluntarily or, as a last resort, having one forced upon them. There are mechanisms, which I will explain in a minute, whereby people are granted abeyance and forbearance.
In the case of many households, if debt were allowed to spiral out of control—and that is not generally voluntary; it is more often due to matters beyond the control of those households, and it is important that we provide support for them—the suppliers themselves could find themselves in a perilous position. These are commercial suppliers of electricity and gas. In fact, this could force out of the market suppliers who specialise in cases such as this. The last thing we want is a lack of provision for people in these circumstances.
These prepayment meters have moved on from the ones that we used to have. The modern smart meters are far easier to top up remotely, and make it easier to check balances.
Stephen Kinnock (Aberavon) (Lab)
I thank the Minister for giving way; he is being very generous.
My constituency office is being contacted by a great many people who have still not received their prepayment vouchers from the energy suppliers, but are receiving letters from the suppliers telling them that if they do not use the vouchers by January they will be cancelled, which would of course push those people further into debt. What are the Government doing to ensure that they receive the vouchers and do not lose the money to which they are entitled?
Kevin Hollinrake
Other Members have made that important point, and I will come to it, but I had better make some progress, because you asked me to finish in about four minutes, Madam Deputy Speaker, which I shall endeavour to do.
We believe that there is a role for prepayment meters. Ofgem rules already require energy suppliers to offer a prepayment service only when it is safe and reasonably practicable to do so, and that applies whether a meter is smart or traditional. There are clear obligations on energy suppliers regarding customers in payment difficulty, and a prescribed process for occasions on which a warrant is required. That point was raised by the hon. Member for Kilmarnock and Loudoun (Alan Brown) and, indeed, by the hon. Member for Glasgow North East.
There are clear expectations for suppliers in respect of the steps to be taken before they instal a prepayment meter owing to debt, or switching a smart meter from credit to prepayment mode. Those steps include conversations to discuss debt repayment, budget management and energy efficiency measures, and referrals to debt advisers and charities. Before a prepayment meter is chosen as the debt repayment pathway, its safety must be assessed, as well as the customer’s ability to pay. Suppliers must give their customers seven days’ notice before installing a prepayment meter or switching a smart meter to prepayment mode. Ofgem recently published a regulatory expectations letter, in which it set out its expectation that suppliers will ensure that prepayment meters are safe and reasonably practicable in every case.
I would like to highlight some of the circumstances in which it is not deemed safe to have a prepayment meter, which include having specific disabilities or illnesses, or having children under five, as has been set out. Indeed, the hon. Member for East Lothian (Kenny MacAskill) raised that point. It is absolutely right that we provide support for those who are most in need.
The hon. Member also raised the issue of social tariffs, which were introduced in 2008 as part of a voluntary agreement between the Government and energy suppliers. They were replaced by the current mandated warm home discount scheme in 2011. This has improved outcomes by providing consistent and transparent benefits, and by utilising data matching to improve targeting. Clearly, it is important that we continue to review our current provisions and see what else might be done to help people in those circumstances.
Alan Brown
The Minister almost seems to be making an argument that the warm home discount scheme has been more successful than the social tariffs. Why then has the Department for Business, Energy and Industrial Strategy confirmed that it is considering revisiting social tariffs? I do support that, but he seems to be making a contrary argument.
Kevin Hollinrake
I do not think it is a contrary argument. We should always look to improve our rules. We believe it is an improvement on the past scheme, but there may be further improvements we can make. That is the right iterative process to take.
Richard Graham
On action, what does the Minister think can be done on social tariffs?
Kevin Hollinrake
That is a very good point. We are happy to listen to evidence from right across the House on different things that might be done, but clearly the most important thing is to ensure that support is targeted at those most in need. If there are better ways to do that, then we should certainly be listening. I would be very happy to talk to my hon. Friend at any point about any suggestions he might have. I know these issues are very important to him, so I am very keen to continue that conversation.
Kevin Hollinrake
I am sorry, but I am already past my time. I will have to conclude.
As Members will know, the Government have stepped in through various different mechanisms, including the energy price guarantee, energy bills support scheme and the energy bill relief scheme for businesses, with about £75 billion of taxpayer support for those areas.
The hon. Member for Hornsey and Wood Green talked about inherited debt, which is a very interesting point. We have not had evidence of that. If she has evidence of that and could write to me, I would be very interested in taking that up for her.
Before I conclude, I want to touch on standing charges, which is a very important point. We want to ensure that the market is as competitive as possible, so that people can access fair deals and we do not get the poverty premium that I mentioned earlier. Under Ofgem rules, charges must reflect the cost of delivering the service. It can be the case that there is a higher cost to suppliers for operating supplies for those on prepayment meters. It is important that we continue to look at that to see whether there might be better ways to ensure those customers are treated more fairly.
To conclude, the Government are listening to consumers and industry. We are providing a substantive support package via the energy bills support scheme and the energy price guarantee. Ofgem, the regulator, has set robust regulatory protections for consumers on prepayment meters. We are committed to providing the support and protections necessary to ensure that consumers and industry will thrive in the decades to come. [Interruption.]
I will conclude by talking about the vouchers. There is a problem in terms of vouchers. About 60% of people have managed to gain support through vouchers. We have written to suppliers on this particular matter. We need to improve the communication between suppliers and customers to ensure that take-up is higher. We believe that the take-up will improve over future weeks, but we are definitely keeping that under review and are keen to ensure all that support reaches households where it is intended to do so.