UK Electricity Prices

Lord Whitehead Excerpts

Thursday 4th June 2026 Grand Committee

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

My Lords, I congratulate the noble Lord, Lord Lilley, on securing this debate. It is a very important debate not just on our present energy crisis as a result of events in the Middle East but to review, among other things, how the energy market has developed in the UK over a long time and what has gone into it.

I, maybe naively, constructed my remarks on the basis of the Question, which addresses why the UK has among the highest energy electricity costs in the OECD area. That is undoubtedly true, although we need to make a number of caveats about how different countries manage their energy markets. Looking at other countries is significant in that respect.

However, I am sorry, but not surprised, that the debate this afternoon has been on a much wider basis. It would require all of us to get around the table for about three hours to talk all these things out, and it would certainly take me more than the 10 minutes that I have this afternoon to remotely address all the points that have been made.

As a general point, I had wanted with my closing speech to address what is being done now about a number of things which I think between us we can agree have been problems and distortions in the UK energy market over a number of years, which need rectifying in the future. But—this is where we come to fairy tales—we know that climate change is real and not a fairy tale. We cannot address the problems and difficulties of the UK energy market and its prices without factoring in what we are doing about climate change. Otherwise, the best thing to do would presumably be to dig a whole load more coal mines and start coal mining again. In our situation, we have to deal with climate change as a central part of our energy economy.

We do that on the basis of a UK energy system in which, for example, more than half of the CCGTs presently in operation are likely to go out of commission within the next few years—a maximum of 10 years, because they are beyond their lives. That is real; it is not a fairy tale. As the noble Lord, Lord Moynihan of Chelsea, informed us, we have a grid system that is completely clapped out and was originally built for an entirely different energy system—not a modern energy system based on climate change and delivering things where they need to go. Whatever the situation, we would have put a great deal of effort in replacing the grid, so that it is up to modern standards and purposes, particularly as far as digitalisation is concern. That is not a fairy tale either.

As the noble Earl, Lord Russell, mentioned, it is also not a fairy tale that, as it works at the moment, the system is based on marginal cost pricing. That means that whatever you do in terms of cheaper power in the system, the most expensive element of the system when the bidding process comes in is the one that sets the marginal cost for the entire system. That marginal cost price is still dominated by gas—marginally less so than previously, but it is still a very long way from being resolved.

None of these is a fairy tale. These are things we have to address now with the energy system that we have. I think it was again the noble Lord, Lord Moynihan of Chelsea, who mentioned that one of the early mistakes that the previous Government made was to generate low-carbon power on the basis of the renewable obligation system, which gives rewards to the 30% of the system still run by renewable obligation-based energy over and above what you would expect it to get because of the volatile price of gas going into the system. But we have it in the system and we have to deal with it. What do we do about it? How do we get those elements out of the system and get a system that really reflects the cheapness of the power coming out of it for the future?

When we look at other energy markets, one answer to these questions is that various other countries are not exposed to those marginal prices and the gas input of 30% or so into the UK system that we are. In France and Canada, for example, it is only a few per cent based on gas. Even in Germany, there is a higher proportion but it is still much lower than us. People may like to say that this is what I would say this afternoon, but it is overwhelmingly the case that the present high electricity prices in the UK market are based on our being very high users of gas in the system to create electricity, and therefore our costs in the system go along with the volatility and changing prices of gas.

There are two more non-fairy tales, of course: the invasion of Ukraine and the situation in the Middle East at the moment. It is true that gas prices have come down a little since the peaks during the invasion of Ukraine, but they are still considerably higher than they were before it. That is the system we are dealing with at the moment.

What are we trying to do to deal with that? First, we have to make sure we get off gas in the system. Part of the mission to achieve clean power by 2030 and accelerate net zero is to place gas on the margins of the system so that it produces a relatively small amount, as has been stated, backing up the system rather than being a central part of it as a whole.

We have indeed brought in price caps, as noble Lords will know, to ensure that price rises are kept in check over a period. The Government never said that energy bills would all come down as a result of price caps or as a result of the transfer of some of the legacy things, such as the renewables obligation or the energy company obligation, away from levies and into the Exchequer. We did not say that would necessarily bring down bills; we said it would make sure those bills would go up rather less than they would otherwise. That is not a fairy tale but an actual fact—that is what has happened with, for example, the reduction in the Ofgem April price cap and the effect on the price cap coming up fairly shortly.

As noble Lords have mentioned, the Government are trying to make sure that prices come down for the industry. Mention has been made of the supercharger, which will cut businesses’ electricity costs by up to £420 million per year, which particularly relates to discounts on electricity network charges for businesses in sectors such as steel, cement and chemicals from 60% to 90%. That will make a real difference.

The Chancellor also announced in April that the Government will cut electricity bills by up to 25% for over 10,000 manufacturers from April 2027 through the British industrial competitiveness scheme. We are working hard to make sure that there is downward pressure on those bills, both domestic and industrial, through the moves that we are making against the background of the electricity system we have at the moment. At the same time, we have to tackle the structural problems that we have in the electricity system for the longer term. It is not just a question of putting more renewables on to the system; it is a question of revising the whole system so that the benefits of those renewables and low carbons come through and that the things that are a cost to the system go to the margins. That is why we are seeking to delink the cost of electricity from management by gas, particularly by taking action against the renewable obligation bodies that still make up quite a considerable portion of the energy market. We think that will produce a considerable reduction in the hold that gas has over the market over the next period. There will be fixed-price contracts for eligible generators, and we will be delinking from gas prices and protecting consumers from future crises.

I am aware that, as I had predicted, I have not been able to take in the entire sweep of this afternoon’s debate in one go. I warmly hope that the noble Lord, Lord Lilley, will secure a further two or three debates so that we can debate a number of the other issues.

To conclude, the Government are determined that families and businesses cannot be left at the mercy of volatile fossil fuel markets on an international basis. That is why we must press on with the transition not just for climate change purposes but for the good management purposes of having secure, homegrown power that will ultimately bring bills down for good.

Oral Answers to Questions

Lord Whitehead Excerpts

Wednesday 26th October 2022 Commons Chamber

The Prime Minister was asked—

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Q1. If he will list his official engagements for Wednesday 26 October.

[The Prime Minister (Rishi Sunak)]

Mr Speaker—[Interruption.]

[The Prime Minister]

This morning, I had meetings with ministerial colleagues and others. In addition to my duties in this House, I shall have further such meetings later today.

[Dr Whitehead]

I congratulate the Prime Minister on his new post and as the first Prime Minister of a south Asian heritage, which I think will be a cause of great pride among many of my constituents. I also take some pride in welcoming a fellow Southampton, or Saints, supporter into No. 10.

During the last campaign that the right hon. Gentleman ran to become Prime Minister, he pledged to prohibit any development of onshore wind, which is now the cheapest form of power available to us in this country. Now that he is Prime Minister, will he change his mind?

[The Prime Minister]

I thank the hon. Gentleman for his kind words and look forward to seeing him at St Mary’s—although my right hon. Friend the Leader of the House may have something to say about our love of the Saints.

When it comes to energy policy, I stick by what we said in our manifesto. The important thing is to focus on our long-term energy security. That means more renewables, more offshore wind and indeed more nuclear, and that is what this Government will deliver.

Oral Answers to Questions

Lord Whitehead Excerpts

Wednesday 20th April 2022 Commons Chamber

[Mr Speaker]

I call the shadow Minister, Dr Alan Whitehead.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The COP26 President acknowledges the tremendous contribution that solar has made and can make to the achievement of our net zero goals. I am sure that he also acknowledges that it is now one of the renewables that is cheapest and most quickly installed, so why are the Government ignoring its future development, having devastated the industry a few years back by precipitously withdrawing all support for development, and doing nothing to ease the penal planning restrictions on both domestic and ground-mounted solar installations? He says merely that he expects installations to increase fivefold by 2035, but without providing any support to allow that expectation to become a reality. Is it not time that the Government took seriously the contribution that solar can make to net zero targets?

[Alok Sharma]

I respectfully disagree with the shadow Minister; the Government are doing an enormous amount on this issue. In the latest contracts for difference auction process, solar is back in. We have already removed VAT on solar panels to allow installations on residential accommodation. If he looks at the detail set out in the energy security strategy, he will see that there will be a big focus on solar, wind and, of course, nuclear.

Oral Answers to Questions

Lord Whitehead Excerpts

Wednesday 30th October 2019 Commons Chamber

The Prime Minister was asked—

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Q1. If he will list his official engagements for Wednesday 30 October.

[The Prime Minister (Boris Johnson)]

Immediately after questions today, I will open the debate on the Grenfell Tower inquiry report.

Mr Speaker, I know that the whole House will want to join me in recording that, after 10 tumultuous years, this is your last Prime Minister’s questions. As befits a distinguished former Wimbledon competitor, you have sat up there in your high chair not just as an umpire ruthlessly adjudicating on the finer points of parliamentary procedure with your trademark Tony Montana scowl, not just as a commentator offering your own opinions on the rallies you are watching—sometimes acerbic and sometimes kind—but above all as a player in your own right, peppering every part of the Chamber with your own thoughts and opinions like some uncontrollable tennis-ball machine delivering a series of literally unplayable and formally unreturnable volleys and smashes.

Although we may disagree about some of the legislative innovations you have favoured, there is no doubt in my mind that you have been a great servant of this Parliament and this House of Commons. You have modernised, you have widened access, you have cared for the needs of those with disabilities, and you have cared so deeply for the rights of Back Benchers that you have done more than anyone since Stephen Hawking to stretch time in this session. As we come to the end of what must be the longest retirement since Frank Sinatra’s, I am sure the whole House will join me in thanking you and hoping that you enjoy in your retirement the soothing medicament that you have so often prescribed to the rest of us.

I know that Members across the House will want to join me in wishing the England rugby team the very best for the final in the world cup on Saturday.

This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall have further such meetings later today.

[Dr Whitehead]

I fully associate myself with the Prime Minister’s comments about your outstanding service, Mr Speaker, and wish you a long and successful life after your speakership comes to an end.

Labour will produce a strong offer at the forthcoming election on the climate emergency and net zero, including a full ban on the extraction of fossil fuel by fracking. What chance does the Prime Minister think he has of matching that offer, particularly in the light of the news that the Conservative manifesto will be written by a lobbyist for the fracking industry?

[The Prime Minister]

We will shortly make an announcement about fracking in this country, in view of the considerable anxieties that are legitimately being raised about the earthquakes that have followed various fracking attempts in the UK. We will certainly follow up on those findings, because they are very important and will be of concern to Members across the House.

But I must say that this Government yield to nobody in our enthusiasm for reducing CO₂. We have cut carbon emissions massively in the UK and we were the first European country to commit to net zero by 2050, and that is what we are going to do. We can do it because we believe in a strong, dynamic, robust market economy that is delivering the solutions in clean technology that are deplored by the Labour party.

Oral Answers to Questions

Lord Whitehead Excerpts

Wednesday 18th July 2018 Commons Chamber

[The Prime Minister]

First, I would like to take this opportunity to thank my right hon. Friend for the work that he did as Secretary of State for Exiting the European Union. Secondly, as he knows, we have published the proposals that we have for the future trade relationship with the European Union. Of course, as we look through those negotiations, we will be looking to see where the European Union has entered into certain agreements with others in the past. Very often, the European Commission will say, “X can’t be done,” only for us to say, “X was done with another country and therefore it is possible for it to be done with us.” But what I want to see is not just an amalgam of those free trade agreements but an ambitious plan—which is what I believe we have produced—that will protect jobs in this country, deliver on the referendum result and, crucially, ensure that we have no hard border between Northern Ireland and Ireland.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Q9. The largest apprenticeship provider in Southampton recently reported to me that he has suffered a 70% drop in apprentices on his books since the introduction of the levy-based apprenticeship system. That accords with figures from other providers in my area and means that hundreds of young people will now not get the apprenticeships they need. What is the Prime Minister doing to get the disastrous roll-out of the levy-based apprenticeship system back on the road?

[The Prime Minister]

What we have seen since the apprenticeship levy was introduced is a change in the number of people doing apprenticeships, but we have also seen an increase in the quality of the apprenticeships that are being undertaken. The Government are now looking at how the levy is operating to ensure that we can do what I want to do, which is ensure that every young person has the opportunity to pursue the course, be it of education or training, that is right for them and that is going to give them the best start in life.

Oral Answers to Questions

Lord Whitehead Excerpts

Wednesday 6th December 2017 Commons Chamber

[The Prime Minister]

I absolutely agree with my hon. Friend. She has highlighted a very important sector for the United Kingdom, and I welcome the investment to which she has referred. That is why this sector is one of the sectors that have been given such significance in the industrial strategy that my right hon. Friend the Business Secretary has published. It is exactly an area where we see benefits in the form not only of investment and jobs in the UK, but, as she says, of improving the treatments available for patients and of improving their lives.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Q8. When the Prime Minister rings up Donald Trump to express our concern about his moves concerning Jerusalem and the US embassy, will she also inform him that we will be proceeding to recognise the state of Palestine as a central part of keeping the two-state process in play?

[The Prime Minister]

We want to see a negotiated settlement between the Israelis and the Palestinians. We believe that that should be based on a two-state solution, with a sovereign and viable Palestinian state, but also a secure and safe Israel. That should be a matter for negotiation between the parties.

Oral Answers to Questions

Lord Whitehead Excerpts

Wednesday 18th October 2017 Commons Chamber

[The Prime Minister]

I am very happy to welcome the initiative to which my hon. Friend refers. We know we need to address mental health more carefully and with greater attention across the public in general, but mental health concerns for those in the armed forces and those who have left the armed forces are a very real challenge that we need to face, because they have put themselves on the line for us and we owe it to them.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Q8. A major Southampton housing association tells me that 65% of its tenants who are on universal credit are now in rent arrears averaging £700, hampering the association’s ability to get on with building new houses. What message does the Prime Minister have for my local housing association? Is it just “Tough, get on with it”, or has she got something more positive to say?

[The Prime Minister]

We are indeed giving support to housing associations to build more homes. That is why, a couple of weeks ago, we announced that an extra £2 billion will be going to housing associations to enable them to do exactly that.

Oral Answers to Questions

Lord Whitehead Excerpts

Wednesday 26th April 2017 Commons Chamber

[The Prime Minister]

I thank my hon. Friend. I think I will be visiting communities around the whole country over the next few weeks. I congratulate the staff at Milton Keynes university hospital on achieving that rating. As my hon. Friend said, it was backed up by considerable investment. As we know, between 2015 and 2020 more than half a trillion pounds is being spent on the NHS in England. That is only possible because we have safeguarded the economy over the past seven years. As I have said previously today, that will only be possible in the future if we secure the strong and stable leadership our country needs. As I said, in Wales Labour has been cutting the health budget.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Q12. I invite the Prime Minister, instead of going to Milton Keynes, to visit me in Southampton and take a tour of Southampton’s schools. If she does, she will find that those schools are in despair about the cut in pupil funding of 10% in Southampton, which is £475 per pupil or equivalent to the loss of almost 400 teaching jobs across the city. She will also find one school that is inviting parents to clean the school toilets—

[Mr Speaker]

Order. The hon. Gentleman has got his point across with considerable force.

Oral Answers to Questions

Lord Whitehead Excerpts

Wednesday 10th June 2015 Commons Chamber

[The Prime Minister]

First, may I welcome my hon. Friend to this place and praise him for his maiden speech which moved all those who heard it or have subsequently read it? He is absolutely right that the best way to tackle poverty is to get people into work, then make sure that there is a decent minimum wage that rises over time, and then cut people’s taxes by taking those earning minimum wage out of income tax. Our plan to raise the personal allowance to £12,500 will make a real difference and I want to see progress on the minimum wage going on at the same time as that, but all the while we have to recognise that the absolute foundation is a growing economy that is producing jobs. Getting into work is the greatest way to combat poverty.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Q6. Can the Prime Minister reassure me that press reports that he is going to cut funding support to household energy efficiency programmes are wrong, and that instead he is committed to maintaining support for programmes to ensure that the most vulnerable in our society have warm homes to live in?

[The Prime Minister]

We made some very big progress in the last Parliament with home insulation programmes and support for solar panels. There are now almost 1 million homes in the UK with solar panels. We want to carry on with those programmes and make sure there is value for money.

I hope it will not be seen as gloating to welcome the hon. Gentleman back, because he is quite a rare bird: a Labour MP in the south of England.

G7

Lord Whitehead Excerpts

Wednesday 10th June 2015 Commons Chamber

[The Prime Minister]

I note my hon. Friend’s long-standing interests in the links between Britain and Bangladesh, and in the strength and prosperity of Bangladesh. There was not a specific discussion on the matter she raises, but we talked about inclusive Governments representing all their people and governing on behalf of all their people, which is relevant in this case.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The German Chancellor, Chancellor Merkel, in her statement at the end of the G7, wanted to emphasise the agreement of the G7 to phase out all fossil fuels as a means of electricity generation by the end of the century. Did the Prime Minister have a hand in securing that agreement? If so, what target was in his mind for the UK?

[The Prime Minister]

We worked very hard to get the strongest possible language on climate change. As I said to my hon. Friend the Member for South Dorset (Richard Drax), having set Britain on a path of low-carbon electricity and having reduced our carbon emissions, we want other countries to do this as well. We did not achieve all we wanted in the communiqué, but it was pretty strong stuff.

In terms of decarbonising electricity, I repeat what I said. What is happening in Germany at the moment is that because it has reduced its nuclear programme it is actually burning more, rather than less, coal. Our strategy is to reinvest in the nuclear industry and go on investing in renewables, and have gas plants constructed too. Over time, that will require carbon capture and storage. The pragmatic thing to do is to promote that technology and commit to full decarbonisation only when we know we can bring it about.