Fuel Poverty

Debate between Lord Field of Birkenhead and Anne Marie Morris

Tuesday 23rd October 2012 Westminster Hall

[Mr Frank Field (Birkenhead) (Lab)]

Some of our poor souls may be waiting for tomorrow for the big debate on fuel poverty. I hope that we will prove that they have missed the boat and that the real debate took place this afternoon, when the Minister announced precisely what the Government will do. Indeed, the Government need to announce what they are going to do after the difficulties into which the Prime Minister threw himself the other week. All of us who listened to or read what the Prime Minister said accepted that he was on to not only an important issue but the worry that most of us as consumers have that we have no idea what we are buying, let alone whether it is the best buy. In my parliamentary experience, that is very similar to the position that people face when trying to buy a pension. We could argue that buying a pension is somewhat different from heating our own homes, but there are certainly similarities between the industries, which make it difficult to understand what is the best and safest buy.

Today’s debate could not be better timed as a dry run for the Government, and I hope that the country can hear how they will respond to the Prime Minister’s special initiative. The day after he announced what he thought should happen, Ofgem in its wisdom responded—always well behind the curve—suggesting that if only people had enough information they would be able to make the right decisions. We all know, however, that merely providing people with information does not necessarily mean that they are informed or that, when informed, that information helps them to make the right decisions.

I want to sketch the size of the problem, what previous Governments have done to tackle the issue of people being cold in winter and what the Government could do today to make a break with the past, to extend a helping hand to some of our most vulnerable constituents and to get an issue behind them. The Government, among many other things, inherited a definition of people in fuel poverty—where the definition came from, which Mount Sinai it came down from, I do not know—which is those who spend more than 10% of their income on keeping warm. If we look at the detailed Government analysis of consumer expenditure, about 4.7 million people are technically in fuel poverty and, of those, 4 million are actually vulnerable.

In this debate and in the slightly bigger debate tomorrow, we need to look at how we have protected that group from dying unnecessarily in winter or from being unnecessarily cold. There were two previous schemes, of which the first was the voluntary social agreement, which ran from 2008 to 2011. Not much was wrong with it, except for three main disadvantages: people could be covered by the agreement but not on the cheapest rate, so they could be confused consumers and think they were getting the best deal, while being far from actually getting the best deal possible; the companies were allowed to decide who could apply, so they were the gatekeepers to their own scheme; and there was no link to an idea such as a social tariff, whereby people who were on it got the best deal that the company was offering. I want to return to the concept of a social tariff, because it is important if we are looking at how to move to the next stage of the debate and, moreover, how to help people.

The current scheme—to be charitable to the Government, I think that they inherited it—was to run from 2011 to 2015 and is called the warm home discount scheme. Under it, the companies again act as tax masters; they can put a levy on each of our bills and use the money to persuade people that they are helping them. Again, it is a brilliant scheme, except that we might expect a company paying a rebate to which the rest of us as consumers had contributed to give those people their lowest rate—far from it. Which? tells us that 75% of us—the figures are not broken down for vulnerable and other consumers—are not on the cheapest rate that we could be on, given the companies from which we buy our power. It is reasonable to suggest that the vulnerable might constitute 75% of that total. Therefore, probably 75% of those households, families and individuals who are helped by the warm home discount scheme are, on the one hand, getting a rebate paid for by the rest of us consumers and, on the other, paying it out in fuel bills that are unnecessarily high.

[Anne Marie Morris (Newton Abbot) (Con)]

Has the right hon. Gentleman taken on board the issue of those who simply do not or cannot have a choice? I am thinking in particular of those on prepayment meters. Consumer Focus research has shown that, on average, those on prepayment meters pay £1,306 a year, whereas those on direct debit pay £1,222 a year. Many of those individuals are undoubtedly poor and have no choice, because they are rental tenants and do not have the opportunity to take up the Government schemes. Has the right hon. Gentleman given some thought to how to help those vulnerable people?

[Mr Field]

Indeed I have, but, sadly, what is important is not whether I have but whether the Minister has, because he is in a position to do something about it. The proposals that I will outline shortly cover that group as well, because they put the onus on the company, not on the individual or the landlord, thereby shifting the responsibility and, in that sense, the subsidy from us as consumers paying energy companies that oversell or overprice their products to companies having responsibility to offer everyone the cheapest rate if we fall within the vulnerable groups, which includes many of the people mentioned by the hon. Lady. The problems with the current scheme include the rebate on a bill that might not be the lowest possible bill. The core group of people who qualify for such help—there is also an extended group—is narrowly defined, and my guess is that many of the core group would not include those whom the hon. Lady was thinking about, because many of them are in their own properties, whether owner-occupied or rented, and have control of their meters, so they would not be subjected to the landlord practice of which she spoke.

Under the current scheme, we have a core group that qualifies and then an extended group that is still defined by the company—not by us or the Minister, and not approved by Parliament as one might expect, but by the companies themselves. They are still in the driving seat. The problems with the warm home discount scheme include getting a rebate but not necessarily qualifying for the lowest rate or being trapped in how to buy our energy and therefore paying through the nose. Although the bulk of the funding for the rebate comes from us, many of those who are vulnerable are outside the core group, even though the core group gets 75% of the money in the scheme.

I have a plea for the Minister, and I will give him piles of time to reply, so that we can probe him further. It is a proposal that he could adopt, that would give the Government credit and that would dig the Prime Minister out of the hole that he is in, thereby perhaps earning the Minister promotion. The other day, we saw his skill in defending what the Prime Minister said on the Floor of the House. How much easier life would be for the Prime Minister if he had a proposal that the Minister thought was workable and might carry some weight in the country!

My proposal is that the Government should insist that companies do not have a licence to sell fuel unless they offer their most vulnerable consumers their lowest rate, not an artificially lowest rate, but the lowest rate at which they sell fuel. Unless they have a loss leader, one assumes that they will make a profit on that lowest rate, so they would not be asked to act in denial of Mr Scrooge. They would even make money, although perhaps not as much as they might make from other people. That would cover the group to which the hon. Member for Newton Abbot (Anne Marie Morris) referred and about whom she is rightly very concerned, in that those in the vulnerable group—I will come to that in a moment—would have the right to be sold fuel at the lowest rate. Account would have to be taken of the fact that some people have meters and receive their fuel in various ways, but such a scheme would be simple, and everyone would understand it.

It is important that people understand whether they qualify. In another role, in another place, Mr Weir, you have often referred to cold weather payments and who is eligible and who is not. We could spend a lot of time having great fun thinking about other people who should be added to the groups that are defined as being eligible for cold weather payments. Most of us would admit that they cover the most vulnerable in our society, if not all the vulnerable. They cover 4 million of those who are likely to suffer fuel poverty.

Switching back to the beginning of my speech, I said that the Government’s own data show that 4.75 million people are in fuel poverty but that some of them, like some people on higher incomes, spend more than 10% of their income on fuel because they want to be ultra-warm, or do not think about it, but 4 million households in fuel poverty are vulnerable and would be covered by the cold weather payment definition.

My suggestion is that the Government could win applause in the House tomorrow by being the first Administration to introduce proposals that effectively deal with our constituents who, particularly during winter, are cold because they cannot afford to heat their homes properly—those who are most likely to die during the winter because they are cold and those who are simply waiting for the Government to act. Ofgem, in its brilliance, said yesterday or today that nothing in the regulations, the law or anywhere in this land could stop the Government announcing that scheme and compelling companies to operate it. With 17 minutes to go, I hand over to the Minister, who could put us all us out of our misery within a minute or two.