Energy Company Charges

Lord McCrea of Magherafelt and Cookstown Excerpts

Tuesday 4th February 2014 Commons Chamber

[Robert Halfon]

I thank my hon. Friend, with whom I have discussed the issue. I will come on to it later, so I hope he will bear with me for a moment.

Some companies’ levies are extraordinary. I spoke last night to the managing director of Spark Energy, which says that it has a special tariff system and that the majority of its customers are tenants. Some 10,000 of Spark’s 80,000 customers, those who do not pay by direct debit, are charged up to £390 a year extra. The managing director told me that that was purely down to costs. I will make this point later, but what is to stop another company coming along and saying, “It’s £450 or £500 and that is down to costs”? We need transparency.

Let me make three points: first, I believe that these charges effectively act as a stealth tax on the poor; secondly, I want to rebut the arguments used by energy companies to defend such practices; and thirdly, I will say what I think the Government should do about them.

The excessive charges often hit those we should protecting the most, and just like my constituent, it is often the elderly who are affected. Many pensioners do not like paying by direct debit because they want to be in control of their finances. Over the past few weeks I have been inundated with letters from pensioners. One said:

“We are from the old school—brought up to put our bills money away every week. Never to be in debt. But because we prefer not to have direct debit, we are punished.”

Another wrote that

“as members of the older generation, we are very aware that keeping a careful eye on budgets and control of finances is very important, and we have always been in favour of paying bills as and when they arise—budgeting year by year for increases and ensuring that we have money to cover such expenses. In this way we avoid becoming overdrawn and incurring bank charges.”

That is exactly the sort of fiscal responsibility we should encourage, and it is not exclusive to pensioners.

Understandably, anyone on a low income might be concerned that a direct debit could be taken at a moment when they are not able to pay for it. They might be waiting to get paid a day later, for example, and missing a direct debit payment would incur a heavy bank charge. It also does not take into account those who struggle to get access to proper banking facilities. Some 1.9 million households in the UK do not have a current account and there is no facility for them to have an overdraft. Half a million of those households do not even have access to a basic bank account that can accept direct payments. Such people are incredibly vulnerable and have very little choice over their payment methods, yet they are being penalised for that and are often those who can afford it least.

This is not just about finances because, crucially, many people, particularly the elderly—certainly in my constituent’s case—enjoy the social aspect of going to the post office to pay their bills. Many pensioners have contacted me to say that they do not trust direct debits and feel that companies discriminate against them because they cannot use computers. As one person rightly pointed out, direct debits and credits are always susceptible to human error on the part of the recipient, and mistakes take an enormous amount of time to sort out. All echelons of society should be catered for, not just computer and smartphone users, credit card holders and the technologically literate generation.

[Dr William McCrea (South Antrim) (DUP)]

rose—

[Mr Marcus Jones (Nuneaton) (Con)]

rose—

[Robert Halfon]

I will give way to the hon. Member for South Antrim (Dr McCrea) who represents a party that has been enormously supportive on this issue.

[Dr McCrea]

I congratulate the hon. Gentleman on the effort he is making on this important issue. The motion before us reminds us that more than 1 million people in the UK do not have access to a bank account. Surely that points to the fact that energy companies are penalising the weakest and most vulnerable people in society.

[Robert Halfon]

The hon. Gentleman is right, and even worse, those companies justify the charges by saying that they are because of the cost of pursuing non-payers. In essence, the poorest and pensioners who pay on time are paying for companies to pursue non-payers or late-payers.

--- Later in debate ---

[Dr McCrea]

Does my hon. Friend agree that across the United Kingdom, until the present time, the energy companies have, in many ways, got away with the additional charges? I trust that the exposure brought about by this debate will assist in doing something about that.

[Jim Shannon]

I thank my hon. Friend for that helpful intervention, which clearly highlights the issue that we are all trying to bring to the Minister’s attention.

I want to speak particularly for the elderly people in my constituency and across the whole of the United Kingdom. At the Belfast pensioners parliament, Age Sector Platform gave a horrifying statistic: the number of winter excess deaths in Northern Ireland in 2012 was 486. Almost 500 people died because of their exposure to the winter weather. All of them were aged over 65, so we clearly need to address that age category. It is clear that older people are being hit hardest by the rising cost of energy and their reduced incomes. The energy providers must ensure that the elderly are on the cheapest tariffs possible. That is not happening. Even when they are told of the advantages, the language is so complicated they cannot understand it. We would do well to be able to understand it ourselves.

A good starting point would be to remove the charge for those who do not pay by direct debit. The simple fact is that many elderly people prefer to pay by cash or cheque, not by direct debit. Although it is simple for you, Madam Deputy Speaker, and sometimes even for me, to use online banking, it is clear that it is not as simple for elderly people, who should not be penalised to the tune of £114 a year just because they like to collect their pension from the post office. I underline the point made by the hon. Member for Harlow about the social contact that elderly people enjoy in the post office when they pay their bills by cash, rather than by direct debit. Many do not have regular visitors, so that social contact means much to them and its importance cannot be underlined enough.

I am a former business owner and I much preferred it when customers paid cash, for no other reason than that it meant I would get my money! Indeed, at times I would offer a small discount—or even a big one—as an incentive for that payment method. Now another option applies and the people who are hit hardest are those least able to afford it.

Northern Ireland—this point has not been made yet—does not have access to all of the alternative sources of energy. My hon. Friend the Member for South Antrim (Dr McCrea) and I have discussed the fact that parts of Northern Ireland and my constituency do not have access to gas. I wish they did. Many of my constituents on the Ards peninsula and in Ballygowan, Saintfield and Ballynahinch would love gas to be introduced to the area, and perhaps that will happen one day.

Our food bank in Newtownards is also involved in running the Christians Against Poverty scheme to help people who have debts to get on top of their issues and live on a budget. More and more people are deciding to get help to control their finances.

--- Later in debate ---

[The Minister of State, Department of Energy and Climate Change (Gregory Barker)]

This has been an excellent debate and there have been thoughtful speeches from Members across the House. I pay tribute to my hon. Friend the Member for Harlow (Robert Halfon) for bringing this matter before the House and for framing this very real question in his powerful introduction to the debate. I also pay tribute to my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) who will speak after me. She has joined my hon. Friend the Member for Harlow to bring into close focus an issue that rightly warrants the scrutiny of Members across the House.

Let me be clear: the coalition Government are doing more than any Government before them to help hard-pressed consumers with the cost of energy bills, and we are fairly, squarely and rightly on the side of British consumers. My hon. Friend has raised legitimate questions about the way that consumers pay for energy by different methods, and the Government want to address that. We share the concern that my hon. Friend has put into sharp relief, but it is not a new issue. I am glad to use this debate to tell the House that Ofgem will be looking into the issue as part of the new competition test announced by the Prime Minister, to ensure that energy companies are living up to their obligations and licence requirements, and that the interests of the British consumer are at the heart of the modern energy market.

[Dr McCrea]

During the Minister’s remarks, can we get away from having those on the Front Benches make a political broadcast, and deal with the cross-party motion before the House? Will the Minister tell the House—I certainly did not hear this from the Opposition Front Bench—what is happening to the concerns that we as elected representatives have on behalf of our constituents, and which are summarised in the motion?

[Gregory Barker]

I certainly intend to do that, but I think the hon. Gentleman is being a little unfair. I have already mentioned the most important point of the speech, which is that we have asked Ofgem to consider the matter raised by my hon. Friends the Members for Harlow and for Chatham and Aylesford, and Members across the House, as part of the new competition test that was brought forward by the Prime Minister towards the end of last year. That will have real teeth and will report within a matter of months, if not weeks. We expect that in the near future, and Ofgem will be tasked to do it.