Fuel Poverty and Energy Price Caps

Alan Brown Excerpts

Thursday 19th November 2020 Westminster Hall

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Ms Rees. I congratulate my hon. Friend the Member for Linlithgow and East Falkirk (Martyn Day) and my constituency neighbour, my hon. Friend the Member for Ayr, Carrick and Cumnock (Allan Dorans), on securing this debate. I thank the Backbench Business Committee. This is a very important subject, and it is a shame that there are not more hon. Members here to debate it, but obviously, between covid and the fact that it is a Thursday afternoon, it is understandable that the Chamber is not as full as it would normally be.

My hon. Friend the Member for Linlithgow and East Falkirk set out the issues really well. He highlighted the need to work on a cross-party basis. It was interesting to hear about the work undertaken with Falkirk’s forgotten villages. I am sure many of us have villages that claim to be forgotten villages. It is great to see them working together to secure a successful outcome and a gas grid connection. Hon. Members can tell how steeped my hon. Friend is in his constituency and the work that he does for his constituents by bringing forward those examples, defending his constituents and trying to effect change, as highlighted today. My neighbour, my hon. Friend the Member for Ayr, Carrick and Cumnock, reiterated Scotland’s contribution to the generation of the UK’s energy supply and fuel over the years. He also highlighted how East Ayrshire Council, which is my local authority as well, suffers from fuel poverty and poverty in general, which we would like to be addressed.

On that point, I welcome the fact that the UK Government, the Scottish Government and the three Ayrshire councils today signed off the Ayrshire growth deal. One of the proposals of that deal is for a national energy research demonstrator project at Cumnock. The leader of East Ayrshire Council today highlighted the need to tackle fuel poverty, and hopefully that will make a difference in our area.

I am lucky that I have never had the dilemma of not being able to turn on the heating, or faced the awful choice of what to cut out to turn it on, but as my hon. Friends have demonstrated, too many people do face the awful choice of heating or eating, which is simply not good enough. I am sure that all hon. Members present have dealt with constituents who are in that predicament, or who try to get by by heating only a couple of rooms. Heating only a couple of rooms invariably leads to dampness in the rooms that are not being heated, which obviously exacerbates health problems, including mental health problems, as my hon. Friend the Member for Linlithgow and East Falkirk highlighted. That has a personal cost as well as a cost to the NHS, which has been estimated at between £1.4 billion and £2.2 billion a year in England. If we tackle the problem, we will improve people’s health and wellbeing and cut costs to the NHS. Sadly, National Energy Action estimates that 10,000 people a year die earlier than they should owing to fuel poverty, so we need to tackle that scourge of society.

As has been pointed out, the four nations measure fuel poverty slightly differently, but there is no doubt that Scotland appears to have a higher rate. Some 24% of Scotland’s population are classed as fuel-poor. That is partly due to the fact that about 15% of homes are off the gas grid and have to pay more to heat their homes.

Within that cohort, in the highlands of Scotland, many customers pay about £400 a year more to heat their homes because they are on restricted meters. They pay a surcharge of between 2p and 4p per unit of electricity used. I highlight that to the Minister. Does he think it is fair that people in the highlands have to pay a surcharge while exporting electricity to the rest of the UK? I hope that that can be addressed. We need a better regulatory framework for off-grid heating, to control pricing for people who have to buy oil and gas. I hope that he will take that away and look at it.

It has also been highlighted that covid-19 has had an impact. People losing their jobs or working at home is exacerbating fuel poverty. Energy Action Scotland estimates that fuel poverty in Scotland could increase by 5% owing to the pandemic. Again, that illustrates the need for action.

I welcome the action taken by the Scottish Government to deliver their new child winter heating allowance. Those payments of £200 a year for those eligible start next month and are automatically paid, rather than people having to claim for them, so everybody will get them in full. The UK Government could look at that, along with the request from my hon. Friend the Member for Linlithgow and East Falkirk for an emergency coronavirus energy grant, to which I hope the Minister will respond.

We also need the UK Government to commit to keeping the £20 uplift for universal credit. That additional money has been a lifeline to many, but those on legacy benefits need a similar increase. That is not the responsibility of the Minister’s Department, but I hope he can speak to the Chancellor about that.

As was highlighted, the Scottish Government have brought forward groundbreaking legislation to tackle fuel poverty. We need to know when the UK Government will bring forward their fuel poverty legislation and strategy. We wait with bated breath for the energy White Paper. The Minister said recently, in a written answer, that he is still planning to publish it in the autumn, but I suggest that in Scotland it is already winter, rather than autumn, so hopefully we will see it soon.

One of the most important factors, apart from income and alleviating fuel poverty, is clearly energy efficiency measures. As we have heard, the Scottish Government have led the way on that. I want to focus a wee bit more on the details of energy efficiency—hopefully without repeating too much of what my colleagues have said. Obviously, it is a no-brainer that greater energy efficiency measures can assist in reducing carbon emissions at the point of use, as well as the demand in energy generation, so that also has an effect on reducing emissions further. Clearly, it will assist in reducing fuel poverty levels and it can be part of a green industrial revolution.

I welcome the 10-point plan and the commitment to making £1 billion available next year to make new, and existing, homes and public buildings more efficient. However, while I welcome that, it does feel like a wee bit of a rehash of previous announcements. We remind the Minister that the Conservative manifesto gave a figure of £9.2 billion, so we actually need to see plans for the rest of that money. I also ask the Minister to consider asking the Chancellor to remove VAT on energy efficiency home improvements, because that makes it more cost-effective for those that can only just about afford to install such measures.

Back to the 10-point plan: I welcome the proposals for installing 600,000 heat pumps every year by 2028. Obviously, we need to see how that is going to come forward in terms of an action plan and delivery programme. I request the Minister to look at tackling first those that are off the gas grid, and to make the heat pumps more efficient. To transform people’s lives, the plan needs to align with the installation of energy efficiency measures. Hopefully the programme will be co-ordinated in that way—providing energy efficiency and the installation of new heat pumps.

I do welcome those proposals, but I still think that we need more direct UK Government investment in energy efficiency; again, that comes back to following the lead of the Scottish Government. It is not just the SNP that has said that, but energy companies, third sector organisations and the cross-party Business, Energy and Industrial Strategy Committee in its 2019 report, “Energy efficiency: building towards net zero”. A key point from that report was:

“We note that Scotland’s investment of four times more than England cannot be explained by a less efficient dwelling stock: the latest housing survey data demonstrates that homes in Scotland actually have greater insulation levels than in England. For example, in 2017, 49 per cent of homes in England had insulated walls, compared to 60 per cent of homes in Scotland.”

Also,

“that Scotland has made much faster progress in improving the energy efficiency of its fuel poor homes than England, where in some bands, progress has stalled.”

On that, statistics show relative success—44% of Scottish homes were rated as Energy Performance Certificate Band C or better in 2018, compared with just 34% in England and 28% in Wales. In Scotland, the proportion of properties in the lowest EPC bands of E,F or G has more than halved since 2010, reducing from 27% to 12%. In England the figure is still at 16%, and unfortunately in Wales it is even higher, at 20%, although there is a caveat that the Scottish figures are measured slightly differently. No wonder the BEIS Committee concluded:

“The Government appears indifferent towards how public per capita spend in household energy efficiency in England compares to other parts of the UK”

and

“the governments of the devolved nations treat energy efficiency as a much higher priority than the UK Government.”

That “indifferent” comment is particularly damning. I would like to hear what the Minister has to say about that. I know that £1 billion has been announced, but we need to see the rest of that £9 billion commitment.

The Committee on Climate Change first confirmed that policies were not in place to deliver the UK’s ambitions in energy efficiency to improve homes to at least EPC band C. The CCC stated that regulations for the private rented sector prioritise costs for landlords over the costs for renters, and that minimum standards for social housing were required. By contrast, it observed that the Scottish Government were demonstrating how an effective policy package for energy efficiency improvements in buildings might be delivered. They have actually set out a comprehensive framework of standards, backed by legislation. When will the UK Government put in place a proper framework that covers the private rented sector, social housing minimum standards and owner-occupiers, as the Scottish Government have done?

We know our long-term energy efficiency and investment programme will create jobs that allow the programme to deliver the best value, avoiding spikes in cost, as part of a green industrial revolution. Some 27 million homes need their heating systems decarbonised, so it is critical that they are as energy efficient as possible. That is why it would be good to see a long-term Government programme that looked at energy efficiency as a national infrastructure project. Maybe that could be addressed when the national infrastructure plan is published.

My hon. Friend the Member for Linlithgow and East Falkirk mentioned the energy company obligation scheme. The committee on fuel poverty states that those measures do not actually help those who most need help, which confirms the need for direct, targeted investment. We do not want another failure like the green deal scheme, which has put more people into fuel poverty rather than helping them. I know that the Minister has acknowledged that appeals for mis-selling by Home Energy and Lifestyle Management have taken too long, but his Department needs to look at and resolve that matter.

Our net zero commitments will be built in to the next investment period for the transmission grid upgrades. ECO and smart meter costs are all being added to consumer bills. What will that mean for energy users of the future? Will the Government start to consider general taxation as a way to create some of that investment in our energy system?

Everybody will be pleased to hear that I am going to conclude my remarks, but I have a few comments from the BEIS Committee report. The Committee stated that the UK Government must not only match Scottish levels of funding but create a joined-up strategy, and that the

“weight of stakeholder evidence suggests that Scotland designating energy efficiency as a national infrastructure priority has helped to improve its policy impact, making energy efficiency policy better designed and funded, longer-term, as well as more comprehensively governed and targeted, than in England.”

I ask the Minister to reflect on that and, I hope, to bring forward similar plans for the rest of the UK.

--- Later in debate ---

[The Minister for Business, Energy and Clean Growth (Kwasi Kwarteng)]

It is a pleasure to speak under your chairmanship, Ms Rees, in this excellent debate on a really important issue. I cannot think of a more important issue that the House could debate; very few are more important and more relevant to people’s lives than fuel poverty. I congratulate the hon. Member for Linlithgow and East Falkirk (Martyn Day) on securing this important debate.

The challenges of fuel poverty and the affordability of energy for households are a huge concern for everybody—not just for members of Opposition parties, but for the Government. I particularly share the concerns about fuel poverty relating to health issues, both physical and mental, and the difficulties people are experiencing now because of the coronavirus pandemic. Obviously, my view of what the Government have been doing and of the importance with which we regard these issues will be slightly different from that of Opposition Members, but I can assure the House that the Government take the issue of fuel poverty extremely seriously.

As the hon. Gentleman mentioned, fuel poverty is a devolved matter, with England, Wales, Northern Ireland and Scotland all having their own fuel poverty targets, their own policies and in many cases their own definitions. However, we all absolutely share the view that fuel poverty is a critical issue.

It is not a new issue. In 2015, we published a fuel poverty strategy for England, which set out the Government’s approach to tackling fuel poverty then. The hon. Gentleman is quite right to say that we should publish a new fuel poverty strategy. We had wanted to publish it at the end of this year, but we are very hopeful that we can get it out early next year, and it is absolutely critical that we do so.

We are also committed to ensuring that there is appropriate scrutiny, so I am very happy to spend some time dealing with some of the issues raised in the debate. Obviously, I cannot deal with every single issue that has been touched on. We have talked about power generation, fuel poverty and the nature of the devolved settlement—it has been a wide-ranging debate—and I will try to deal with some of the issues. It is vital that we work together to tackle this really important problem.

The hon. Member for Greenwich and Woolwich (Matthew Pennycook) was good enough to mention the warm home discount, which was not referred to in any of the speeches by SNP Members. Of course, the warm home discount that he was good enough to mention is a critical part of the Government’s fight against fuel poverty. It provides financial assistance to more than 3 million low-income and vulnerable households each winter, and each one of those households benefits to the tune of £140 a year roughly, which represents £3.5 billion of public money and is a significant contribution.[Official Report, 16 December 2020, Vol. 686, c. 2MC.] It does not abolish the problem but it is a significant contribution, and I think that any fair-minded participant in this debate would have acknowledged that. I am grateful to the hon. Gentleman for doing so.

We have already consulted on extending the scheme until March 2022, recognising that it offers vital support to people in this country, and we are considering how a version of the scheme, or even the scheme itself, can perhaps be extended beyond 2022. These are matters of grave consideration.

Members mentioned the energy company obligation and that, too, is a scheme that has helped people in fuel poverty to improve the energy efficiency of their homes. It is another great GB-wide scheme, which is worth £640 million a year, and it has made an impact in improving the energy efficiency of homes across the country. Since it began in 2013, under—dare I say it?—this Government, nearly 2.8 million energy efficiency measures have been installed in over 2.1 million homes. Again, that is making an impact. The ECO has always been focused on supporting low-income and vulnerable households, providing improvements to give a long-term benefit to those households. Again, we are planning to consult on proposed changes to the scheme in 2021; we want to see how any future scheme can contribute to meeting actual targets.

Another form of assistance and another scheme, which Members were good enough to refer to, is the green homes grant. It was launched only in September and is a £2 billion programme to improve the energy efficiency of homes in England. Other attendant fuel poverty schemes are available in Scotland, Wales and Northern Ireland. I remind the House that the green homes grant offers low-income, vulnerable and fuel-poor households up to £10,000 for the installation of energy-efficient and low-carbon heating measures in their homes. There is also a local authority delivery element that considers households of all tenors and of all descriptions within a household income of under £30,000. Local authorities will shortly set out detailed eligibility criteria for that.

The hon. Member for Greenwich and Woolwich (Matthew Pennycook) suggested that there would not be time to fully implement the green homes grant. We are looking at that, and there is some flexibility in the system. I look forward to making the case that we should perhaps extend it, and there may already have been an announcement in that respect.

[Siobhain McDonagh in the Chair]

[Alan Brown]

The Minister will be aware some hon. Members have also raised concerns that people in many constituencies have been unable to get the free quotes required from approved suppliers to progress. Will the Government address that as well?

[Kwasi Kwarteng]

Absolutely. I suggested that there was flexibility in the scheme. One of the reasons that there would be flexibility is that we are trying to increase the number of installers who have the trust mark accreditation, so that they can do the work. It is a good scheme, and it goes some way towards meeting the manifesto commitment mentioned with respect to the £9.2 billion. There is clearly more work to be done and I fully accept that, but we have made a start. It would be irresponsible to say that the Government are “indifferent” to the problem, as was suggested by the Business, Energy and Industrial Strategy Committee. We are not “indifferent” to this important issue, though there may be disagreements as to how best to tackle it. It would be wrong to suggest that we are “indifferent” to that critical and hugely important problem.

The energy price cap was mentioned, and that opens up a whole new avenue of debate. Clearly that has had a role in not only helping people in straitened circumstances, but in helping industry. It has meant that the industry can, overall, be more productive and efficient. That obviously has the effect of driving down costs and thereby driving down prices. We are committed to ensuring fair energy prices for consumers, and that is why we introduced the price cap on default energy tariffs in 2019. The hon. Member for Greenwich and Woolwich mentioned that it was part of the Labour manifesto many years ago before he even got into the House. I think it was in 2013—the election was in 2015. Clearly, however, there was an issue and the Government accepted that. We introduced the requisite legislation. It is extraordinary that we are being criticised for adopting the policy suggested by the Opposition with which we have, over time, agreed. That shows that the Government do listen to ideas, from whichever quarter those ideas may arise.

The default price cap today protects around 11 million consumers, and a further 4 million households are protected by the prepayment meter price cap from 2021 when that is introduced. It is a big intervention in the way the energy market works and shows that we have a non-ideological approach to the issue. It also shows the Government’s determination to support hard-pressed energy consumers.

In my concluding remarks, I will talk specifically about the covid-19 response. I and the Government are fully aware that the covid-19 pandemic poses unprecedented and unusual problems with respect to fuel poverty. I was struck by the suggestion from the hon. Member for Kilmarnock and Loudon that fuel bills had risen by 37% or maybe it was his colleague the hon. Member for Linlithgow and East Falkirk. I fully accept that it is a huge increase.

From the outset of the crisis the Government recognised that the covid-19 pandemic would have a huge impact on household incomes and would lead to more straitened circumstances. That is why the Department for Business, Energy and Industrial Strategy acted swiftly to secure an agreement with energy suppliers to support consumers impacted by coronavirus. In fact, one of the first calls that I made was to try to organise a response, and the suppliers understood the difficult circumstances that we were in. We managed to reach an agreement as early as March, which provided real support for those who needed help the most.

The energy companies have responded reasonably well. There is a broad understanding in the sector about the nature of the problems. We have done a huge amount. People talked about poverty in general, and the Government have spent unprecedented amounts to protect jobs and incomes. We have extended the coronavirus job retention scheme until the end of March, which has been welcomed across the country. We have also increased the third self-employed grant and provided an uplift to universal credit, which was mentioned. I am happy to say that we have responded to the concerns by providing an uplift to universal credit.

We have also increased the upfront guarantee of funding for the devolved Administrations from £14 billion to £16 billion on top of the spring Budget 2020 funding. Despite all of the support and the unprecedented level of intervention, it is a sad fact that many households will struggle with their energy bills this winter. We are absolutely focused on that and I speak to energy suppliers all the time about how best we can meet the challenges. From 15 December this year, new rules will require energy companies to identify self-disconnecting prepayment meter customers, people who are confronted often with the very harsh dilemma that was pointed out and choose to take themselves out of the prepayment meter scheme. We require energy companies to offer them support to stay on supply and to offer emergency and family-friendly hours and credit to all prepayment meter customers. That is a world where we are driving change to meet the very problem that the hon. Member for Linlithgow and East Falkirk so ably identified.

In the spirit of cross-party co-operation, I hope I have always extended a warm hand to Members to discuss the issues. We have had an excellent debate. Like the hon. Member for Linlithgow and East Falkirk, I regret the fact that more right hon. and hon. Members could not participate today, but I am sure the question will be revisited soon. I will be very happy to attend a further debate if that is what Members want and also to meet individual Members on a face-to-face basis to discuss these really important issues.

Question put and agreed to.

Resolved,

That this House has considered fuel poverty and energy price caps.