Energy Social Tariffs

Alan Whitehead Excerpts

Thursday 23rd November 2023 Westminster Hall

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

I will not go into great detail this afternoon on behalf of the Opposition on the background and the need for a social tariff, or a similar instrument, because the hon. Members who have taken part in the debate have made the case for one excellently. I congratulate the hon. Member for Motherwell and Wishaw (Marion Fellows), who introduced the debate, not only on the debate, but on the comprehensive way in which she presented the case for social tariffs and urged the action that needs to be taken.

I very much commend the contribution—thoughtful, as always—from the hon. Member for Waveney (Peter Aldous). On other occasions, I have said that he is virtually an hon. Friend on these issues. I commend him for the forthright and detailed way in which he not only made the case for social tariffs, but also talked about what we ought to be talking about this afternoon, which is what happens after we have concluded that this is the right thing to do. He covered the fact that the onus is on the Government to take action and what considerations we have to undertake to secure not just a sticking-plaster solution for perhaps one winter, but something that applies long term and targets the right people in society, giving them the help that they need to keep their energy bills affordable.

I also very much commend the contribution of my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe), my actual hon. Friend. Among other things, he set out the groups of people involved. In particular, he talked about those in very difficult circumstances that have not just arisen from the energy price shock that we had a little while ago, but that affect their daily living requirements on a longer-term basis. They are the people who would very much be eligible and we should think very seriously about ensuring that those people have that long-term social tariff support.

That point is very much underlined by Ofgem’s very recent announcement on the energy price cap. The announcement underlines—if underlining were necessary —just what a difficult situation the people we are talking about continue to find themselves in. The price cap comes to just under £2,000 for a dual fuel tariff. Of course, that is not the actual bill that anyone will pay; it is an average of the sort of bill that people can expect to pay under the price cap. A lot of people—particularly those in disadvantaged and difficult situations—will pay a huge amount more, either because of their need for constant heat, because of their circumstances, or because they have other issues such as a combination of difficult living circumstances, inadequately insulated homes and high heating bills all at the same time. The price cap is the very least indication of where a lot of those people will be. Not only that, but we know from projections that the cap will be something like that for a very long time to come.

The price cap is not a way station in the downward curve of energy bills for the future. All the projections we have, particularly from Cornwall Insight, are that it is likely to remain at the same level, certainly throughout 2024 and probably going into 2025, and that they will not dip much below about £2,000 on average. As recently as April 2021, the price cap was precisely half that amount.

The people we are talking about are faced with the prospect of paying twice as much as they were as recently as two years ago for the next two or three years, with all the affordability issues that that will continue to bring into play. That underlines the point made by hon. Members this afternoon. It would be great if we had a social tariff this winter that could effectively continue the price support that has been applied previously, but that energy price support is coming to an end. After this winter, at the latest, it is not being replaced. That underlines the fact that a social tariff should not just be for Christmas—it needs to endure in providing assistance and help for those groups in society.

That is the problem with the other key point that has been mentioned this afternoon—namely, where is the consultation? It is not that the Government have said that a social tariff is a terrible idea that will never be done by Government ever. It is difficult to remember exactly which Minister of State for Energy it was, because they keep changing, but in January the Minister said:

“we will look at a social tariff and at how vulnerable people are looked after, but we have to look at it in a considered manner.”—[Official Report, 25 January 2023; Vol. 726, c. 1031.]

On 18 April, the then Secretary of State for Energy Security and Net Zero said:

“We do think that things like a social tariff could be very helpful”.—[Official Report, 18 April 2023; Vol. 731, c. 111.]

Then, in May, the Government stated, in response to a petition:

“The Government is considering potential approaches to consumer energy protection post-April 2024. The Government intends to consult on options in summer 2023…Government officials are considering potential options, including discounted tariffs, for a new approach to consumer protection in energy markets that will apply from April 2024”.

They have said all these things. They have said that there will be a consultation. What has not actually happened is a consultation.

It is difficult for us in this Chamber to home in on what a social tariff might look like, because the Government have not said anything about the sort of area that the social tariff would fall into as part of any consultation. We do not need just a consultation; we need to see the substance of that consultation and what the Government are minded to do about the commitments they have already made. That is completely lacking at the moment.

We can speculate to some extent on why there has been no consultation. Personally, I think the Government were rather hoping that this energy price crisis would be completely a thing of the past by now, and that instead of the energy price trajectory going down and flattening out, there would be a more straightforward downward price trajectory so that we would return to the position in 2021, when prices were about £1,000. Then the Government could say, “Well, actually, we don’t need a social tariff because it is much more affordable for everybody now, and we can tweak various other forms of assistance to make sure that life is good.” That has not happened. The data from just the past few days shows that it has not happened and will not happen in the near future, which should concentrate minds about what solutions need to be proposed.

This may be a little bit of speculation, but perhaps the Government are thinking, “Well, maybe we do need a social tariff.” But as hon. Members have mentioned, where will that be funded from? Will it be smeared across customer bills? Will it come from general taxation or some other arrangement? Of course, because there is no consultation, we do not know what the Government are thinking.

I could see the Government thinking, “Ooh, we’ve spent all this money on price support during the height of the crisis. Do we want to commit ourselves to another fairly substantial amount of taxpayer support for energy bills for the future?” Many of us would say the answer is yes, they should. But the Government may have other views and, indeed, there may even have been tension between Departments on the enactment and funding of that policy. I do not know, but that could have been the case.

There are ways of establishing a social tariff—the hon. Member for Waveney alluded to this—that do not actually cost the amount of money that the Government perhaps think it will. They involve changes in how the energy retail market works, but can deliver very solid back-up arrangements for social tariffs on a sustainable basis, which is what we all want, without that necessary and apparently large chunk of money coming from the Treasury. Again, as was the case for the hon. Member for Waveney, it would be inappropriate to expatiate on that at great length this afternoon, but I think that there are interesting ways we can examine it.

[Steve McCabe]

I am extremely grateful to my hon. Friend, who is making a very valuable point. It would be very helpful if the Minister could tell us what discussions the Government have already had with the energy suppliers and the director of Ofgem, since they have both indicated that they are in favour of a social tariff. Some of the work referred to by my hon. Friend must have been done—we just need to hear what has been discussed.

--- Later in debate ---

[Dr Whitehead]

My hon. Friend is absolutely right. Basically, what we need on the table now is—as they say about homework—for the Government to show their workings. That is why I emphasised that we need not just the promise of a consultation, but a consultation with some substance in the consultation document. We need to see how the thinking process has emerged and what propositions there might be. I agree that getting a social tariff right is quite a long way further on from deciding that there should be one.

It is absolutely right to undertake that process, but we have virtually no information. The Government have certainly not conveyed anything to me about their workings. All I know, along with everybody else, is that there is no consultation. It appears that no action is taking place at all. I would certainly be happy to talk to the Minister about ways to establish a decent social tariff without placing a substantial burden on the taxpayer in order to bring it into being over time. That is an open offer, but we will see whether it is taken up.

To conclude, the onus is on the Minister to stand up this afternoon to say that first, yes, there will be a consultation; secondly, that although we have missed out on help that could have come forward this winter, we will urgently consider what can be done in the meantime to help stabilise some of those bills in light of the new price cap for this winter; and, thirdly, that the Government, as my hon. Friend the Member for Birmingham, Selly Oak has said, will lay their workings on the table at a very early date so that we can collectively take part in the debate as to how we get a social tariff that works in the long term and that protects the people and makes their energy affordable in the way that we all want.