Fuel Poverty

Albert Owen Excerpts

Tuesday 11th February 2014 Westminster Hall

[Roger Williams]

I thank my hon. Friend for picking me up on that. The green deal is indeed a very important part of the coalition’s policy. Figures show that more and more people are making use of green deal assessments. Indeed, some of the companies providing those assessments are not charging for them, but see that as an opportunity to suggest ways forward that will improve the environment of the house. As I understand it, though, some of the green deal finance is not taken up. Some of the green deal recommendations are put into practice without taking up the green deal finance.

[Albert Owen (Ynys Môn) (Lab)]

I congratulate the hon. Gentleman on securing the debate. On the green deal, he is correct to say that the number of assessments is going up, but the Government’s targets have not quite been met. However, when the assessments have been done, the practical steps that are taken are to replace boilers, for example. Surely it would be more cost-effective to have a scrappage scheme and a boiler efficiency scheme, which would help people on grid and off grid.

[Roger Williams]

I understand that the hon. Gentleman has a real passion for this issue. We share that, as we represent rural areas. I am not quite sure how a scrappage scheme would fit into the green deal, but I am sure that he will enlighten me on that after the debate. I will come on to some of my concerns about the ECO—energy company obligation—scheme later.

On the rural situation—this is a caveat on the comments that I have just made—certain parts of the UK face significantly higher energy prices. Rural areas in particular are far less likely to be on the mains gas grid. The Department for Environment, Food and Rural Affairs has found that although 10% of the houses in urban areas do not have a gas connection, that figure rises to 36% in rural areas. In villages, the figure rises to more than 50%, and for hamlets and isolated dwellings it is more than 60%. Those figures are for England in 2009, but they illustrate the point well, although I am sure that for some of the devolved nations they could be much higher.

Age UK says that household energy bills in rural areas are, on average, 27% higher than in urban areas. Without mains gas, people in such homes rely on more expensive forms of fuel such as heating oil, liquid petroleum gas, solid fuel or even electric heating. The extension of the gas grid would bring benefits to many such homes. The Government must also ensure that homes that rely on more expensive heating fuels are better insulated if people are to be able to afford energy bills in the future.

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[Albert Owen (Ynys Môn) (Lab)]

It is a pleasure to serve under your chairmanship again, Mr Sheridan, and to follow the hon. Member for Brecon and Radnorshire (Roger Williams). He has been a sincere campaigner on behalf of the fuel poor for many years, particularly since we both came into the House in 2001. I very much agreed with the tone of his speech and the outcomes that he asked for. I make no apology for concentrating in my speech on some of the issues that he raised because they are very important.

One statistic, which comes from the Department of Energy and Climate Change, is that, on average, fuel poverty in rural areas is twice that of urban areas. The fuel-poor are concentrated in many of the rural areas of the United Kingdom. I am glad that the Minister is present, because he has given evidence to the Energy and Climate Change Committee on a number of occasions, and I know that he is sincere in his wish for an all-UK solution to fuel poverty, whether for those in a large urban town or city or those in a small rural area.

I would like to give some context on why we must do more for rural areas. I have been campaigning for some time about off-grid gas and for the extension of the gas mains. I am pleased that the Energy Bill Revolution campaign has come up with funding mechanisms for that from the EU emissions trading scheme and the carbon floor tax. That is important, but I would like to add a third stream to that funding equation. Shale gas has great potential for this country’s future revenues. If the exploration goes ahead and the volume of recoverable gas is sufficient, the profits should be used to extend the gas mains into rural areas of the UK.

As regulator, Ofgem insists that its policy is to extend the gas mains, but currently the incentives are just not there for the energy distribution companies. I support the Government’s stance on shale gas, and it is quite right that, if we have a bonanza, there must be local community benefits, but there should also be national benefits. If the Exchequer is going to enjoy greater revenues from the exploration of shale gas, similar to those that we have seen from North sea oil and gas, we should have a national strategy. I would like such revenue to be put towards extending the gas grid of Great Britain and Northern Ireland. I stress Northern Ireland because I am fully aware of the problems that people there have with the high price of oil.

I am as disappointed as other Members who have intervened about the fact that the OFT has not strongly concluded that those who live off-grid do not enjoy the benefits of those who are on the grid. It has looked at competition very narrowly. It is difficult to unpick that, and the Competition Commission has been unable to unpick the unfairness that lies behind people’s lack of choice when they are off-grid. For example, they do not enjoy the dual-fuel discounts that the big six and other energy companies boast about because they do not have dual fuels. They cannot get gas and electricity from the same supplier so that they can enjoy a reduction in their bills. That opportunity does not exist for them.

I am pleased that the Labour party has made the commitment that the regulator will look after those who are off-grid in the same way that it looks after those who are on the gas mains grid. I have pressed the Government on that issue on a number of occasions. It is important that the regulator is the champion of people who live in rural areas. The electricity and gas markets were privatised rather hastily and the regulations were put in place to look after privatised areas. The off-grid issue was neglected in many ways, but it is time for that to end.

With the rise of energy prices, we have seen a fuel poverty crisis in many places. DECC’s own figures show that people who live off-grid and those in rural areas have been hurt more than those who are on the grid, so we must take an important step. The Minister and the Government are looking at extending the gas mains, but will he comment today on the possibility of the revenues from shale gas being used as an incentive for the distribution companies that often have no competition?

The electricity and gas market is not fully competitive. Monopolies set the prices in the transmission and distribution of gas—huge prices that contribute between 19% and 24% of gas and electricity bills. We are not talking about a small fraction like the green levy, which was X%. A quarter of the actual price is the result of distribution and transmission. That must be looked into, because bills are increasing. I was very keen on what the hon. Member for Brecon and Radnorshire said about the comparison with European prices. He said that that included tax, but if he looks at the matter closely, the fact that we have a 5% VAT threshold on energy gives us an advantage, because the rate is higher in many other European countries. I know that he was present at this morning’s debate on the effect of VAT on tourism. The off-grid is disadvantaged. We need a regulator and champion to bring benefits to off-grid consumers.

I want also to talk about transportation in rural areas, because it also has an effect. There is a double whammy: people are paying more for oil and off-grid gas and more for transportation and fuel. I very much welcome the Government’s freeze on fuel duty. I have campaigned for it for a long time, under previous Governments, and previous Chancellors have frozen the duty for many years. Members will recall that the fuel duty escalator was introduced in the ’90s. It escalated quite a lot, and there was a crisis point in 2000, when there were fuel protests in this country. There were price freezes thereafter for a number of years. People in my constituency and many rural areas in the UK are affected by the fact that they are paying VAT on their fuel. That 2.5p in every pound that people spend on diesel or petrol has an impact and creates a cost of living crisis in such areas. We are not talking about cars as luxury items; we are talking about essential means of transport.

[Mr Mark Williams]

Does the hon. Gentleman share my disappointment that the whole of Wales is excluded from the Government’s laudable attempt to achieve a derogation of fuel duty? That is despite Wales being a sparsely populated area by anyone’s standards—his constituency and mine certainly are.

[Albert Owen]

I agree with the hon. Gentleman. I compliment the Government for introducing the fuel duty rebate and for making representations on the issue. I am sure that the Minister and my hon. Friend the shadow Minister will know that I am not shy of criticising my own party, and I was not shy of criticising it when we were in government, because it should have taken that step. Nevertheless, it is wrong now to exclude a whole area—a whole country—because it is within 100 miles of a refinery. No one in my area, the most north-western point of Wales, can plug into a refinery. The independent suppliers are paying extra for fuel because of the cost of transport from those very refineries. The 100 mile radius principle is really a fly in the ointment. People in Wales, unlike those in remote areas of Scotland and in some parts of England, have been seriously disadvantaged. They are paying extra.

[Mr Dodds]

I want to pick up on a point made in the previous intervention. The hon. Gentleman will no doubt join me in expressing concern and anger that the rural fuel rebate scheme does not apply to any part of Northern Ireland either, even though we have the highest diesel and petrol prices anywhere in the UK and, indeed, sometimes in Europe. This is a major issue for us as well, and it must be revised and looked at.

[Albert Owen]

Absolutely. The criteria should take rural areas into account, as well as peripheral areas of the UK, because they are the ones that are disadvantaged. Someone in a rural area of central Yorkshire, for example, could probably travel in all directions to get a better deal on their fuel. However, for someone in a peripheral area, such as the hon. Member for Ceredigion (Mr Williams), there is only one way to get their fuel.

[Roger Williams]

The hon. Gentleman and I are at one on this issue. I emphasise the importance of independent petrol retailers, without whom many rural areas would not be served. They also serve to keep the bigger suppliers and supermarkets honest: without the independents, we do not know what the supermarkets would charge.

[Albert Owen]

Absolutely. I ask the Minister to put pressure on the Treasury to reconsider the criteria for the fuel rebate, so that areas such as the periphery areas in west and north Wales and Northern Ireland can be given a fair chance. There is absolutely no doubt that people in those areas pay more for their fuel, as any cost comparison shows. That fly in the ointment—being 100 miles from a refinery—should be excluded from the criteria and the formula. I reiterate that I congratulate the Government on taking the initiative forward, because some areas of the UK will benefit.

I finish on the green deal, which I think everybody in the House welcomes. We welcome the focus of attention on alleviating fuel poverty and introducing energy efficiency measures. However, the green deal that has gone through the House and is now in place is a little cumbersome and expensive. It is well-intentioned, but the rates at which people would borrow money are too high. Again, there is a simpler solution.

I will try to answer the question asked by the hon. Member for Brecon and Radnorshire about boiler replacement. The evidence that I am hearing—I am talking to many of the energy companies as well—is that most energy is lost through inefficient boilers, many of which are in older properties. They are placed in the living room, and most of the heat goes up the chimney. The boilers themselves are inefficient, so the heat goes out through the flues. A package is needed to help with boiler replacements, because modern boilers—condensing boilers, for example—are hugely energy-efficient.

We must remember that most households replace their boilers only after they break down. We are probably all guilty of that: “Oh, this inefficient boiler’s got another year left in it.” That is why the scrappage scheme under the last Government was so successful. People realised, “I might have a year or two to go on this one, but it’s well worth replacing it now.” We are finding—anecdotally, but I have read it on numerous occasions—that there is a pattern. Many people who want to use the green deal get the assessment, go through all the paperwork and find out that just replacing the boiler or the thermostat on the radiator does the job. That is why I think that we should have a reduced version of the green deal, so that people can get quick fixes, perhaps while raising revenues for exterior insulation, for example, for hard-to-heat homes.

There are some good examples in Wales of energy companies—yes, I pay tribute to the big six for this—giving free insulation for lofts, or giving pensioners additional insulation in their lofts and walls. That has been a huge success, but the green deal is missing a trick due to its cumbersome nature. Fuel poverty is hugely important, and I am pleased that it has come to the House. This is an important debate on an important issue. The hon. Member for Brecon and Radnorshire has outlined the issues in a measured way, and I know that the Minister will respond in an equally measured way.

It is in everybody’s interest that we reduce fuel poverty and the amount of carbon emissions. It is in everybody’s interest that we have energy-efficient homes and businesses. When we have this debate, we tend to exclude businesses. We need energy-efficient businesses. Members from all parts of the United Kingdom have businesses in their constituency that are concerned about their energy prices, and they do not get the deals that many individuals get that are easy to switch. It is difficult for small businesses as well. I am pleased to have taken part in this debate, and I hope that the Minister will consider some of the points made by the hon. Member for Brecon and Radnorshire and me. The issue unites the House, and the House of Commons is at its best when united.

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[Julie Elliott]

I thank my hon. Friend for that intervention. Fuel poverty and energy efficiency are important issues. Whenever I knock on doors and talk to people, they are among the main issues that they are very concerned about. People are very worried about their heating bills, and tackling heating bills is not only about tackling energy costs at source but about ensuring that homes are insulated as well as they possibly can be, so that the amount of energy used is as low as possible; that is important because of the impact that it would have on not only climate change, but household bills. Of course, it is not just in the domestic market that energy is a key factor; energy bills are one of the biggest factors in industry, and in employing people. The knock-on implications of energy are massive, so getting it right is very important.

[Albert Owen]

Will my hon. Friend share with the House her views on the regulator being the champion for people who are not on the gas grid? This is the crux of the issue. Many people who are off-grid do not have somebody to speak up for them in an impartial way. She mentioned the Secretary of State, who is looking at the Office of Fair Trading and the Competition Commission in respect of gas prices. Many hon. Members have been calling for that for some time. Again, the OFT and the Competition Commission are being brought in, whereas, if we had a strong regulator, it could deal with this matter.

[Julie Elliott]

I thank my hon. Friend for making those two important points. Of course, we are proposing, as a party, to abolish the current regulator and bring in a new one with more teeth, which will cover some of the off-grid issues that are not covered at the moment. I represent an urban community, and it has been shocking for me to hear, over the past few years, some of the stories about off-grid people’s problems. The situation is bad for everybody, but they have so many other issues on top of that, and that needs sorting out for the long term.

The Secretary of State made great play yesterday of the moneys involved in the big six, and figures were quoted that we published a month ago, so that is not new news. However, at least he has suddenly found that what is going on is a problem. The problem in all this is that the regulator is simply not working and operating in the interests of the general public. We need to focus not just on paying less for energy, but on using less energy. Hon. Members from all parties care passionately about fuel poverty. I hope that the Minister listened carefully to what was said in the debate. I urge him to place fuel poverty, cold homes and, ultimately, energy efficiency at the top of the Government’s agenda.

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[Michael Fallon]

I am a little disappointed about that. We all deplore any excess deaths arising in the winter months, but in terms of fiddling with the figures, the new definition of fuel poverty that we are securing was reached by agreement with fuel poverty action groups that have welcomed the new focus, which, as I say, is on low-income households as well as high-cost households. The problem with the previous definition was that it essentially picked out large houses and wealthy people can be living in large houses. That was not the right way to tackle fuel poverty. It was also a measure that kept moving; people kept moving in and out of the definition.

We are now moving to a better definition, with the agreement with those who work in the area. That will form the foundation for a new fuel poverty strategy that we will publish later this year, which will be deliverable and on which the public can hold us to account.

[Albert Owen]

The Minister makes an important point. There will be issues about whatever calculation we use. However, now that we have moved to a different definition of fuel poverty, will DECC, the Government and other Departments ensure that there is a comparison with the old figures, so that people are not as sceptical about the change for change’s sake? I agree with the Minister that drawing wealthy people into this is not the way forward, but for people to have confidence in the new calculation, there needs to be a comparison over the transition period.

[Michael Fallon]

That seems to me a reasonable point. I will see whether we can set the tables side by side. Of course, I have to tell the House that the figure was not dreamt up by the Government; it was the work of Professor Hills, who consulted widely on it. It has been supported by those who work in this area.

We had already moved, under the 2013 Act, to ensure that the energy market, with its confusingly large number and range of tariffs, which had not been serving the consumer as well as they might, could make it much simpler for consumers to understand prices and ensure that everybody is put on the cheapest tariff that meets their preference. I am glad, too, that that seemed to secure all-party support, as the energy legislation went through the House.

We were confronted in the autumn with some quite unacceptably large price increases, by some major suppliers, of 8%, 9% and 10%. We moved immediately, as would be expected of a listening Government, to consider what could be done to reduce the bit on the bill—the green levies—that the Government have control over. We have secured an average reduction of some £50 per household. That is important. People do not have to wait for an unworkable price freeze. This Government take action immediately to ensure that people see a reduction in their bills as quickly as possible.