Energy Costs in Wales

Alun Cairns Excerpts

Tuesday 11th October 2022 Westminster Hall

[Anna McMorrin (Cardiff North) (Lab)]

I beg to move,

That this House has considered energy costs in Wales.

On our first day back in Parliament this term, this debate on energy costs in Wales is hugely timely. We are facing a national emergency. People are scared, cold, and paying the ultimate price for the energy crisis. I am therefore grateful that the Minister is in his place to listen to us discuss the very real issues that people are facing across the country, but it would be remiss of me to start without calling out the recent incompetent actions from the UK Government. In just a few short weeks, this Tory Government have plummeted millions of people into hardship and misery—the choice between heating and eating, going to bed cold and hungry or giving their child their last tin of food. The shockingly mishandled emergency Budget was inexcusable. It has seen the pound plummet, energy costs spiral, mortgages pulled, interest rates shoot up—and for what? Unfunded tax cuts for the richest 1% in society and bigger bankers’ bonuses.

[Alun Cairns (Vale of Glamorgan) (Con)]

I congratulate the hon. Lady on securing this important debate. In addition to that tirade of comments, will she recognise that the energy price guarantee is the most generous across all the major developed nations in Europe?

[Anna McMorrin]

I thank the right hon. Member for his intervention, but providing that is the very least that could be done in the face of all this incompetence, quite frankly.

The result of this reckless decision will be felt by households across the country for years to come. It is always the most vulnerable who pay the highest price for the political choices made by this UK Government. In Wales, people are worried sick. Thankfully, our Welsh Labour Government have shielded so many from the very worst, but the crippling energy crisis is hard to undo when action from Westminster is worsening by the day. The human cost of such decisions cannot be overstated. At the launch of the Institute of Health Equity’s fuel poverty report last month, Professor Sinha said there is “no doubt” that children will die this winter. Damaged organs and respiratory illnesses are just some of the many long-term health impacts that people will face, and the trauma of going to bed cold and hungry will stay with someone for life.

I was speaking to the National Society for the Prevention of Cruelty to Children just this morning, and it told me how heartbreaking it is to receive calls through its helpline from children who really do not know what to do or how to help their parents, as they witness them struggle to make ends meet, often while living in cold, damp and mouldy conditions. I, too, receive heartbreaking calls from struggling parents just trying to do their best, and from distraught constituents torn between losing their home and losing their business. A pub in the heart of Cardiff North told me that it literally cannot afford to keep the lights on and is moving to using candlelight after receiving a £24,000 energy bill. My constituent Rebecca, a talented jeweller and silversmith, runs a small business on top of doing three other jobs. She faces a sixfold increase in her electricity bill. Her partner, Gareth, who contacted me worried sick, said, “What are we working for if not a better future?”

Well, that better future is being carved out by our Welsh Labour Government, with £51 million of targeted support for those who need it most. Measures include doubling the winter fuel support payment, cost of living support payments, £4 million for fuel vouchers, a heat fund to support those on prepayment meters, and the roll-out of universal free school meals. That is the difference that a Labour Government make. The Welsh Labour Government understand the human cost of this crisis. Perhaps the Prime Minister should pick up the phone to our First Minister for the first time after all.

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[Alun Cairns (Vale of Glamorgan) (Con)]

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate the hon. Member for Cardiff North (Anna McMorrin) on securing this important debate. I look forward to the contributions of all Members, because this is a serious issue that needs addressing in a serious way. In the spirit in which I congratulated the hon. Lady on securing the debate, I am bit disappointed by the party political tone that it has taken. These are genuine, serious issues that need addressing. Constituents are looking to politicians to find the best response to a genuine energy supply crisis and its sources, which we will come to in a moment. I am disappointed that the debate has been so party political so far, but I will try to move it on in a way that might be helpful to constituents who listen.

[Anna McMorrin]

I think the right hon. Gentleman failed to hear what I actually said. I was clarifying what the different Governments provide and setting out the human cost of what is happening because of the political choices made by the UK Government and this Prime Minister. I sincerely hope he can understand that.

[Alun Cairns]

I will respond to some of the points that have been made, but we need to recognise that the absolute cause of the challenge is the war in Ukraine and Putin’s aggression. Anyone who seeks to weaponise the increase in energy prices for political ends is undermining the war effort and Ukraine’s right to defend its nation. It is a serious issue, but that does not mean that we do not need to react.

The Government are reacting. We need to recognise some of the things they are doing and congratulate them, but there will be other areas where we want to press for further support. That is an intelligent way to pursue a debate, rather than saying that everything politicians in Cardiff Bay are doing is right and everything those in Whitehall are doing is wrong. That is simply not credible and it is not the case. I am disappointed that the war in Ukraine is being weaponised in this way.

Just weeks ago, we saw the explosions at Nord Stream 1 and Nord Stream 2, which were clearly attacks, although we have no certainty about the reasons for them or their source. They have had an impact on supplies across Europe, but thankfully supplies to the UK do not come from Nord Stream 1 and Nord Stream 2, and are therefore much more secure. I underline my interest as chairman of the all-party parliamentary group for energy security. It would be helpful for us all to recognise that energy is traded at a multi-national, if not a global, level. That is part of the complexity of the situation, rather than the simplicity that has been described.

Constituents want to know exactly what support they will get. Everyone will get a grant of £400 in addition to a council tax rebate of £150 for properties in bands A to D. There are also additional payments, including a cost of living payment of £650 for benefit claimants, a one-off payment of £300 for pensioners for heating, and a disability cost of living payment of £150. Those payments will alleviate the situation and make sure that some people are able to keep the fires burning. They may have formed the impression that they could end up in an extremely unfortunate situation, but they may well be able to avoid that, depending on their individual circumstances.

The energy price guarantee announced a couple of weeks ago is an extremely welcome measure, and it would be helpful for the Opposition to recognise that. I press the hon. Member for Cardiff North to acknowledge that it is the most generous package that has been offered across Europe. I am happy to be corrected if the hon. Lady wishes to intervene, but independent sources say it is the most generous package in Europe, which means that people in similar circumstances in Europe will find themselves worse off. I am not saying that is a good thing; it is not a good thing. More needs to be done to support everyone—not only across Europe, but well beyond—because the conflict in Ukraine has created a global challenge.

The energy consumption of an average property will cost £2,500. There is a lot of misunderstanding about that. People will pay depending on their energy consumption and that figure is an average cost, which is provided as a guide. It is a significant increase, but lower than it would otherwise have been without the energy price guarantee, and the additional payments will support people and allow them to cope with those increases.

I find it difficult to believe that everything the Welsh Government are doing is right and everything Whitehall is doing is wrong. On the one hand, the hon. Member for Cardiff North claimed that people were living in cold, damp and uninsulated homes—and many are and we need to recognise that—but then seemed to champion the insulating programme and schemes that the Welsh Government have been pursuing. It cannot be one or the other; we must recognise that it is a complex situation and that people are finding themselves in difficult circumstances.

I find it difficult that the wider public debate makes such an issue of a public information campaign. This debate could serve as a public information campaign in itself if it were conducted in a reasonable and intelligent way. We need to recognise that this issue is rightly dominating the news and people should be able to interpret that large increases in energy prices will mean consumption needs to be managed to prevent cost of living challenges. In addition, information is being made available by the Energy Saving Trust, Ofgem and so many other agencies and charitable organisations. I would much prefer that the money that would have been spent on a public information campaign is spent on supporting people to reduce their bills, rather than on duplicating and repeating what we could do and what is available freely on the internet.

I ask the Minister for guidance on two points. I have already highlighted the domestic levels of support that are available, and they are significant, but we need further clarity on park homes. It is not clear how they will be able to benefit, because of how their meters work compared with others. I recognise that this is the first day that Parliament is sitting and therefore it has not been easy to communicate all the messages that need to be communicated, but there are a number of park homes in my constituency and across the whole of the UK—Wales possibly has a disproportionate number of park homes—so further clarity would be helpful. Reassuring messages have been given, but it is helpful to have the mechanics of how it should work.

[Jonathan Edwards]

I am grateful that the right hon. Gentleman raised this point because I asked a written question on this issue and was referred to an answer to another Member. That answer was not particularly clear to me, so when my constituents ask me how they will receive the support I am unable to provide that answer. I am sure that, like me, the right hon. Gentleman would like the Minister to clarify that today.

[Alun Cairns]

I am grateful to the hon. Member for underlining that point. I recognise that it is a complex situation. There are so many facets, which is why, again, we need to have a reasonable debate to address these serious issues. Until now people in park homes will not have had much clarity from this debate, and I look to the Minister to provide it, but it is not a straightforward situation.

I seek greater clarity on the level of support and I press the Minister to look again at extending support for off-grid properties. Many residents in my constituency—I declare an interest as one of them—do not have the privileges or benefits of mains gas and therefore depend on either liquefied petroleum gas or oil. We need to recognise that there is a standard volatility in that marketplace, and off-grid properties may have benefited when oil prices were extremely low during the covid period, at less than $20 a barrel of oil—I ensured that I filled my tank up at that time—compared with the 85p, 86p or even 90p a litre that is available now. I was talking about $19 a barrel, but that was also 19p a litre at the time. It is now up to 90p per litre of oil, which people off-grid have to use, and LPG will have a similar volatility. I hope the Minister will give that greater consideration or at least provide some hope that there will be further support.

There is a final area of support to which I hope the Minister will be able to bring some clarity—not necessarily now, because it is quite a complex picture, but certainly by providing greater information or tables online. The Government website sets out examples of different sorts of businesses and how they will benefit, from the average corner shop or pub to larger organisations. It explains the types of approach and savings that they would make. I looked for specific examples of numbers to be provided according to the market rate. One grocery business in a rural area in my constituency was paying 21p per kWh; now, at the market rate, it is paying £1.26 per kWh. When a business seeks to negotiate through a broker for guarantees of the level of Government intervention and how much that will be, the broker makes the case—as do energy providers; I have spoken to some—that they do not know how much the Government discount is specifically until they accept the contract, as that is when they can confirm it. That does not seem to be the most reasonable position.

I am not saying the Government are to blame for that, but I suspect greater clarity over the numbers will help businesses in my constituency and elsewhere to understand what exactly the discount is. It is in the region of 40% in some cases, while it is less in others. It depends on use. Clarity is needed to provide scrutiny and ensure the most understanding. Although the discount is 40%, if someone happens to have come off a fixed-term contract and moved from 21p up to about 80p, that is still a significant increase.

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[Beth Winter (Cynon Valley) (Lab)]

Thank you for allowing me to speak, Mr Betts, and thank you to everyone present. As you explained, I came from a DLC as soon as possible, so diolch yn fawr. This issue is extremely close to my heart, which is why I really wanted to speak in the debate. In my constituency, we have been doing a lot of work on the cost of living crisis, which I will cover in my contribution.

With their intervention on the retail price for energy, the Government are clearly paying lip service to people’s concerns and failing to alleviate the misery they are causing. We have to be clear: the energy price cap is rising and bills are going up under the newly elected Prime Minister. Despite the Prime Minister and the Chancellor saying that they have intervened to reduce bills, what has really happened? Under the previous Tory Prime Minister, the price cap went up by £693 in April; under this new Conservative Prime Minister, it went up by another £529 last week. That is driving inflation to a 40-year high and creating extreme hardship in communities such as mine in the Cynon valley. Figures for Wales show that, in October 2020, 14% of households were living in fuel poverty. If we use those figures to model the impact of April’s price cap rise, up to 45%, or almost half, of all households are likely to be in fuel poverty.

I undertook a cost of living survey of constituents just before the summer. The stories they told me were truly harrowing, especially in terms of the mental health impact that the cost of living crisis is having, which cannot be overestimated. For example, one constituent said:

“It is affecting my sleep. I am worrying constantly. I keep watching my gas and electric meter.”

Most respondents said they were struggling to pay their energy bills, and almost three quarters said they would cut down significantly on heating in the next 12 months. That is unacceptable. That is a political choice.

As others have said, small businesses are struggling too. A local business owner told me recently that the combined gas and electric bill from the supplier was estimated to be in excess of £25,000. The owner was in floods of tears and had no idea how she was going to be able to continue running her business. That is the reality of the impact of the politically motivated cost of living crisis in this country.

[Alun Cairns]

The hon. Lady is making some interesting points about the real impact and cost for businesses, individuals and families, but I am not quite sure what she is asking for. Is she asking the Government to intervene for the entirety and to return the prices to what they were 12 months ago, say, bearing in mind that there is a global energy crisis as a result of the conflict in Ukraine?

[Beth Winter]

I am about to offer some solutions to the crisis. If the right hon. Gentleman can bear with me, I will answer his question in my speech.

Briefly, the Welsh Government are doing everything they can to support people through the cost of living crisis. They have made an array of announcements to support people, including a £200 fuel support payment, in addition to the winter fuel payment offered by the UK Government; a £150 cost of living payment; £4 million to support people on prepayment meters—not on mains gas—who are facing hardship; and of course the discretionary assistance fund. However, fair funding from the UK Government to Wales is needed to meet people’s needs; it is Westminster that has to step up and support our communities.

[Alun Cairns]

Will the hon. Lady give way?

[Beth Winter]

No, I will not give way. The Chancellor has not yet responded to Welsh Finance Minister Rebecca Evans’s recent letter asking for a meeting. That shows that Wales is being treated with contempt.

Labour at Westminster is clear that, unlike the Tories, we would not have allowed the energy price cap to rise at all this autumn. Labour has proposed a fully costed and funded package of Government support. Our “Warm Homes for All” plan and investment in sustainable British energy, funded from our climate investment pledge, will tackle the climate crisis, strengthen our energy security, create good jobs in new industries and cut bills for good. There will be up-front costs to those measures but, as the Office for Budget Responsibility has stated, not acting will cost far more in damage to the climate and economic security.

We have wind farms on the mountains in my constituency. Who owns them? A Swedish company, Vattenfall. We need our own energy sources. The Welsh Government’s proposal to develop a publicly owned energy company, Ynni Cymru, has been followed by UK Labour’s proposal for GB Energy, a British publicly owned company that will help generate the clean power that will cut bills and provide energy security for the UK. Those measures will start to challenge the private market, but we need public ownership now so that the power we produce contributes to our national community prosperity, not the pockets of private companies, fossil fuel giants and shareholders. It is affordable, as the Trades Union Congress has already set out. Energy costs must be brought down, and to achieve that, we must have public ownership, which is in the interests of the people of the UK and the future of our planet.

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[Graham Stuart]

Forgive me; if I had been left anything like half the time that was available by the Opposition spokesman, I would have been able to accommodate the hon. Gentleman.

After that initial six-month scheme, the Government will provide ongoing focused support for vulnerable industries. There will be a review in three months’ time to consider where that should be targeted to ensure that those most in need continue to get support.

Non-domestic users that are eligible for support with energy bills include those on standard variable energy contracts, those whose fixed-price contracts are coming to an end and those businesses that have agreed a fixed-price contract in the last six months. We recognise that it is a challenging time for businesses, particularly those that are energy intensive, many of which are situated in Wales, as hon. Members will know.

The Government have provided more than £2 billion of support since 2013 to energy-intensive industries. We are continuing to ramp up the support, through measures such as the extension of the energy intensive industries compensation scheme. That is being extended for a further three years, and will double the relief available. We are also consulting on the energy intensive industries exemption scheme, with a view to increasing the aid intensity and reducing electricity prices for energy-intensive industries, thus supporting many jobs in Wales.

In parallel to those measures, the Government are taking decisive steps to tackle the root causes of the issues in the UK energy market, by boosting British energy supply and increasing independence to ensure that this does not happen again. The hon. Member for Southampton, Test is right that that is what we need to do. That includes the work of our energy supply taskforce, a new oil and gas licensing round, lifting the moratorium on UK shale gas production, and driving forward progress on nuclear and renewables.

It is important to remember that our energy needs this year are 75% dependent on fossil fuels. We are driving forward on the path to net zero, more than any other major economy in the world. However, the idea that the market could be entirely decarbonised by 2030 is mad. It is crazy. That is the official policy of His Majesty’s Opposition. The poverty, bankruptcies and ruin that the Opposition’s policy would cause this country—and the impact that it would have on families and businesses in Wales—are incalculable. We need to ensure that our energy system is working to shield consumers in Wales and the whole of the UK from the worst impacts of a volatile international energy market, and to reap the benefits of our increasing cheap renewable electricity generation while reducing our dependence on imported fossil fuels.

I will not take any lectures from Labour Members in this space. Today, renewables make up more than 40% of our electricity supply; just 12 years ago, in 2010, it was 7%. The Labour party talks but it does not deliver; it is the Conservatives who deliver. We have led the world. We have transformed the economics of offshore wind with our contracts for difference, which were brought about under a Conservative-led Government and are now being mimicked right around the world. Why? Because they recognise the high up-front capital cost of these projects, increase certainty for investors, lower the cost of capital, and have seen the price per megawatt-hour for offshore wind go from £120 in a 2015 auction to £38, I think, in the latest round. Not only that, but because of the CfDs brought in by a Conservative Administration, we are now seeing tens of millions of pounds paid back to reduce bills for taxpayers.

The Government are working with electricity generators to reform the outdated market structure where gas sets the price for all electricity. We have recently launched the review of electricity market arrangements, REMA—a major review of Britain’s electricity market design to ensure that it delivers an enduring framework that works for our businesses, industries and households—and we will introduce reform where necessary.

As issues of energy efficiency, fuel poverty and heat are devolved, Scotland, Wales and Northern Ireland have specific net zero strategies, and we work closely with our counterparts in the devolved authorities to ensure that our strategies align. Overall, the UK has a strong track record in making homes more energy-efficient, with 46% in England now achieving an energy performance certificate rating of C or better, compared with 14% in 2010. Again, it is the Conservatives who deliver and reduce energy costs, and it is Labour who produce hot air and nothing to help families with the cost of living. The energy performance of our buildings continues to improve, helping to reduce consumer bills and improve our energy security.

We are taking steps to encourage businesses to reduce their energy demand.

[Alun Cairns]

Will the Minister give way?

[Graham Stuart]

No—I will have to sit down very shortly.

We have long-term regulations to ensure that landlords are incentivised to improve the energy efficiency of buildings and to set a minimum standard. We are also providing tax incentives for less energy-intensive technologies by bringing forward an exemption on business rates for green technology, saving businesses an extra £35 million in 2022-23.

We are doing an awful lot, and my job, when the Prime Minister appointed me to this position, was to accelerate the uptake of all of these energies to move us to net zero, and to do so in a way that supports families and does not impoverish them, which is sadly what the policy of the Labour party would bring about.