Winter Fuel Allowances

Andrew Percy Excerpts

Tuesday 27th November 2012 Westminster Hall

[Mr Mike Weir (Angus) (SNP)]

I am pleased to introduce this debate under your chairmanship, Mr Amess.

When I introduced a private Member’s Bill on this topic, it received the support of hon. Members of all parties, which demonstrates the depth of concern about the off-gas-grid energy market. The issue has also been constantly raised by Members during energy debates. Unfortunately, Government Whips objected to my Bill, and it is now suffering a lingering death in the twilight zone of the Order Paper.

I do not intend to use this debate to address the general problem of fuel poverty, the details of which should be well known to Members of all parties. I note, however, that 15% of all households in the UK are not on the gas grid, and that some 32% of such households are in fuel poverty, as opposed to 15% of those on the grid. Unfortunately, it seems that little has been done to address the immense problems that have been raised over the years. The present Government, to their credit, got the Office of Fair Trading to undertake a review of the market, but to almost universal disbelief, frankly, that decided that the market was working fairly. Despite that, much of the OFT’s work on the market is of great interest.

I have raised the issue of winter fuel payments for off-gas-grid pensioners on numerous occasions, as I am sure the Minister knows. Ministers in this Government and the previous Government have indicated that the idea has merit but, of course, nothing has happened. Back in March 2010, the Select Committee on Energy and Climate Change, of which I was a member, raised the issue in its report on fuel poverty.

My Bill would not extend winter fuel payments to additional groups, nor would it tread on the contentious issue of means-testing winter fuel payments, which concerns some Members. My Bill does not attempt to address the many issues that surround off-grid energy. It is tightly drafted to give some relief to a particularly vulnerable sector: those pensioners who are off the gas grid. There are many such pensioners in my constituency, and they face a number of particular problems.

First and foremost, there is the cost of home fuel oil. As with all forms of energy, the price of home fuel oil has rocketed in recent years, but there is clear evidence that the price rises in the early autumn and stays high over the winter. Even valueoils.com, which sells the oil, states:

“Winter months are typically more expensive than the summer given the rise in demand across Europe, the summer months of June and July will usually provide the lowest rates.”

The graph on its website shows a dramatic price increase in all areas of the United Kingdom over the winter months, and it is important to note that that is as much an issue in rural areas of Wales, England and Northern Ireland as it is in the highlands and islands of Scotland.

When I secured this debate, Mike Foster, the former Member for Worcester, contacted me to point out that the Oil Firing Technical Association

“suggest a typical rural household could have saved £170 if heating oil was bought in June 2010 compared to January 2011 nearly doubling the value of the Winter Fuel Allowance.”

Even the House of Commons Library note that was produced for my Bill’s Second Reading states:

“The average costs of heating and providing hot water for a typical three bedroom house with LPG have been estimated at around £2,300 per year (based on April 2012 prices with a conventional boiler), heating oil is thought to cost around £1,700 and gas around £1,200.”

It is also worth noting that over the past four years the cost of heating an average home with propane or home fuel oil has increased by £850 and £750 respectively, while the cost for gas has increased by £400. Not only are off-grid homes more expensive, therefore, but the costs are rising much more sharply. In short, heating a home with liquefied petroleum gas costs almost twice as much as heating a home with access to the mains gas grid. Importantly, the main use of LPG and home fuel oil is for heating, so although those homes generally—as most homes do—have electricity and benefit from the discounts offered by energy companies, they still face greater costs, particularly for heating and cooking.

The traditional Government response has been to call for an extension of the mains gas grid as one way to address the problem. Indeed, the Scottish Government recently announced a new scheme to do that but, realistically, such schemes are going to help only those households with a mains gas supply relatively nearby. Even then, the cost of connecting to the gas grid can be substantial and well out of the range of many people who would like to be connected. I have dealt with cases in my constituency just outside towns when although there is a gas main relatively close by, residents have been quoted many hundreds of pounds for connection to it. Furthermore, many rural and island areas will never be able to connect to the gas grid. The grid simply does not exist in many remote areas, let alone in island areas, so in such areas the cost of connection would be enormous.

[Andrew Percy (Brigg and Goole) (Con)]

I have an example from my constituency. The marshland villages to the south of Goole are not on the grid. I have raised that with the network, and it has no intention of putting them on the grid. Such communities face the double problem of being more reliant on their cars and often living in the worst insulated houses.

[Mr Weir]

The hon. Gentleman makes a good point, and I was going to address some of those problems. In many rural areas, the situation is exacerbated by the fact that much of the housing is old and of a construction that makes it difficult to install energy-saving measures such as cavity wall insulation. Many houses in rural Scotland are of a solid wall construction, and there is a limit to what can be done to save energy. Once the roof insulation has been put in, the only real option is to install some sort of solid wall insulation, which is difficult in many of those houses.

Such households will receive the same winter fuel allowance as pensioners on the gas grid, but there is a crucial difference in how the energy is delivered. Those who are on the gas grid will receive their winter fuel bill around the time that the winter fuel allowance is generally paid, so the system works well for those people. Indeed, in the explanatory notes to the regulations that last amended the benefit, the previous Government specifically stated:

“They are paid in a lump sum each winter to ensure that money is available when fuel bills arrive.”

No one could dispute that that is a good thing, but that is not how it works for those who are off the gas grid. Such people face the difficulty of having to pay for their LPG or home fuel oil up front at the beginning of the winter, well before they have the benefit of the winter fuel allowance. Many find it difficult to do so and may not completely fill up the tank, leaving them having to do so in the depths of winter, which brings its own problems, and not only due to the cost.

The OFT’s report found that there are many competing suppliers in the market, but by definition many of those suppliers are small. Although some of the larger players offer greater payment flexibility, smaller ones are unable to do so. The Minister may be interested to know that some of the bigger players have expressed an interest in doing something, but they sometimes have difficulty finding vulnerable customers because of the regulations. Although electricity companies, for the purpose of the discount, can access such information, I understand that other energy companies cannot because of the way the regulation was drafted under the Energy Act 2010.