Barry Sheerman
Main Page: Barry Sheerman (Labour (Co-op) - Huddersfield)(10 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint
I am not surprised that energy suppliers, big or small, do not like having their prices frozen. I would be surprised if they did support it. However, when Stephen Fitzpatrick, the chief executive of Ovo, was asked whether it would affect his company model, he said:
“No I don’t think so, we set up our business to make sure that we are able to pass on the greatest amount of savings possible to energy customers.”
When asked, “Will you be affected?” he replied:
“No I think it will probably be great for our business to see any kind of pressure put on the big six.”
The same goes for Co-operative Energy. The big prize for Good Energy, Co-operative Energy, Ovo and the others is a reforming of the market to ensure that they have greater access to the products they wish to sell. There is a big prize for them that many of them support through our reforms.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
I hesitate to interrupt a very good speech. Those of us who support the reference to the CMA worry that there will be another 18 months—there will be a new Government, which will obviously be a Labour Government—when we still will not have tackled the deep disaster of the mess that the Conservative party made of the privatisation of the energy sector. We need a fundamental look at energy, root and branch.
Caroline Flint
My hon. Friend is right. In the statement last week, I thought he made a very fair contribution, saying, “Look, there are real problems here that we all have to acknowledge, address and deal with.” I welcome the reference to the CMA, but we cannot allow the silence that some Government Members would now like to follow on this issue of public importance. That is why we have to draw a line in the sand and have a freeze. It is also why we should get on with some of the other ways in which we can address the reforms that are necessary in this market. I have been very open that there may be aspects of the CMA investigation into this murky world that will find other issues that Labour has yet to look at and that might be helpful to our reform programme. I very much welcome that, but we cannot allow this issue to be kicked into the long grass.
The report clearly highlights the need for reform in our energy market, as we have made clear for the last three years. It identifies five significant problems that are preventing consumers from enjoying the full benefits of competition. None of them is new.
Mr Davey
I think it will have hardly any effect, if any effect at all. The case for shale gas is to do with energy security, as I have made clear many times.
Returning to my thought experiment, let us imagine what would happen if there were a legally imposed price freeze—prices frozen by the state, not by individual firms. What would happen if wholesale prices shot up? Let us say Russia invades Ukraine and gas prices in Europe shoot up. Would a Labour Government keep prices frozen then? I do not know if they are sure themselves. The right hon. Member for Don Valley might want to confirm whether they would keep prices frozen then. Their price freeze is not really a price freeze; it is a con. Let us assume, however, that whatever happened to wholesale gas markets and prices, they would freeze prices. The truth is that would hit the small players and play into the hands of the big six. As Ian McCaig, chief executive of First Utility, the largest of the new independents, said:
“Bluntly, it could put me under… How am I going to absorb those costs? I only retail, I don’t generate. The answer is, I can’t.”
Mr Sheerman
I think it was Harold Macmillan who said, “Events dear boy, events.” Of course there will be major events—ones that we could not predict at this moment—but I know the right hon. Gentleman to be an honest gentleman so he must acknowledge that the real difference—it changed the whole momentum of this debate—was the speech at the Labour party conference by the Leader of the Opposition.
Mr Davey
That is simply not true. We were reforming the markets from day one because we had inherited the big six from the Labour party.
Let us return to the small independent competitors. In its response to Labour’s Green Paper, Good Energy said:
“The proposed price freeze poses a disproportionate impact for smaller companies such as ourselves as we do not have the same level of vertical integration as the big 6 which allows us to control our costs.”
If raw energy costs rise during a freeze, vertically integrated firms with deep pockets can withstand a profits squeeze, but smaller, retail-only firms would go bankrupt. Result: reduced competitive pressure on the big six and higher overall prices when the freeze comes to an end.
John Robertson
I thank the hon. Gentleman for his intervention. If he is right and I am wrong, I apologise, but that is not what it said in the newspapers. That is not how the CEO was quoted. He was quoted as saying that the lights could go out. To me, that sounded like the big bully threatening people in the playground: “I’m going to put your lights out.” That is basically what he was saying to us. Well, I know how to deal with bullies, and it is not my lights that will be going out. I say to the CEO of British Gas that if he and his company cannot do their job, there are plenty of other companies that would like to take it on. If that is the case, let us sell it off to other people who are willing to do the job. We do not need to listen to bullies telling us how they want to run the country. That is a matter for the Government, after all.
We have heard a lot about the green levies, which the Government have reduced. Some of us felt that that was not the right thing to do. Having said that, if people’s bills were to be reduced by £50 as a result, that would have been great. But their bills were not reduced by £50; they have gone up by £60. The energy companies are saying to our constituents, “Hey, good news! The Government have just saved you £50”, but a lady in my constituency could not even afford the bills before the £60 increase, so no credit is due to the Government there.
I ask the Government to look into this matter, and it would be much better to do this in a cross-party manner. I believe that this Secretary of State is doing his very best to stop the multi-party arrangements in energy, but in the past we have always got on well together. We ought to work together as a team to try to get the country back together again and to put an end to this point scoring.
Mr Sheerman
My hon. Friend makes a good point about the importance of working together across the parties. Does he agree that, if the Secretary of State and the Secretary of State for Business, Innovation and Skills did not have the Minister of State, Department of Energy and Climate Change, the right hon. Member for Sevenoaks (Michael Fallon) standing guard over them to ensure that they keep to the Conservative line, we would get a much more rational response from this Liberal Democrat Secretary of State?
John Robertson
When more than one Department is involved in this place we always have a problems—it does not seem to matter what is done. If we involve a Secretary of State for Business, Innovation and Skills and a Secretary of State for Energy and Climate Change, they are going to have their own drivers, which are not always the same. A Minister put in place to cover both Departments has a hard job, because it cannot be easy dealing with the Secretary of State for Energy and Climate Change, let alone the other one. So good luck to the right hon. Member for Sevenoaks—we will see where he goes. We certainly need to look at how energy is governed, and it should not be done across Departments. One Department should be dealing with it, although it could be done by a bigger Department.
I have no objection to companies making profits, but profits have gone up by £3.3 billion since 2010. The Secretary of State talked about what happened in 2009, 2006 and 2007, but he never said anything about what happened after that. The fact of the matter is that an increase of £3.3 billion since 2010 is a touch excessive. Public affairs consultants in the big six say they make only 2% profit while bragging to their shareholders that profits have gone up 20 times as much. That deals with what the hon. Member for Warrington South (David Mowat) was saying about the splitting of wholesale and retail. Everybody knows that I have spoken about that for a number of years. I believe that they should be split, because all we ever get from energy companies is that they have an increase in profits—it could be 4%, 5% or 6%—but that it is not enough to help them invest.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
It is always very fortunate to be called last before the closing speeches, because it concentrates one’s mind wonderfully. I am not an energy specialist, but I am very interested in how we make policy in our country. Having listened to this debate, I know that it is about the supply, price and security of energy. I remember hearing a wonderful group from the Royal Society of Arts, Tomorrow’s Company, talk about the best kinds of companies being those that really set examples in looking after the balance between their employees, shareholders, consumers and suppliers, as well as after the community in which they sit. Today’s debate has been about companies falling short, particularly in terms of consumers and the communities in which they sit.
As politicians, we have been pretty cowardly on energy for a long time. The fact is that when privatisation was introduced not enough Conservative Members said strongly that it was a mix, a muddle and a botch. It was, and we are all paying for that terrible privatisation. In parallel, we are paying for rail privatisation in my region. In both cases, there is absolutely fragmented ownership and a lack of “joined-upness”—somebody owning one bit does not talk to somebody in another bit. It is a mess. If we look seriously at privatisation, we can see that it has been a disaster for this country.
Mr Sheerman
With only four minutes left, I will not give way, as the right hon. Gentleman knows is the case.
So often, politicians from all sides have been very reluctant to take on the big, hard issues. We only have to look at nuclear power. I have always thought that it was an option that we should have taken seriously and for which we should have been building long ago. Even with the six large energy companies, we have ended up without the ability to come forward with either the finance or the technology to build a nuclear power station, and instead have to look to Chinese money and French technology. What a dreadful situation in an energy sector that has been driven down to such a weak status and such low capacity by its botched privatisation.
Of course we need to make big changes. To be really old-fashioned, I would say that we should have a royal commission on such a matter. I am in favour of the motion, and of the Government’s good decision to refer the energy market to the Competition and Markets Authority. Will it, however, be only a sticking plaster on a real and deeply structural problem in our deeply dysfunctional energy sector? I am afraid that it will be. I want there to be a royal commission, which could encompass the whole of the problem, rather than one bit of it.
We all want efficient regulation. From looking at the present regulator—its strength and teeth, and its capacity to act and to be bold—I have to say that it has been woefully lacking in protecting my constituents and people up and down this country. To be truly political, that is part of my deep unease about how this Government in all their decisions—this is one of them—are moving us to a country in which there is a disparity between the really rich and ordinary people. I do not mean poor people, but those mentioned in that wonderful book, “The Spirit Level”, which argues that healthy societies and healthy democracies do not have an enormous gap between the rich or super-rich and ordinary people.
Such a gap is developing in this country, and when we look back at this Liberal Democrat/Tory Administration, it is one reason why we will say that that was the time when our country became deeply divided, with the rich people being favoured by this privatisation and the Royal Mail privatisation. “Rest in peace” will be the epitaph of the Administration that has made this country more divided and more unhappy.