Bill Esterson
Main Page: Bill Esterson (Labour - Sefton Central)
Bill Esterson (Sefton Central) (Lab)
With permission, I will make a statement on the Government response, which was published yesterday, to the Energy Security and Net Zero Committee report, “Tackling the energy cost crisis”, which we published in October.
This issue is very much at the heart of what families up and down the country are dealing with. I stood in the last election on a commitment to bring down energy bills, and I welcome the Government’s decision to reduce them by £150 from April. That £150 is a start on the road to the cut of £300 that was mentioned before the election in July 2024. We should be honest, however, because the solutions to high energy costs are often presented as easy—they are not—although the underlying truth is very simple indeed: bills are too high, which is in large part the legacy of years of under-investment in infrastructure and the lack of long-term planning.
The warm homes plan, which was also published yesterday and which the Government refer to in their response to the Select Committee report, gives encouragement that many people will see their bills fall through the adoption of clean technologies. Insulating homes delivers warmth and health co-benefits in addressing cold, damp and mould, offers security and is an effective way to lower bills. Perhaps the success of the gas safe model over many years provides an idea of how to ensure confidence in the insulation of homes, following the well-documented failures of the energy company obligation scheme. In the Government’s response to our report on retrofitting last year, they promised to update us once the warm homes plan was published. Hopefully, the Minister is preparing—or, probably more accurately, his colleagues are preparing—to do just that.
Our report, published yesterday, offered the Government recommendations on how energy costs for consumers and businesses might be reduced in the immediate term. The inquiry into the cost of energy continues, pressing for answers on why electricity prices in the UK remain stubbornly higher than in countries such as Germany and France, and what energy reforms are needed to help with industrial competitiveness. In our report, we made a number of recommendations about supporting those facing fuel poverty. We recommended that the warm home discount be targeted using a tiered approach, so that funding is allocated based on household need and energy usage, and that value of the rebate be linked to wholesale prices. We recommended that the cold weather payment be reformed so that the £10 payment is made to eligible households every day that the Met Office forecasts that the average temperature will be 0° or below the following day.
The key to helping those in real need is enabling energy companies to identify properly those customers who need support and relief. We called on the Government to work out how data might be used to target support to those who need it. The Government agreed with us on the importance of data sharing, but believed that their taskforce was already making progress in this area. Sadly, the Government rejected our call for better targeting of the warm home discount and for a social tariff, claiming that the warm home discount was already a social tariff—which is not the evidence that we heard. They also rejected our calls for a fairer approach to cold weather payments.
The level of consumer debt is alarmingly high and growing. We noted that the network companies have recently benefited from flaws in the price control system that overestimated the impact of inflation on their borrowing costs. We recommended that the Government recover the excess profits made and use it to clear much of the debt. We regret that the Government rejected our recommendation, not least as by doing so, they admit that consumer debt will continue to be added to everyone’s bills. According to one retailer we took evidence from, that figure is £160 a year. We called for Ofgem to limit the back billing period for customers with a smart meter to six months. The Government referred us to Ofgem and indicated some broad support. We heard that bills fall 3% when households have a smart meter that works, even before trying to maximise the benefits. I am pleased to say that we had agreement from the Government about the importance of a better, more ambitious smart meter roll-out.
We recommended that the ombudsman’s job would be more effective if it was placed on a statutory footing and better enabled to enforce its decisions. The Government agreed with us. We also recommended that the ombudsman should cover small and micro-sized businesses, with the ability to make awards up to £50,000. We thought that energy companies should not be able to pursue customer debts that were currently being considered by the ombudsman. The Government told us that they were content to rely on Ofgem rules that companies should only pursue debt in a proportionate manner. It was clear to us, from the evidence we heard, that a complaint before the ombudsman is sufficient to suggest that the retailer is not currently being proportionate in its actions.
Our main recommendation for businesses and industry follows a suggestion from Make UK to provide an opt-in scheme that would provide businesses with certainty about costs, as uncertainty is almost as damaging as the high prices themselves. I hope that the Government will act on these recommendations, which they say that they will keep under consideration. We also heard about businesses being put on to contracts where the costs might not be as transparent as they should be. We also think that businesses should be allowed to exit energy contracts up to 14 days after their first bill.
My Committee colleagues are under no illusions about the scale of the challenge that we face with energy bills. The Secretary of State spoke yesterday about the potential to use tariffs to cut bills. We identified other opportunities to cut bills. Over time, we will recommend more. I would just make a plea: that the Government take a look at the evidence behind the recommendations in our report and consider whether they might want to adopt more of what we suggested. It would not be the first time that a Government had rejected Select Committee recommendations only to adopt them quietly later.
Claire Young (Thornbury and Yate) (LD)
In their response to the report, the Government said that in the clean flexibility road map, they have committed
“to develop measures focussed on barriers to the participation of low-income and vulnerable consumers in using energy flexibly.”
Given what we heard yesterday about the importance of heat pumps and heat storage in participating in flexibility, does the Chair of the Select Committee agree that one important measure could be to make heat pumps and heat storage more affordable?
Bill Esterson
The hon. Lady is on to what we will report on in the second half of our inquiry; we took evidence along those lines in yesterday’s session. The House also heard yesterday from the Secretary of State, with the announcement of the warm homes plan, about the support that will be available for the technologies that the hon. Lady mentioned, so I hope that her question has been heard by those on the Treasury Bench.
Melanie Onn (Great Grimsby and Cleethorpes) (Lab)
It is welcome that the Government agreed with the Select Committee that we should be more ambitious about smart meter roll-out, so that household customers can get the best tariffs for them. We also heard evidence that there was a lack of consumer confidence in smart meters. Does the Chair of the Select Committee think that there is more that the Government could do to rekindle that confidence for the benefit of consumers?
Bill Esterson
The low take-up of smart meters is one of the big challenges that faces the energy market. It is very much linked to some of the problems that customers have around the country. I mentioned in my statement that just having a smart meter cuts bills by 3%, before even investigating the access it gives to a range of tariffs. Anything that can be done to improve the roll-out must make a difference. We also heard evidence from Martin Lewis about the importance of this matter. Giving people more access to tariffs is part of what the Government want to do, and it is consistent with the evidence that we heard. How we increase the smart meter roll-out will be key; clearly, it has not gone well so far.
Richard Tice (Boston and Skegness) (Reform)
At the time of the election, the Government promised that the rush to renewable energy would bring bills down by £300. They are now currently almost £200—some 12%—higher than back then. Now the Government are resorting to dipping into general taxation to try to con the British people by reducing bills by some £150; they will still be much higher than the Government’s promise. Could the Chair of the Committee confirm—perhaps the Committee has a view, perhaps it does not—when the renewable energy rush is going to bring the bills down as promised, or will the Government have to admit that they misled the British people?
Bill Esterson
That is really looking to the second part of our inquiry, but we have heard evidence on this already. The price cap at the start of 2024 was £1,928. It is now £1,758 and, according to the retailers, is due to come down further over the next few months. It is also important to compare like with like. We have to increase the capacity of generation in this country; comparing gas-fired power stations to renewables, renewables are 40% cheaper on a like-for-like comparison for new generation. Just in the last few days, we saw that Reform’s favourite leader, Putin, intervened again and we had an immediate spike in gas prices, so the evidence is very strong that the Government are on the right track. We have the immediate fall in the price cap—the figures I read out—and we have the Government agenda. The Committee will be looking, in the second part of its inquiry, at much of the detail and making further recommendations on how to cut bills in the short term.
Chris Hinchliff (North East Hertfordshire) (Lab)
There are two particularly important conclusions in the Select Committee’s inquiry: first, that reducing energy costs for everyone should be the top priority; and secondly, that there is no shortage of money in the wider energy system. Does the Chair of the Select Committee agree with me that GB Energy is an important part of the answer? We need publicly owned generation that is about not producing electricity for maximum profit but producing electricity that can be sold at lower prices and drive down costs across the market.
Bill Esterson
As I said in my statement, the years and years of under-investment—the complete opposite of what was promised when the energy system was privatised in 1989—have led us to this place. That has been a very large contributor to the challenge with energy bills that we face now. The Committee heard evidence from E3G that as much as £500 in profit is made in the private sector from an average household bill. When we recommended that the debt be written off by using the excess profits made by the network companies, we were told that that would cause a chilling effect on future investment. Of course, that problem would not exist if we had not gone down the privatisation route in the way that we have. My hon. Friend makes a good point, but we are where we are, and we are going to have to find answers to the question of how we bring down bills further, in addition to the measures already taken by the Government.
Jim Shannon (Strangford) (DUP)
I thank the Chair and the Select Committee for considering this massive issue. Around 40,000 older people in Northern Ireland—that is over 10% of older people there—live in poverty. Energy is perhaps one of their biggest outlays and it is critical. Did the Committee consider what can be done to protect our elderly against the worst energy crises, which really can be life or death?
Bill Esterson
That is a very important question. It was an important part of what we looked at in the first half of the inquiry. Our recommendations on the cold weather payments are relevant to what the hon. Gentleman asks, as are our recommendations on debt for those very many people who, because of the energy crisis, now face debt. We also made recommendations on the warm home discount, including extending it to all on benefits. The Government chose to stay with the current system, but these were very much recommendations that we supported for the reasons that the hon. Gentleman outlined. As I said when finishing my statement, I hope the Government will return some of the recommendations that they have so far not accepted.