Domestic Gas and Electricity (Tariff Cap) Bill

Bill Grant Excerpts

2nd reading: House of Commons
Tuesday 6th March 2018 Commons Chamber

[Bill Grant (Ayr, Carrick and Cumnock) (Con)]

It would be prudent at this time for me to thank the Business, Energy and Industrial Strategy Committee for its hard work and its contribution to the Bill. I wish to refer to what the hon. Member for Leeds North West (Alex Sobel), who is no longer in his place, said earlier about paying with meters. He appeared to think that they came along with privatisation, but I can go back to the 1950s and 1960s, when meters took a shilling, which is the equivalent of 5p today. Prepayment meters have been with us for quite some time.

When competition works, it delivers the best for consumers, shareholders and the Government alike, and over the past two decades, energy utilities have secured significant investment. It would be a mistake to damage the market that has evolved in recent decades or distort it unnecessarily by introducing state-owned or publicly owned suppliers. That would jeopardise public investment, cost the taxpayer significant sums and lead to the loss of corporate tax receipts. That approach would, in my view, be folly, given that this Conservative Government have already worked hard, and continue to do so, to ensure that the market is more competitive.

The number of energy suppliers has increased fourfold, from about 13 to 50, since 2010, giving the consumer a much wider range of options should they choose to take them. The advent of smart meters will in due course make energy bills more accurate and pricing more transparent, although I concede that there is some way to go to secure the installation of about 53 million such meters by 2020, which is an ambitious target. By working with Ofgem, which has rightly come in for some criticism this afternoon, and by harnessing the power of the internet, the Government will make it quicker and easier for consumers to switch suppliers, which should reduce their energy costs.

There is a large of group of over 5 million active consumers who are willing to use their options to secure the best deal, as was referred to earlier in the debate. Almost one in five United Kingdom households are switching supplier each and every year. The big six are having to work much harder and offer better deals to retain that group of important customers and to compete for their loyalty. However, there are people who, for whatever reason, still do not switch. The non-switchers, who include some of the least well off and the most vulnerable in society, remain for the most part a captive market for the large and dominant suppliers. A form of two-tier market has inadvertently emerged, and those households tend to be on high-cost tariffs.

Our aim as Conservatives must be to create a competitive market that is fair to consumers and to the suppliers, and in which the big six cannot rest on their laurels and prosper—and they have prospered—by inflicting higher charges on those who can least afford it. Encouraging switching does go some way towards achieving that, and we should certainly continue those efforts, but in the meantime we also need to protect the very large group of non-switchers.

The Conservative manifesto proposed the introduction of a safeguard tariff that would protect consumers on the poorest-value tariffs, and I am pleased to support this Bill, which honours that commitment. Indeed, I commend the Government for driving forward their promise to deliver lower fuel bills for millions of customers. This temporary cap, which is not a freeze, as has been said often today, will ensure that 11 million or so customers on a standard variable tariff will, delightfully, no longer have to pay an inflated price for their gas or electricity. That can only be good news for constituents in Ayr, Carrick and Cumnock and throughout the United Kingdom. It is not a distortion of the market, but a corrective measure.

In 2015-16, it was estimated that domestic customers in the UK supplied by the big six paid almost £1.5 billion more than they would have done in a properly functioning marketplace. It is clear that the marketplace is not working, but it will work better, because the Bill will help to reduce that figure and bring prices into line with what they should be in a properly functioning market, while letting the market continue and even flourish within the confines of the cap.

In conclusion, as a Conservative, I believe in the free market, but like many, I recognise that there are times when it can fall short, and this is one of those occasions. It is then the Government’s responsibility to listen, step in and make the necessary reforms and regulations to ensure that the market works well for as many people as possible. The Bill will ease the unfairness and yet allow the market to prosper. I am pleased to support it and, in doing so, note that the cap will cease by the end of 2023 at the latest, but there is the opportunity for it to end in the near future, in 2020.