Domestic Gas and Electricity (Tariff Cap) Bill

Caroline Flint Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 30th April 2018 Commons Chamber

[Stephen Kerr]

I am grateful to my hon. Friend for his intervention. I share the concerns—I think they are shared across the whole House—about the performance of Ofgem as a regulator. I have broader concerns about the general performance of regulators full stop. Frankly, we seem to have a collection of regulators who either have powers but do not seem to be prepared to use them, or who do not feel they have adequate powers but are not prepared to ask for them. That seems incredible to me. I am very wary of leaving the issue of vulnerable energy customers to the discretion of Ofgem, because I am fearful that the discretion of Ofgem will mean that it will continue, by its own admission, to fail vulnerable customers.

This is an important issue that needs to be aired here and now on Report. Ofgem needs to sit up and take note. It is also important that we hear from the Minister, from the Dispatch Box, what change in the pattern of behaviour we should expect to see from Dermot Nolan and Ofgem. Will they have the determination and grit of the marathon runners in Stirling yesterday? Will they do something with the powers they currently have and the powers they will have when the Bill is passed? Above all, I want the Government to fulfil the promise of our Prime Minister who, on behalf of the Conservative party, said:

“Our party did not end the unjust and inefficient monopolies of the old nationalised energy corporations only to replace them with a system that traps the poorest customers on the worst deals”.

I am fearful that that is what we could do. I look for reassurance from the Minister.

[Caroline Flint (Don Valley) (Lab)]

I welcome back to the House this unfinished business. It has been a long-running saga and I have appeared in pretty much every episode for the past six years. I am hoping tonight will be my final appearance on this particular matter, with no repeats to follow.

I welcome the proposed absolute price cap. We have arrived at a place where there is much cross-party agreement, but it comes at a price. That price has been borne by consumers. The Competition and Markets Authority confirmed in 2016 that between, 2012 and 2015, the average detriment to the consumer—overcharging, in plain English—was £1.4 billion a year. The CMA found that the scale of overcharging, far from diminishing, was rising, reaching £2 billion a year by 2015.

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[Rebecca Long Bailey (Salford and Eccles) (Lab)]

You will be pleased to hear, Mr Deputy Speaker, that I will be brief.

I thank all Members who have contributed to proceedings on the Bill and all members of the Public Bill Committee, who worked diligently and in such a consensual way. I particularly congratulate my hon. Friend the Member for Southampton, Test (Dr Whitehead), who over the past weeks and months has spent many hours working on not only this Bill, but a great many pieces of legislation. I thank the Public Bill Office and the Clerks for their tremendous support, as always.

Somewhat unusually, I am delighted that we are here to send a Bill to the other place in a speedy fashion. The Opposition will support the Bill’s Third Reading. However, the Minister and the Secretary of State, diligent as they are, may share some of my exasperation that wider Government inaction—shall we say?—and delay at the beginning of this Parliament has meant that millions of people are still suffering with big energy bills as the winter comes to a close.

The 2017 Conservative manifesto committed to implementing an energy price cap that would protect 17 million households. On 9 May 2017, the Prime Minister herself wrote of the cap in The Sun:

“I expect it to save families on poor value tariffs as much as £100.”

Yet the policy was thrown into doubt when the Queen’s Speech said merely that the Government would introduce

“measures to help tackle unfair practices in the energy market to help reduce energy bills.”

That was followed by numerous letters between Ofgem and the Secretary of State in which it was made clear that legislation was required, but the Government still did not introduce a draft Bill.

It was not until mid-October that we saw evidence of the Government’s commitment coming to fruition, but even then there were reports that some in the Cabinet had no intention of seeing legislation on the statute book. Thankfully, pressure from the Opposition, and indeed from Government Members, has ensured that the Bill has made progress. A price cap will therefore eventually be in place, but the fact sadly remains that in nine days’ time it will have been exactly a year since the Prime Minister wrote her commitment to energy customers in The Sun.

I am happy that we are here today—I commend the Minister and the Secretary of State—but it is disappointing to say the least that a year has passed and the cap is still some way from implementation. As a result, energy customers have not been protected during a winter in which we have seen some of the coldest weather on record. Prices have continued to rise, and in the past couple of weeks, British Gas has announced a 5.5% price rise, while EDF has announced a 2.7% rise.

My hon. Friend the Member for Southampton, Test and other hon. Members attempted to improve this Bill and help the Government to ensure that their own commitments were met. Sadly, although the Minister was very amiable, the Government did not accept many of the amendments.

[Caroline Flint]

May I add another couple of dates to help Members to understand how long it has taken to get us here today? I think that, as I get older, collective memory becomes an even more important asset. It was in October 2011 when the then Prime Minister, David Cameron, held a summit to tackle rising energy prices, and it was in October last year—six years later—when we finally heard talk of a Bill.

[Rebecca Long Bailey]

My right hon. Friend is correct. I share her exasperation and that of many Members on both sides of the House about how long it has taken to tackle this very serious issue.

Briefly, let me turn to some of the amendments that were discussed—Members will be pleased to hear that I will not go through all of them. Amendment 6 would have required Ofgem to ensure that the tariff cap conditions resulted in customers on standard variable and default rates having their annual expenditure reduced by no less than £100, as per the Prime Minister’s election promise. If the Government had accepted that amendment, it would have given energy customers confidence that the Government were serious about their commitment significantly to reduce the bills of millions of customers. However, the Minister said that she felt that the Opposition had been mischievous in trying to place a Government policy within a piece of Government legislation. I do not think that I need to say any more about that—we will not try to do so again.

After our discussions in Committee, we redrafted an amendment that we had previously tabled. Rather than proposing a hard stop date, amendment 5 would have simply ensured that the cap would be in place within five months of Royal Assent. Ofgem has stated that it will take five months from Royal Assent to implement the cap. It indicated that placing such a deadline in the Bill would not cause it a problem or hinder its process so, again, it was sad that our amendment was not accepted.

Similarly, new clause 1 would have developed requirements for a differential between a supplier’s cheapest and most expensive rates after the termination of the cap. That would have offered a degree of ongoing protection for consumers while wider market reform could take place.

I wish to pick the Secretary of State up on a statement that he made on Second Reading. He said:

“Britain has long been a pioneer in not only the privatisation and liberalisation of industries but the regulation of these utility industries, too.”—[Official Report, 6 March 2018; Vol. 637, c. 206.]

I am afraid that I have to take issue with him. Although I am pleased that the Bill is completing its final stages today, the necessity of the Bill in itself demonstrates the Government’s abject failure adequately to ensure that our UK utilities have been regulated. In the past year alone, £120 has been paid by every household in the UK for dividends to energy company shareholders. As I have said before, the six distribution network operators had an average profit margin after tax of 32% a year between 2010 and 2015, which equates to £10 billion over six years. During that time, shareholders received £5.1 billion in dividends, or half the net profit generated. In the past 10 years, water companies paid 1,000 times more in dividends than in tax. Three of them paid more in dividends than they made in profit in that period, which means that they were borrowing on the back of household bills to pay their shareholders. Radical reform of our energy market is needed—it is not optional, but necessary.

We have yet to see any response to Dieter Helm’s consultation on the cost of energy, which included many proposals for reform. Perhaps the Secretary of State will confirm when a response to that consultation will be published. It is urgent that we have such a response if effective competition is to be achieved by the end of 2020, or indeed by 2023, when the energy price cap will definitely be lifted.

I support the Bill and I welcome this Government action, but, as I have said, the cap is simply a sticking plaster. I hope that the Government will now act speedily and listen to the comments of Members about the wider reforms that our energy market requires.