Energy Prices

Debate between Caroline Flint and Mike Weir

Wednesday 14th January 2015 Commons Chamber

[Caroline Flint]

I do find that incredible, given that the Chancellor issued a stern warning to the energy companies only last week about their not passing on falls in wholesale cost. I do find it unbelievable that we cannot get a consensus in the House on this issue.

[Mr Weir]

I have been listening carefully to what the right hon. Lady has been saying and I agree with most of it, but she mentioned the CMA, and one of the things that slightly concerns me is the length of time the investigations often take. What assurance can she give us that if this were to happen, it would be a prompt investigation with action taken on prices? The last thing we need is for this to be kicked into the long grass so that we get an answer only 18 months down the line when things may have changed completely.

[Caroline Flint]

I welcome the hon. Gentleman’s support for Labour’s policies in this area, and I hope we can persuade the Scottish National party that the price freeze is a good policy as well and that it should get behind it.

To inform the hon. Gentleman, the timetable is that the CMA report is due to be completed in December of this year, but an interim report should be forthcoming in June. Our view all along has been that when Labour is in government, we will freeze prices and introduce measures to make sure that the regulator can ensure that wholesale cost reductions are passed on. Also, in tandem with the CMA, we will be issuing further detail of our reforms, which I have to say in some respects the CMA has taken on board, which I welcome.

The second excuse we have been given is that wholesale costs are only one part of an energy bill. I heard a spokesman for E.ON yesterday refer to “non-energy costs” preventing reductions being passed on, but let us remember that even though there are other costs, wholesale costs are still, as we would expect, the single biggest component of a household energy bill. When the cost of the single biggest component falls by 20% or even 30%, I think the bill should come down, too.

Let us also not forget that one part of a typical energy bill has been increasing sharply: the profits of these companies. Ofgem’s latest supply market indicators suggest that profit just on the supply of energy—and there is another even bigger profit on generation—has more than doubled from £49 per household in 2013 to over £100 per household today. Energy companies do control that, so that argument does not stand up to scrutiny either.

Cost of Living: Energy and Housing

Debate between Caroline Flint and Mike Weir

Thursday 5th June 2014 Commons Chamber

[Caroline Flint]

I absolutely agree with my hon. Friend. I commend the fantastic work he is doing with rural communities the length and breadth of Britain and thank him for the support he has given my team in addressing some of the issues facing households who are off the grid. As he says, for those off the grid this is an equally disappointing Queen’s Speech. There is nothing on bringing forward winter fuel payments, which would allow people to buy their heating oil when it is cheaper, or on bringing those who are off-grid under the energy regulator so that they can enjoy some of the protections that everybody else would enjoy. Labour would have put both those measures in a Queen’s Speech.

[Mr Mike Weir (Angus) (SNP)]

I am pleased that Labour has now supported early winter fuel payments, for which I have been pushing for some time. Does the right hon. Lady recognise that one of the other problems is that the energy company obligation does not include off-grid boilers? Would Labour be prepared to push forward a measure on that? [Interruption.]

[Caroline Flint]

I am hearing from different parts of the House that the ECO does and does not allow it. Clearly, we must have an energy efficiency and insulation programme that meets the needs of various communities in the different circumstances in which they find themselves. With my hon. Friend the Member for Ogmore (Huw Irranca-Davies), I am working through a number of proposals and listening to communities about what would work. I am also listening to those working in the sector, as well as those who supply oil and gas and those who want to see what they can do to help more with energy and insulation. We are looking into this in greater detail.

That leads me to my next point. In the long term, the most sustainable way to cut people’s energy bills is to improve the energy efficiency and insulation of our housing stock. Despite the progress made under the previous Government, who helped more than 2 million households through Warm Front and millions more through the decent homes programme, Britain still has some of the least energy-efficient housing stock anywhere in Europe. Some 80% of our stock today will still be around in 2050, and this Government’s green deal, which I remind the House was billed as the biggest home improvements programme since world war two, has been an abject failure. Just 2,500 households have signed up for a green deal package. To put that figure in context, it is only slightly more than the number of Liberal Democrat councillors left after the party’s collapse in the local elections a couple of weeks ago, including on Kingston council in the Secretary of State’s area.

We have a big enough challenge bringing our existing stock up to scratch without having to worry about retrofitting the housing we are building now. That is why, when in government, Labour set a target that every new home built in Britain would have to be built to, or as near as possible to, a zero-carbon standard by 2016. In this Queen’s Speech, however, we have the bizarre but not uncommon spectacle of the Liberal Democrats trying to claim credit for a policy that was actually introduced seven years ago and which they have undermined. That is exactly what they are doing: taking our zero-carbon homes policy, exempting developments of up to 50 homes, watering down the standards for larger developers, and then wanting credit for it. Whatever the short-term benefits, in the long term there is a real risk that these decisions will leave consumers stuck with homes that are not meeting the high standards of energy efficiency. Given the scale of the challenge we already face, that is a problem we could well afford to do without.

On housing more generally, the country is suffering from the biggest housing crisis in a generation: house building is at its lowest peacetime level since the 1920s; affordable home starts are down by a third since the election; and home ownership is falling further and further out of reach for young families. As a result, more and more people are having to rely on renting a home in the private sector, but the cost of renting has gone up, rising more than twice as fast as wages since the election, despite the prediction of the former Housing Minister and, if reports are to be believed, the soon-to-be former chair of the Conservative party, the right hon. Member for Welwyn Hatfield (Grant Shapps), who reassured us that rents would not go up. But they have gone up, and renters are getting a bad deal and are being forced to pay all kinds of unfair charges and fees.

Nothing is being done to provide the certainties that families need to plan for their future. What does this Queen’s speech have to offer them? Nothing. All we have is Help to Buy. Of course, any help for first-time buyers struggling to get on the property ladder is welcome, but why is a scheme that is meant to help first-time buyers allowing for taxpayer-based mortgages for homes worth up to £600,000? How many first-time buyers can afford homes worth £600,000? As more and more voices are warning, unless rising demand for housing is matched with rising supply, house prices will inflate even further, making home ownership even less affordable for those on lower-middle incomes.

As my right hon. Friend the Member for Leeds Central (Hilary Benn) will set out in his speech later, if this were Labour’s Queen’s Speech, we know what we would do to get Britain building again, help people get on the housing ladder and give people who rent more security. We would get 200,000 homes built a year by 2020. We would unlock the supply of new homes by giving local authorities “use it or lose it” powers and boost the role of small house builders. We would legislate to make longer-term tenancies with predictable rents the norm and properly regulate letting agencies.

Like energy, water is another essential to life, but more than 2 million households are forced to spend more than 5% of their income on their water bills. At the moment, the water companies can choose whether or not to offer a social tariff to those customers who struggle the most. As a result, only three companies do so, and fewer than 25,000 households receive any help at all. That is just not good enough. If this were our Queen’s Speech, my hon. Friend the Member for Garston and Halewood (Maria Eagle) would use powers to establish a national affordability scheme, funded by the water companies, to ensure that help gets to those who need it and to put an end to the current postcode lottery.

As well as dealing with the problems that hold back our country, we should be making big, long-term changes to our economy so that we can grow and earn our way to a higher standard of living. Work should pay and people should always be better off in work than out of it. One reason it does not always feel like that is the rising cost of child care. As my hon. Friend the Member for Manchester Central (Lucy Powell) has highlighted, since the election the cost of a nursery place has risen five times faster than pay. There are 578 fewer Sure Start centres, and 35,000 fewer child care places. However, the Government’s new child care allowance will not even start until well after the next election. If this was our Queen’s Speech, we would expand free child care from 15 to 25 hours for working parents of three and four-year-olds to make work pay, and we would create a legal guarantee of access to wraparound child care for primary school children through their school from 8 am to 6 pm.

As my hon. Friends the Members for Streatham (Mr Umunna) and for Leeds West (Rachel Reeves) will set out next week, there is so much more that the Government could and should have done in the Queen’s Speech. Let us take zero-hours contracts. We welcome the fact that the Government have adopted our policy of banning exclusivity clauses, but that is only one part of the problem. What about people working regular hours for month after month, or even for years, who are still on zero-hours contracts? This Queen’s Speech does not help them. What about strengthening the national minimum wage, tax breaks for firms that boost pay through the living wage, job guarantees for the young and long-term unemployed, or help for small businesses by cutting business rates and reforming the banks? That is the sort of Queen’s Speech that our country needs.

I am afraid that what we got yesterday was a series of half-baked measures, re-announcements and policies brought in to solve problems this Government created in the first place. Why was it necessary to include a Bill to deal with the problem of people leaving one part of the public sector with huge pay-offs only to be re-employed in another part? Let us be honest about this. It is because of the thousands of people who have done exactly that since the Government’s reorganisation of the NHS. Let us remember, when they talk about getting the banks to lend to small businesses, to ask why they are dealing with this problem only in the fifth year of this Government.

Perhaps we should not be surprised that the Government have fallen short. While family budgets were being squeezed throughout the country, the Government were in denial; from this Queen’s Speech, we can see that they still are. They crow about a recovery, but as the Minister without Portfolio, the right hon. and learned Member for Rushcliffe (Mr Clarke) said on Monday, ordinary people have not yet felt any sense of recovery. I agree: a recovery that does not benefit ordinary working people is no recovery at all, and the promise of Britain—that the next generation should do better than the last—is being broken.

The test of any Queen’s Speech is whether it deals with the challenges the country faces today and sets the foundation for our country to be stronger and more prosperous for the future. On both those counts, this Queen’s Speech fails. In 11 months’ time, the country will face a choice between a Britain where a few at the top do well and everyone else is left to take their chances, where people are working harder for longer for less, and where the powerful play by one set of rules and the rest of us live by a different one; and Labour’s vision of a Britain with fair play at its heart, where businesses pay their taxes, do not exploit migrant labour and have an apprenticeship scheme alongside any workers they bring in from abroad, where there are fair rules for things such as welfare, selling energy or coming into our country, where there are fair rewards for a country in which hard work pays, responsibility is rewarded and everyone shares in its success, and where there are fair chances for a country in which people do not have to be born into privilege to get on or to have a secure roof over their head and their life chances are not defined by the postcode in which they were born. That is Labour’s vision for Britain.

Energy Price Freeze

Debate between Caroline Flint and Mike Weir

Wednesday 6th November 2013 Commons Chamber

[Caroline Flint]

My hon. Friend is right; she is talking about the trading floor in Victoria. It is interesting how closely the different parts of these organisations work together. In fact, some companies have welcomed the move to separate the generation and supply side, but we are not interested in a piecemeal approach with six different versions of what it should involve. That is why we need law that is consistent, transparent, and does the job.

At the moment, poor liquidity is recognised as the single biggest obstacle to improving competition in the energy market. If all electricity had to be traded via an open exchange, or a pool, that would create a level playing field that would enable any market participant to compete on price in order to retail power to the public. This would be different from the previous pool in two important respects. First, under the previous pool there were only two generators, who were therefore able to exert considerable influence on the market price and, indeed, to ratchet it up over time. Today, there are many more generators. Secondly, when the old pool was originally established in 1990, only generators were able to place bids, which again gave them excessive market power. Today, there is no reason why a two-way pool, with generators and suppliers both placing bids, could not be introduced. Indeed, if the Government look around the world, at the Nord pool in Scandinavia or the power exchanges in the United States, they will see plenty of examples of markets with more exchange-based trading of this kind that are more liquid, more transparent, and encourage greater competition.

Of course, we should do this in the most cost-effective way. Given the volumes that are already being traded on the day-ahead exchange, we would be open to creating a pool by requiring all generators and suppliers to trade 100% of their output on the N2EX exchange. If the Secretary of State does not agree, will he explain why he thinks that allowing these firms to do most of their trading in secret, behind closed doors, serves the public interest?

[Mr Mike Weir (Angus) (SNP)]

I am listening very closely to the right hon. Lady, and I even agree with some of it, but I am genuinely confused about the idea of a pool and how it fits in with the Energy Bill’s contracts for difference, which guarantees a strike price for generators. I fail to see how putting all the energy into a pool will create competition, as the price has already been set, and if it goes above that, the company will have to pay back the difference, while if it goes below it, the taxpayer will have to pay.

[Caroline Flint]

That might be the price for the generator but it is not the retail price, and that is what is important in terms of competition and keeping pressure on. I am surprised that Scottish National party Members decided not to support the price freeze. They are on the side of the Prime Minister and the big six while my colleague Johann Lamont—Scotland’s Labour leader—and Scotland’s millions of energy consumers support the price freeze.

Energy Prices and Profits

Debate between Caroline Flint and Mike Weir

Wednesday 4th September 2013 Commons Chamber

[Caroline Flint]

I have been clear that our approach to fracking and what it could offer must be evidence-led. In the past few years, I have been disappointed by the fact that, for all sorts of reasons, the Government have chosen to up the ante on what gas from such exploration can provide. We do not really know the exact cost-benefits of fracking for gas. We do not know how much is there and whether those benefits will be realised when we get it out of the ground. I am afraid that I shall have to disappoint the hon. Lady by not ruling it out, but our approach must be evidence-based and pragmatic. I certainly do not believe that we should be offering tax breaks, given everything that is going on in this country, for something that might not happen for 10 years, if it happens at all.

The Government have harmed the reasonable debate that we should be having about fracking by trying to polarise the use of the gas against that of renewables. That has been incredibly unfortunate as regards having a practical, reasonable and evidence-led debate. That is what we will lead on in trying to debate the issue, which is important for our country.

As I have said, we can simplify the tariffs. We can take our proposal to put all those who are over 75 on the cheapest tariff. But before we even get to tariffs, we must ensure that the prices that make up bills are set fairly and openly in a properly competitive environment. That is crucial because wholesale costs are the single biggest component of domestic energy bills and make up more than half the prices consumers pay.

If we do not have a competitive wholesale market putting a downward pressure on prices, people might be on the cheapest tariff but might still not be getting a fair deal. The Government seem to say that they agree that the market is not as transparent or competitive as it should be, but what are they doing about it? Not very much.

[Mr Mike Weir (Angus) (SNP)]

Will the right hon. Lady give way?

[Caroline Flint]

I just want to make a little progress.

The Energy Bill takes broadly based back-stop powers to improve liquidity, but the Government cannot even say in what circumstances or in what way they would use those powers. I am sure that the Secretary of State will pray in aid Ofgem’s work on liquidity. In our previous exchanges, he has defended the regulator against my criticisms, but I hope that he has read the Select Committee’s report, “Energy Prices, Profits and Poverty”, which was published over the summer. Its conclusion is stark. The very first page of the report states:

“Ofgem is failing consumers by not taking all possible steps to improve transparency and openness in the energy market.”

I am afraid Ofgem’s proposals on wholesale market liquidity do not go anywhere near addressing the two main problems with the market.

The first problem is that the market is dominated by six companies that both generate power and retail it to consumers with a market share of 98%. As Which? pointed out in its report over the summer, the obvious problem with the structure is that it provides little incentive for companies to keep wholesale prices efficient if the effect of doing so is to reduce the overall profitability of the company. Why would the supply arm of an energy company try to drive down profits on the generation arm if the outcome was to reduce the amount of money the company as a whole was making? Although the companies are right to say, as they frequently do, that their retail profits are only 5%, which is pretty healthy, their profit margins on generation are much more substantial. Which? suggests in its report that last year they were about 19%.

Energy Prices

Debate between Caroline Flint and Mike Weir

Wednesday 11th January 2012 Commons Chamber

[Caroline Flint]

No, I will not give way to the hon. Gentleman again.

The bigger issue is how we carry out a root-and-branch reform of the energy market for the future.

[Mr Mike Weir (Angus) (SNP)]

I thank the shadow Secretary of State for giving way, and she is making a very good point. Rather than asking EDF why it is reducing the price by 5%, should we not be asking why it is doing so two months after putting it up by 15%?

[Caroline Flint]

It was actually 15.4%, but I do not want to be churlish. I am pleased that the prices have come down, but part of what we are seeing from the energy companies is due to the fact that they are starting to smart from the criticism levelled at them. The problem is getting worse and, as I have said, complaints have gone up and prices, which went up steadily over the past few years, have soared in the past year. We are not the establishment—the Government are, they are in the driving seat and they have the tools to do something about it. I only wish they would.

We must ask the fundamental questions, and the fundamental problem in defining whether prices are reasonable and fair and considering the other pressures on those prices is the fact that we are hampered by the lack of transparency in the market. The energy companies that generate energy sell it on to themselves and then on to customers. If the few big dominant firms were forced to sell the power they generate to any retailer, companies such as supermarkets and other independent retailers—like Good Energy, which came top of the poll for customer service in the Which? report—could play more of a role in the market. There would then be more competition and the upward pressure on prices would be eased.

Times are tough, we all know that, and we know that it means difficult decisions must be made. When times are tough, fairness is our first priority but, unfortunately, for the Government fairness is the first casualty. Millions of families and pensioners across the country are struggling with their energy bills and a cost of living crisis, but the Government are so out of touch that they are making things worse rather than better. They are cutting the help people get with their energy bills and scaling back on energy efficiency. By failing to stand up to the energy companies, they are letting down the public. We know that people need real help now and a more responsible and competitive energy market for the future. For those reasons, I commend the motion to the House.

Energy Prices

Debate between Caroline Flint and Mike Weir

Wednesday 19th October 2011 Commons Chamber

[Caroline Flint]

Absolutely, and that is in our motion today. Every Member of this House has a chance to vote to urge the energy companies to share some of their profits with the people who are their customers and to get prices down. As my hon. Friends have said, the problem is that even when people try to find a better package they do not get the right information.

[Mr Mike Weir (Angus) (SNP)]

Are things not, in fact, even worse than that? People can reduce the amount that they pay by switching only if they pay by direct debit, which acts against those on the lowest incomes who do not have bank accounts, and those of our constituents who do not wish to set up direct debits as they want the ability to decide which bills they pay when, in these difficult times.

[Caroline Flint]

Absolutely. There is no point in the companies having a system that does not recognise the situation of ordinary families. The National Pensioners Convention talks about the fact that fewer than six in 10 pensioners have access to a computer to go online. It is not fair or right. The onus should be on the companies, not the public. However, all the Secretary of State could do this week was blame the public: “It’s your fault you’re not getting out there and getting a better deal. It’s your fault you’re not saving yourselves £200 a time.” He has got a lot to answer for, because he has just sat back and let people suffer.