Energy Consumers Support Update
Claire Perry Excerpts(5 years, 8 months ago)
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The Minister for Energy and Clean Growth (Claire Perry)
In line with the commitment we made in the clean growth strategy, the Department has been working alongside the implementation of the Each Home Counts review to develop a digitally led consumer energy efficiency advice service. I am committed to ensuring that all consumers are able to access trusted impartial energy efficiency advice in order to reduce their bills, make their homes warmer and cut their homes’ carbon emissions. A key element of this will be a call centre to assist those unable to use the website.
The Department is procuring this call centre presently. The selected supplier, Sitel UK Ltd, has indicated that it requires an indemnity in respect of liabilities that it may incur if employees of a former subcontractor providing telephone-based services bring employment law claims against it in light of the alleged application of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
In relation to this, I am writing to inform you of a departmental minute which will be presented to Parliament today, giving notice of the Department incurring this contingent liability in the form of indemnity protection provided to Sitel UK Ltd.
We believe it is appropriate to incur this contingent liability, to ensure that trusted impartial energy efficiency advice can be provided to all consumers without further delay. We consider the provision of this liability as the best value for money option to ensure the new service is available to all.
[HCWS937]
Business, Energy and Industrial Strategy
Claire Perry Excerpts(5 years, 8 months ago)
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Claire Perry
It is important that we have a level playing field for companies in the market. I have received representations stating that the customer accounts threshold for offering warm home discounts and ECO should be dropped to ensure that more companies can offer them to customers. We introduced legislation recently to reduce that threshold from 200,000 to 150,000, in increments of 50,000. Customers in receipt of warm home discounts will have a lower chance of losing them if they switch.
[Official Report, 18 July 2018, Vol. 645, c. 461]
Letter of correction from Claire Perry.
An error has been identified in my opening speech during the debate on Lords amendment 1.
The correct figure should have been:
Claire Perry
It is important that we have a level playing field for companies in the market. I have received representations stating that the customer accounts threshold for offering warm home discounts and ECO should be dropped to ensure that more companies can offer them to customers. We introduced legislation recently to reduce that threshold from 250,000 to 150,000, in increments of 50,000. Customers in receipt of warm home discounts will have a lower chance of losing them if they switch.
Business, Energy and Industrial Strategy
Claire Perry Excerpts(5 years, 8 months ago)
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Claire Perry
The regulations we are debating today introduce a key change to the scheme. I have decided that more energy suppliers should be required to offer the warm home discount to customers so that from winter 2019 about 99% of the domestic market will be covered by obligated suppliers. [Official Report, First Delegated Legislation Committee, 9 July 2018, c. 4.]
Letter of correction from Claire Perry:
An error has been identified in my speech in the First Delegated Legislation Committee on 9 July 2018.
The correct response should have been:
Claire Perry
The regulations we are debating today introduce a key change to the scheme. I have decided that more energy suppliers should be required to offer the warm home discount to customers so that from winter 2020 about 99% of the domestic market will be covered by obligated suppliers.
Wylfa Nuclear Power Project: Taxpayer Liability for Safety
Claire Perry Excerpts(5 years, 9 months ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Albert Owen (Ynys Môn) (Lab)
It is always a pleasure to serve under your chairmanship, Mr Robertson. On this last day of term, I welcome the opportunity to highlight the benefits to the economy of new nuclear power and low-cost carbon, and also to promote Wylfa Newydd, which is in my constituency. The hon. Member for Kilmarnock and Loudoun (Alan Brown) did not notify me that he would discuss it; I saw it on the Order Paper. I think it is custom to do so, but I will let it go for now, because I will have the opportunity to deal with many of the issues that he raises.
I recently wrote a booklet, called “Resetting the Energy Button”, for a number of reasons. Its purpose is to show how my constituency, the Isle of Anglesey, can play a major role in the move forward towards a low-carbon economy. Ynys Môn has a proud history of electricity generation. It has the natural resources, it has an experienced workforce and it very much mirrors the British Isles.
The Minister for Energy and Clean Growth (Claire Perry)
Will the hon. Gentleman be so kind as to send me a copy of his booklet? I am in need of some good holiday reading for the summer.
Albert Owen
Absolutely. In fact, I will also send one to the Chair, because I know that he is interested in this subject. Indeed, I should send some to the entire Scottish National party group in the House. I will do that over the summer. That is a promise.
Many energy developers have recognised the potential of the Isle of Anglesey to contribute to this major investment not just in new nuclear, but in marine energy and other technologies. You will know, Mr Robertson, from the time that we have spent together in the House that I am pro-renewables, pro-nuclear and pro-energy efficiency. I see no contradiction in that: I think that all three are needed if we are to meet our climate change goals and reduce emissions.
In the decade from 2001—when I entered the House—to 2011, the House of Commons was moving towards consensus on this issue. That was important. I accept that it was not universal, but there was a view that we needed a rich and diverse energy mix and that new nuclear was part of that mix. I was very proud to vote for the Bill that became the Climate Change Act 2008, because that was very pioneering of the UK; we were the first nation to introduce such a law. However, to achieve the objective, we need rich, diverse energy. We need base-load, and I will argue with the hon. Member for Kilmarnock and Loudoun that nuclear does provide base-load. He talks about offline, but this is factored in. Base-load is important, as is the intermittent status of renewables and, in particular, wind. He talks about figures, but I point out to him that we have had a very hot period over the last 28 days, and wind energy, offshore wind, contributed just 3% for that period. The rest came from base-load such as nuclear; the nuclear percentage went up in that period. I am therefore arguing convincingly for both—that we have the intermittent energy that we need in hot periods, but also, when we have cold periods, that we have the full load that is provided by nuclear and renewables. We need that balance.
New safe nuclear generation started in my constituency in 1963. Indeed, my father worked on the construction of the first Wylfa power station. The hon. Member for Kilmarnock and Loudoun had family who were in the nuclear industry: he told us in a previous debate that his brother-in-law was. Many families, across the United Kingdom, have benefited from the high-skilled, long-term employment opportunities that nuclear offers. The nuclear power station in my area was opened in 1971 and it produced up until the date of closure, which initially was 2010; that was extended to 2015. We are talking about 44 years of generation. I mention the jobs issue, because many of my peers at school left school and worked in the nuclear industry at Wylfa for all their working lives. Very few other industries can offer the longevity of employment and quality of jobs that nuclear brings; indeed, jobs for life are very rare.
Construction jobs are also important. In the move forward to Wylfa B or Wylfa Newydd, as it is correctly known now, we see an important uptake of skills for nuclear engineers and apprentices, and many people are training for the construction jobs—plastering, building, welding and so on. That is hugely important for areas on the periphery of the United Kingdom, such as at Wylfa in my constituency and, indeed, in Scotland. Scotland has benefited from nuclear over many years and still does today; £1 billion of gross value added comes from the nuclear sector—the two power stations. I believe—I will take an intervention if I am wrong on this—that the life of the two nuclear power stations has been extended by the SNP Government. Safe generation of nuclear energy is hugely important in Scotland, Wales and England. If we did not have it, we would be importing nuclear at this time of year either from England into Scotland or from France into the United Kingdom.
The Minister for Energy and Clean Growth (Claire Perry)
It is a pleasure to serve under your chairmanship this afternoon, Mr Robertson. While I have the floor, may I take a moment to thank the Clerks and those who work so hard across the House of Commons to ensure that these debates take place? I particularly thank the Hansard reporters who are a miracle of accuracy, regardless of the quality of the debate—I just wanted to put that on the record before we go off on our summer holidays, although as we know, none of us are going on holiday; we will all be working hard in our constituencies.
I thank the hon. Member for Kilmarnock and Loudoun (Alan Brown) for securing this debate. We have had important conversations today, including two very stirring speeches from the hon. Members for Ynys Môn (Albert Owen) and for Glasgow North East (Mr Sweeney). I could not have made the case better myself—I will not try to, because Members probably do not want to hear me talking about that—but a point was made about having an energy supply that is diverse, strong, reliable, low cost for consumers, low carbon and, crucially, able to create innovation for reinvestment in the UK and for export.
I pay tribute to the long experience of the hon. Member for Glasgow North East in the shipyard. As he will know, if we had thought more about export potential when making some industrial decisions in the past, we would not have lost those high-skilled jobs. To reassure him, I was at the Cammell Laird shipyard two weeks ago to help to launch Boaty McBoatface. It was wonderful to see what £200 million of Government investment in polar research has delivered for that shipyard—thousands of jobs have been created and it has been able to bid for large-scale projects again. I enjoyed the speeches.
I will try to address the specific questions about safety, incidents and long-term liabilities. The hon. Member for Ynys Môn made a powerful case about our heritage. We should all be proud that we are leaders in the global civilian nuclear community in terms of safety and regulation, which we have built up extremely well over the years.
In this country, we do not set energy policy on the basis of ideology but on the basis of the test that I have discussed, so we will not make the mistakes of countries such as Germany. Last year, I was at the Conference of the Parties in Bonn to debate climate change, and barges of brown coal were sailing past the COP site—putting two fingers up to those who believe in reducing emissions and getting coal off the grid.
We all like to look at our apps, and there is an excellent one that tells us about the energy mix in the last 24 hours. We have burned no coal, which is excellent, and we used a bit of wind, which made up about 6% of the energy supply. Of the rest, 25% was from nuclear, 50% was from combined-cycle gas plants, some was from biomass and some was from interconnectors.
Mr Sweeney
Last year, for the first time since industrialisation, the country did not burn coal for energy generation, which was a huge milestone. The Minister talks about the huge industrial benefits and the benefits to the wider economy. Does she also recognise the benefits of the nuclear advanced manufacturing research centre in Rotherham, which has re-established large-scale casting capabilities in Sheffield—an industrial capability that had been lost in the UK?
Claire Perry
The hon. Gentleman is absolutely right. I will make reference to the nuclear sector deal that invests in the small modular reactor technology that he talked about and that engages with the industry and its supply chain by investing in innovation and skills and by thinking about what we can generate and export in the UK. I also pay tribute to the organisation that he mentioned.
Alan Brown
The Minister quoted the figure that 25% of electricity generated in the last 24 hours was from nuclear. In 2016, on average, nuclear supplied 21% of the energy mix, so 25% is not a huge variation and does not demonstrate the massive reliance that would mean we need to have nuclear forever.
Claire Perry
The hon. Gentleman and I know, because we form a holy trinity of debating on energy matters with my friend, the hon. Member for Southampton, Test (Dr Whitehead), that we all look forward to that 100% renewable future, but the problems of intermittency and storage will not be solved in the near term. We will not make ideological decisions that will put up costs and restrict energy supply if we do not have to—and we do not have to, because we have one of the best and most diverse energy mixes in the world.
Albert Owen
The figures that the Minister mentioned put gas at 50%. The big challenge is getting rid of gas boilers, which are in most houses. Moving to electricity will require a base-load from somewhere other than gas, which could well be nuclear.
Claire Perry
The hon. Gentleman is right, but we should start from where we are on energy policy. There is a role for further decarbonising gas to keep it in the mix, which is why I am keen to investigate, using excellent environmental standards, the potential contribution of onshore shale gas. [Interruption.] He is chuntering; he may not agree.
We have an independent regulator, the Office for Nuclear Regulation, which has scrutinised the proposed reactor design for Wylfa. The design has received design acceptance, which means that all regulators are satisfied that the reactor meets the regulatory expectations on safety, security and environmental protection at this stage of the process.
The hon. Member for Southampton, Test invited me to talk about the media reports—he is doing better than I am if he is reading the Japanese newspapers. I reassure him that any operator in the UK is required to obtain insurance to fulfil their financial responsibilities in the event of an accident, and as he referenced, international treaties, such as the Paris and Brussels conventions, provide the framework for the management of nuclear liability in the UK.
This deal will be no different. I emphasise that we are still going into negotiations and having conversations—we have not done the deal yet—but we are absolutely clear about the commitment to insurance for any form of accident. Not putting decommissioning liabilities on the taxpayer, as the hon. Member for Ynys Môn pointed out, is also part of those calculations. I agree with him that we did not think hard enough about that in the past; successive Governments had not worked out how to include those liabilities. We have learned, however, and we are moving forward with that.
Before the reactor can be built and operated, it will need a nuclear site licence. Wylfa will also always be subject to environmental permitting through Natural Resources Wales. A development consent order process that will run under the Planning Act 2008 will scrutinise the construction and operation proposals for the project.
The Energy Act 2008, passed by the Labour Government, introduced the funded decommissioning programme that moved the dial on who pays for decommissioning liabilities. It is now the case that all operators of new nuclear power stations are legally required to have secure financing arrangements in place to meet their full share of the costs of decommissioning and of waste management and disposal. We are absolutely committed to managing radioactive waste safely, responsibly and cost-effectively for the long term, but also to looking at other opportunities to reprocess some of that waste, as the hon. Member for Glasgow North East said. We will not repeat past mistakes where the taxpayer had to foot the bill for decommissioning.
There were some questions about liability in the event of an accident. I am happy to say that the last significant incident was the Windscale fire in 1957, and we are light years away from that plant in terms of nuclear operating technology and the safety regime that we operate. The Nuclear Installations Act 1965 makes the insurance that I mentioned a requirement, without which operators cannot operate. As the hon. Member for Southampton, Test mentioned, we also have legislation based on the Paris and Brussels conventions. If the total cost of claims ever exceeded €1.2 billion, a further €300 million would be provided by all contracting parties to the Brussels supplementary convention. Any further claims above that total would be met at Parliament’s discretion.
The only liability-based agreement with Hinkley Point relates to insurance failure, and the Government will provide an insurance product in the event that one cannot be obtained on the market. I am not in a position to comment on what might be the case with Wylfa, but I emphasise that the operator of the plant at Wylfa will have the same obligations as all other nuclear power stations and installations in the UK, and will be required to fulfil those obligations in the event of an incident.
Hon. Members have asked about what happens with the Brexit negotiations. Nuclear safety is and always will be our top priority. We will continue to apply the international standards on nuclear safety specified by the International Atomic Energy Agency irrespective of our future relationship with Euratom. I emphasise that we want a close association with Euratom: a new relationship that is broader and more comprehensive than any existing agreement between Euratom and a third country. The Nuclear Safeguards Act 2018 provides the reassurance of a backstop in the very unlikely event of any changes.
Alongside that, the UK is negotiating nuclear co-operation agreements to add to those already in place. On 4 May, we signed a bilateral NCA with the United States, and we have further arrangements with Japan, Canada and Australia that are also on track. Those relationships facilitate the sharing of best practice in terms of nuclear operations and liability management. As I said, we are considered to be a proud leader internationally in the field of nuclear safety and regulation.
Further investment will bring huge benefits through innovation. My right hon. Friend the Secretary of State travelled to Wales to launch the nuclear sector deal on 28 June, which was a fitting setting to underline how the nuclear industry provides economic opportunities across the UK, particularly in more remote areas, as we have heard from many hon. Members. The nuclear sector deal is worth more than £200 million. It focuses on innovation and skills, which we can then use to export, and by striking it we aim to ensure substantial cost reductions across the nuclear sector, to ensure that the sector can remain competitive with other low-carbon technologies, because I constantly have to balance all investments with the potential pressure on consumers’ bills.
Dr Whitehead
It would be really helpful if the Minister were able to indicate, either today or very shortly, when she will be able to place on the record the shape of the negotiations on Wylfa—the main components of the negotiations, what has already been agreed in principle and what remains to be discussed. I do not know whether she can do that in the near future, but it would be helpful if she could indicate at an early stage when it might be possible.
Claire Perry
I appreciate the hon. Gentleman’s desire for transparency, but obviously I cannot do that, because doing so would prejudice negotiations that are ongoing. He will know, based on his long experience, that there is an interplay of costs, of contracts for difference numbers, and of potential asks from the UK Government and from shareholders, and these negotiations are long and complicated.
Part of the challenge, if you like, with large-scale nuclear is that a very large, up-front cost is associated with it; it is a very capital-intensive investment, although one that we want to make for the reasons I have mentioned. However, the conversation that we had earlier was about small modular reactors, which require less up-front investment, have more flexibility and allow us to invest in multiple sites, which are reasons why such reactors are so attractive; they allow us to spread those up-front costs much more widely.
In conclusion, this debate has been a very good opportunity to emphasise again the value of nuclear in our energy mix; to reassure people in this House and elsewhere that the UK Government will not make energy policy based on ideology but will soberly assess the cost, the innovation, the carbon and the security as we go forward; to celebrate the fact that we have one of the most robust nuclear safety regimes in the world, including world-leading independent regulation; to note the fact that people are hungry to see the details of the Wylfa deal and I will make sure that my right hon. Friend the Secretary of State, who is of course conducting those negotiations on our behalf, is aware of that; and, essentially, to reassure the House and others that—as is the case with all other nuclear generation in the UK—Wylfa will be a safe source of energy and one that minimises any form of liability being borne by the taxpayer.
Domestic Gas and Electricity (Tariff Cap) Bill
Claire Perry Excerpts(5 years, 9 months ago)
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The Minister for Energy and Clean Growth (Claire Perry)
I beg to move, That this House disagrees with Lords amendment 1.
Mr Deputy Speaker (Sir Lindsay Hoyle)
With this it will be convenient to take Government amendment (a) in lieu of Lords amendment 1.
Claire Perry
As Members will know, the Bill has received very broad and strong cross-party support during its passage through this House. I thank all of those who have spoken, who have worked behind the scenes, who have lobbied and who have voted for a very important piece of legislation. I repeat my thanks to the hon. Member for Leeds West (Rachel Reeves), who is not in her place, for her excellent stewardship of the Business, Energy and Industrial Strategy Committee, which contains Members from all parties, and for her continued support on the Bill. The Committee did some excellent work during the Bill’s pre-legislative scrutiny.
I also extend my thanks to the hon. Member for Southampton, Test (Dr Whitehead) and the Labour Front-Bench team for their extremely constructive approach to this Bill and for helping us to develop an amendment that we will come on to debate in a moment.
First, we must consider the amendment that was made in the other place about what will be done to protect consumers when the price cap comes to an end. That is an extremely important question. As the Government have made clear, the price cap is a temporary intervention to protect consumers on standard variable and default tariffs while other reforms continue apace to bring about the conditions for effective competition in the retail market. I understand the concerns, which have been raised by Members from all parts of the House and by Members in the other place, that there is a risk that some features of the market may remain that will need to be addressed. For instance, as the energy market is reformed, it is absolutely vital that the protection of vulnerable customers in this market is kept under review, and action taken if necessary to afford those customers the protections they need.
There are also concerns about the possible return of practices such as tease and squeeze, which is essentially enticing people onto cheap fixed tariff deals only to move them on to higher tariff deals when the fixed period ends. I agree wholeheartedly that we must seek to end those practices. However, introducing a requirement such as the Lords amendment seeks to do, which essentially commits us to an indefinite price cap, is not the appropriate solution. Instead, the Government propose amendment (a) in lieu of the Lords amendment, which will ensure that Ofgem must conduct a review before the end of the price-cap period into the pricing practices of suppliers and, in particular, identify whether there are categories of customers who are currently paying, or who may in future be at risk of paying, excessive charges for standard variable and default tariffs.
In reviewing the practices of suppliers and identifying whether consumers are paying excessive charges, the regulator must consider whether there are consumers who will be excessively negatively affected when they move from fixed rates to standard variable tariffs—the tease and squeeze problem—and also whether vulnerable customers continue to require protection. If it is the regulator’s view that protections are indeed required, the amendment says that necessary steps must be taken to provide those protections, using a broad set of existing powers under the Gas Act 1986 and the Electricity Act 1989.
It is the Government’s view that amendment (a) therefore futureproofs something that we all care so strongly about in this place—the protection of consumers from excessive charges, particularly on SVT and default rate tariffs—and rightly provides in the Bill the necessary impetus and discretion to the regulator to consider the most appropriate response to those excessive tariffs under its existing powers.
Stephen Kerr (Stirling) (Con)
Let me speak in relation to the amendment in lieu, which says:
“customers who appear to the Authority”—
that is Ofgem—
“to be vulnerable by reason of their financial or other circumstances are in need of protection.”
How will the data be made available for anyone to be able to make that assessment, because, currently, there is a restriction in the availability of that data to pinpoint the help that is necessary?
Claire Perry
I pay tribute to my hon. Friend’s work as a member of the Business, Energy and Industrial Strategy Committee and his doughty championing of consumers. He will be aware that the Government have taken through another piece of legislation, which was required to ensure that the regulator can work with Government datasets in order accurately to pinpoint vulnerable customers. I am sure that the whole House will be pleased to know that if that legislation has not yet received Royal Assent, it will do imminently. I look to my officials to ensure that that is the case.
Mr Jim Cunningham (Coventry South) (Lab)
Perhaps I misunderstood the Minister, but will Ofgem carry out a review constantly, or will it be a one-off review with a time limit?
Claire Perry
I can reassure the hon. Gentleman that the original provisions in the Bill give Ofgem very broad powers, from the date on which the Bill receives Royal Assent, to implement the cap and then to review it as often as Ofgem feels is necessary. When the cap is operating, it can be reviewed many times. We have instructed Ofgem to conduct a review when the cap ends to ensure that the groups of customers identified can be helped. My understanding is that there is nothing in Ofgem’s existing powers that will prohibit it from doing the same thing in future. The regulator was in the past given extremely broad powers under the gas and electricity Acts, and it would be within its discretion to carry out such reviews. However, across all parties we felt it was important to put on the face of this Bill, which is the first piece of legislation to introduce these sorts of tariff caps and to empower further the regulator to use its powers, the requirement to carry out the initial review.
Ian Murray (Edinburgh South) (Lab)
On the same theme, what powers does the regulator currently have to ensure that energy companies are not artificially inflating prices ahead of the Bill coming into force?
Claire Perry
The hon. Gentleman refers to the regrettable series of price increases that we have seen from all the major, big six energy companies. Prices will of course go up because, as the hon. Gentleman will know, the wholesale price of gas in particular doubled—I believe; I will make sure the record is correct—in the last six months. The regulator can always define price rises as excessive, but the point of this very welcome cap is that those who are particularly vulnerable and who are on standard variable and default tariffs—often people who are elderly, perhaps less well-educated and furthest from the digital market, in which we all compete to switch—will be protected without having to switch. Indeed, the work that Ofgem is currently undertaking to ensure that the cap is set at a fair level will be vital to making sure that those protections come forward.
Amendment (a) will ensure that the legacy of the Bill, of which we should be extremely proud, is not undone by a return to business as usual by those suppliers that have thought up or carry out additional practices, such as tease and squeeze. I thank Members of this House, including Members from the Opposition Front-Bench team, for helping to create the amendment, which we believe is the most appropriate response to the concerns raised by members in this House and in the other place. I am delighted to see my hon. Friend the Member for Weston-super-Mare (John Penrose) nodding during my speech. Along with the right hon. Member for Don Valley (Caroline Flint) and others, he has been vital in driving this issue up to the top of the Government’s agenda and making sure that we get the Bill and this amendment right. I offer huge thanks to my hon. Friend and the others who have been involved.
James Heappey (Wells) (Con)
Will the Minister confirm that while the Bill has had to take this unexpected second lap of this place, Ofgem has been hard at work on its preparations for enacting what is likely to be in the Bill when it is passed? Will she join me in advising any energy companies that are considering legal action over the summer that it would be rather inappropriate for them to get in the way of legislation passed in this place quite legitimately?
Claire Perry
I thank my hon. Friend for that intervention, because it enables me to say four things. First, I am grateful to the noble Members of the other House, because legislation is always better when it is scrutinised carefully. I think amendment 1 is helpful, so I am not unhappy to have the chance to talk about it.
Secondly, the new chair of Ofgem, Martin Cave, who will shortly take up his post, is a brilliant campaigner in support of the idea that customers should benefit from this regulated energy market. Indeed, I think he proposed the original idea of a tariff price cap. His appointment and the Bill will both help to strengthen Ofgem’s powers. Members will know that he wrote to the Chairman of the Business, Energy and Industrial Strategy Committee—I think it was only last week—setting out Ofgem’s determination to use its powers as widely as possible.
Thirdly, I reassure my hon. Friend that I have come to the House from a meeting with Ofgem, at which we discussed its progress on the price cap. That is well under way, and Ofgem has an extremely good team working on it. Ofgem has already published various technical papers setting out the methodology behind the cap calculation, and it intends to publish in full the details of that in very short order. That will give everybody a chance to scrutinise the cap and make sure that there is nothing untoward.
Fourthly, I wrote to the chairmen of the big six—I think they are all men—last week setting out that the Government would take an extremely dim view of companies that sought to frustrate the introduction of the cap, for which we have all worked so hard, by some sort of legal challenge; and that instead they should work with Government in this exciting time in the energy markets and look to their own activities to see how they can drive down costs, and drive up efficiency and customer service.
Rebecca Pow (Taunton Deane) (Con)
On that note, does the Minister believe that the Bill will narrow down competition, and thereby affect prices, or increase it? Competition is generally viewed as good for a market, because one tends to get lower prices as companies try to attract customers.
Claire Perry
I strongly believe in competitive, well-regulated free markets. Indeed, in this market there are now more than 60 energy suppliers, all bidding for our business. I have recently switched again to a company that appears to be offering a very good green tariff. However, the problem, and the reason for the Bill, is that there is a very large group of customers who are sticky—who stay on expensive standard variable and default tariffs because they do not know how to switch, or they are not aware that they can. We can all think of grandparents, parents and others who fall into that category—it also includes young people who are renting accommodation—and they tend to be the furthest from the white heat of the switching market.
Understanding what the Bill does to the economic conditions in the market is, of course, an important part of Ofgem’s role. To go back to the original CMA report, however, we also know that the current pricing practices result in £1.3 billion of what it described as “excessive” returns, and we expect that number to come down. If you will indulge me, Madam Deputy Speaker, I wanted to make sure that the House was aware of that.
It is important that we have a level playing field for companies in the market. I have received representations stating that the customer accounts threshold for offering warm home discounts and ECO should be dropped to ensure that more companies can offer them to customers. We introduced legislation recently to reduce that threshold from 200,000 to 150,000, in increments of 50,000. Customers in receipt of warm home discounts will have a lower chance of losing them if they switch.[Official Report, 4 September 2018, Vol. 646, c. 2MC]
I hope the House agrees that amendment (a) is the most appropriate response to the concerns that have been raised, and that it will be welcomed by Members in this place and the other place. I hope that we will be able to move swiftly on this issue and keep our remarkable outbreak of cross-party consensus going, because I think the Bill is an absolutely vital piece of legislation.
John Redwood (Wokingham) (Con)
Can the Minister give us some indication of the kind of saving we that we could expect from the managed market, as a result of the amendment, compared with where we are at the moment?
Claire Perry
I do not know whether my right hon. Friend is referring to the per-household saving. We have been quite careful not to talk about that, because although we can understand that a total maximum excessive disbenefit of £1.3 billion is created by current pricing practices, how much of that is saved and passed on to consumers will depend on all sorts of things, including changes in the wholesale market and the efficiency of companies. I can reassure him, though, that the absolute price cap that was brought in to protect customers on pre-payment meters and those classified as vulnerable has led to savings of about £60 per household since it was introduced. Of course, prices go up, but customers are still better off than they would have been. Our expectation is that both overall and per household, consumers will see bills lower than they would otherwise have been.
James Heappey
Will the Minister reassure the House that she does not see this price cap as “job done” in terms of reducing people’s bills, and that she and her team in BEIS will continue to drive forward innovation in the energy markets so that new tariffs can come forward, and continue to focus on energy efficiency measures so that we can drive down people’s bills in those ways as well?
Claire Perry
My hon. Friend uses his great experience in this area to point to this being two halves of an equation in making sure, first, that energy is going into a property at the lowest possible price, and secondly, that consumption is as low as can be.
With ECO now at over £600 million, we are targeting that entirely at fuel poverty. The consultation has closed and we have the responses to come out. There is the whole challenge of getting energy efficiency levels up so that, overall, households are more energy-efficient. I am looking at the hon. Member for Neath (Christina Rees) on the Opposition Front Bench. I very much enjoyed a visit to her constituency to see an energy-positive home. That is an incredible innovation funded by her local excellent councillors, looking at how to design homes that return energy to the grid and are cool and lovely to live in. That is the kind of technology and innovation that we want to see.
I hope that we can all agree on this amendment, send it up to be agreed in the other place, and get on and pass the Bill before this place rises, because the regulator has told us that it will need up to five months to calculate the mechanism. It is absolutely vital, as my hon. Friend the Member for Wells (James Heappey) said, that that mechanism is absolutely watertight so that energy companies do not seek to frustrate further the introduction of this measure. We want it in place by the end of this year so that people can start saving on their energy bills this winter.
Dr Alan Whitehead (Southampton, Test) (Lab)
Labour Members are delighted that the Bill to institute an absolute price cap on energy costs is about to pass into law, mechanisms notwithstanding, this afternoon. We are delighted because of the parentage of the Bill, which emanates from the Labour Benches. If hon. Members are worried about the authenticity of the parentage, I can produce a birth certificate: the motion that was debated in this Chamber on a Wednesday afternoon, at exactly this time, on 6 November 2013. It said:
“That this House calls on the Government to freeze electricity and gas prices for 20 months whilst legislation is introduced to ring-fence the generation businesses of the vertically integrated energy companies from their supply businesses, to require all electricity generators and suppliers to trade their power via an open exchange, to establish a tough new regulator with the power to force energy suppliers to pass on price cuts when wholesale costs fall, and to put all over-75-year-olds on the cheapest tariff.”
That motion was in the name of my right hon. Friend the Member for Don Valley (Caroline Flint). When it was debated that afternoon, it did not, I have to say, receive a terribly positive response from the Government of the day.
draft Oil and Gas Authority (Offshore Petroleum) (disclosure of protected material after specified period) regulations 2018
Claire Perry Excerpts(5 years, 9 months ago)
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The Chair
Given the temperature today, colleagues who want to take off their jackets should feel free to do so.
The Minister for Energy and Clean Growth (Claire Perry)
I beg to move,
That the Committee has considered the draft Oil and Gas Authority (Offshore Petroleum) (Disclosure of Protected Material after Specified Period) Regulations 2018.
It is a pleasure to serve under your chairmanship, Mr Pritchard. I removed my jacket some time ago. All members of the Committee would agree that the UK’s offshore oil and gas industry is one of the country’s great industrial successes. However, as we know, it has faced numerous challenges over the years, including ageing infrastructure and growing international competition. That is why in 2013 we asked Sir Ian Wood to conduct a review of the offshore sector to see how we could maximise the economic recovery of petroleum. One recommendation of that excellent review was to ensure that the industry had timely and transparent access to petroleum-related information and samples, such as data about reservoir infrastructure or pieces of strata—bits of rock—acquired in the course of drilling a well.
The Government committed to implementing the Wood review and included various powers in the Energy Act 2016 on information and samples. For example, there is a requirement for relevant persons in the industry to retain certain pieces of information and samples for a specified period, as set out in the Oil and Gas Authority (Offshore Petroleum) (Retention of Information and Samples) Regulations 2018. We also introduced safeguarding plans for information and samples for when licence events such as termination occur. At that time, the Oil and Gas Authority was given powers to require relevant persons to provide it with samples they hold that it may need in order to discharge its regulatory role and to contribute towards the highly welcome objective of maximising economic recovery of offshore petroleum. The regulations we are considering are the final piece of the picture. Once information or samples have been acquired by the OGA, the regulations will enable it or a subsequent holder to make the material available after a specified period.
We are all bound by the 2016 Act, which places a general prohibition on the disclosure of protected material, subject to certain exemptions. Indeed, one such exemption permits the OGA or a subsequent holder to make protected material available at such time as may be specified in regulations. Such material might include information about geological surveys, wells drilled, petroleum production and other reports or computerised models of the subsurface or a reservoir—the Committee will know I believe we lead the world in subsurface analysis and geological data collection. It also includes samples of petroleum, fluids or strata acquired or created when drilling or producing from a well and could include information about installations and maps of infrastructure or pipelines associated with offshore petroleum development—it is vital to know where they are.
The Delegated Powers Committee made a recommendation, and of course we listened, so the 2016 Act included a list of factors to which the Secretary of State for Business, Energy and Industrial Strategy must have regard when determining the appropriate period after which protected materials may be made available. There are three aspects to that requirement. First, companies must have had sufficient time to satisfy the purpose for which they created or acquired the information or samples. Secondly, there is the potential chilling effect of requiring disclosure in discouraging future activity, which would be counter to the stated aim of maximising economic recovery. Finally, what is the benefit to industry and the economy in making samples and information more widely available? Each of those factors must be taken into account when setting the period after which disclosures can be made.
The periods may vary from immediate disclosure for basic information that is not deemed to be sensitive, such as the fact that a survey had been done, to 15 years for raw information from seismic surveys, which are both expensive to do and could contain highly significant commercially relevant data. While care has been taken to ensure that the specified times are set appropriately, there is no requirement to publish the material. Indeed, the OGA could consider keeping information confidential for a longer period, but it would be asked to weigh up the impact of that against delivering its statutory objective on the maximising economic recovery principle.
These are very technical regulations—I anticipate that the hon. Member for Southampton, Test will have gone through them in great detail—but the proposals on which they are based were subject to consultation with industry and other interested parties by the OGA.
The OGA has published a consultation response, detailing the feedback and what it has done with it, such as excluding more subjective information from immediate release. The OGA will continue to provide guidance on the application of the regulations before they come into force. We did not need to carry out a full impact assessment because the additional impact of disclosure under the regulations is expected to be marginal, but there are, potentially, some minor costs on industry due, for example, to familiarising staff and systems with the regulations.
The OGA considers that improvements to information retention, reporting and disclosure processes, including through the regulations, are critical to achieving the statutory objective of maximising the economic recovery of the UK’s offshore petroleum reserves and, by doing so, to increasing the productivity levels of a vital industry and ensuring that its highly paid jobs are maintained for as long as possible. The changes are expected to make an important contribution to the OGA’s vision for the industry, which suggests that maximising economic recovery could create £140 billion of additional gross value added for the UK and create thousands of jobs right across our nations. In addition, they could facilitate the reuse of reservoirs and infrastructure for other purposes, including for carbon capture utilisation and storage. I am sure that the Committee will be delighted to know that, despite the cancellation of the original CCS competitions, we have spent since that point more than £300 million on continuing to map and understand our reservoirs, and that we are considered to have the best reservoirs for long-term carbon storage in the world, which will potentially open up huge opportunities when we continue to work with industry to come up with economically viable ways of performing CCS.
Although the regulations are highly technical, they are an important and useful addition to the regulatory framework and I commend them to the Committee.
Claire Perry
Would it not be nice to have that running through all debates? As always, the hon. Member for Southampton, Test has asked some sensible questions. The information that I have been provided with suggests that the OGA has consulted industry extensively on the periodicity of the provision of information. Further guidance will be forthcoming if people want it.
The hon. Gentleman prompted a question in my mind, which was, what happens if a person who requests information disagrees with the period for which that information is retained? Basically, appeal provisions are set out in the Energy Act, which he sat through in Committee, that say non-compliance with a reporting notice is sanctionable. The OGA has dedicated compliance personnel who already ensure compliance with other aspects of information and samples powers, and it can set a deadline for the provision of information with which companies must comply. I hope that answers his sensible questions.
Dr Whitehead
I would be grateful for clarification on one more point. As is set out in the regulations and the guidance, the Minister mentioned that the OGA is not required necessarily to publish according to the lines that are set out in the regulations and that it may not publish as a result of representations by companies that say there would be particular problems.
Unless there is subsequently some form of code that relates to that, the OGA could put itself in the situation of not recording the circumstances under which it has declined to publish something that it should have done, or, if it has declined to publish something that it should have done, what its justification for doing so was. That might make some of those actions actionable, if someone wanted something to be determined according to what the regulations had set out, but the OGA had declined to publish it for reasons that it had not put forward. There may already be guidance on that, but if the Minister could assure me on that point, it would be helpful.
Claire Perry
It is an important question. Essentially, the OGA has to pay attention to the objective of maximising economic recovery. It is therefore a judgment question for it as to whether it makes information available. We have now set out more guidance on the timeframes, depending on different sorts of information, but it may make a judgment that it will not publish because it would inhibit the delivery of that objective. For example, a field or licence report that might be subject to a shorter reporting period could contain confidential seismic data that is subject to a longer protection.
The hon. Gentleman will know from his time on the Energy Act Committee that many of those compliance and appeal requirements were set out in that Act. I will ask the team to draft a note to him so he can be satisfied that that power of judgment is being exercised correctly and that appropriate appeal routes are in place if there is a sense that it is not.
It is always a pleasure doing business with Her Majesty’s official Opposition, because we have a thoughtful discussion. It is rather disappointing that Scottish National party Members never bother to show up to debates about this vital industry these days. Luckily, I have my hon. Friend the Member for Dumfries and Galloway behind me, but, if I may be so partisan, having a political party that does not effectively represent the most economically valuable industry in that geographical area is disappointing. With those remarks, having hopefully reassured the hon. Member for Southampton, Test on his good questions, I commend the regulations to the Committee.
Question put and agreed to.
Oral Answers to Questions
Claire Perry Excerpts(5 years, 9 months ago)
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The Minister for Energy and Clean Growth (Claire Perry)
The hon. Gentleman will know, because there are more than 6,000 installations in Manchester alone, that the feed-in tariff scheme has been hugely successful in attracting investment in small-scale renewable electricity, delivering more than 800,000 installations across the country. Partly as a result of that scheme, costs of the technology have dropped dramatically, but also because of the success of the scheme, it became, as he will know, very unaffordable. I am very aware of the need to set out what the next stage of small-scale renewable investment looks like, and I look forward to doing so shortly.
Jeff Smith
Businesses are very aware of the need too. There are thousands of stakeholders in the renewables industry who need to understand the regulatory framework that they will be operating under when the feed-in tariff ends. The Government promised an update on the approach to small-scale renewables by the end of last year, but we have heard nothing. Will the Minister please tell us today when the feed-in tariff consultation will be published?
Claire Perry
I share entirely the hon. Gentleman’s desire for us to get on with it. In fact, I have met many representatives of the sectors. We just have to get the scheme right. We must not create something that causes a bonanza for people who are gaming the system or that puts up bills for consumers. We are very aware of the need to provide certainty for investors, and I look forward to doing so soon.
Martyn Day (Linlithgow and East Falkirk) (SNP)
Claire Perry
I can only refer to the comments of my right hon. Friend the Secretary of State. We want to provide a balanced, secure energy supply that keeps bills down for consumers. That is why we will be investing in nuclear. We have invested in many forms of renewable energy. In fact, we are now leading many parts of the world in that investment, and we will continue to do so.
Dr Alan Whitehead (Southampton, Test) (Lab)
Solar PV installations this year will be running at just 2% of their peak rate in 2011. This is certainly due to the downgrading and forthcoming closure of the FIT scheme in March 2019. As the Minister has mentioned, a consultation on FITs has now been promised for a year. It was supposed to have been published by this recess; now it is not. Why is the Minister fiddling about the future of FITs while the solar house burns down?
Claire Perry
Such alliteration, despite such late nights. The hon. Gentleman will know that we have been really successful in pulling forward a huge amount of solar. In fact, solar has contributed enormously to the energy mix over the past few days, as the hon. Gentleman will know. Much of it is not recorded because it sits behind the meter. However, I acknowledge his point. We intend to bring forward a scheme that works, that does not put up bills for consumers and that acknowledges that much of our renewable future will be subsidy-free.
Jo Stevens (Cardiff Central) (Lab)
The Minister for Energy and Clean Growth (Claire Perry)
In the Government’s response to the review, we committed to take forward recommendations to improve clarity on employment status, boost protections for agency workers and increase state enforcement of basic rights for vulnerable workers. Consultations finished last month, and we have had more than 420 responses. I give huge thanks to all stakeholders who contributed; we will be responding very shortly.
Alex Norris
Insecure work weakens our economy. Last week the Office for National Statistics reported falls in manufacturing and construction output. The past few weeks have been dominated by Ministers worrying about their jobs. When will the Government have a functioning industrial strategy that worries about my constituents’ jobs?
Claire Perry
I am sure the hon. Gentleman and his constituents will welcome today’s news that we have record employment in the British economy. We totally agree with him that the future of work is good work, which is why we commissioned the Taylor review and want to deal with the challenges of the gig economy. I hope that we will get cross-party support for those vital protections for his constituents and for mine.
Jo Stevens
Rather than simplify employment law, the Taylor review has recommended introducing yet another category of workers, so we will have three tiers with different employment protections. The EU directive on transparent and predictable working that is currently being considered provides an EU-wide definition of workers, clarity and transparency, and the right to a written statement of terms and conditions on day one of employment. Will the Minister confirm that the Government will support the directive, so that it is adopted before 29 March next year?
Claire Perry
Again, I thank all respondents to the consultation, including many high-quality responses from the unions. We will respond to the consultation in due course.
Rachel Reeves (Leeds West) (Lab)
One in six workers in our economy is now self-employed. Some are bogusly self-employed—not entitled to the basic protections that we should all expect when we go out to work every day. Matthew Taylor’s review into good work was published more than a year ago. When are the Government going to respond and bring forward legislation to end this abuse?
Claire Perry
The hon. Lady, as always, makes a powerful point. We are taking action by prosecuting companies that are not paying the national minimum wage and we are ensuring that those basic rights are enforced. We want to get this right because this legislation will have to last not just for six months or a year, but for many years as our economy develops.
Justin Madders (Ellesmere Port and Neston) (Lab)
I am sure that the whole House will join me in wishing my hon. Friend the Member for North West Durham (Laura Pidcock) all the best during her maternity leave. As we know, the Taylor review failed to offer much protection for those in the gig economy who are pregnant. The Government’s earlier Deane review on self-employment made recommendations on equalising maternity allowance, but that was two and a half years ago. Do the Government intend to implement those recommendations?
Claire Perry
I welcome the hon. Gentleman to his position. I was around his constituency on Saturday helping to launch the RSS Sir David Attenborough—what a fine place he represents. He is absolutely right to focus on these basic maternity protections. This Government are continuing to improve paternity and maternity rights. We want to get that right and that will be part of our response.
Chris Green (Bolton West) (Con)
Ben Bradley (Mansfield) (Con)
The Minister for Energy and Clean Growth (Claire Perry)
There used to be those who said it is not possible to have protection for minimum-wage workers and lots of jobs. How wrong they are! Today, thanks to a Conservative Government since 2010, we have record employment, and a full-time worker on the minimum wage is now £3,800 better off thanks to the wage legislation we passed and changes to the income tax personal allowance. Since 2015, we have doubled the budget for enforcing the national minimum wage, and last year we identified a record 15.6 million workers who were not being paid properly for low-paid work.
Claire Perry
That is absolutely right. Any employer who is not paying the national minimum wage and is breaching the law deserves to be found out and taken to task. That is why HMRC is conducting proactive risk-based analyses, particularly in sectors or areas where there is a high-risk of workers not being paid. In 2016-17, HMRC proactively investigated over 1,400 cases, in which 68,000 workers were being illegally underpaid. That is absolutely outrageous, and penalties have been issued. The work will continue: employers must pay the national minimum and living wage.
Paul Masterton
I thank the Minister for her answer. She highlights that a number of employers are not paying the minimum wage, so what support do the Government intend to give small employers to help ensure that they can pay their employees a fair wage?
Claire Perry
That is an excellent point, and it is quite right that small employers who may struggle with some of this are encouraged to do so. We have taken up to £3,000 off their national insurance contributions bill through the employment allowance. We have cut corporation tax from 28% in 2010 to 19% today, and we reduced business rates to the tune of £2.3 billion in the 2017 Budget. All that is going into small employers’ cash flows, so they can pay their workers what they deserve.
Ben Bradley
The latest figures show that weekly wages in Mansfield are notably—several hundred pounds a week—lower than the national average. Projects such as the Heathrow logistics hub could provide huge opportunities for my constituents, but what support are the Government offering to help low-wage areas such as Mansfield and Warsop attract such high-skill and well-paid jobs?
Claire Perry
I commend my hon. Friend for fighting tirelessly for his constituents. I basically reassure him that, through the industrial strategy—it, of course, sets out our long-term plan to boost productivity and earning power across the country—we are supporting the development of local industrial strategies to drive up productivity, because productivity increases are what drive pay increases.
Stephanie Peacock (Barnsley East) (Lab)
Given the Court of Appeal’s decision last Friday, will the Government now urgently bring forward legislation to end the uncertainty and to enshrine the right of all workers on all shifts to the national minimum wage, including for careworkers’ sleep-ins?
Claire Perry
The hon. Lady makes a powerful point. I know from my own constituents the difficulty that the original decision has provided both for employers and for workers. I am afraid that I cannot answer her question from the Dispatch Box, but I will take it away and write to her.
Mr Dennis Skinner (Bolsover) (Lab)
Not only is it true that the number of people on zero-hours contracts is rising at a very high rate, but the Government do not seem to think that it is anything to do with them. There are close on 1 million people on zero-hours contracts—there are 2,000 or 3,000 on one pit site in Shirebrook near Mansfield in my area—and the Government sit idly by. It is only when they talk about the golden future for workers and get stuck in with getting rid of zero-hours contracts that we will believe a word they say.
Claire Perry
I am afraid the hon. Gentleman, despite the rhetoric, is just wrong. I have visited some of the pit areas, and one of the saddest things I ever saw was a former pit engineer who, because of the appalling transport links left as a terrible legacy to the pit areas, was unable to get out of the area and find work. [Interruption.] If he would just listen for one second, he would know that many people on zero-hours contracts actually choose that level of flexibility. [Interruption.] Well, they do, and the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) should talk to her constituents and find out. However, he is absolutely right that the thing we need to do—[Interruption.] Blimey, you must be hell to live with. [Interruption.] He must be hell to live with; not you, Mr Speaker, clearly. The hon. Gentleman must be hell to live with. He will know that this Government are determined to drive up wages and standards for working people, because we, not the north London intelligentsia, are the party of working people.
Alison Thewliss (Glasgow Central) (SNP)
The lowest-paid workers are young workers, who are not entitled even to the Government’s pretendy living wage. A 17-year-old is entitled to £3.63 an hour less than a 25-year-old starting on the same day in the same job. When will this Government end the scandal of state-sponsored age discrimination?
Claire Perry
My understanding is that there have always been differentials for different age groups. We will continue to review this because we are the party that nationally—right across the UK—wants to make sure that productivity and wages increase, rather than using the rhetoric we hear from other Members.
Michelle Donelan (Chippenham) (Con)
Julian Sturdy (York Outer) (Con)
The Minister for Energy and Clean Growth (Claire Perry)
Blimey, Mr Speaker, I am getting through them today.
As my right hon. Friend the Secretary of State laid out at the northern powerhouse business summit, the industrial strategy is encouraging innovation across the UK, developing those high-quality jobs and wages we all campaign for. Sector deals are about building long-term partnerships and businesses, and the grand challenges in areas such as clean growth will equip the UK to seize opportunities and be a world leader in the industries of the future.
Michelle Donelan
One of the biggest challenges we face is the STEM skills gap, something that I repeatedly mention in this place, given that Wiltshire is a hub of engineering design and technology. What work is my right hon. Friend doing with the Department for Education to ensure that we are developing the skills needed by businesses?
Claire Perry
I thank my hon. Friend and neighbour for the work that she has successfully done in her constituency promoting the importance of STEM skills. We are working with the Department for Education to grow STEM skills in the UK through initiatives such as T-levels, by investing more than £400 million, and I am particularly keen that that work focuses on harnessing the huge potential of women, a group who are very under-represented in the sector. That is why initiatives such as POWERful Women are so important.
Julian Sturdy
The Government’s commitment to creating a globally competitive technical education system must be applauded, and I hope that they will draw on best practice from establishments and institutions in my constituency, such as York College and Askham Bryan College. Can the Minister update me on discussions she is having directly with businesses about the creation of new institutes of technology, and will she consider rolling them out as quickly as possible?
Claire Perry
My hon. Friend is right: these have to be a collaboration between the Government, business and local decision makers. We will announce in the autumn which institutions will make up the country-wide network, supported by £170 million of funding for the institutes of technology. As we set out in May, the first pupils will sit the first of the new T-levels in September 2020.
Vernon Coaker (Gedling) (Lab)
One of the real challenges for the Government’s industrial strategy is how to ensure that investment is rolled out across all the regions and nations of the UK. How, practically, will the industrial strategy ensure that that happens—in particular, in regions that have failed to get the investment they deserve such as the east midlands?
Claire Perry
That is an excellent question, and the proof of all this will be taking our grand aspirations for the UK and making them work locally. I am pleased to tell the hon. Gentleman that we have fantastic local areas, often working cross-party—I am thinking particularly of Teesside and the west midlands—[Interruption.] The east midlands; thank you. We have really engaged local leaders and decision makers in pulling that investment through and developing their own local industrial strategies.
Emma Little Pengelly (Belfast South) (DUP)
Northern Ireland has an excellent construction industry. Unfortunately, it has been difficult over the past number of years because of the lack of the Northern Ireland Assembly and decision making. Can the Minister outline what discussions have taken place between her Department and Northern Ireland to ensure that Northern Ireland benefits from the new construction sector deal?
Claire Perry
We talk regularly with representatives from Northern Ireland, which is—as the hon. Lady will know—a vital part of the UK. The sector deal that we have done with the construction sector—more than half a billion pounds set out between the Government and industry to drive up the productivity of that sector—of course applies to Northern Ireland. We look forward to seeing productivity increase across the UK.
Steve Double (St Austell and Newquay) (Con)
The space sector will play an important role in achieving the aims of the industrial strategy. Will my right hon. Friend the Minister join me in welcoming the agreement signed by Virgin Orbit with Spaceport Cornwall at Farnborough air show yesterday, and will she ensure that the Government continue to work with Spaceport Cornwall to make sure that we have horizontal satellite launch in this country as soon as possible?
Claire Perry
Unlike the Minister for Universities, Science, Research and Innovation, I was unable to enjoy the announcement at Farnborough yesterday, but I agree with my hon. Friend that it is a fantastic announcement. He and Cornwall County Council should celebrate it, and I look forward to visiting Cornwall on Friday, where this topic and many other industries will be addressed.
Chris Elmore (Ogmore) (Lab)
One of the challenges but also opportunities for the Government’s industrial strategy is working with the devolved Administrations. Can the Minister set out what discussions she has had with the Welsh Government to ensure that the long-term industrial strategy supports industries such as Ford in Bridgend, which employs many hundreds of workers in my constituency?
Claire Perry
Again, that is an excellent point, demonstrating that we are so much stronger when we work together. We all, including my right hon. Friend the Secretary of State, speak to representatives of the devolved Administration on issues such as the auto sector deal and the nuclear sector deal, which was very much a joint effort.
Bill Grant (Ayr, Carrick and Cumnock) (Con)
Eleanor Smith (Wolverhampton South West) (Lab)
The Minister for Energy and Clean Growth (Claire Perry)
The hon. Lady will know through her long and distinguished service in various union careers that the challenge of ensuring that all workers, whether employees, workers or self-employed, receive the rights and protections they are entitled to without having to fight for them is at the heart of the Taylor review. I hope that she and her colleagues will welcome the recommendations made.
Eleanor Smith
Like my hon. Friend the Member for Leeds West (Rachel Reeves), I want to draw the Minister’s attention to the plight of many self-employed workers in today’s modern workforce. More and more people are classed as self-employed, but they have no protection rights. They have no redundancy rights, no pension protections, no sick pay, no holiday pay and no parental leave pay. Why do the Government believe that self-employed people do not deserve the same entitlements as employees?
Claire Perry
I think the hon. Lady probably knows that the Government do not believe that. However, she has identified the real challenge that is out there in the workplace. It is not always clear what status an employee has, and that is something that we must clarify. One of the fundamental points in the Taylor review related to employment status and access to statutory employment rights. I am not ruling out being able to do more for self-employed workers, but at the heart of the review is the need to understand the definitions involved, and to ensure that people in those categories are given the rights and protections that they deserve and for which the hon. Lady and I have campaigned.
Ellie Reeves (Lewisham West and Penge) (Lab)
Companies such as Uber and Pimlico Plumbers wrongly categorise their workforces as self-employed in order to deny them basic rights such as holiday pay and even the national minimum wage. I have heard what the Minister has had to say today, but when will the Government finally clamp down on false self-employment and exploitative practices?
Claire Perry
The hon. Lady will know that we have already made progress. Up to 300,000 workers who are entitled to payslips will now receive them, all workers are given a statement of their terms and conditions from day one, and 1.2 million agency workers are given a breakdown showing who pays them. We know that we must do more, but we want to respond carefully to the hundreds of responses to the Taylor review consultation that we have received, so that we can make the necessary changes and ensure that those practices are stamped out.
Angela Smith (Penistone and Stocksbridge) (Lab)
James Cartlidge (South Suffolk) (Con)
The Minister for Energy and Clean Growth (Claire Perry)
Like me, my hon. Friend has a rural constituency, and many of us live off-grid and are at the mercy of these rises. We know that the market for heating oil does function: it has been reviewed and is considered to be competitive. But my hon. Friend will know that I have also set out an aim that we want to get all new properties built in areas off-grid off fossil-fuel forms of heating by 2025, as that is not only costly but very carbon-producing.
Helen Hayes (Dulwich and West Norwood) (Lab)
Claire Perry
The hon. Lady makes an excellent point, and I would be happy to meet her to discuss this. I am thinking back to the days when we used to go out and try to sell goods from various catalogues and I used to collect the money. That was exploitative then, and I suspect that it is exploitative now. Perhaps she and I should meet; I would be happy to discuss the matter.
Luke Hall (Thornbury and Yate) (Con)
Claire Perry
I refer my hon. Friend to my earlier answer. If a contract is in place, that wage must be paid, and if he has any evidence of systematic underpayment or any level of avoidance, HMRC and the Government want to hear about it.
Mr Steve Reed (Croydon North) (Lab/Co-op)
Toby Perkins (Chesterfield) (Lab)
Many small care agencies face bankruptcy in the light of the Treasury advice on the way in which sleep-ins are paid, which has now been changed by the courts. The Minister for Energy and Clean Growth, the right hon. Member for Devizes (Claire Perry), did not seem to know too much about this, but may I urge her to avail herself of the facts urgently, because many small agencies will go bust if we do not get this right?
Claire Perry
I want to reassure the hon. Gentleman; he is absolutely right. I have had strong representations and visits about this issue in my own constituency. My reluctance to comment on it at the Dispatch Box is because it is legally incredibly complicated, as he knows, and we have just had the freshest possible news about the judgment. We need to take that away, and we will comment on it shortly. I would be very happy to work closely with him on this issue.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
Two weeks ago, I and colleagues from across the House, along with hundreds of others, attended a poignant service of remembrance at the Piper Alpha memorial in Aberdeen to mark 30 years since the worst tragedy in offshore oil and gas production. That tragedy claimed 167 lives, and many of those people were from Aberdeenshire. What are the Government doing, along with the industry, to ensure that UK oil and gas remains the world leader in health and safety practices offshore, so that we can avoid another tragedy such as this?
Claire Perry
Thirty years seems like a long time ago, but this is still the freshest possible knowledge for many people in my hon. Friend’s constituency: 167 men, many from a tight area in the north-east of Scotland, perished in the worst offshore disaster we have ever had in the history of our industry. Nothing will ever bring them back, but it was the findings of the Cullen inquiry that drove the changes that have made the UK a world leader in health and safety, and I want to pay tribute to our colleagues in the Health and Safety Executive, because they continue to focus on safety first when it comes to exploiting the resources in the North sea.
Alan Brown (Kilmarnock and Loudoun) (SNP)
To avoid double-charging on battery installations, the Government have pledged to amend the Electricity Act 1989 when parliamentary time permits. Instead of a two-day holiday next week, is that change something that the Government could start to look at?
Claire Perry
That will be part of the entire review of how we bring forward the necessary investment in battery technology to support renewable energy intermittency.
Martin Whitfield (East Lothian) (Lab)
Will the Minister confirm support for the Civil Nuclear Police Federation in its meeting this summer with his Cabinet colleagues over the proposals to reduce retirement and pension ages for armed officers from 67 to 68 down to 60 to match those of the police?
2015 Steel Summit Commitments
Claire Perry Excerpts(5 years, 10 months ago)
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The Minister for Energy and Clean Growth (Claire Perry)
It is a pleasure to serve under your chairmanship, Sir David. It was also a pleasure, as is often the case, to listen to the hon. Member for Redcar (Anna Turley), who is my friend and who speaks so passionately on these matters. I congratulate her on securing the debate. It is always good to see such a doughty group of campaigners for this vital industry.
The hon. Lady will know, as will her colleagues, that I visited her constituency and saw for myself the shock caused by the closure of what was once an exceptionally large and productive plant and the concern expressed by people who had lost highly productive jobs that were critical to the UK’s economy. She also knows that the Government, and my hon. Friend the Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington), who has responsibility for the sector, want to do everything that we can to ensure the return of those jobs. She has done wonderful work in her constituency, ably supported by the hon. Member for Scunthorpe (Nic Dakin), other parts of her region and its mayor, to reopen that site as part of the new, low-carbon economy. I am in no doubt about the passion with which she speaks and of what a hammer blow that closure was for employees, their families and the whole region.
The hon. Lady is right to raise what has happened since the closure. That was clearly a momentous time for the industry, and some tough questions had to be answered by the Government and the industry, working together. There have been signs of progress. We have seen a recovery in the world price of steel. The UK has benefited from the decline in the value of our currency, which has made our exports more competitive. However, we are under no illusions about the difficulty of the international market, which we will raise with President Trump when he visits us this weekend.
We are all deeply and profoundly disappointed with the section 232 tariffs. Huge amounts of work have happened behind the scenes to try to focus the US on potentially legitimate concerns about over-capacity production in China, rather than on penalising its closest allies and their industries. Those conversations have happened—my hon. Friend the Secretary of State for International Trade and President of the Board of Trade raised it directly with the US Secretary of Commerce last week. We will continue to make the case for a UK and EU exemption to the tariffs. We have shared legal support on these exemption questions with UK firms and with the industry, and we are pressing hard on behalf of those companies for assurances on the product exclusion process.
Those are the direct impacts of the tariffs. The indirect impact can have a chilling effect on the supply chain, which we are aware of. Indeed, we voted in the EU in support of provisional measures to curb steel imports only last Thursday. We will continue to offer a doughty response, which we must do on behalf of British-based companies.
That 2015 plant closure was such a pivotal moment. We received the five asks of the steel industry, which looked not only at what could be done in the short term but also at the long-term outlook for those companies. A number of changes to the industry’s structure have happened since. Greybull Capital acquired Tata’s long products business, which is based in Scunthorpe and is now part of the British Steel group. The Scottish mills have reopened under the ownership of Liberty Steel, which also bought Tata’s speciality steel business, based in Sheffield and Rotherham.
We should all be pleased to see the Tata-thyssenkrupp venture in Port Talbot coming to fruition. I visited it myself and saw the pride in that long tradition of steelmaking. I pay tribute to the management and the unions, who worked so hard in making that deal happen. Securing those jobs was vital. The deal was accompanied by the decision to invest in the blast furnace. The company will now work to ensure the commitment that as much as possible will be done to avoid any compulsory redundancies until 2026. I have to pay tribute to the pool of highly skilled workers who are dedicated to the future of the industry. We are incredibly lucky to have them.
However, the Government have done our bit, too. We set up our industrial strategy. The hon. Member for Redcar rightly raised energy costs. The Dieter Helm review that we commissioned found that, while our energy companies pay more than some of their European counterparts, it is often because other countries decide to spread those costs to consumers’ bills.
Stephen Kinnock
I recommend that the Minister looks at the “Steel 2020” report produced by the all-party parliamentary group on steel and metal related industries. It contains a detailed road map on what can be done on energy, including on wholesale costs, network and transmission costs, energy efficiency aid, reform of the emissions trading system and long-term remodelling. Will she update us on what the Government are doing, and whether she has had a chance to look at the report?
Claire Perry
I am happy to read the primary source. I have seen many of those recommendations, which inform our response to the Helm review.
I was making the point that other countries have taken policy decisions to put the costs that would in this country be borne by industrial customers on to household bills. We have ended up in a situation in which some of our industrial energy bills are higher than average, but our household bills are lower than average. Those policy levers are difficult to change; we all support, for example, the energy price cap Bill that we will bring forward later this week.
However, as the hon. Member for Redcar pointed out, we have spent more than £250 million in compensation specifically for the steel sector and other energy-intensive industries to help to mitigate those policy costs as we transition to a low-carbon future. We successfully pressed for the introduction of trade defence instruments to protect UK steel producers from unfair dumping. We set out visibility on the pipeline going forward, which I know was a big ask from hon. Members in the room.
The Government plan to procure construction contracts that will use 3 million tonnes of UK steel over the next five years, which is enough to build 170 Wembley stadiums. I understand the comment from the hon. Member for Penistone and Stocksbridge (Angela Smith) on the Swansea bay tidal lagoon. Believe me, I worked so hard on those numbers, but to build the country’s most expensive ever power station basically to create a couple of dozen jobs was just not economically effective when compared with other opportunities in all our constituencies.
The power of Government procurement should not to be underestimated. Every Government steel contract in England is now required to consider its social and economic impact on local communities and what those decisions mean for the constituencies we are all so proud to represent.
We are grateful for the constructive proposals put forward by the steel council. I asked for guidance on this. The steel council, which I was proud to chair when I was the relevant Minister, met last in June and will meet again before September. It now meets regularly, and that is an opportunity to discuss the current challenges but also for the industry to work together. Historically, members of the industry have not sat around a table and worked together on the outlook and productivity investments; it has had a very competitive mindset. The industry working together and with Government is a very important part of the plan as we go forward.
Nic Dakin
The Minister is setting out her stall very well, but as she has said, most of the benefits that we have at the moment are down to global changes and the restructuring that the industry has done itself. The assistance on energy prices was in train before the steel crisis in 2015. Since the crisis, there has been some progress on procurement, but frankly the steel sector deal, which the Government have always been positive about and have said is the way to address the steel crisis issues and the five asks, has not yet delivered. Will the Minister tell us where we are on delivering a sector deal for steel and, indeed, whether that will happen? Is it just a case of officials preventing Ministers from doing their job?
Claire Perry
No, no—far from it. The hon. Gentleman invites me to move on to the next part of my response, which is about exactly this issue. One of the first parts of the sector deal is getting the sector to work together to say, “What is it that we collectively need going forward?” We had the “Future Capacities and Capabilities of the UK Steel Industry” report produced at the request of the industry; the Government paid for it with taxpayers’ money. It highlighted onshore opportunities that will be worth up to £4 billion a year by 2030. This is about customer demand and substituting for imports specialty steels, higher-quality steels or steels that can support the investments in the offshore wind industry—things that are now being imported. That opportunity exists for the UK plants and it is forming part of the sector deal.
As I have urged hon. Members to recognise before, we should not use the steel sector deal as a measure of how much the Government love the sector. The idea is not to have Government write it and say, “This is what you need to do.” It is for the industry to come together and set out what it needs and wants from Government. We have seen the publication of sector deals that directly benefit the industry that we are talking about. The automotive sector deal was an early one out of the traps. The automotive industry has already increased its use of UK-made content. That went up from 36% previously to 44% two years ago, and the aim is to reach 50% or more by 2022, as a direct result of the sector deal. The construction sector is a vital market for many of the steel products in this country, and we published the construction sector deal last Thursday. It aims to build homes and offices quicker than in the past and it also has commitments in relation to domestic content.
We are absolutely committed to securing a steel sector deal that works for Government, industry and employees. It would be unfair to blame any delay on my hard-working officials. This is about getting the right deal—one that is not just a simple request for money but is saying, “What are we collectively going to do to increase productivity and competiveness, so we can invest again in these steel plants and create jobs in these important areas?”
Angela Smith
I do not agree with the Minister’s comments about the tidal bay lagoon, but there are other aspects of UK manufacturing where a sector deal could play a real part. The development of the shale gas industry is one of those. Can the right hon. Lady update us on progress made in maximising UK steel content in the shale gas industry?
Claire Perry
That is an excellent point. The hon. Lady will know that I am keen for us to have an energy policy that delivers secure, affordable, low-carbon and innovative energy. I believe that onshore shale gas can play a part in that, and we are soberly going through the process of testing the wells. She raises an important point about ensuring that that work is done using UK steel content. I will take that away for my conversations with the companies, but I did hold a very effective shale industry roundtable, at which I was struck by the number of small companies that are making the pipes and specialty products that rely on UK steel and the opportunities for them, so the hon. Lady makes an excellent point.
I again reassure colleagues here today that work is going on on the sector deal, but we have to encourage the companies that we are working with and that provide so many jobs in the constituencies represented here to think about what they will do. There are positive signs. We are seeing steel companies investing in very good research and development. Companies are bidding for money from our industrial strategy challenge fund—the current wave—for more innovative products, and that is incredibly important going forward.
Nick Dakin
UK Steel was disappointed with the Government’s response to the sector deal proposals so far—not because there are not weaknesses in what it has put forward that it is aware of, but because the things that were highlighted were not, bluntly, weaknesses. There needs to be a proper dialogue going on that delivers an outcome. How long does the Minister think it will be before we have a sector deal for steel?
Claire Perry
I will not speak for the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Watford, who chairs the steel council and is closely involved in the conversations, but I urge the hon. Gentleman to think about the outcome, not the timing. We recognise the importance of the industry. We are setting out plans to ensure that its products can be sold into other UK sectors as part of those deals. I am confident that we will get there, but the steel sector deal has to be a deal that works for the long-term future and is not a quick fix. I think that all of us would say that putting another sticking plaster over the problems that we saw in 2015 would not be the way to secure the jobs of the future. We know that there is a huge opportunity from UK—domestic —clients wanting to buy these products, and we have to help the industry to find a way to get there.
Anna Turley
I appreciate the Minister’s response to that question and her update on the steel council; I am glad that it is meeting regularly. I just want to go back to the point made by my hon. Friend the Member for Scunthorpe (Nic Dakin), in his first intervention in the debate, about the option of putting together another steel summit. I feel that the time for that is now. Particularly if the sector deal is struggling, getting everyone together and getting everything on the table might just help to facilitate it.
Claire Perry
In my closing remarks, I was going to address the hon. Lady’s point on that, because I think we have made progress in ensuring a sustainable and competitive future for UK steel. However, we cannot be complacent. We know that there are global challenges that affect the sector dramatically. We have made progress on improving the competitiveness and innovation of the industry, and it is really heartening to see that we have these brilliant companies wanting to do the R&D and innovation in the UK. With global or European companies, that has not always been the case: they have made decisions to make certain sorts of products here, but to keep the R&D and intellectual capital elsewhere.
We will continue to work in partnership with the steel sector. This involves not just the companies, but the unions, the devolved Administrations and other stakeholders—in particular, the local communities. I will raise with the Under-Secretary the question of whether the time is right for another steel summit, particularly in the light of international events. Ideally, it would be when we have some progress to report back from the conversations that we are having at a diplomatic level.
I close by thanking sincerely the hon. Members present for raising these issues once again and by assuring them that there is no complacency and we are all dedicated to this vital strategic industry.
Question put and agreed to.
Draft Warm Home Discount (Miscellaneous Amendments) Regulations 2018
Claire Perry Excerpts(5 years, 10 months ago)
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The Minister for Energy and Clean Growth (Claire Perry)
I beg to move,
That the Committee has considered the draft Warm Home Discount (Miscellaneous Amendments) Regulations 2018.
It is a pleasure to serve under your chairmanship, Mr Bailey, and it is nice to be in a cool room to discuss the warm home discount.
The regulations extend the warm home discount, or WHD, scheme until 2021, vitally ensuring that more than 2 million low-income and vulnerable customers receive a £140 rebate on their energy bills in winter, which is when they need it most. This is vital support, and a key policy for tackling fuel poverty. We are committed to tackling fuel poverty—it was a manifesto commitment—and this is part of our package.
The best long-term solution for reducing fuel poverty is to bring down the cost of heating a home by improving its energy efficiency. I have launched a number of interventions towards the aim of eliminating fuel poverty. In the clean growth strategy, we stated the aim of upgrading all fuel-poor homes to band C by 2030. In March of this year, I consulted on focusing all the energy company obligation funding, which is £640 million a year, on low-income and vulnerable households, away from a split between fuel poverty and carbon reduction. We have committed to the continuation of funding for domestic energy efficiency until 2028 at least at current levels, which is an investment of £6 billion over the next 10 years. We have also consulted on proposals to strengthen the existing minimum standard regulations in England and Wales, so that private landlords who own F and G-rated homes must make improvements before letting them. That is part of the wider, longer term aspiration that we set last year to improve as many homes as possible to band C by 2035. However, the energy-efficiency improvement of homes, although the best solution, takes time and some properties, particularly those that are harder to treat—often in rural areas such as the Devizes constituency I am so proud to represent—are left behind. That is why energy bill rebates through the warm home discount continue to play an important role.
This is all part of a package designed by the Government to be on the side of consumers, helping them to reduce their energy costs. We hope that there will be cross-party support for the Domestic Gas and Electricity Tariff (Price Cap) Bill when it comes back to the House in the next few days, as it will protect 11 million households currently on the highest energy tariffs.
The current scheme ensures that 1.2 million low-income pensioners in receipt of pension credit guarantee credit receive an automatic rebate of £140 on their energy bills and that more than 1 million more low-income and vulnerable households receive the rebate following an application to a participating energy supplier. In recognition of the success of the scheme, in the 2015 spending review we committed an annual £320 million to it, index-linked until 2021—rising with inflation. However, the regulations that underpin the scheme expired in April and therefore we are all gathered here today—I sound like I am at a wedding—to debate extending the scheme until 2021.
It is important to note that the extension to the regulations will not inhibit any future reform of the scheme. Colleagues will know that we intend to consult later this year on a number of changes from next year, including expanding the successful data-matching process that helps customers who may be eligible for the scheme to access it without having to go through a consumer application process, and also considering targeting the scheme more effectively by making use of the best possible data that the Government may collect and hold, obviously with the clients’ permission. To do that we need primary legislation and I am delighted that the data-sharing powers under the Digital Economy Act 2017 are expected to come into force before the summer recess.
The regulations we are debating today introduce a key change to the scheme. I have decided that more energy suppliers should be required to offer the warm home discount to customers so that from winter 2019[Official Report, 4 September 2018, Vol. 646, c. 2MC.] about 99% of the domestic market will be covered by obligated suppliers. Historically, a small supplier below the 250,000 customer account threshold did not have to offer the warm home discount, but we have decided that that threshold should drop to 150,000 customer accounts between 2019 and 2021. We want to step the threshold down gradually to give small suppliers, many of which are recent entrants to the energy market, time to put the right processes in place. The impact of the threshold will be reviewed, and if the scheme continues beyond 2021 we would expect it to be reduced further.
However, it is important to note that these regulations do not make significant changes to the scheme eligibility for winter 2018. This winter, I want to prioritise the safe and timely delivery of the rebates. That will mean that all eligible pensioners on pension credit guarantee credit would continue to receive a discount of £140 on their bills.
These regulations make only small changes to the eligibility for the broader group—the part of the scheme for which customers have to apply—because it will now include universal credit recipients, to reflect welfare changes. However, we believe there is more room for more innovation and industry-led projects to identify fuel-poor households and provide the most suitable package of advice and measures. So I have decided to increase the spending cap on industry initiatives from £30 million to £40 million. We are also expanding the list of activities allowed under the industry initiatives scheme to include, for example, the provision of financial assistance with energy bills for households that are not eligible under the core group or broader group for the warm home discount.
For example, those could be households that are not on benefits but are particularly at risk of fuel poverty. We all have such households in our constituencies, for example households that may have a member with a long-term illness or disability, or with other needs. The energy company will now have the opportunity to help. However, the total will be limited to £5 million overall and up to £140 per household, which is equivalent to the value of the rebate.
We want to ensure that these initiatives focus on support to reduce bills for the long term, not just as a one-off, for example through energy advice or energy debt assistance. The regulations will continue to reduce the cap on the spending allowed on debt write-off from £12 million to £10 million, and to continue to reduce it in future years, to £8 million in 2019-20 and to £6 million in 2020-21.
Albert Owen (Ynys Môn) (Lab)
The regulations cover England, Scotland and Wales. Has the Minister had consultations with Welsh Ministers, because the definition of “fuel poverty” in each of those countries is different? Also, may I ask about a very important issue, because we will be debating Northern Ireland tonight? Is there a comparable scheme in Northern Ireland? If there is, will it be administered under the budget that we will be debating this evening in the main Chamber?
Claire Perry
While I am finishing my speech, I will look to my officials to give me specific answers to those questions, but I thank the hon. Gentleman for the intervention and I am always very keen to work with what are a series of really innovative initiatives in the devolved Administrations. I have seen at first hand some of the best practice there and we can all share it and learn from it.
To conclude, the affirmative regulations that we are considering today will provide vital support for low-income and vulnerable customers to keep warm for the next three winters. The changes we propose will mean that more suppliers will be required to provide assistance to their eligible low-income customers, enabling suppliers to spend more on industry initiatives to provide innovative and long-term bill support to households in need. I commend the regulations to the Committee.
Claire Perry
There was a time when our colleagues in the Scottish National party used to join us, but no longer; well, there we are. I thank hon. Members for their contributions, and I will try to answer the questions.
The hon. Member for Ynys Môn, if I am saying that correctly, raised an important point about devolved matters. There are different definitions of fuel poverty in Wales and Scotland, as he will know. We have worked closely with the Welsh and Scottish Governments, and this policy supports households who fall into those categories with both the energy company obligation and the warm home discount. Scotland has devolved powers under the Scotland Act 2016 to develop a further scheme if it wishes to, but has not yet used them. This is also a devolved matter for Northern Ireland; it does not have its own warm home discount scheme and the primary powers for the warm home discount do not cover Northern Ireland, but because it is a devolved matter that is a matter for the Government there.
The hon. Member for Southampton, Test, who is a friend, raised the question about the year seven and year eight timing. This scheme will have no impact on year seven, because that has effectively completed and customers will start to get rebates again from October. As he will know, we sometimes get letters from constituents saying, “Why is it taking so long?” It can sometimes take up to several months, which is not always desirable. He asked some important questions about the clustering of companies around the sub-250,000 level. Companies that are not so new into the market and have many years of standing have deliberately chosen to cluster at that level; in my view, that means customers who might wish to switch have a less than optimal array of companies to switch to. That is exactly why we have decided to drop the threshold.
An equally important question relates to what the hon. Gentleman said about people who have switched and lost the discount. There is currently no means, and we are not proposing means, for them to claw it back. Because it is an automatic rebate, people do not always know they are getting it, but I am keen that, when people make a switching decision, there is information about which suppliers do and do not offer the warm home discount. I have written, and I think I copied the hon. Gentleman into the letter—if not, I will do so—to the largest price comparison websites, urging them to make it clear to customers who might be looking to switch where they should look to find out whether they were in receipt of the warm home discount and how to take that into account when they make a switching decision.
The hon. Gentleman also asked about cash going forward. This quite substantial allocation of money was part of the 2015 spending review, so that will be a matter to propose for the next spending review. I emphasise again that this plus ECO, which is over £640 million a year, are substantial investments in tackling the issue of fuel poverty, which bedevils so many households. I think that covers off all the points I wanted to make in reply, but I will ensure he gets a copy of the letter.
I thank the Opposition for their support; this is an important scheme and one that we want to see extended as quickly as possible to as many people as possible. I therefore commend the regulations to the Committee.
Question put and agreed to.
Draft Renewables Obligation (Amendment) Order 2018
Claire Perry Excerpts(5 years, 10 months ago)
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The Minister for Energy and Clean Growth (Claire Perry)
I beg to move,
That the Committee has considered the draft Renewables Obligation (Amendment) Order 2018.
It is a pleasure to serve under your chairmanship on this lovely sunny evening, Mr Wilson.
The draft order would amend the Renewables Obligation Order 2015, which, as the Committee knows, provided the detailed legislative framework for the operation of the renewables obligation scheme in England and Wales. The order is designed to control the costs to consumers—something we all care about—of supporting unexpected generation under the renewables obligation from two types of generating station defined in the legislation: biomass conversion stations and co-firing stations.
Biomass conversion stations are former coal plants that have converted to run wholly on biomass. Co-firing stations combine a mixture of coal and biomass. The renewables obligation scheme has been the main financial mechanism to incentivise large-scale renewable electricity generation in the UK. The scheme has now closed to new biomass, co-firing and conversion projects, but existing projects will continue to receive support up to 2027.
Of course, the scheme does not provide cash payments to generators. It operates through a system of tradable renewables obligation certificates. Electricity suppliers have to present a certain number of certificates to Ofgem to support each megawatt-hour of electricity they have supplied to consumers. Ofgem issues RO certificates to generators relative to the renewable electricity they generate. Generators sell the certificates to energy suppliers or to traders as tradable commodities. It is assumed that the cost to electricity suppliers of complying with the regulation is passed on to consumers through their energy bills. The size of the obligation is set each year, based on the number of certificates expected to be issued.
The RO scheme has been highly successful in bringing forward renewable energy, and 25,000 stations across the UK now generate more than 65 TWh of renewable electricity a year, which is equivalent to about 22% of the UK electricity supply market. As to its contribution to decarbonisation, more than 28 million tonnes of carbon dioxide emissions were avoided in 2016-17 alone. However, we must of course keep energy bills as low as possible for consumers while we go through the transition, and since 2015 steps have been taken to control costs; but we need to do more.
It is our view that both co-firing and conversion stations have an important transitional role to play in decarbonising the grid, and they can generate at high levels more or less continuously. However, stations already accredited under the scheme can increase the amount of biomass they use quickly and without notification to Ofgem, which can, of course, significantly increase support costs. The Government acted in 2014 to discourage that deployment of new generating capacity by removing grandfathering rights for certain sorts of co-firing and biomass conversion generating stations. However, despite those changes, last year evidence suggested that there was significant unforecast generation, which is something we are keen to avoid. Indeed, we think that if we were not to intervene now, there would be an increase in bills of £2 per year per household. For business users, and particularly those with low electricity consumption, there would be increases of up to £140 per year, whereas the bills of energy-intensive industries would increase by up to £53,000 per year.
The reason the Committee is meeting tonight is to control those costs by implementing annual caps on the number of renewables obligation certificates that can be issued for non-grandfathered biomass co-firing or conversion generating stations or units. There are two sorts of stations to which caps will apply: capped and mixed. Capped stations comprise one or more capped combustion units only, which are not protected by grandfathering policy. That means, essentially, that there is a cap on the number of certificates that can be issued to the station in each obligation year, set at 125,000.
Mixed generating stations have both non-grandfathered capped units, and exempt grandfathered units. The order will set a flexible cap, first by estimating the number of certificates likely to be issued for generation at the exempt units. An allowance of 125,000 certificates will then be added for each of the station’s capped units. If generators choose to exceed their capped unit capacity, further certificates will be issued for generation only up to the level of the overall station caps. If generators decide to maximise generation at their exempt grandfathered units, there will be no restriction on the number of certificates issued, provided that the capped units remain within their allowance.
The order also makes some technical changes that are unconnected to biomass conversion and co-firing. For example, we are bringing certain combined heat and power stations into line with the existing requirements for other stations, and are requiring a declaration that double subsidies will not be claimed under other schemes. The order clarifies that existing greenhouse gas trajectories in the Renewables Obligation Order 2015 apply equally to electricity-only dedicated biomass power stations and biomass power stations with combined heat and power. The order will also clean up various typos, which do not have a material effect on the legislation.
The Government are committed to keeping energy bills as low as possible for consumers, while cutting greenhouse gas emissions and supporting economic growth. The cap mechanisms implemented through the order take into account feedback from stakeholders. They balance the interests of generators and consumers. The flexibility provided by this approach will allow units to generate more when electricity demand is highest. I commend the order to the Committee.
Dr Alan Whitehead (Southampton, Test) (Lab)
It is a pleasure to serve under your chairmanship, Mr Wilson.
As the Minister set out, the order essentially deals with a very narrow point of policy relating to biomass conversions and biomass production. It is about stations that have converted from coal to biomass and are receiving renewables obligation certificates—in other words, they converted before the ROC period came to an end. As the Minister said, there are no more stations in that category because, although the ROC programme is continuing for another nine years, it has been closed to new applicants since the arrival of contracts for difference on 31 March 2017. The order is about existing conversions that have an expectation of the number of ROCs they would receive as a result of their power generation. It contains a proposal to limit the number of those ROCs. As the impact assessment for the order states,
“The policy objectives are to protect the”
levy control framework
“and limit the costs to consumers of additional unforecast RO spend on biomass conversion and co-firing.”
The Minister made a customarily comprehensive case about the order’s purpose, but I am not sure it is likely to do what is says on the tin. Will it really protect the LCF and limit the costs to consumers of additional unforecast RO expenditure, as described in the impact assessment, the explanatory memorandum and the Minister’s statement? I ask that question because the order is founded on renewables obligation certificates, but it talks about the money potentially spent or saved in relation to the levy control framework. Those are not quite the same things, and I will try to shed a little light on why.
Renewables obligation certificates came into place in 2002. As we have mentioned, no new ROCs are issued now, but during the period of their life, they were created as a result of agreements that were set out with various renewable power plants to provide a varying number of ROCs per megawatt-hour of electricity produced. In that sense, they are a little like bitcoin, inasmuch as they have been mined, produced and then are in existence as a result of the activity of producing energy, but they have no value in themselves. They can obtain value as a result of being bought, as the Minister said, by bodies that are obligated by the ROC system to provide evidence that they have supplied a proportion of their output from renewable power.
Such bodies can do that in two ways. First, they can show at the settlement point a number of ROCs from their own generating activity that coincides with their obligation level—and if they do that, their obligation is met. On the other hand, if they have a shortfall, or do not generate any power from renewable sources, those suppliers would have to meet their obligation via another route, in one of two further ways. Either they pay a buyout price for their ROC shortfall—the price will be administratively set by Government at a substantially higher level than the likely traded prices of ROCs—or they purchase from the companies that have created the ROCs enough ROCs to meet their obligation level.
That, of course, is what gives ROCs their value and places money in the hands of the renewable generators who have invested money in their projects with the expectation that, in part, their project will be underwritten by the proceeds of ROC sales. However, a question then arises: what is likely to be the actual value of a ROC? It is that value that is paid by the supplier and that impacts on customer bills. It impacts on the levy control framework—that is, a controlled total for the amount that can be spent on underwriting for renewables over successive five-year periods. It is not money that is actually spent, because it is money that is effectively supplied by consumer bills. Of course, that is real money as far as consumer bills are concerned, but it is to be regarded as an imputed tax and spend by the Treasury, so it is as if extra taxation had been raised and then charged against the levy control framework. That levy control framework is the subject of the order, inasmuch as the Government’s imputed tax and spend within that framework has been running ahead of what that framework suggested it should be. Measures have therefore been taken to try to get it within the overall framework.
The next question that arises is whether the way in which ROCs are valued is easily coterminous with what it is the Government are trying to do about maintaining those levy control framework levels. This is the key bit. If the value of a ROC is high, that will result in more putative tax and spend, and hence more cost against the levy control framework. If the value is low, it results in some, but less, cost against the levy control framework.
How does that value rise and fall? Essentially it comes from two elements. First, there is the headroom that the Government have built into the system. That is the level of obligation suppliers have to meet. That is, or should be, adjusted to remain ahead of the supplier ROCs so that they retain value, and so that the generators are rewarded for their efforts. The headroom sits in the system and will have a central effect on ROCs’ values. That is, if the headroom is set very high—10% above the current level of the ROCs—then, with the obligation up to a relatively high percentage of the power supplied by a supplier, the ROCs will gain value, because people will chase more of them to cover their obligation requirement. If the headroom is reduced, the value of the ROCs drops. Furthermore, the more ROCs in the system, even within the obligation level framework, the easier it is for suppliers to obtain them to meet their obligations. In other words, if more ROCs chase a set amount of obligation space, the price will reduce.
How does that relate to what the draft statutory instrument seeks to do? It wants to cap the number of ROCs for particular plants operating biomass and bioliquid methods of producing electricity. That retrospectively alters the terms under which those companies undertook a build for biomass or a conversion to biomass of a plant that previously burned coal. Changing retrospectively the terms of scheme is exactly what caused the 2015 hiatus when the feed-in tariffs for solar were dropped. In this instance the situation is worse, because although dropping those FITs affected the development of new solar, it did not affect the remuneration of existing plants. The draft order seeks directly to affect the planned remuneration of existing plants by shifting the goalposts after agreement has been reached.
That is why a number of affected plants that had converted from coal to biomass told the consultation that the changes would make them—at least for the foreseeable future, and presumably until the Government outlaw coal from the system—produce electricity from coal and not from biomass, since the terms of the altered system are such that it will be economically less advantageous to generate power from biomass and economically more advantageous, relatively speaking, to produce power from coal, which I thought the Secretary of State was against. Indeed, the Minister and I have agreed considerably on the need to remove coal from the system. It would be a particularly perverse outcome of this instrument if we increased, rather than reduced, the amount of coal being used to produce power in the system over the next few years.
That, however, is the collateral damage, as it were, of a less than perfect measure. The Government tell us that the real effect of the cap on ROCs for those companies is that it will take the pressure off the levy control framework. The impact assessment explains at length just how much a cap will save. It suggests that doing nothing means expenditure of between £55 million and £320 million, whereas under this draft instrument the range is between £5 million and £20 million.
It will not, however, necessarily do that. Capping the number of ROCs that can be issued by plants would have a potential effect on the number of ROCs available for purchase. The effect would therefore be to increase the value of the ROCs that will be available. The amount of money paid out for them, which would be regarded as putative tax and spend, would go back into the levy control framework. That would not change the overall effect very much, although that depends on the proportion of the total amount of ROCs available and the plants affected, which the impact assessment does not address.
The fine and detailed calculations made in the impact assessment, which are in the SI and the explanatory memorandum, do not add up to a hill of beans unless done properly against what the countervailing effect of having fewer ROCs in the system would do to the overall cost to the levy control framework. I do not know what the exact effect would be, but it does not appear to have been well worked out. In principle, it possibly delivers the wrong mechanism—saving costs to the levy control framework as far as ROCs are concerned.
Far be it for me to advise the Government on what to do about the ROCs system, which undeniably through its trading mechanisms causes costs to consumers and the LCF total, but in terms of a mechanism that would have an effect on those costs it might be worth—
Claire Perry
Will the hon. Gentleman accept an intervention that might provide him with some comfort and save us a bit of time? His suggestion is that if we had a totally free market with an infinite number of ROCs and a price-setting mechanism based on demand and supply, by capping the number of ROCs, prices will go up and the overall value will be the same. However, the obligation is set annually. Therefore, in effect, every year a certain number of ROCs are issued, taking into account that fewer ROCs in the system would have an impact on that level. The ratchet will come down based on there being fewer ROCs in the system. It is not a completely dynamic system—there is that annual setting of the absolute number.
Dr Whitehead
I thank the Minister for that intervention. Unfortunately, the annual settlement for the amount of ROCs compared with headroom took place last October.
Dr Whitehead
Indeed, it happens every year, but the system will not rectify itself in any way until about one and a half years after the order is in place. Therefore, if ROCs are fewer in number and increase in value, the workings carried out may not have the effect that the Minister or the officials who drew them up think they will have, because of how those values relate to scarcity or abundance as far as possible purchases are concerned.
I was going to mention, as the Minister did, the headroom for ROCs. If one looked at the relationship of headroom to the number of ROCs in circulation, one would certainly see that having a depressing effect, but it would have a much wider effect on the whole of the market. As a result of our, I accept, quite lengthy expedition of how ROCs work, work against each other and may or may not work up to the levy control mechanism, does the Minister really think that the order will work as she has described? Given the lack of an assessment of a possible countervailing effect from a reduction in ROCs because of how the system works, might it not be a good idea to take that away and have another look at it, to see whether it will work as well as she thinks and whether any action on headroom figures might have an equal effect, as I have just described? The countervailing effects of the headroom recalculation might be worse than the proposed measure.
I am not drawing any conclusions. I am stating that it does not appear that all the factors relating to how ROCs work have been taken into account in the calculations. I would not like to see us pass legislation that does not do that properly and that possibly draws us into areas where we think we have done something about the system, but actually we have done something rather different.
Claire Perry
I disagree with the hon. Gentleman. The information given to me suggests that the set level of ROCs already factors in cost control measures. The legislation cap takes into account the ROCs that have been issued since April 2018.
The hon. Gentleman is proposing a “do nothing” scenario where we would end up with higher bills and companies continuing to receive unexpectedly high returns from generation. We want to ensure that we achieve our renewables targets, which we can do with the system and a relentless focus on driving down consumer bills. We should not be afraid to say that a system put in place for all the right reasons has not delivered as we thought. Essentially, people will always game whatever system is in place.
I take the hon. Gentleman’s point about ensuring that there is not a policy hiatus, but there is none. We are proposing a sensible change that will stop unexpected levels of generation coming onstream, but the quid pro quo is that we have given the generators flexibility in how they treat their various plants. We have given them the ability to have a bit of management within their own system.
I accept the estimates of the likely savings—I am sorry that the hon. Gentleman does not, because my officials have done an excellent job with the analysis—and the costs that we will not see. It is an extra £1 or £2 for average household bills, an extra £80 to £140 for business users, and up to £53,000 for energy intensive industries, such as steel, ceramics and cement, which he and I know are extremely strategically important and have huge resonance in many of our constituencies.
I am, as always, interested to listen to the hon. Gentleman. I appreciate his detailed combing through of the small print of every SI, but in this case I do not accept that these numbers are wrong. I commend the order to the Committee.
Question put.