Energy Prices Bill

David Linden Excerpts

Committee stage
Monday 17th October 2022 Commons Chamber

[Dr Whitehead]

I am delighted to hear that, and it is one gain from this evening’s debate.

On the third part of the Bill, I very much concur with a lot of what the hon. Member for Weston-super-Mare (John Penrose) said. The Bill gives powers to the Minister and the Secretary of State that provide for sweeping arrangements not only to intervene in energy markets, but to override Ofgem in various licensing arrangements. There is a power to give direction and a power to change licences, and a whole range of other measures. A number of industry figures are certainly concerned about the stability of investment they can undertake with those powers on the statute book, not knowing whether those changes could take place at short notice and in a way that may affect their investment decisions and the investment landscape for the future.

At the weekend, a senior source at one energy supplier suggested that the Secretary of State had undertaken a power grab “worthy of Henry VIII”. Obviously, our modernist Secretary of State may well be modelling himself on Henry VIII. I do not know whether he is, but this source said that this

“gives absolute power to the secretary of state over all rules governing all aspects of the UK’s energy industry, in perpetuity.”

He continued:

“That means bypassing Ofgem and the entire licensing and regulatory regime without any safeguards or time constraints and no consultation or appeal process for anyone—supplier, generator, networks—affected by any decision.”

So we are very concerned to ensure that those powers taken by the Secretary of State should at the very least have a sunset clause on them when the energy crisis has abated a little. As we can see from the legislation, no such sunset clauses are provided, which leads to a suspicion that this is a potential serious power grab by the Government, and these are powers to oversee the energy process without any of the checks and balances that we have in the system at the moment. If that is the Government’s intention, it is to be deplored. Again, I hope that at the very least the Minister could clarify his intentions on that section of the Bill and how he intends to limit the activity of these things over a period of time.

We have tabled a number of amendments, and as they relate to some of the comments I have made, I shall briefly address them. Amendment 1 would ensure that the full cost of reductions is passed on to customers. Although a passing through arrangement is contained in the Bill to deal with people such as landlords, park home owners and various others who are taking the rebates on bills on behalf of customers and supposedly passing them on but not actually doing so—I very much welcome those clauses—there are other arrangements for third parties in receipt of funds where they are not necessarily required to pass those rebates on to customers at all. For example, the Low Carbon Contracts Company gets money in from contracts for difference but is by no means obliged to pass that back to customers. It is supposed to pass this back to energy companies, but it does not have to do so, and the energy suppliers themselves have no obligation to pass it back to customers. The amendment tries to close some of those loopholes to make sure that all moneys related to this area are passed on to customers.

New clause 2, on the marginal cost of electricity, was mentioned by my right hon. Friend the Member for Doncaster North on Second Reading. The new clause would ensure that we would not be in this situation in the first place. If we had sorted out the whole question of the marginal cost of electricity as it relates to all electricity being effectively determined in retail price as if it had derived from gas and the much lower cost of renewables that we have at the moment in the system being effectively discounted, we would not have some of those renewable generators making “super-profits” and being perhaps subject to the ministrations of clause 16. That is because they would be working in the market on their own prices and looking competitively at a price set by their own boundaries, rather than working through gas in the first place. We think it is important that the Government take action on that quickly, which is what our new clause suggests we do.

I know we are running out of time, but let me come to our amendment on the Energy (Oil and Gas) Profits Levy Act 2022 arrangements. Again, as my right hon. Friend said on Second Reading, they were deplorable, as where fossil fuels are concerned 91% of profits can be returned back to those companies, and do not come to the customer to help reduce their bills, if they have investments in fossil fuels for the future. No such arrangement is provided for in this Bill as far as renewable generators are concerned; it is just a request for payment and nothing else. We want the Government to urgently look at this and bring forward a report on what the effect of reducing that 91% arrangement to 5%, for example, would have on the money that would be coming through to help customers pay their bills for the future.

Finally, as we mentioned on Second Reading, we have tabled a couple of amendments to start the process of payments from September, rather than the end of this year, as is proposed in the Bill. We think that would produce quite a lot more money for customers’ bills to be assured in the process. We understand that the Scottish nationalists are moving a manuscript amendment, new clause 18. It would worry us as it is calling for all the arrangements to be sorted out as far as what happens after six months is concerned within one month. We would prefer that we all united behind new clause 8, which would require full disclosure of the profits and turnover of oil and gas companies and various other generators over the next two years.

[David Linden (Glasgow East) (SNP)]

I suspect the hon. Gentleman is probably only clearing his throat and getting on to his speech, but may I ask him what his objection is to new clause 18? If I heard him properly, he suggested at the beginning of his speech that if the Government had brought forward a manuscript amendment, he would not necessarily be too upset. Given that the SNP has done that, via manuscript and new clause 18, what is the Opposition’s objection to that?

[Dr Whitehead]

We think that most of what is new clause 18 is unexceptionable as far as information that is required. We do not think that all this has to be or should be resolved within one month, as is proposed; getting all that information on the table about the profits and turnover of companies over the next two years is a better way to do this.

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[David Linden]

rose—

[Dr Whitehead]

I am about to finish my remarks, but we might well have a debate about new clause 18—

[David Linden]

Will the hon. Gentleman give way on that point?

[Dr Whitehead]

I am sorry, I cannot give away further because I am right out of time, and I know that the Chairman is encouraging me to bring my remarks to a close, which is precisely what I intend to do.

Subject to what the Minister says, we may wish to divide on new clause 3 and amendment 2. I am anxious to hear what he makes of our various other amendments, but although we probably do not wish to proceed further with them, that is not to say that they do not merit important consideration in our proceedings on the Bill. We hope the Minister will be cognisant of that.

[David Linden]

I am grateful to the hon. Gentleman for giving way—

[The Second Deputy Chairman of Ways and Means (Mr Nigel Evans)]

Order. Dr Whitehead, are you giving way?

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[David Linden]

We can normally get through a Chancellor in 28 days, so it is ample enough time for the Government to come forward with a review.

[Alan Brown]

It is a fair point and, as my hon. Friend pointed out earlier, Labour Members also have a new clause, which they want to push, calling for a report to Parliament in 28 days, so it seems to be a timeframe that we can all agree on.

New clause 18(2) would mandate the Government to assess what average household bills will look like when the pledged support scheme ends next April. I appreciate that estimating future energy bill increases is not an exact science, but the Government should be able to come up with an indicative price range, which should also give a look-ahead at the supposedly two-year support period of the so-called energy price guarantee. This is an important exercise, because it was the Prime Minister who told us that the two-year policy would stop average bills hitting £6,000 a year. As I said earlier, the explanatory notes for the Bill state that these mitigations will prevent so-called average bills of £2,500 from rising to £4,200. That means that, without further support, average household energy bills will, on the evidence before us and according to this Government, rise to something like £4,200 to £6,000 per annum. How on earth is that affordable? Clarity is required urgently.

New clause 18(2)(b) is all about analysing fuel poverty statistics. Now, when I mention fuel poverty statistics, we need to remember that these are not statistics but real people we are talking about—people who cannot afford to heat their homes; people who might not even be able to turn on their cooker and heat their food; parents skipping meals; people with health conditions that are made worse because they are having to live in a damp house; terminally ill people who are having to move out of their homes and are unable to die in dignity in their homes because they cannot afford to heat them; people on prepayment meters who are building up their standing charge debt because they cannot afford to put money in them. That is the reality of fuel poverty. That is why I want the Government to assess and report on the reality of their policy decisions during this cost of energy crisis.

Fuel poverty statistics lag behind real time: it takes time to analyse the statistics and then bring them through. The cost of energy has gone up so quickly that past fuel poverty statistics are effectively meaningless. National Energy Action estimates that, even with a £2,500 average bill put in place, some 6.7 million households will end up in fuel poverty. We need to understand how much worse that will get across the United Kingdom. I suggest that if the Government wish to make an informed decision about what future support packages will look like and how they will actually support the most vulnerable, they should be the ones to undertake the assessment.

That feeds directly into subsections (2)(c) and (2)(d), which are about, first, assessing the merit of extending the universal scheme as it was originally intended and, secondly, looking at a more targeted approach. The key to subsection (c) is ensuring that we have no further increases in fuel poverty. Given that we are still saying that 6.7 million households will be in fuel poverty, that is an extremely tame target. The real target should be the eradication of fuel poverty, which is why I am willing to support many other amendments on the Order Paper, particularly from other parties, on energy-efficient installations and the upgrading of homes to EPC band C, which is a UK Government target. There should be greater investment in energy efficiency measures, and truly upgrading homes will reduce bills, reduce the energy demand and of course create additional green jobs.

Given how damaging fuel poverty is, and that the Government have not made clear what future support will look like, I cannot believe that the Labour party is not willing to support manuscript new clause 18 and try to force the Government’s hand to provide information to Parliament so that we know the real impact of the cost of energy crisis.

Amendment 16 is about support for off-grid homes. Earlier, I highlighted that a one-off payment of £100 for alternatively fuelled properties is insufficient. Liquid fuels have increased in price from 30p a litre to more than £1 a litre, which is three times more expensive. People cannot afford to fill their fuel tanks. They have to lay out a minimum of £500 to £600 for a delivery. If they do not have that cash, they do not get it—they do not get credit. Filling a tank costs about £1,200 once VAT is included. Why do the Government think that a one-off £100 payment is sufficient?

One of my constituents lives in an off-gas grid property. He rightly observed that the energy price guarantee is being paid for by the general taxpayer, because it comes out of borrowing or taxpayers’ money. That means that off-grid customers are effectively subsidising people on the gas grid who are getting a bigger support package. Four million households are effectively subsidising 28 million households, which actually have cheaper fuel bills. It is an incoherent policy, which is why we brought forward amendment 16, but I would also support any other proposals that would make the Government support those who live in off-gas grid properties.

I wrote to a previous energy Minister about regulation of off-grid fuels for properties. The answer I got was that we do not need regulation; the market will take care of itself. That in itself shows a complete lack of understanding of what it is like for people in rural properties who cannot shop around. Generally, there is only one supplier in the area, so it gets to set the terms and conditions and the prices of the fuel that people buy. The Government need to look at regulation of those fuels as well.

Amendments 10, 11, 14 and 15 are about giving Parliament a greater level of scrutiny and approval. It is about ensuring that proposals are implemented under the affirmative rather than the negative procedure, which puts all the powers into the hands of the Secretary of State. I tried to point this out to the Secretary of State who, as a Back Bencher, was all about Parliament sovereignty, but now that he is in the Cabinet he is yet another hypocrite who is quite happy to take Henry VIII powers and other unparalleled powers for himself. [Interruption.] I said hypocrite, yes.

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[Barry Gardiner]

The Minister began his speech by saying that the energy crisis is a global crisis. That is true. It grew out of the surge in global demand after the pandemic and it has certainly been compounded by the Russian invasion of Ukraine. However, it has been entrenched by the complicity of those countries in OPEC that have steadfastly refused to increase production and which the Government still count as close allies, including Saudi Arabia, on which much greater diplomatic pressure should be applied.

The hon. Members for North Shropshire (Helen Morgan) and for Hexham (Guy Opperman) alluded to the way in which the Bill looks predominantly at the supply side. It should also look at the demand side. The chief executive of E.ON, Michael Lewis, has pointed out that a sustained programme of energy efficiency could have reduced the amount of energy used in UK homes by 25%—the equivalent of six Hinkley C nuclear power stations. The cheapest energy is the energy that we do not use, and the fact that 59% of homes in England are rated D or below for energy performance is a major factor in the desperate need of many families for support with their bills. A simple uprating of a home from energy performance certification D to C would save a home £500 a year—and that is on the basis of energy prices in April this year, before the latest spike. There would be even higher savings now.

That is why this summer E.ON and EDF called for the Government to double the energy company obligation scheme and for an expansion of the eligibility criteria to include 150,000 more homes. I hope that, under clause 22—under the powers to intervene that the Secretary of State is giving himself—the Government will use those powers to expand the ECO scheme precisely as those two major suppliers have requested.

While failure to address the demand side shows that the Government should have been investing in a comprehensive retrofit scheme over the past 12 years, it also highlights their failure, until Russia’s illegal war in Ukraine, to understand just how essential energy security is to our national security. Energy efficiency and renewable energy were regarded, in the words of our Prime Minister—that is, three Prime Ministers ago—as “green crap”. The truth is that, if we had rolled out a comprehensive programme of renewables and energy efficiency measures over the past 12 years, that stuff would now be regarded as green gold and there would be scant need for the provisions of this Bill.

Our failure should teach us another lesson. The way to become more energy secure and less reliant on fossil fuels is not to double down on them and devise new subsidies for fracking and new fields in the North sea, but to ramp up investments that will transition our economy from the fossil-fuelled past to the clean energy future. The Government claim that we have to expand our oil and gas production and that that will make our bills cheaper. The truth is it will not, not just because the wholesale market is an international market, rather than a domestic one, but because the North Sea Transition Authority is clear that the average time to production of any new facility is five years. Anything we do now to expand exploration licences cannot begin to have even the marginal impact that the minute percentage increase in global supply would predicate until 2027.

Moreover, in its analysis of production projections the North Sea Transition Authority has set out that the North sea basin will see annual declines of 9% and 6% respectively for gas and oil production out to 2050. That means that the Government are seeking to ramp up our dependence on fossil fuels at precisely the time they are diminishing and becoming more expensive, and are set to leave us with stranded assets and liabilities. Investment should be going into reducing demand, providing onshore wind and solar and creating the new jobs that will accompany such investment.

I set out in my speech on Second Reading the basis on which the oil and gas producers are and should be contributing to the measures in clause 1. Last year, energy prices meant that an average family were paying £1,100. After the windfall tax and the unfunded borrowing, that will be limited to an average of £2,500. The cost of that over the two years would be £31 billion, but now that the Chancellor has introduced the welcome Treasury-led review after six months, that would be simply £7.5 billion for the period in question. That is just about half a year’s worth of taxing the oil and gas producers at the global average level.

I welcome the Chancellor’s statement announcing the Treasury-led review, and urge him to ditch the investment allowance subsidy and adopt a tax rate that the rest of the globe considers fair and equitable.

[David Linden (Glasgow East) (SNP)]

I rise to speak to new clause 1, tabled in my name and those of my hon. Friends from the city of Glasgow. In doing so, I also express my support for all the amendments tabled by my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown), in particular manuscript new clause 18. I know that he will wish to press amendment 16 on the off-gas grid, which impacts constituents in the Gartloch area of my constituency.

For those of us who have the privilege of being Glaswegian, or at the very least adopted Glaswegians, arguably nothing symbolises home much more than the sandstone tenements which line our high streets and housing estates. Of course, they are not unique to Glasgow; tenements can be found in Liverpool as well as in Scotland’s lesser city of Edinburgh. Indeed, my hon. Friend the Member for Lancaster and Fleetwood (Cat Smith) even took me to see some tenements on Barrow Island last year. Let it never be said that she does not know how to organise a good date night, Mr Evans.

There is a serious point to all that and one that is particularly pertinent to Scotland in the context of both housing and energy policy. Nearly a fifth of all our housing stock is pre-1919—that is, 467,000 homes—and 68% of those have disrepair to critical elements. Furthermore, 36% have critical and urgent repair needs. The nature of these buildings is that they are incredibly expensive to heat. Without question they are genuinely beautiful, with their high ceilings and large bay windows, but they are constructed from sandstone with little to no cavity wall insulation.

It is welcome that the Government have introduced the Energy Prices Bill. Indeed, I always had faith that the Secretary of State for Business, Energy and Industrial Strategy would come round to our view that strong and regular state intervention was the way forward, but I am concerned that the Bill is only part of the solution to the energy crisis for tenement dwellers, as well as housing associations.

Back in 2019, a report was commissioned by the Glasgow and West of Scotland Forum of Housing Associations, which campaigns on behalf of community controlled housing groups. It warned of the “ticking time-bomb” of such properties. It has been estimated that the cost of restoring more than 46,000 tenement flats in Glasgow that were built pre-1919 and are deemed to be dangerous could hit £2.9 billion. I know that my local housing association, and those of my hon. Friends the Members for Glasgow Central (Alison Thewliss) and for Glasgow North (Patrick Grady), certainly do not have that in their reserves.

[Patrick Grady (Glasgow North) (Ind)]

I thank my hon. Friend for tabling the new clause. He is absolutely right about the concerns of housing associations. The cost of energy going up may mean that many of their tenants in the tenements do not want to put on the heating this winter. That is bad not only for the residents, who are our primary concern, but for the housing stock, particularly older tenemental properties. It will simply increase the future costs if those buildings become more mouldy and damp and suffer all the other effects that inclement weather can have on such structures. It is all the more important that such amendments are taken forward so that housing associations in particular can invest in energy efficiency measures to support their struggling tenants.

[David Linden]

My hon. Friend is absolutely right to put that on the record, and ng homes in his constituency, for example, will be glad that he has.

For my constituents living in Tollcross Road, Westmuir Street or Shettleston Road, living in those historic and iconic buildings comes at a cost, especially in the winter when energy consumption is higher. We all surely agree that installing solar panels and electric car charging points in homes is a good way to combat the climate and nature emergency and to make energy consumption cheaper and more sustainable. For those in tenement properties, however, that is near-impossible, which is why my new clause 1 seeks some form of additional support for these unique properties. We all agree that retrofitting properties can be helpful for energy efficiency, but in reality we will have to incentivise owners and housing associations to do that for tenements.

[Alison Thewliss (Glasgow Central) (SNP)]

My hon. Friend is making a good case. He may be aware of the project in Niddrie Road, Govanhill, where a tenement block is being retrofitted to the Passivhaus standard with Southside Housing Association. Does he agree, however, that rolling that out across the tenement stock in the city of Glasgow alone would be hugely expensive and quite disruptive for tenants, so the cost needs to be borne in mind?

[David Linden]

Yes. For those of us with a strong interest in housing policy, Govanhill is a fascinating place to look because of the innovative stuff that has happened there as a result of the SNP Scottish Government. The Passivhaus standard is incredibly expensive; I know that Shettleston Housing Association in my constituency is still paying for the development at the top of Wellshot Road. It is important, but it comes at a cost, which is all the more reason for the Government to come forward with support.

One way to do that is to zero-rate VAT on refurbishment and retrofitting, which would cut 20% from the cost straightaway and act as a fiscal stimulus for a construction sector that will clearly be affected by any impending recession. The current energy crisis gives us the ability to provide short-term support by way of a price intervention, but longer-term support with the zero-rating of VAT for retrofitting tenements.

I know that the Minister and his party are big fans of cutting taxes—perhaps not today, but certainly normally more than I am—but I hope that we can agree that approving our new clause 1 would merely require the Government to conduct an impact assessment, which is surely not objectionable to those on the Treasury Bench. Those of us familiar with Glasgow politics know that the late Sir Teddy Taylor was the epitome of what was known as a “tenement Tory”. I can guarantee that top tenement Tory status will be conferred on the Minister if he works with us tonight and accepts the new clause without a Division. In the meantime, I am grateful to the Chairman of Ways and Means for selecting the new clause for consideration, and I look forward to the response of the Minister—indeed, the top tenement Tory—when he winds up the debate.

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I will not say too much more on the energy efficiency front. My hon. Friend the Member for Hexham (Guy Opperman) talked about the importance of energy efficiency, and I think he is quite right. Communicating that in the right way is the issue. Finding the right interlocuters, the right people, to talk to the public is terribly important. My hon. Friends raised the Henry VIII powers and I think I have already dealt with that.

[David Linden]

Will the Minister give way?

[Graham Stuart]

I am going to press on, if I may.

Turning to amendments 2, 3, 10 and 11, and new clauses 7, 9 and 17, for amendments 10 and 11, designating a scheme is simply a matter of identifying the scheme documents that the Secretary of State already has the powers to provide. Therefore, the affirmative procedure would be disproportionate. New clause 7 requires the undertaking of an impact assessment on setting the price reduction at pre-April Ofgem cap levels. The unprecedented level of support introduced via the scheme and others in the Bill means that I do not think this is necessary and I ask Members not to press it to a Division.

[David Linden]

Will the Minister give way?

[Graham Stuart]

I have so much to do and a duty to cover as much as I can, having agreed not to go on too long.

New clause 9 aims to remove regional variations from standing charges. Ofgem, which is responsible for the network charging regime, is considering that matter and we should not pre-empt the review’s outcome in the Bill.

Amendments 2 and 3 aim to enable the backdating of the gas price reduction scheme in Great Britain to begin from 8 September. The Government have designed the scheme to work in combination with the 22 May cost of living package to which I referred. That ensures that the most vulnerable households will see little change in their energy between last winter and this. I therefore do not see any need to alter the operative date of the energy price guarantee schemes.

I move on to amendments 19, 17, 18 and 7, new clause 5 and amendment 5 on the energy bill relief scheme. On amendments 17 and 19, the Government fully intend to introduce regulations under clause 9 and we expect them to be laid in Parliament by the beginning of November. I have committed to publishing a review of the scheme in three months.

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[Barry Gardiner]

Will the Minister give way?

[David Linden]

Will the Minister give way?

[Graham Stuart]

The hon. Member is so persistent that I will give way to him.

[David Linden]

Hope springs eternal. In his summing up, the Minister has not yet touched on new clause 1. I suspect that that is nothing to do with the fact that he does not know what a tenement is, but can he touch on new clause 1, please?