Energy Price Freeze

David Morris Excerpts

Wednesday 6th November 2013 Commons Chamber

[Charles Hendry]

I will not get involved in the private discussion between the Labour party and the Scottish National party, which seems to be creeping into this debate, but it is a matter of regret that new nuclear power plant will not be built in Scotland as well as England.

Without the necessary investment, we will see not the lights going out, as people sometimes say, but brown-outs, where major energy users are asked to come off line for a period, and a price spike, which will have very damaging consequences for businesses and consumers. We need huge investment, therefore, in a range of different sectors. As part of the solution, we need to reform the market to bring in more investment than we have seen for many years. The situation was bad under the last Labour Government, but it goes back much further. Although we recognise the need for others to enter the market, I am disturbed by part of this debate, because we cannot secure such investment without the big six. We need the big six alongside other players in the market, and were we to drive them away, it would be much more difficult to deliver the necessary security of supply.

Market reform is part of the process, but until recently, so has been political consensus. When the right hon. Lady reflects on her speech today, I hope she will consider its impact in the boardrooms in Spain, Germany, France and elsewhere around the world. They will be saying, “Is this a party that welcomes our involvement and future investment in the UK?” I can assure her that she is introducing a degree of political risk, making it more difficult to secure the investment we need if we are to deliver the affordability we want.

[David Morris (Morecambe and Lunesdale) (Con)]

Is my hon. Friend aware that when the Leader of the Opposition announced the price freeze, £1 billion was wiped off the energy stock market overnight?

[Charles Hendry]

That did happen, but it is actually worse than that, because to deliver the £100 billion-plus we need invested in our low-carbon sector, the companies investing need to borrow money, and the greater the political risk, the higher the interest on that borrowing. If the cost of borrowing increases by even 1%, the result will be a dead-weight cost of £1 billion a year on consumers’ energy bills—just to pay for Labour’s political risk.

--- Later in debate ---

[David Morris (Morecambe and Lunesdale) (Con)]

It is a pleasure to be in your presence while you are in the Chair, Madam Deputy Speaker. This is the first time I have spoken under your guidance.

I want it to be known that I am not standing up for energy companies or anything to do with them. I am standing up for common sense and the consumer. All hon. Members are keen for energy prices to drop. I am proud to support the work of my right hon. Friends the Secretary of State for Energy and Climate Change and the Prime Minister. For the first time in decades, genuine action is being taken to improve our energy market. I really believe that.

The right hon. Member for Don Valley (Caroline Flint), who is not in her place, said a lot about myths. All political parties like to talk about myths, but let us talk about reality. If a potential Prime Minister stands up in the Chamber and says, “I am going to freeze energy prices,” they will send the stock market into disarray. That is what happened. Overnight, £1 billion was wiped off the stock market in energy.

I have two nuclear power stations in my constituency—energy is the largest employer in my constituency. Hon. Members can imagine the horror of my constituents who saw that. They knew immediately that the energy companies would react to safeguard their interests after losing £1 billion, and they hiked energy up by 10%. They then wanted their customers to sign up to a three-year freeze deal, which would completely negate what the Leader of the Opposition wanted to achieve. That is the reality of what happened.

[Toby Perkins]

Is the hon. Gentleman seriously saying that the price freeze offered by a number of companies recently—not any future price freeze—was linked to the Labour party conference? Is he saying that the Labour party conference announcement led to those price freezes? I have not heard anyone else make that case, so is that what the hon. Gentleman is seriously saying?

[David Morris]

I am referring to the announcement in the Chamber—obviously this is a more official domain than the Labour party conference.

The three-year price freeze negated completely the policy. It seemed popular, people are still talking about it, and the press are talking about it with gusto. But the reality is that unless the energy industry is renationalised, that is how the markets will react. Last time there was a similar run, the Leader of the Opposition was Secretary of State for Energy and Climate Change. We had a price fix of three years. If he could not do anything against the markets when he was in power, what makes him think that he can do it now? It is all pie in the sky. In reality, the energy companies will carry on looking after themselves, the consumers will get the hike on the threat of a price freeze, and it will cause pandemonium among consumers, especially in their pockets.

As I have said, my constituency has two nuclear power stations. The announcement by the Leader of the Opposition has the potential—if it has not already—to damage pension funds through the shares in the company.

[Dr Whitehead]

Because gas is the market maker, the two nuclear power stations in the hon. Gentleman’s constituency are making large amounts of additional money from the electricity they sell at gas market maker prices because they are not subject to the carbon floor price. Therefore they are completely insulated from the effects that he mentions. Far from being worried about the situation, I would suggest that they are worried about the possibility that the Government might remove the carbon floor price and thus remove the free money that they are getting.

[David Morris]

I disagree with the hon. Gentleman’s analogy. We are talking a lot about gas, but the two nuclear power stations are huge employers in my constituency. What is the Opposition saying to my constituents with the suggestion of a price freeze? Will there be a freeze on their wages? That is what would happen. How can those two new stations produce energy efficiently and make some profit out of doing so without passing the effect of the price freeze down to the people who work in the area? The local economy would be hard hit. It is one thing to announce price freeze policies on the hoof, but that is the reality.

We are trying to be more responsible. I agree that we must take down green levies, which are a blight on struggling families. The average British family pays £112 a year because of green levies and I am delighted that the Prime Minister is taking action on that. We all support low-carbon energy production, but there is no point in confusing saving the planet with taxing people to death. We also need to invest in local energy production which is less susceptible to foreign crises and currency fluctuations. My hon. Friend the Member for Warrington South (David Mowat), who is no longer in his place, articulated accurately how the European markets are dealing with this problem. We can debate what sort of locally produced energy we should have, and I am very aware of people’s different views on that, but having local production is vital in my area for a variety of reasons, including the local economy and the cost to the consumer.

[Bob Stewart (Beckenham) (Con)]

It is clear from what my hon. Friend says that we need more nuclear power stations. They will produce energy at the lowest price, so let us get on with it.

[David Morris]

My hon. Friend takes a Churchillian stance on this issue. We do need more nuclear power in this country and I have never made any bones about saying so. Under this Government, Britain has done well at improving homes to make them more energy efficient, and that cuts costs even at a time when costs are rising. I want us to go further and consider the possibility of tax breaks for companies that build homes with solar panels.

We must push to bring more companies into the market. In 1997, there were 20 major energy companies; now, there are just six. The monopoly must be broken up, and that will never happen unless people are willing to switch providers. The Leader of the Opposition switched supplier. I do not want to ridicule him for that; I want to praise him, because he did the right thing. I just wish he would encourage others to join him, because this is one way of creating competition that will push costs down.

There are more ideas than the ones the Department of Energy and Climate Change is working on, but whatever happens the public must be aware that while the Labour price freeze sounds attractive, it is fundamentally weak and will not lead to lower energy bills—it might even increase them. The truth is that there is no obvious solution to the problem, but by putting a number of measures in place we can take control of it. I support the work of the coalition on energy markets. For the sake of my constituents, I beg hon. Members on both sides of the House not to put that work at risk.