David Mowat
Main Page: David Mowat (Conservative - Warrington South)(9 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
We have, as is customary, had an interesting and wide-ranging debate, and we have been able to establish beyond peradventure three important facts, mostly through the contribution of the Secretary of State, who is, characteristically, I have to say, not in his place for the end of the debate; that happens frequently. The first of them is that over the past 12 months as wholesale energy costs have fallen, consumer bills from the largest suppliers have not followed. Secondly, as my right hon. Friend the Member for Don Valley (Caroline Flint) said and the hon. Member for Angus (Mr Weir) also made clear, the least well-off—those with the lowest disposable incomes—have had the highest increase in their bills and have the lowest rates of switching. Thirdly, as has become typical in these debates, the Energy Secretary made a lengthy and confused speech, and four years into his job he is neither in control of energy policy nor intends to do anything about the issues we are debating. Constituents in all parts of the UK will find that an extraordinary and unacceptable state of affairs.
We know that the regulator is concerned. It made that clear in its state of the market assessment, and there is an asymmetrical approach between cost increases and decreases in consumer bills—the rockets and feathers argument. We know it thinks that that is worse than it was the last time it looked at it in 2011. We also know as of today that Ofgem thinks that the E.ON change is a small step in the right direction, rather than some demonstration, as the Secretary of State seems complacently to believe, of a dynamic market working in the interests of consumers. We know from the figures to which Ofgem has access that over the course of the last 12 months the profit margin on the retail part of the businesses of the largest companies has increased from 4% to 8%, and that is without taking into account the generation businesses and the margins achieved by the integrated companies in that area.
The Secretary of State gave away his real attitude, probably inadvertently. He claimed that people could, if they really cared, get a better deal. They might not care in Kingston or Surbiton, but in many communities around the country represented by Members of all parties they do care. They do care that they have had higher bills—£260 higher since 2010. They do care that they see wholesale prices falling but their standard tariffs not following, and they do care that they have heard this afternoon from the Secretary of State a litany of excuses and, distortions and complacent disinterest in doing anything at all about the situation we find ourselves in.
I agreed with much that the hon. Member for South Suffolk (Mr Yeo) said—that will probably not do him any good with his own party, but given his recent experience with it, I doubt he cares very much, frankly. I think it is disgraceful that demand-side management was less than 1% in the recent capacity market auction, and that case was made prior to those auctions. I also agree with his points on vertical integration. He knows, unlike other Members who have tried to demonstrate their expertise in these areas, that the proposals we set out in November 2013 included looking at, and making sure there was, a proper ring fence between the supply and generation arms of the companies precisely for the reason he gave in relation to transparency. Where I disagree with him—and the hon. Member for Tamworth (Christopher Pincher) made a similar case—is on the impact on investment. I think both of them will recall, if the hon. Member for Tamworth was present on that day, that when Andrew Buglass from the Royal Bank of Scotland, one of the biggest investors in clean energy, came before the Energy and Climate Change Committee, he was explicitly asked whether he thought the Labour party policy on energy prices was affecting investment decisions, and he made it clear that the investors he talked to
“take a lot of comfort from the cross-party support that has been shown through the EMR process”,
in terms of supporting contracts for difference and the framework, if not the detail, of the capacity market mechanism. That is what is most important in relation to investment, and I am sure the hon. Member for South Suffolk knows and understands that.
My hon. Friends the Members for Glasgow North West (John Robertson) and for Wansbeck (Ian Lavery) helpfully reminded us with both passion and precision—as they frequently do in such debates, and on the Select Committee of which they are both members—of the impact of high fuel prices on consumers. My hon. Friend the Member for Glasgow North West reflected on the power of big suppliers who could, with the will, do so much more.
The right hon. Member for Rutland and Melton (Sir Alan Duncan) gave a spirited lecture on posturing—a subject he appears to have great expertise in. He seemed not to be aware that Ofgem has access to market data and can therefore observe trends. This is not just about one market, but the combination of the day-ahead and forward markets over a sustained period. Over that period, wholesale costs are down and that has not been reflected in consumers’ bills.
The hon. Member for Elmet and Rothwell (Alec Shelbrooke) is a less frequent speaker in these debates, although he is an habitual sedentary chunterer. We have all become used to that—it is part of his charm. He will know that he voted back in June against the regulator being able to take action for consumers. His constituents will find that difficult to understand, and I am sure they will be reminded of that fact between now and May. Because he did not take part in previous such debates, he seemed unaware that, as my right hon. Friend the Member for Don Valley made clear, the policy we have had since autumn 2013 has been transparently set out in this House. She and I have been asked a number of times about the price freeze, and we have made it clear that the policy is to prevent increases in bills, not reductions. The first time I did so was during a speech at an afternoon fringe meeting at the September 2013 party conference, which was recorded by the BBC, so the record is absolutely clear, as reflected in the comments of the energy correspondent of The Daily Telegraph.
Tom Greatrex
I am conscious that I do not have much time, but I will give way to the hon. Gentleman, who has been present for the debate but has not been able to contribute.
David Mowat
I have a quick question on the price freeze—or price thaw, as it now is. In the event that prices fall during the time of the price freeze, will companies be permitted to increase them subsequently, and if so, to what level: the previous level, the new level—or will some pronouncement be made on that subject?
Tom Greatrex
I am slightly surprised at the hon. Gentleman. In the conversations we have from time to time, he usually demonstrates a much better grasp of the issues. He knows that our policy is a freeze on price increases, which does not prevent decreases. That policy is in place because of the increased margin that was made between 2008 and 2009, when the same problem occurred: wholesale prices went down by 45% but that reduction was not passed on to consumers. That is the reality, which has affected his constituents, mine and those of every Member of this House. The Government should ensure that the regulator addresses that, in line with the motion before us.
Tom Greatrex
I will not give way again because I want to respond to more of the contributions that were made.
My hon. Friend the Member for Inverclyde (Mr McKenzie) made clear the importance of taking action on fuel poverty. My hon. Friend the Member for Ynys Môn (Albert Owen), in a telling contribution, helpfully reminded us of what the Prime Minister said about the importance of the regulator being able to take action when the fairness principle is not applied—an important point that we should all be aware of. My hon. Friend also touched on the issue of off-grid customers.
The hon. Member for Dover (Charlie Elphicke) quoted from an anonymous Labour source in his speech, which effectively defended energy companies rather than standing up for his constituents. A named Labour source—me—can tell him that that will not go down well with his constituents in the 113 days we have left until the general election. My hon. Friend the Member for Southampton, Test (Dr Whitehead) made some important points about the regulator’s role in standing up for consumers when it is clear that the competition in the market that we would like to see is demonstrably failing.
This is a simple, straightforward and compelling proposition before the House: where there is a failure of the competitive market dynamics—we have seen precious little evidence of those in recent months—that the Secretary of State and others are proposing, the regulator can help to focus the attention of suppliers through the use of a back-stop power to ensure that the relationship between wholesale prices and the retail prices consumers pay is properly applied. If the suppliers do not act, the regulator will be able to step in and make good the situation. The Secretary of State has demonstrated again today that he is out of touch, out of his depth and, unfortunately, almost out of time. I am a generous-spirited individual, however, and as he seeks to secure a lasting legacy as his tenure in his job comes to an end, I will give him one last chance. He can now vote for the motion and act to ensure that energy cost reductions are passed on to consumers. I strongly advise him to do so, and I commend the motion to the House.