UK Energy Market

Debate between David Mowat and Dan Poulter

Wednesday 9th March 2016 Westminster Hall

[David Mowat (Warrington South) (Con)]

I do not want to be an apologist for the big six, but there is something about the subject that I always find intriguing. We have heard mention of “market failure”—another term for a cartel, frankly—but why have the big six not been able to turn their cartel into profits? Yesterday, npower announced the laying off of some 2,500 people and a loss of £100 million. Other members of the big six, according to the numbers, do not appear to be making massive profits either. Where does the money go?

[Dr Poulter]

I assume that the inflated energy tariffs are benefiting the shareholders in a number of those companies, because the companies are certainly not passing the reductions in their costs on to the consumer. If we want to restore trust in the energy market, they need to do so. Some of the most vulnerable consumers, the people least likely to switch, are losing out. Clearly there is exploitation in the big six market position, at the expense of vulnerable consumers.

[David Mowat]

My hon. Friend is of course right: we must have more switching—we are all behind that—and we must make the market work better. My point, however, is that shareholders do not appear to be benefiting. Npower lost £100 million in the UK, and others have not made a great deal of money out of the market. It would be useful for us to reconcile that—perhaps the three Front Benchers will help us later.

[Dr Poulter]

The Front Benchers can speculate why the benefits of the reductions in costs for the energy suppliers are not being passed on to consumers, because they are clearly not being. The money is going somewhere, but not to consumers’ pockets. If we genuinely want to have an energy market that has the trust of the public and protects those people who are perhaps not engaged with it effectively, something different needs to happen. The money is going somewhere, but not to the people to whom we want to see it going, and that is what a market mechanism is designed to do—to benefit the consumer.

--- Later in debate ---

[Dr Poulter]

I completely agree with the Chair of the Energy and Climate Change Committee; that is a good point well made. I hope we will have the opportunity to do that either through legislation or through cross-departmental work. This is an issue not just for the Department of Energy and Climate Change but for the Department for Communities and Local Government, which can implement much energy legislation that affects homes in the private rented sector. I am sure the Minister will want to take the issues forward with Ministers from that Department in some cross-Government working, because it is important that the energy market benefits the most vulnerable people in our constituencies.

Despite the CMA’s investigation and its provisional findings last year, the behaviour of the big six energy companies seems to remain broadly unchanged, profoundly uncompetitive and, as I outlined, certainly not in the interests of some of our most vulnerable constituents. Ahead of the conclusion of the CMA’s investigation into the energy market, numerous measures have been put in place that have not been in consumers’ best interests. I am aware that other Members wish to speak, so I will try to bring my remarks to a conclusion fairly soon, but it is worth highlighting where that review is and where it may lead us.

The CMA’s provisional findings were a clear indictment of a market that in my view—this is not without a good amount of evidence—is failing consumers. They showed that energy suppliers were exploiting their unilateral market power to price tariffs above a level that could be justified by the costs at which they were buying energy. In the Which? annual energy supplier satisfaction survey, three of the big six suppliers failed to meet the overall average customer satisfaction score of 53%, and npower had the lowest score for the sixth year running, at 41%. I am sorry to highlight that to my hon. Friend the Member for Solihull (Julian Knight), given the point he made.

Ofgem’s latest complaints figures show that the big six received an eye-watering 5 million customer complaints last year. I am sure hon. Members agree that such flaws in the energy market demonstrate the need for radical reform and change. There is also concern about the level of detail that the CMA has provided to date on its potential remedies, which is seen as lacking. I hope that we will get clarity on that tomorrow when its final report is published. There may be merit in the safeguard tariff proposal, but not enough thought has been given to how it will interact with proposals to get more people switching.

Crucially, the CMA appears to have given little or no thought to the steps that will engage people in the energy market, particularly after the failure of Ofgem’s retail market review. At a time when people should be saving as much as £400 by switching from a big six standard tariff to one of the smaller suppliers’ cheapest tariffs, a rise in switching of just 15% is a drop in the ocean. That raises big questions about what can be done to get people to switch and save, and the CMA needs to deliver clear answers.

[David Mowat]

My hon. Friend mentioned npower, which got a very low customer satisfaction score, has lost 200,000 customers, I believe, and is having to make something like 2,000 to 2,500 people redundant. In that respect at least, there is an argument that the market is working.

[Dr Poulter]

The market may be reflecting the damage to npower’s reputation, with some loss of jobs. None of us would like to see job losses in our constituencies, but clearly there are lessons for npower to learn. However, it is only one of the big six energy companies. As a group, their behaviour has consistently been not customer-focused, as the Which? survey bears out, and they have not made improved energy tariffs available to customers, particularly vulnerable customers. I do not believe that that is a good or healthy market, which is why Ofgem referred the issue to the CMA in the first place.

Crucially, the CMA appears to have given little or no thought to how we can engage people in the energy market. There are sticky customers—vulnerable customers, older people and those in the private rented sector—who do not engage, and we need to see that change.

In their draft legislation, the Government are looking at developing greater price visibility, compelling offers and quicker switching. Those ideas have a lot of merit and will encourage greater engagement in the market by some, but I am not sure all, customers. There is a compelling case for the CMA inquiry ensuring that the presentation of pricing is more engaging for customers. In particular, the switching process needs to be improved— both the time limit and how it works. The Government are looking at that in the draft legislation, which is welcome. We know that customers will switch, but the challenge is getting them more engaged in the market.

Today’s energy market is failing customers. Millions of people, many of whom are vulnerable and living on fixed incomes, are being punished for loyalty to their energy supplier, paying hundreds of pounds more for their energy than they should. The big six are using that money to hook in new customers with loss-leading tariffs, which is a cynical and poor way to treat customers that destroys market competition at customers’ expense. That is one of the key reasons why the big six retain their market position. The situation is worsened by too many complex rules and regulations and a lack of pricing transparency.

The CMA has a unique opportunity to deliver a new regulatory model based on simplicity and common sense, underpinned by clear, strong and practical principles that protect vulnerable customers and those on fixed incomes. In a refreshed energy market, with the energy companies showing genuine corporate responsibility, there is an opportunity to put customers at the centre of a market that is meant to serve them. Those who profit from exploiting their customers should have no choice but to change or face much more stringent financial and other penalties from regulators.

I would like to see three changes to the energy market coming from the CMA review, and I would be grateful for the Minister’s comments on them. We need to see fair pricing—energy suppliers’ prices should reflect underlying costs, and suppliers should be stopped from overcharging loyal customers or running loss-leading tariffs that damage competition and drive smaller suppliers out of the market. Regulations should be based on clear principles, with the priority being to avoid customer harm and to protect vulnerable customers and those on fixed and lower incomes, particularly those in fuel poverty. That leads to the key third principle of energy market reform: we must protect the vulnerable. We need a regulated, annually set social tariff that stops the most vulnerable customers and those in fuel poverty being exploited by the big six.

If we do not achieve those things, the energy market will become a contradiction in terms. Consumers, particularly the most vulnerable, deserve better. I look forward to hearing from my hon. Friend the Minister.

Energy Bill [Lords]

Debate between David Mowat and Dan Poulter

Monday 18th January 2016 Commons Chamber

[Dr Poulter]

My hon. Friend makes some important points. Does he agree that the challenges he has outlined in relation to the long-term viability of North sea oil and gas are further highlighted by the Iranian nuclear deal that has been signed, and the fact that that supply of oil will be coming on to the global market when prices are already depressed?

[David Mowat]

My hon. Friend is right. That development was probably already discounted in the market. Nevertheless, more oil will, of course, put the price down. Like the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell), I worked in the oil industry for a period of my life. During that time a phrase that was often used was that the solution to low oil prices is low oil prices. At some point there will be a market reaction, but it is a long way off. My hon. Friend is right—the Iranian thing does not look helpful.

I have two points on this part of the Bill. The first is one that the SNP may agree with. The new authority is to be based, apparently, in Aberdeen and London. I do not understand why any of it has to be in London. I leave it at that. We have a need in this country to have everything in London. If anything needs to be only in Aberdeen, it is the new authority.

The second point is whether the new authority is going to have issues with US competition law. I do not fully understand that, but my experience is that there could not even be a meeting between US oil companies in the same room without lawyers involved, because of their incredible concern about US anti-trust laws. I wonder how the authority will deal with that, but no doubt somebody cleverer than I am has thought about that.

We have spoken about CCS. Clause 80 is an interesting amendment proposed by the Opposition in the House of Lords. That clause says, broadly, that we should no longer take credits from the EU emissions trading scheme as part of the process. If we step back and think about that, it is the Opposition saying that they do not want a European solution to cap and trade. I made this point earlier and I think I am right. It is true that the European ETS system is useless; that is a different problem. It is completely useless because the European Parliament would not increase the cost of carbon as we have, for example, but that is no reason to give up on a European solution. It seems odd that the two more pro-European parties in this House—I think it is fair to say that—want to go away from a European solution to sort out emissions.

NHS Funding (Ageing)

Debate between David Mowat and Dan Poulter

Tuesday 25th March 2014 Westminster Hall

[The Parliamentary Under-Secretary of State for Health (Dr Daniel Poulter)]

It is a pleasure to serve under your chairmanship, Sir Edward, for what I believe is the second time. I congratulate my hon. Friend the Member for Suffolk Coastal (Dr Coffey) on securing today’s debate. As I am also an MP who represents Suffolk, which is a predominantly rural county, I recognise and support her interest in the allocation of NHS funding in areas with a high proportion of older people. I understand that she is meeting with colleagues at NHS England, who lead on clinical commissioning group funding allocations, to discuss the matter later in the month.

It is worth outlining at the outset that the funding formula allocations for this year mean that Suffolk and every other CCG is a winner. They have all seen an increase in their NHS funding. It is important to make that clear.

Before I go any further, I will pick up on some of the points made. I will not detain the Chamber by talking further on the issues raised by the hon. Member for Harrow West (Mr Thomas). His was a wide-ranging contribution, and I understand that he had to leave early, so I will write to him separately.

My right hon. Friend the Member for Banbury (Sir Tony Baldry) made an eloquent case, as he always does, for Oxfordshire and the issues faced in that county. He outlined in particular the challenges presented in rural areas by an ageing population.

My hon. Friend the Member for Warrington South (David Mowat), as ever, made a compelling case for his constituents and for the importance of changes in the funding formula being gradual. I think he was saying that it is important not to destabilise local health care economies. The funding formula was a political formula set by the previous Government, while the current formula is not political but set independently with no political interference. It is important, however, as has been outlined in the debate, that we move towards a new set of arrangements in a staged and managed manner. Otherwise, local economies will be destabilised and that could lead to unintended consequences and potential effects on local hospital services, something none of us wants to see.

The hon. Member for Strangford (Jim Shannon), as always, made a useful contribution on behalf of his constituents. I understand that Northern Ireland has the fastest ageing population in the UK, with the number of over-65s due to increase by 10.7% in the next few years. The only sustainable long-term strategy is one that engages actively with the population through not just the health sector, but the community and elsewhere, to ensure that the focus is on whole-person care in Northern Ireland, with communities working together with the NHS to deliver better care and dignity in care for older people. That was, I believe, outlined in the Budget and it is to the Northern Ireland Assembly’s credit that they highlighted the significance of an ageing population. That issue is a funding priority for them, and rightly so.

It is also important to highlight the context in which this discussion is taking place. My hon. Friend the Member for Suffolk Coastal was right to highlight the Nicholson challenge and to say that, to meet it, we need to transform radically the way we deliver care, in particular in rural areas and communities. She was also right to highlight that the £3.8 billion integration fund that the Government are setting up to join together and better integrate the primary care, secondary care, care in the community and adult social care delivered by local authorities—in her constituency, by Suffolk county council—is the way to do that. The focus is no longer on seeing a patient or a person within the silo of where they are cared for, but on joined-up, holistic care and ensuring that people with long-term conditions such as asthma, diabetes, chronic obstructive pulmonary disease and dementia are cared for in the right way throughout their care. The primary focus for that must be to deliver more care in the community and in people’s own homes. That is something we can all sign up to.

I turn briefly to the points raised by the hon. Member for Copeland (Mr Reed). I cannot let him get away with some of the things he threw into the debate today. He talked about fragmentation of services. Service fragmentation is shown no better than through the decisions on the use of private sector providers made by the previous Government. Let us not forget that they paid those providers 11% more than the NHS to provide the same service and care—something a Labour Government should have been ashamed of. This Government were certainly ashamed of that, which is why we put that right and ensured that the tariff is now set so that the private sector cannot be advantaged over NHS providers. We have also ensured that the tariff is much more focused on integrated care, rather than fragmented care.

The previous Government—understandably, to some degree—focused on reducing waiting lists, but unfortunately that did lead to fragmented services. For example, when an older person went in to have a hip replaced, the focus was purely on the operation and not necessarily on the rehabilitation and recovery that is so important after such operations. That led to fragmentation. That is why this Government and NHS England are looking at tariffs across primary and secondary care and the community to ensure that there is a genuine focus on holistic care for those who have operations, rather than just seeing people as a widget in the context of an operation, as the previous Government’s tariff setting did. We need to see such people, whether young or old, in the round and ensure that, importantly, there is a more holistic focus on rehabilitation and care.

I notice that although the hon. Gentleman said that he would get on to whether he supports an independently-set formula, he failed to do so. I am sure that all hon. Members find that disappointing. Not committing himself either way on that question suggests that he prefers the political, set formula encouraged and supported by the previous Government, which disadvantaged areas with ageing populations. I hope that at some point in the next few months when we have these debates, the Labour party will clarify its position and we will understand whether it does support an independently set formula or whether it would like to return to the political, fixed formula of which the previous Government were so fond. It would be useful for us to understand that.

[David Mowat]

I think the Minister is not doing do justice to the Opposition spokesman, who did semi-answer the question. He made it clear that he did not accept the independent, clinically driven formula. I think he called it obtuse. It is extremely interesting for, among others, my constituents and health care professionals in towns such as Warrington, who would have gained from a fairer formula, that the Labour party will not accept an independent, clinically driven formula as a basis for allocation. That very important point was made today.

[Dr Poulter]

If that was the case—I may have missed it—my hon. Friend has made an important clarification. It is important that we have a formula that is as far as possible beyond reproach and set according to clinical need—the needs of patients. It is important that a number of factors be taken into account when that formula is put in place, as has been articulated clearly by NHS England in the discussions about how the formula is set. Deprivation is a factor. It is important to note that one of the primary drivers for setting the funding formula is now age and the needs of an ageing population. That is an important factor to highlight in this debate.

I shall now deal with some of the points made by my hon. Friend the Member for Suffolk Coastal. She may be aware NHS England has undertaken a fundamental review of its approach to allocations, drawing on the expert advice of ACRA and other external groups. The review’s findings have resulted in a new formula that provides a more accurate model of health care need. Last December, NHS England published the allocations for 2014-15 and 2015-16, based on the new formula. That gives CCGs two years of certainty about what their funding allocation is, which we can all welcome.

I know that my hon. Friend is very busy and may not have had the time or opportunity to review in detail during the past three months the information relating to the new formula, but I hope I can reassure her on the direction of travel. The formula is putting us much more on the trajectory she wants to see. It is independently set and therefore has a lot of clinical merit.

Oral Answers to Questions

Debate between David Mowat and Dan Poulter

Tuesday 26th February 2013 Commons Chamber

[David Mowat (Warrington South) (Con)]

10. What assessment his Department has made of the effect of hospitals built under the private finance initiative on the work of neighbouring hospitals.

[The Parliamentary Under-Secretary of State for Health (Dr Daniel Poulter)]

This Government recognise that no hospital operates in isolation. We are providing seven NHS trusts that are facing difficulties as a result of PFI agreements with access to a £1.5 billion support fund to pay for extra costs accrued as a result of those damaging PFI schemes.

[David Mowat]

I apologise for my voice—perhaps I shall soon be interacting more directly with the NHS.

The Warrington and Halton hospital has independent trust status. It is busy and getting busier. The previous Government built a huge PFI hospital about 10 miles away at Whiston, which does not have the patient volumes to sustain the demands of the botched PFI deal. It is heavily loss-making. Will the Minister provide assurance that there will be no forced merger and that my constituents will not pay for a bad decision made a decade ago?

[Dr Poulter]

I thank my hon. Friend for his question. He is right to highlight the very damaging PFI scheme signed by the previous Government for the St Helens and Knowsley NHS Trust. The percentage of annual turnover going on PFI payments at the moment is 14.2%. That is unsustainable, which is why this Government are trying to sort out the mess created by the previous Government’s signing up to too many PFI agreements.