Energy Price Freeze

Debbie Abrahams Excerpts

Wednesday 6th November 2013 Commons Chamber

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I wish to start by putting the energy bill crisis into the context of the cost of living crisis. As we know, since May 2010 prices have risen faster than pay every month apart from this April. Why was April different? It was different because people on high incomes wanted to take advantage of the tax break that this Government had given them. We also know that one in four children live in poverty—in some wards in my constituency the figure is one in two—with the level set to increase in the next few years. By 2020, because of this Government’s policies, 1.1 million more children will be living in poverty. These are the choices that this Government have made.

Escalating heating bills are a major factor affecting costs to households and to businesses. Last year those costs increased by between 6% and 11%, and since this Government came to power an extra £300 has been added to energy bills. So why is this happening? Until the last few months, this country had a flatlining economy—we have had three years of it. Although the growth over the past few months is welcome, if we had had just 1% growth since 2010 we would have generated £335 billion more in the economy, with all the associated jobs and personal income that that would have brought. If we had had 2% growth, we would have generated £551 billion, and many economists believe that that will just not be recoverable.

Related to that situation has been the fact that pay has either gone down or been frozen. Some 400,000 more people are living below the living wage, bringing the number of those doing so up to 5.2 million. In Oldham, the level of weekly pay has fallen from £432 in 2010 to £426 in 2012, which is well below the regional and national averages. But this is not just about the Government’s mismanagement of the economy; they seem incapable of showing leadership and standing up for ordinary people against powerful vested interests. Too many big businesses have for too long been behaving unethically, whether we are talking about tax evasion or aggressive tax avoidance, cheating the Exchequer of up to £35 billion a year; large companies choosing to pay small businesses in their supply chain late—an estimated £30 billion is owed to small businesses in late payments; or the big six energy suppliers acting as a cartel, claiming that wholesale energy costs have driven up energy bills by 10.4% on average a year, whereas this actually costs them only 1.6% on average.

I tried to intervene on the Secretary of State to make the point that this is happening at a time when these companies are publishing profits of £3.7 billion, which is an increase of 73% since 2010. According to Ofgem’s latest electricity and gas supply market indicators, the typical domestic dual fuel bill now stands at £1,420 a year compared with the £1,105 that it was in May 2010. But what have this Government done, apart from tell us to put jumpers on? Governments set the tone for the culture of a society. They do so not only explicitly through their policies, but by what they imply. It is clear from this Government’s policies and actions exactly where their priorities lie, and it is not with ordinary people and with addressing the inequalities and poverty that exist in this society.

The effect is, as one would expect, fuel poverty. Its level had fallen in recent years, following the various energy-efficiency measures introduced under the last Labour Government, such as the Warm Front programme. But with rising energy bills swamping all that, even under the Government’s new definition of fuel poverty there are now 2.4 million people who are fuel poor, with the average household fuel poverty gap standing at £494.

The Fuel Poverty Advisory Group warned in 2010 that instead of fuel poverty being eliminated by 2016, more than 7 million households could be fuel poor. In Oldham East and Saddleworth, 16% of households—8,000—are fuel poor. To help them, Oldham council launched a collective energy switching scheme that enrolled 22,000 households. The council admits, however, that that is not enough—and it is not enough.

There are wider effects. Sir John Major has said that the real choice people face is whether to heat or eat. I am particularly concerned about this winter and its effect on the most vulnerable in society—older people and those who are ill or disabled. We know that on average 24,000 people, predominantly older people, will lose their lives every winter. Last year however, there was a 75% increase in the number of expected deaths, partly because of the increase in flu but also, according to statistical analysis, because of the extreme cold. It is inconceivable that heating costs will not play a part in the number of excess winter deaths we face, and it is just not good enough to say “Put a jumper on.” If we consider the issue in the context of the crisis in accident and emergency, we can see that there will be absolute meltdown.

It is not only the elderly and the vulnerable who are affected. A constituent wrote to me who is a teacher with a young son of four and twin girls of 20 weeks. She lives in private rented accommodation with her husband, but the landlord cannot afford to update the boiler. She is not eligible for anything. She said, “Last winter was a nightmare. I have newborn babies; what am I going to do? What will support me? The heating costs are bad enough.” I have also had constituents, similar to those mentioned by my hon. Friend the Member for Rochdale (Simon Danczuk), who have written to me about their constant battles with the energy companies. It is just not good enough.

[Mr Anderson]

My hon. Friend is making a very serious speech. Is it not true that when we talk about professionals such as teachers struggling to find the extra money, they are the same people who have had their pay frozen for almost three years? The Government are now talking about freezing their increments, too. They are losing out twice over: costs are going up and their wages are stagnant. That is a direct result of the Government’s policies.

[Debbie Abrahams]

I could not agree more with my hon. Friend. It is a double whammy and the Government are doing nothing to address it.

When the Minister replies, perhaps he can respond to the questions that my constituent has raised. What is she to do? She is working, so she cannot claim support to renew her boiler. Thousands of families up and down the country face equivalent problems and he must give a response on the difficulties mentioned by other Opposition Members.

I wholeheartedly support the pledges made by my right hon. Friend the Leader of the Opposition and my right hon. Friend the Member for Don Valley (Caroline Flint). We must overhaul the energy market, abolishing Ofgem and creating a tough new energy watchdog. We must require the energy companies to pool the power that they generate and we must require those companies to put all over-75s on the cheapest tariff.

--- Later in debate ---

[Luciana Berger]

I thank my hon. Friend for that intervention as I was just about to make that very point. I am delighted that the motion reinforces our policy that energy companies should automatically put over-75s on the cheapest tariff. That would assist 5,867 people in my constituency, and constituents of hon. Members across the House. Older customers are less able to benefit from direct debit deals because they are less likely to have access to a bank account, or access to the internet to get online deals. It is possible, perhaps through data-sharing, for energy companies to put the over-75s on to those cheapest tariffs. They could do that today and make a real difference to hundreds of thousands of pensioners up and down our country.

I am supporting the motion today because we need a tough new watchdog. We know that Ofgem is not doing a proper job because back in 2008 it was investigated, and 16 different areas identified.

[Debbie Abrahams]

Does my hon. Friend want to comment on what the Secretary of State said about Ofgem and that report? Does she think Ofgem is doing a good job?

[Luciana Berger]

I thank my hon. Friend for that contribution. Back in 2008, 16 areas were identified where Ofgem was not doing a proper job. The other year it was found that it had improved in only four of those 16 areas which, over that time, is frankly not good enough. When millions of our constituents and businesses up and down the country are suffering, we need a proper regulator with teeth, as well as the responsibility and ability to ensure that when there are reductions in wholesale costs, those reductions are passed on to consumers in way that is not done at the moment.

The Secretary of State was keen to talk about the green deal and the energy company obligation, which the Government have presented as a sort of quick-fix. Of course we need to do everything to ensure that we help millions of households across the country that do not have proper insulation in their homes, as that is one of the best ways to reduce bills. What the Government have proposed, however, and what they are doing on the green deal—well, the figures speak for themselves and we wait to see what will happen by the end of the year. The Minister said he would not be sleeping at night if 10,000 homes had not had a green deal package, but we wait to see the figures.

--- Later in debate ---

[Mr Anderson]

The regulator clearly admits not being fit for purpose. My hon. Friend the Member for Liverpool, Wavertree (Luciana Berger) mentioned the report from 2008. Ofgem said then that it had not been transparent. The actual gas wholesalers are not transparent. I do not know whether hon. Members are familiar with the Henry hub, which is a pipeline and hub in Louisiana that distributes the vast majority of natural gas in the United States. It is also used as the name for the pricing point for gas prices on the markets in New York. Those prices are set in dollars per million BTUs—British thermal units. In April 2012, 1 million BTUs cost $1.95. In June 2008, they cost $12.6. So the cost was six times lower in April 2012 than it was in June 2008. Even now, it is only $3.62 per 1 million BTUs, yet we are told it has to go up because the price has gone up. How can we trust people who manipulate the figures?

On 6 September 2013, the US Energy Information Administration stated:

“The 36% decrease in the average natural gas price paid by manufacturers between 2006 and 2010, from $7.59 to $4.83…was large enough”—

but—

“Since that survey was conducted, natural gas prices have fallen further.”

The people responsible for energy in the US are saying that prices have gone down, but we have been told that bills have had to go up so much because wholesale gas prices have gone up so much. Are we being misled? Is there a cartel? People say that there is not, but have we forgotten about OPEC? Have people forgotten what happened to us in the 1970s, when people literally had us over an oil barrel? Why should we expect more today from the same people?

The Prime Minister’s other deflection was about who created the big six. I will accept some responsibility, because I believe that my party did not do enough in government to control the energy market. Up until 2008, we did not get our act together and the huge price increase seemed to wake people up. The Conservative party, however, cannot get away from its history. It created the big six by its decision, in the 1980s and 1990s, to privatise the utilities industries. The Conservative Government started by dismantling the most technically advanced coal industry in the world, an industry that was leading the world on clean coal technology—could we not use some of that now? They then went and told Sid to buy shares in gas, electricity and water. They were actually using public money to bribe people to get themselves back into power. It worked very well for them, but the chickens are coming home to roost and the people feeling it are sitting at home at night wondering if they dare put the fire on. We have left billions of tonnes of coal under our feet to lie dormant, while we are being held to ransom by gas and oil companies. We have to bring energy into this country from the most unstable places in the world.

There has been a lot of talk in the past few years about carbon capture and storage. I had the pleasure of sitting in a Committee with the Minister and discussing how wonderful the green deal was going to be. That all led to nothing. The price freeze is welcome—it is a step in the right direction and people need it. What is also required is proper regulation by Ofgem, or whatever takes its place.

[Debbie Abrahams]

Does my hon. Friend agree with my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger) that it is scandalous that Ofgem has not delivered on all the criteria it was meant to? That also fits into what my right hon. Friend the Member for Doncaster North (Edward Miliband) has pledged.

[Mr Anderson]

I find it scandalous, but not surprising. Ofgem was never capable of dealing with people who have spent lifetimes manipulating oil and energy markets throughout the world. Why should the world be any different from how it has been for a hundred years? That is one of the reasons why the people who came before us in this House had the sense to nationalise the energy utility sector. It could then be run in the interests of the people of this country, and not for the people who do not live in this country. All they want to do is siphon money off from the purses and wallets of the people we represent to fund their own profits. While I am not surprised, I am concerned.

My party has a problem. I am clear that unless we have control this situation will go on and on. We might have a 20-month window when we freeze prices, which is welcome, but what happens after that? Will companies be able to put prices up? We have been told that the market will be reformed in a way that will stop them doing that. Well, I will believe that when it happens. This probably will not go down well with my hon. Friends on the Front Bench, but anybody who listened to “Question Time” last week—the real question time where sometimes people answer questions, not just deflect them—will know that when it was suggested that we nationalise these industries again there was a huge cheer from the people in the room. They realise that without proper ownership we will never control these people. The people who went before us knew what they were doing.

We are coming up to the 25th anniversary of the privatisation of the utilities, and look what we are left with after 25 years of them having it all their own way. We have no security of supply and instead are relying on some of the most unstable countries in the world for our basic energy needs. We have not followed up on developing new technologies—where we once led the world—not just in coal, but in wind and wave and other things; on those things, we should be much further advanced than we are. We have a national grid that the people running it accept is not fit for purpose, and we have just stood back and let the companies get on with it. They have not upskilled the work force or trained it to meet the challenges of the future, because they have been too busy siphoning the money off into profits, and at the end of the day, the people carrying the can are the customers, our constituents.

At the Labour party conference, our leader said repeatedly that this country deserved better. We do deserve better, and it is clear that only Labour will deliver it. I am probably wasting my time, given that the invisible men of the Liberal Democrats are not even here—and there are only four Members of the major governing party here—but unless we vote for the motion tonight, this will not happen before 2015, and unless the people of this country vote for us in 2015, it will not happen then either. Ours are serious solutions for serious times. So far, all we have heard from the so-called leader of this country have been attempts to deflect responsibility with jibes, cheap jokes and humour. This is no laughing matter. We need to realise that this is a matter of life and death for the people whom we represent. We realise that, and so do the parties on the Government Benches, but they will not face up to it.