Energy Rebates: Highlands and Islands

Debate between Drew Hendry and Kerry McCarthy

Wednesday 6th March 2024 Westminster Hall

[Kerry McCarthy (Bristol East) (Lab)]

It is a pleasure, as always, to see you in the Chair, Mr Paisley. I thank the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) for bringing forward this debate, as well as all four Members who have taken part and highlighted the specific circumstances that mean fuel poverty is even more of an issue in their constituencies than in the rest of the UK.

We know that overall the average fuel poverty gap increased by 66% between 2020 and 2023. We know that 3 million people are in debt to their energy providers. We know that the Government are struggling to roll out their home insulation scheme; we saw figures the other day showing that in the first eight months of the Great British insulation scheme, only 2,900 houses had benefited from measures meant to benefit 300,000.

Obviously, in areas such as the ones represented by the Members present, home insulation is even more of a challenge. That is partly because of the nature of the homes—they are older buildings that are difficult to retrofit—but also because there is a much smaller retrofit-skills market. The scattered nature of the housing and its isolation means that the economies of scale from rolling out an insulation scheme would be far more difficult to implement. Unless local skills and finance can be mobilised, the areas are unlikely to be first in the queue to benefit from national schemes.

All Members in this debate have spoken eloquently, partly about the conditions that mean that fuel poverty is more of an issue: the longer darker nights, the cold, and the rain that “comes straight at you”, as the right hon. Member for Orkney and Shetland (Mr Carmichael) described. The hon. Member for Inverness, Nairn, Badenoch and Strathspey said that a third of people are living in fuel poverty, and a fifth of people are living in extreme poverty.

One of the things that I am grappling with is the debate about prepayment meters. We know about forced disconnection, when people simply cannot afford to carry on paying for their electricity. What is more difficult to ascertain is the extent to which people, while not going to those extremes, are living in very cold conditions because they have cut back on paying bills. We know that when there is energy bill support, and when prices come down, their energy use will go up, which implies that they were using less energy than they needed to keep themselves warm. A point was made about the impact on the health of children, older people and people with disabilities. People with disabilities have higher energy costs.

[Drew Hendry]

I am grateful to the hon. Member for underlining that there are big impacts on health, as well as the point that where there is a rebate and some funding to help people, it has a measurable impact. The whole point of the proposal on the highland energy rebate is to put that in place. It is an excellent point to underline and I am grateful that she has brought it to the table.

[Kerry McCarthy]

I would say that we do need to look at this in the round. Hopefully, the Minister will enlighten us a bit more, but Ofgem did a call for input on standing charges, which I think closed at the end of January. As far as I know, the outcome has not yet been published, but I think that it is for the Minister to give us some more details about the balance between standing charges, unit prices, and indeed the discussions about the social tariff. We are certainly looking at all those things.

As the hon. Member for Inverness, Nairn, Badenoch and Strathspey has said, the fact that the highlands and islands lack access to the gas grid means that they are in a particularly difficult situation. It was mentioned that 62% of properties in mainland Scotland were off the gas grid; I think I have that figure too. However, some places are almost entirely off grid, as I think the hon. Member said. That obviously leads to significantly higher costs because oil is often then used as a fuel, or heating is entirely electric.

Again, we have very much taken on board the point about decoupling from gas prices, but this all means that those people do not benefit immediately when wholesale prices do come down. I have figures here from Lochalsh & Skye Housing Association, which says that households in the area pay an additional £1,000 a year on energy bills compared with an average-sized home in the rest of Scotland, amounting to a 76% premium. That is just one figure illustrating the problem.

The point was very well made that Scotland is home to a huge amount of old and new generation energy generation. As the right hon. Member for Ross, Skye and Lochaber (Ian Blackford) asked, where is the benefit for Scotland from that? I was reading through a report from Changeworks on fuel poverty in the region in advance of this debate, and there was a quote from an energy adviser that really stood out:

“The annoyance of being a 321% net generator of green electricity to the rest of the UK, all from renewables, yet we have no access to the polluting fuel which is mains gas and the price of energy is four times the cost.”

Again, we know that renewable energy is going to be way cheaper than fossil fuels, and that is one of the reasons why Labour is committed to the “clean power by 2030” mission—because we know that that will help bring down energy prices. However, I can appreciate how absolutely galling it is to be somewhere where so much energy is generated—I think the right hon. Member for Ross, Skye and Lochaber talked about an economic renaissance for the highlands and islands linked to renewable energy—yet to be last in the queue to actually benefit from that. We absolutely need to tackle that unfairness.

I do not know whether anyone wants to intervene on this, but my understanding is still that the SNP is opposed to a windfall tax within our proposal. It is telling that we have this debate today, with the upcoming Budget; I hope that we see firm action from the Chancellor on tackling fuel poverty and recognising many of the unfairnesses that have been raised. There is some talk— I think we have actually heard most of the Budget already, which is not normally the case—about movement on a windfall tax on oil and gas. Labour is calling for an increase in the rate on the energy profits levy to 78%—

[Drew Hendry]

Will the hon. Lady give way?

[Kerry McCarthy]

Sorry, I will just finish what I was saying. And we are calling for an extension of the sunset clause to 2029, which would raise billions of pounds for the green transition, cutting household energy bills in the process.

[Drew Hendry]

I apologise if I got it wrong, but I thought that the hon. Member was inviting an intervention on that subject.

[Kerry McCarthy]

I was, but I just wanted to get my bit in first, otherwise I would have lost track.

[Drew Hendry]

Yes, of course. The point—I think I have to underline it again and again in this debate, and I think that the hon. Lady understands this—is that there is already a windfall tax, and other taxes coming from the highlands and islands through renewable energy, and we are getting nothing back. We are already seeing the effect of money being taken out, and it is not going back into the pockets of the consumers who are being punished in this way.

[Kerry McCarthy]

To do justice to the issues that hon. Members are raising, I will not go down the path of having an argument about the windfall tax, because we want to focus specifically on fuel poverty in constituencies.

[Drew Hendry]

The hon. Lady did actually raise the issue of windfall tax, so to say that she does not want to debate it is rather perverse. Let me try to help her a bit: over the past two years, oil prices rose to extraordinary levels and, as a result, many oil production companies made excess profits and have engaged in large-scale share buybacks. It is pretty simple and straightforward: in effect, it is a return of capital to shareholders, but it is untaxed. The Labour Opposition and the Government missed the opportunity to recognise the one-off nature of the situation. A one-off tax on share buy-backs could have alleviated the impact of higher energy prices, but both the Government and the Opposition missed the chance.