Ed Davey
Main Page: Ed Davey (Liberal Democrat - Kingston and Surbiton)(12 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint
I will come to Ofgem a little later in my speech, and I will give way to the Secretary of State.
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
The right hon. Lady has said quite a few times that the energy market has changed. Will she confirm that in 1998 there were 14 of the original 15 incumbent energy suppliers, but that by the time Labour had finished, that had gone down to six? That is a consolidation in the energy market, does she not agree?
Caroline Flint
That is exactly why this needs to be tackled. [Laughter.] No, this is being grown-up. I will repeat what I said earlier. I hope that the Secretary of State heard me. I do not know what commitments the Liberal Democrats made in their manifesto, but the manifesto that was written by the current leader of the Labour party before the last election said that we needed to reform the energy market more radically. That is why we have said that we need to have a pool into which all the energy would be put to open up the market. We were very clear about that.
When Ofgem, as the independent authority, took away some of the price caps, it was meant to be on the basis that the market was mature and competitive enough to be able to deliver the consumer choice and competition that were needed. That did not happen and the number of companies reduced. As I said earlier, when we look at the situation regionally, rather than just nationally, we see that it is not only about the big six—in some areas, there is just the big one.
As I said, it was our manifesto commitment radically to reform the market and we have been saying every single day since that we need to do more. Unfortunately, the Government have not been open to that discussion. I hope that that will change when we debate the Energy Bill in a few weeks’ time. We have propositions in today’s motion that, having listened to the comments today, I hope will get support from a number of quarters, and not only from our own Back Benchers.
Caroline Flint
I have allowed a lot of interventions. The Secretary of State is asking me to give way, and I think that I should give way to him.
Mr Davey
The right hon. Lady is right to say that there has not been enough competition in the generating side of the market. I will speak at length about competition in both the retail and wholesale markets. The real issue between us is whether we should get extra competition in the generating side of the market through pooling, as she proposes, or by addressing the lack of liquidity in forward markets, which we believe to be the real problem. Does she want to compare and contrast her approach with ours?
Caroline Flint
There are a number of measures that we should be taking to tackle liquidity. Pooling is just one of them. No doubt there will be more detail on this matter and amendments when we have the Energy Bill before us. The issue is that there has so far been nothing in the draft Bill that has opened up that debate. After the Prime Minister’s intervention last week, it seems that we will now have a debate that he did not realise would be forthcoming.
I will make some progress, because we only have a half day on this issue and colleagues from across the House want to speak. We had a shambles last week. We can only imagine that civil servants in the Department of Energy and Climate Change are now busily rewriting the Energy Bill. If they are, we would like to put forward three clear proposals that could help people now and reform the energy market for the long term.
First, there is a proposal on which we think there could be action for this winter if there were unity, but on which we might need to legislate somewhere down the road. It is about targeting help where it is needed most this winter, not next year once the Energy Bill is passed, and not when Ofgem finishes the consultation on its retail market review in 2013. We all know that something like 75% to 80% of people are not on the cheapest tariff. Ministers say that it is possible for households to save up to £200 on an annual dual fuel bill by shopping around for the lowest online rate, but elderly customers, who are most vulnerable to the cold weather and most at risk of fuel poverty, are among the least likely to be able to access the cheapest online deals or switch supplier.
In January, we proposed putting all over-75s on the cheapest gas and electricity tariff, which would save as many as 4 million pensioners, including 8,000 in the Secretary of State’s constituency, as much as £200 a year. The Government rejected our proposals, but given what the Prime Minister said last week, their position now appears to have changed somewhat. If it genuinely has, can we come together today and send this clear message to the energy companies: “If you don’t put the over-75s on the cheapest tariff, we will legislate to make you”? That is our first proposal—getting help to those who need it most.
We also want everyone to benefit from a more competitive and responsible energy market, which means wholesale reform to how energy is bought and sold, so here is our second proposal. At the moment, no one really knows what the true cost of energy is. The way the market is structured means that the big energy companies are allowed to generate power, buy it from themselves and sell it on to the public. We believe that has to end. The time has come to open up the energy giants’ books, stop the backroom deals and end the secret contracts. If the energy companies were forced to sell the power that they generate into an open and transparent pool, anyone could bid to retail energy. That would encourage new entrants, increase competition and ease the upward pressure on prices.
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
There is, I hope, at least one thing that unites the House today: we all want to help people struggling with high gas and electricity bills. When times are tough, as they are now, and when salaries are not going up yet prices of many essential things are, the last thing that people need is higher energy bills. We have heard the same worry in debates on the cost of petrol and diesel, for very similar reasons. When the price of oil and gas on world markets goes up, that pressure can feed through, and not just in the UK. The challenge to many Governments around the world is how to react to that and how they can insulate their people and their economy from fossil fuel price hikes. I therefore welcome the debate, which enables the House to test out the Government’s policies and the Opposition’s ideas.
I will set out the Government’s policies on how we believe we can best help people and businesses facing higher bills. Our position is based on a combination of ever-tougher competition and ever-more ambitious efforts to save energy. I wish to spend some time talking about that competition today.
Huw Irranca-Davies (Ogmore) (Lab)
I thank the Secretary of State for giving way so early in his contribution. We face the start of a cold snap at the end of this week, and it seems that we are getting into the cold spell of the year. Will he consider, if not legislating immediately, at least calling in the big six and the other energy providers to encourage them, instruct them and demand that they provide the lowest-cost tariff to the over-75s? We know that the older someone is, the more vulnerable they will be to cold snaps this winter, not just next winter.
Mr Davey
The hon. Gentleman may or may not be aware that two or three months into my time as Secretary of State, I secured a voluntary agreement with the big six. I negotiated it and the Deputy Prime Minister announced it in April. The agreement was clear, and the big six are delivering on the promise that they made to us, namely that they will inform people of the lowest tariff available to them. That was part of a range of policies that we have agreed with them. For example, there is the warm home discount, which is often forgotten in this debate. We legislated for that discount to ensure that £130 will go straight off the bills of the poorest pensioners and the poorest people in our society next year. That will get money to the people who really need it and help them with their energy bills.
Caroline Flint
The Secretary of State may not be aware of this, but I understand that research by Which? indicated that there was some confusion about whether energy companies were informing customers of the cheapest deal when they wrote to them.
The point about the over-75s is that a lot of them are not online. If they ring up their energy company and say, “I would like to go on to that online deal”, the company will say that they cannot do it in that way. We say that not being online should not be a barrier to that group of people getting access to the cheapest deal.
Mr Davey
I could not agree more. We want to ensure that all people can access the best deal, whether or not they are online. That is why we have made the voluntary agreement and why we will take powers in the forthcoming Energy Bill to ensure that the energy companies have to inform people of the best deal. As I will set out in my speech, we want to enable the poorest people in our society to get the help they need, whether about switching, competition or energy insulation.
Mr Frank Field (Birkenhead) (Lab)
Every poorer person will be pleased with the subsidy that other consumers are paying for, but probably 75% of them are paying way beyond what they need to pay. It is great for people to have a subsidy, but that subsidy may, and probably will, be wiped out by the price that those companies charge. There is a redistribution—quite rightly—from those of us who are better off to those who are less well off, but the money goes not towards extra fuel for our poorest constituents, but into the coffers of the companies. Surely there needs to be a combination with the current subsidy. I would go slightly further than my right hon. and hon. Friends on the Opposition Front Bench and ask why the scheme should not be extended to the 4 million people who are eligible for cold weather payments, which we know is the most vulnerable group.
Mr Davey
One thing I agreed during my negotiations with the big six earlier this year, ahead of this winter, was that those who receive a reduction in their bill through the warm home discount should also receive the most attention from energy suppliers to help them get the best available tariff. Those people were the priority then and they are the priority now.
What I find slightly odd about Labour’s position, is that they seem to be worried only about the over-75s. What about everyone else facing high energy bills? What about families who are struggling with those bills? The Government’s policies will address everybody.
Mr Davey
I want to make some progress and I will come to my hon. Friend in a moment.
The Government’s policies combine competition and energy saving, and are designed to drive a wedge between rising world energy prices and the actual energy bills that people in Britain end up paying—decoupling bills from prices. If tougher competition in the UK energy market can take the sting out of rising global prices, and if we can help people to use less energy, we can cushion families and firms.
In many ways, the right hon. Member for Don Valley (Caroline Flint) said similar things. She talked about competition and markets, and it was music to my ears. Where we differ, however, is in the detail, and in particular on how to generate the extra competition that she spoke eloquently about.
Mr Davey
No, I will make some progress and give way later.
When we consider competition in energy markets we must first separate the retail side from the wholesale side—or, in English, competition between firms that sell us energy and firms that generate it. There are, of course, many firms that are on both sides of that equation, just as there are policies to help on both sides.
Let me start with the suppliers, the retailers, the people to whom we pay our bills. We can drive competition in that area in two ways: by making the existing bigger players compete harder to keep their customers, and by enabling more firms to enter the market and grow—something on which the right hon. for Don Valley is rightly keen. Switching has, of course, been the principal way to do both those things, which is what happened by letting customers choose their supplier and forcing energy firms to offer better deals to hold on to customers. As the right hon. Lady rightly said, however, that system has not been working well, and switching has not helped the vast majority of people. In fact, it seems that switching rates have been falling just as prices have been rising. That bizarre finding seems to be the result of the virtual end of door-to-door selling which, as many of us know from our constituencies, was fraught with problems. Switching rates appear to have fallen in recent years, and those who continue to switch tend to be the internet savvy and often the more well-heeled, leaving the less well-heeled and less internet savvy out in the cold when it comes to getting the best deals. In essence, it is a very unsatisfactory situation.
The policy question is about whether we can promote competition through switching in other ways, or whether switching is simply not the way to go. I am delighted because it seems from the right hon. Lady’s speech that the Opposition have not given up on switching, and in fact they seem to be copying some of the policies that I first articulated. Since imitation is the sincerest form of flattery, I take that as a vote of confidence. For Members who may have missed that neat trick from the Labour Front Benches let me explain. The right hon. Lady talked about her commitment to collective switching, and she mentioned Labour’s “Switch Together” scheme. The Government support collective switching because we talked about it first. The right hon. Lady knows that the Labour party could have pushed that idea when in government, but it did not, and it was this coalition Government who got it.
When I was the Minister responsible for consumer affairs in the Department for Business, Innovation and Skills, I pushed the general notion of rekindling the spirit of co-operatives into different retail markets, and, in league with Co-operatives UK, I set up a competition to stimulate new ways for communities to buy things together. From that work, energy co-operatives emerged as among the most promising. That is because gas and electricity are pretty similar commodities, wherever and however people buy them, and because people are increasingly worried about their bills. However—this is crucial—many people find it too difficult to switch by themselves, and I have been addressing that problem. I have talked to a range of people about the barriers to collective switching, and I have got people—including Ofgem, the large energy companies or firms, and organisations capable of managing a collective switch—round the table where we have made real progress.
Regulatory barriers are coming down. Last week, we announced a nationwide competition, in which the winners, whether councils, community groups or others, will get seedcorn cash to help them get going. That national competition—not a Labour party competition—is called Cheaper Energy Together and should provide a boost to awareness and learning that could transform switching in the UK, not least because winning bids must show how they would involve the fuel poor in their schemes. If we are to see a revolution in switching, with collective switching, I will insist that the most vulnerable are part of that.
It must be slightly embarrassing for Labour Members to know that when they were in government, they did not use the collective principle to help people. It must be embarrassing because, although the current Government are using the collective principle to tackle fuel poverty, the Labour party did not. I am, however, genuinely delighted that the Opposition have overcome their embarrassment, and taken up our idea.
Caroline Flint
The Labour party was the first political party in British history to organise a collective switch, and we are proud of that. I am not sure what the Liberal Democrats might do—it might be switch apart rather than switch together.
Switching is important, but in truth, even if people are on the cheapest deal, it does not mean they are getting value for money and a fair price. That is why we must reform the way the energy market works, and tackle the dominance by certain companies that both generate and retail energy, and do not let others get a look in.
Mr Davey
I will come to that point, but I remind the right hon. Lady of what I said earlier. Under her party’s watch, the number of companies went down from 14 to six, so we will not listen to her too much.
Let me finish my point about switching and say why it is so important. Collective switching got going in Belgium just a few years ago, and we have now seen live, successful switches in the UK. The Consumers Association, Which?, led the way with its big switch earlier this year. It helped around 37,000 people to switch and get an average saving of £223. We have also seen smaller collective switches. Last month, South Lakeland district council was the first local authority to run a switch. Nearly 1,700 residents signed up, and early indications suggest savings that range between £60 and more than £200.
Yesterday, Oldham borough council launched its collective switch, which I attended. I did not see the right hon. Lady; perhaps she was there at a different time. That collective switch is called “Power to the people”—Citizen Smith would be proud. A wide variety of schemes are coming forward. I am already aware of eight, perhaps the most ambitious of which is Cornwall Together, in which the council, the NHS, the trade union Unison, the third sector, and St Austell brewery have come together to organise a collective switch.
Collective switching is not a silver bullet or panacea, but people are seeing how it can be part of the answer and reform the way switching works. Switching does not just force existing firms to compete more vigorously to keep customers, it enables smaller suppliers to grow their customer base faster. We know that customer inertia can be a barrier to competition, preventing new companies from getting market share, and collective switching reduces that barrier for small companies. Co-operative Energy won the big switch organised by Which?, and doubled its customer base overnight. Collective switching has the potential to be part of the way that we reshape the market.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)
I welcome the Secretary of State’s comments on community involvement and the role of local councils. Many years ago, I wrote to all six energy companies to seek their support. Some were aggressive in their replies, not least Scottish Power. Only one—Scottish and Southern—wished to participate in such a scheme. What is the Secretary of State’s experience of energy companies’ reactions to the important role he mentioned?
Mr Davey
I am disappointed that the companies did not respond more positively when the right hon. Gentleman wrote to them. I do not know whether he wrote to them under the Labour Government. The voluntary agreement that we managed to secure after two months in office included a commitment from the energy companies to take part in collective switching proposals. A number of the big six took part in the Which? big switch, so we have moved them and we are changing things.
A key barrier to collective switching and ordinary switching is individual bill payers getting their details to the third party organising the switch, the switching website or the new supplier. In principle, that should not be too difficult, but the evidence we have found is that it is. We have therefore started to tackle the problem. In the voluntary agreement I negotiated, the companies agreed to put quick response codes on their bills. “What,” hon. Members may ask, “is a QR code?” It is a bit like a bar code, but smarter. The QR code should make it much easier for people to provide the energy bill details needed for switching, reducing the effort people must make. I can announce to the House that we will be consulting on that and a number of other measures when we introduce our consultation on consumer bills.
The Government have gone further to reduce the hassle of switching. In another consumer project I worked on at the Department for Business, Innovation and Skills—it was called midata—we looked at other ways in which an energy company could provide the customer with the customer’s data, for example, in easy-to-use or easy-to-pass-on electronic formats. BIS is now consulting on making the midata ideas a statutory requirement. Coupled with the work of Ofgem on simpler bills, that could be a huge catalyst for helping many more people to switch.
Caroline Flint
An Energy Bill is imminent. We have had pre-legislative scrutiny, white papers and impact assessment. Has it only just occurred to Department of Energy and Climate Change Ministers, including the Secretary of State, who took over at the beginning of this year, that they should consult in the run-up to a Bill that will be before the House in the next few weeks? Labour did a lot in government: 1.7 million fewer people were in fuel poverty when it left government.
Mr Davey
Unlike the right hon. Lady, this Government respect an independent regulator. Ofgem has been conducting its retail market review. It would have been completely inappropriate for the Government to publish a consultation before the independent regulator completed its work. She ought to know that. We have been waiting for the report and got it just last week. As a result of receiving that work, we will take forward our consultation, which will enable us to introduce new legislation in the Energy Bill.
Simon Hughes
My right hon. Friend is right to say that it would have been nonsense not to wait for the review to finish before considering what to do, but given that it is also absolute nonsense to propose abolishing a regulator, only to create a new regulator to do a similar sort of job—namely, regulating the energy industry—will he take the much more sensible option of being open to suggestions from wherever they might come as to ways in which we might toughen the role of the current regulator to make it much more responsive to the needs of our constituents?
Mr Davey
My right hon. Friend is absolutely right, and the Government will do just that.
I pay tribute to Ofgem’s work on simpler bills—the retail market review it published last week is an excellent piece of work. I was disappointed that the right hon. Lady did not welcome it. That might be something to do with her policy of abolishing Ofgem, which I should like briefly to turn to as my right hon. Friend has raised the matter. We want to understand why the right hon. Lady believes that abolishing one regulator and replacing it with another will make any difference whatever. That is a recipe for delay and chaos and for letting the energy companies get away with it while the Opposition mess around moving the deckchairs on the Titanic.
The right hon. Lady said that the previous Government looked at whether reforming the regulator would be better than creating a new one. She gave no good reason why we could not reform Ofgem, which is what this Government will do. It is interesting that she wants to spend time rebranding public bodies. I do not know whether she believes that is a good use of taxpayers’ money, but, interestingly, her proposal is rather disloyal to the Leader of the Opposition. I am sure she is aware that he legislated on Ofgem when he was Secretary of State for Energy and Climate Change. Just two and a half years ago, he told the House that the purpose of his Energy Act 2010 was
“precisely to strengthen Ofgem's powers in a number of respects and to make it a more proactive regulator”—[Official Report, 7 January 2010; Vol. 503, c. 254.]
Will the right hon. Lady come to the Dispatch Box to suggest that the Leader of the Opposition got it wrong just two and a half years ago?
Caroline Flint
The truth is that despite the powers extended to Ofgem, it is just not delivering. Four years ago, it found that some customers were charged different prices for using the same amount of energy, but energy companies are still using predatory pricing tactics. In 2008, Ofgem launched reforms aimed at supporting consumers, but according to its own evaluation in 2011, the reforms failed. In August 2011, Ofgem commissioned BDO to undertake a forensic investigation of how to improve transparency in the market, but by May 2012, Ofgem had quietly dropped six of the eight BDO recommendations and varied the remaining two. It is not delivering; it is not doing its job.
Mr Davey
I am extremely disappointed that that is the position the right hon. Lady has arrived at. The retail market review last week proposed to reduce and limit the number of tariffs from the massive number that exist at the moment to just four core tariffs. As my right hon. Friend reminded us, he asked the Labour Government to do that just a few years ago, but they did not. Ofgem has acted where the Labour Government did not. It will help to tackle the complexity of multiple tariffs, which have not helped transparency or competition. I am delighted that its plans allow collective switch tariffs to emerge in addition to the core tariffs. I am surprised that she wants to abolish a body that, under this Government, is taking the action that the previous Government failed to take.
Gloria De Piero (Ashfield) (Lab)
I have a very simple question for the right hon. Gentleman. Will the Government require energy companies to put all over-75s on the cheapest tariff, which is important in the run-up to Christmas?
Mr Davey
I am grateful for the hon. Lady’s question, not least because I was born in her constituency. The Government want to help everybody. I am surprised that she is focusing simply on over-75s. We are acting on over-75s and on all poorer pensioners, because the warm home discount will get £130 off their bills this year. We are taking action.
Mr Davey
No, I will not.
I have spent some time on competition in the retail energy markets, but the right hon. Lady spoke a lot about competition in the generating markets, to which I should like to turn. She made a great deal of wanting to reintroduce a pool to the UK and said it was in the Labour party’s manifesto. She did not really explain why, having abolished the pool in the UK in 2001, Labour wanted to re-introduce it. The Labour Energy and Competitiveness in Europe Minister at the time of pool abolition—she is now the noble Baroness Liddell—told the House:
“There is no question but that the electricity pool has distorted the market”.—[Official Report, 15 June 2000; Vol. 351, c. 1102.]
When the NAO reported on the old pool in 2003, it said that the
“the centralised arrangements of the pool carried with them a risk that some generators could manipulate the market and Ofgem consider that this risk materialised through much of the period of the Pool’s operation to the detriment of consumer interests.”
Indeed, many at the time believed that the pool was leading to higher and not lower energy bills. That is why the Government are not convinced by the Opposition’s policy.
Dr Whitehead
Is the Secretary of State aware of how many generators there were at the time of the abolition of the pool compared with the number of retailers, and does he think those circumstances have been replicated today? It would help the debate, if he could provide some numbers.
Mr Davey
I have already. I explained how the number of companies fell under Labour. [Hon. Members: “How many?”] There were two: PowerGen and National Power. Yes, I do know. And there are more generators now, so going back to the pool, when there were fewer generators, would be a bit odd.
Ian Swales (Redcar) (LD)
Does the Secretary of State think that the previous Government’s abolition of the public interest test on takeovers was one reason for the consolidation of the energy market?
Mr Davey
As a former competition Minister, I know that commenting on such things is extremely tricky, so I will leave that to my right hon. Friend the Secretary of State for Business, Innovation and Skills.
I want to focus on how we can tackle the real problems in the energy market. I think we all agree that there is a problem with competition. When we compare the UK market with overseas markets, a key observation is that our markets are less liquid, especially the forward market. To get a good, competitive energy market, firms should be buying and selling electricity three, six, 12 or more months in advance. If they were, and if we had greater market liquidity, it would be much easier for independent generators to enter the market and invest in generating plant confident that they can buy and sell electricity and manage their risks.
Faced with the might of large, vertically integrated energy companies supplying their own power, independent generators find it difficult to enter the market. I think we agree on that. The question is: how do we deal with that? The problem is with liquidity, not the pool. The right hon. Member for Don Valley, who clearly dislikes Ofgem, has not noticed that by threatening to take action Ofgem has, to some extent, already made progress on liquidity. As we have seen, large volumes are now being traded in the day-ahead market, which has improved price transparency. That is a good start.
Mr Davey
No, there is more than one company, as I think the right hon. Lady will find when she checks.
Ofgem and my Department agree that Ofgem’s voluntary measures do not go far enough, so the latter has been working on a mandatory auction, and it might well be that some sort of trading obligation is the way forward. I can confirm that I have been considering this matter intensively for some time, and that I will bring forward measures in the Bill to address it. At the very least, these will be back-stop powers in case the efforts of industry and the regulator prove insufficient. If we are to drive competition in the generating side of the electricity market to help people and firms struggling with bills, we must address the liquidity problem. The right hon. Lady’s policy does not do that, but ours does.
Barry Gardiner
I agree that it is important to free up liquidity in the forward market—I do not think there is any dispute about that—and, in so far as that goes, it is welcome. However, it will not address the problem of a generator such as Centrica making a £1.5 billion profit while the retail prices of British Gas rise, because it will not be possible to see that integration—it can show its profits where it likes. The Secretary of State talked about integration of the retail and wholesale market. He has to address that, otherwise we will not resolve this problem.
Mr Davey
The only way to ensure greater transparency is to have more liquid markets. That is the whole point of liquid markets. Without them, people cannot compete or buy and sell their electricity forward, and we cannot ensure price transparency. That ought to be welcomed by the Labour party. I would be worried if it set its face against greater liquidity in the forward market. It would be a very odd position to take.
I have spent some time explaining how our various policies will promote fiercer competition and help cut bills, and I have set out why I think the Opposition’s proposals are fundamentally flawed.
Gavin Shuker
What social obligations does the Secretary of State feel would be appropriate to place on energy companies?
Mr Davey
We put quite a lot of social obligations on them now. As the hon. Gentleman knows, the carbon emissions reduction target scheme is being replaced by the energy company obligation, which will include the affordable warmth target to help people in fuel poverty, and the carbon saving community obligation to help areas in fuel poverty. There will also be measures promoting solid wall insulation and other things needed to take energy efficiency policies forward.
Andrew George (St Ives) (LD)
I strongly support all the initiatives that my right hon. Friend is describing, but the energy companies are not addressing all the issues of fuel poverty. Those on the margins of credit still cannot take advantage of direct debit deals, while the falling block tariff also works against their interests, and there are a number of other measures where those companies are not addressing fuel poverty. Does he agree that they could do much more to help those in fuel poverty?
Mr Davey
That is one reason why I welcome the retail market review, and we will be consulting on measures and introducing them in the Energy Bill to address those and other matters.
I want to talk briefly about energy efficiency, although I am conscious of the time. On the social tariffs that the hon. Member for Luton South (Gavin Shuker) talked about, and on energy policy across the board, it is important to see both sides of the equation and understand what we are trying to do with clean energy. By 2020, all the energy and renewable subsidies combined will add £95 to bills, yet those same bills will fall by about £220, thanks to the energy efficiency improvements that our policies are bringing forward. Our green policies are about lower bills, not higher, and we are delivering on that.
As part of our policy, energy efficiency is a top priority for me, because reducing demand saves consumers money now and reduces future pressure on supply. I will give just two examples, although I am sure that Members across the House could give many more. Installing solid wall insulation saves about £270 a year on the average energy bill, while upgrading an old, G-rated boiler to a modern, A-rated one can save £200 a year. Our flagship green deal scheme will make it easier for home owners and tenants to improve the energy efficiency of their homes, paying for those improvements through savings on their fuel bills. I hope that we will continue to have the Opposition’s support, but I am not always clear where they stand on the green deal.
Caroline Flint
The Deputy Prime Minister suggested in a speech last year that he would tackle the concern about the high interest rate associated with the green deal. It will be about 7%. What progress has been made on bringing it down?
Mr Davey
The right hon. Lady ought to know that the interest rate will be set by the market, and that this—I say this as a former consumer credit Minister—is actually a great deal. People would not get an unsecured loan of this nature at the interest rates in the green deal. This will be a good deal for people on low incomes, in particular.
Through the energy company obligation, which will be introduced with the green deal, we will be requiring energy companies to provide an estimated £1.3 billion a year of support for energy efficiency in our homes, including £540 million to fund energy saving improvements to around 230,000 low-income, vulnerable households every year. Whether through reform of the energy market, our proposals on competition or our proposals on energy efficiency, the Government are taking action that will help people with their bills. The right hon. Lady’s motion would do the reverse—her proposals are fundamentally flawed—so I invite my colleagues to join me in the Division Lobby and defeat her motion.