Ed Davey
Main Page: Ed Davey (Liberal Democrat - Kingston and Surbiton)
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
Today, I am laying before the House the annual energy statement, alongside the statutory security of supply report. This coalition Government are putting in place the most coherent, sustainable energy policy the United Kingdom has ever had. We are creating one of the most competitive and attractive electricity investment markets in the world; improving our energy security and affordability; and boosting home-grown clean energy, and providing jobs and economic growth in the process.
This ambitious energy and climate change policy is vital so that Britain can meet our significant challenges. The coalition Government inherited from the previous Administration an energy future with a huge, multi-billion pound black hole at its heart, which was the result of years of underinvestment, dithering and delay. So this Government are having to take the tough decisions others ducked to make sure that Britain’s lights do stay on. Everything we are doing has to ensure that we drive investment into the system, not scare it off or freeze it out. But, as I will make clear in this statement, energy security must go hand in hand with affordability.
So let me set out the robust plans we have to deliver affordable energy security. To deal with the problem of tightening electricity margins up to 2018, the Government have been working with National Grid and Ofgem to develop existing safeguards, in order to have more electricity available for the grid at peak times, including, if needed, through the use of power plants currently mothballed. We are introducing to Britain a capacity market to ensure that we attract the investment we need in new power stations. The first capacity market auction will take place next year—for delivery from the winter of 2018. In addition to those measures to keep the lights on, Britain now has a long-term strategy encapsulated in the Energy Bill. Over the summer, we published draft strike prices for renewable electricity under contracts for difference. Detailed proposals for the implementation of electricity market reform were published this month.
The fruits of bringing this greater predictability and certainty to investment are already showing. Latest estimates suggest that at least £35 billion has been invested in new electricity infrastructure since 2010, and much more is in the pipeline. In the past 12 months alone, we have provided consent for seven major energy infrastructure applications worth about £20 billion, with the capacity to generate electricity for more than 6 million homes. That, of course, included last week’s announcement that we have reached key commercial terms with EDF for the first new nuclear power station in a generation at Hinkley Point C. And there is more: through the Energy Bill’s final investment decision enabling programme, 23 applications for 26 investment contracts are currently being evaluated by the Department of Energy and Climate Change for a broad range of renewable technologies, including onshore wind, offshore wind and biomass projects.
Even though British households pay some of the lowest prices for gas and electricity in Europe, such facts are scant comfort to those who have seen energy prices rise considerably over the past 10 years. The main driver of these energy price rises has been rising wholesale energy costs, not social and environmental policy. But apportioning blame is also scant comfort to people who are struggling to make ends meet. That is why we have been taking action to help people and businesses struggling with their energy bills.
We have already introduced some help that is immediate. Two million vulnerable households will get £135 off their energy bill this winter, thanks to the Government’s warm home discount. Around 12.5 million pensioners will get the winter fuel payment—£200 for the under-80s and £300 for those over 80. And of course there are cold weather payments if needed, which last year delivered over £146 million to help cut bills for the most vulnerable.
This year we have added to these policies with more direct action. Our new big energy saving network is training 500 volunteers to go out into communities to help people get better deals from energy suppliers and reduce their energy bills. These volunteers will be fully supported. We know how much people in communities across the country rely on the post office network, so we will be working with the Post Office to raise the profile of the big energy saving network so that it can make the links with the elderly, the vulnerable and other cost-conscious families trying to make their budgets go further.
We have also brought together in one place all the advice from across Government—from the Department of Energy and Climate Change and the Department for Work and Pensions—and from charities such as Age UK and Citizens Advice. Today, I am writing to all Members of this House with information about this new guide so that they can share it with their constituents, to make sure they are getting all the help to which they are entitled.
But while such immediate help for consumers and companies is important, we need more permanent change if we are to keep bills down not just for 20 months, but for 20 years and beyond. The energy company obligation is delivering such permanent change by modernising our housing stock and making it cheaper to heat our homes. Some 230,000 low income households will be warmer this winter, thanks to energy efficiency measures already installed through the ECO.
Energy efficiency remains a central part of our strategy both to help the fuel poor and to deliver permanent energy savings, but the permanent energy change that we seek also needs more competitive markets. This, however, is not something that the Opposition understand, for the previous Government created the big six, and their irresponsible policies would only help the big six. In contrast, from day one, this coalition Government have been determined to take on the big six for consumers—[Interruption.] The Opposition do not like it. We have been taking on the big six for consumers with the stick of competition. We have done a lot, but as I will set out, we need to do more.
Already our measures to deregulate have seen a major growth in the number and size of independent energy suppliers. In 2011 there was no independent supplier with a customer base greater than 50,000. Now we have three independents with more than 100,000 customers, and a further eight companies have entered the market since May 2010. We have delivered a doubling of the number of independent energy suppliers offering competition to Labour’s big six, and already hundreds of thousands of people are benefiting, but we are doing more. We are backing Ofgem’s reforms to help consumers get better deals—market reforms to make sure that customers are on the lowest tariffs for them, are moved off poor value dead tariffs, and no longer face the complex web of hundreds of tariffs designed more to confuse than to compete.
Our reforms are ensuring that people are given clearer, more personalised information on their energy bills so that they can compare tariffs and switch more easily to save money. We are also promoting collective switching, particularly aiming to ensure that the more vulnerable get to benefit from the best deals on the market. Today, however, I am challenging the industry to deliver faster switching. If someone can change their broadband provider with a few clicks of the mouse, why should they not be able to do the same with their gas or electric? It should not take five weeks for the change to take effect; 24-hour switching is my ambition.
First Utility has been out in front with its target of reaching 24-hour switching. Now E.ON, SSE and Scottish Power and a number of independent suppliers, including Good Energy, Ovo and Co-operative Energy, have accepted my invitation for urgent talks over the next month on how we can dramatically speed up switching.
I want five-week switching to come down to one-week switching, and then I want to go faster still. Let us be clear that it will not happen overnight. We could announce 24-hour switching and then suppliers would say, “Okay, we’ll put up our prices to cover the cost”. That cannot and will not happen. I want to talk to suppliers who can agree to and deliver a plan to speed up the process of switching down to 24 hours, without increasing bills.
Companies that are interested in making things easier for customers to switch are invited to come and see me, in addition to the others that have already agreed to do so. Our preference is to do that jointly with suppliers, building on the good work of Energy UK, which has raised ambition on the issue across the industry, but we are prepared to take action, if required, to compel those who drag their heels.
I have also written to energy companies about direct debits. I share concerns that they might be holding on to significant credit balances when customers have overpaid through direct debits. I expect all suppliers to make every effort to return money to customers with closed accounts. I accept that that sometimes will not be possible, but, when it is not, my view is that credits should be applied directly to help the fuel poor and other vulnerable customers. The Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), will meet energy suppliers next week to discuss that question and that of the level of credit balances that energy companies are holding on to.
In our debates on energy bills, many have understandably asked whether competition is working in our energy markets. Although the coalition has already done a great deal to promote competition, we are ready to do more. As the Prime Minister announced last week, we now propose to introduce annual reviews of the state of competition in the energy markets. The first of the new competition assessments will be delivered by spring next year. The assessment will be undertaken by Ofgem, working closely with the Office of Fair Trading and the Competition and Markets Authority when it comes into being.
The exact metrics for the review will be a matter for the regulators but I will ask them to look in depth and across the energy sector at profits and prices, barriers to entry and consumer engagement. The Government have equipped the regulators with strong powers to deal with unjustified barriers to competition. If abuses are found they must be addressed.
We also need to ensure that the energy suppliers are open and honest about the profits they are making, so I have also asked Ofgem to deliver, again by spring next year, a full report on the transparency of the financial accounts of the energy companies and ways in which that could be improved, building on the work already completed by accountancy firm BDO.
Ofgem will publish its consultation on financial transparency this afternoon, but the public need to know that our reforms will have teeth and that companies that play outside the rules will be penalised and fined. With our Energy Bill, Ofgem now has powers to require energy companies to make compensation payments directly to consumers who have lost out, but today I want to go further. That is why I intend to consult on the introduction of criminal sanctions for anyone found manipulating energy markets and harming the consumer interest.
Ours is a record of delivery and action. As set out in the annual energy statement—[Interruption.]
Mr Speaker
Order. The remainder of the statement must be heard. Matters are not greatly assisted by the fact that the statement is over-long. Frankly, a blue pencil should have been deployed, as statements should take no longer than 10 minutes, but we must let the Secretary of State trundle towards his conclusion.
Mr Davey
I am concluding, Mr Speaker.
As set out in the annual statement, the Government are acting to help those most in need to keep warm this winter and ensure that everybody gets a better deal from the energy companies. We are also acting to deal with Labour’s energy crunch, filling in its energy black hole with home-grown energy and bringing stability and certainty to drive investment. That is our strategy for affordable energy security, a strategy to power the country, protect the planet and help keep bills affordable. I commend the statement to the House.
Caroline Flint (Don Valley) (Lab)
Oh, dearie me. A coherent energy policy? I must say that I feel for the Secretary of State, because he has to deal with the fact that the Government’s energy policy is increasingly being made at the Dispatch Box by a Prime Minister who has completely lost the plot. I would like to thank him for early notice of his statement and its contents—on Sky, on the BBC’s “Watchdog” last night and on the “Today” programme this morning.
The Secretary of State was meant to be making the annual energy statement, but what we heard today would be better described as the annual excuses statement—excuses for why people’s bills are going up, excuses for why Ministers are doing nothing about it, and excuses for why each and every time they give the companies what they want and leave consumers to foot the bill.
The energy companies blame social and environmental obligations for their price rises, so the Prime Minister promises to roll them back. Threatened by Labour’s price freeze and plans to reset the energy market, suddenly the companies are clamouring for another review to kick the issue into the long grass. On Tuesday the chief executive of E.ON told the Energy and Climate Change Committee:
“I believe that we need to have a thorough Competition Commission investigation, supported by Ofgem, because they are the experts—they have been in the industry for a decade.”
Lo and behold, today the Government have given the energy companies what they want: their review, led by the very same regulator that has let them get away with ripping people off in the past.
Then, today, we heard the big announcement: encouraging people to switch from one company to another. But the truth is that no amount of tinkering with tariffs, telling people to shop around or, as the Prime Minister suggested, wearing another jumper will solve the real problem with Britain’s energy market, because even the cheapest tariff in a rigged market will still not be a good deal.
The proof of how weak and spineless the Government are when it comes to standing up to the energy companies is that only three weeks ago the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker) told the BBC that the idea that Government levies were responsible for bill rises was “nonsense”, but now, boxed in by a Prime Minister who is not willing to stand up to the energy companies and a Chancellor who is actively courting climate change deniers in his own party, the Government say that the levies are to blame.
It is interesting that the Secretary of State conspicuously did not talk about rolling back the green levies in his statement. The truth, of course, is that any obligation to support clean energy or improve energy efficiency must deliver value for money, but how is it possible that social and environmental obligations that, according to his Department’s own figures, make up only £113 of people’s bills can account for price rises of £400? Will he tell us which of the levies, 60% of which were introduced by his Government, he now wants to scrap? Is it the energy company obligation, at £47, the warm home discount, at £11, or the carbon price floor, at £5? Does he accept that, whether it is bill payers or taxpayers who pay, unless he deals with the way people have been overcharged, he is letting the companies off the hook?
As for the annual competition review, I remind the Secretary of State that there have been 17 investigations into the energy market since 2001. If he is today announcing the launch of a new annual review of competition in the energy market, what on earth has Ofgem been doing all this time, and what does he expect it to find out in the next 10 months that it has not discovered in the past 10 years? The last review by Ofgem, to which he gave his full backing, finished only in June. This is what he said at the time:
“I welcome the continued progress of Ofgem’s reform of the retail energy market…That’s why I am backing Ofgem’s reforms”.
The Minister of State, the right hon. Member for Bexhill and Battle, was even more effusive. He said:
“It’s encouraging that Ofgem is going full-speed ahead with these crucial reforms to the retail energy market.”
Today we hear the Secretary of State saying that the Government will build on the BDO recommendations on reform of the energy market, but the truth is that Ofgem ignored BDO’s recommendations and the Government stood by it.
We do not need another review: we need action. We need action to freeze people’s energy bills and fix this broken market; to break up the big six by ring-fencing their generation from supply; to put an end to secret deals and require all electricity to be bought and sold via an open exchange; and to create a tough new watchdog with the power to force these companies to cut their prices when wholesale costs fall—which, I am pleased to tell the House, is now supported by the hon. Member for Westmorland and Lonsdale (Tim Farron), the president of the Secretary of State’s party. That is what real action looks like.
Today’s annual energy statement could not have come at a more important time. Energy prices are rising three times faster under this Government than the previous one, bills are up by £300, and the latest price rises will add another £100 this winter. For people in fuel poverty, the gap between their bills and what they can afford is at an all-time high, but for the companies, the mark-up between wholesale costs and the prices they charge grows ever wider. Fifty-seven households have had work done under the green deal and 7,000 workers in the insulation industry have lost their jobs. Investment in clean energy has halved, and the Government have legislated to stop any future Administration setting a decarbonisation target until 2016 at the earliest. Last year, the UK’s carbon emissions increased by more than any other country in the EU.
That is the Government’s record. As we learned from Age UK on Monday, what it means in reality is that 3 million elderly people will not be able to stay warm in their homes this winter. They want their bills frozen, not their homes. The question they want answered today is simple: why are this Government too weak to stand up to the energy companies?
Mr Davey
I thank the right hon. Lady for her response, in which there was clearly not a single apology to Britain for the black hole in energy security that the Labour party left from when it was in government.
The right hon. Lady talked a lot about Ofgem. Who created Ofgem? The Labour party. Who reformed Ofgem to make it stronger? The Leader of the Opposition. In attacking Ofgem, an independent regulator, she is attacking her own party leader’s record. We are reforming Ofgem; we have given it new, stronger powers. We have created a new regime in the Energy Bill, and there is new leadership. I believe that Ofgem can deliver on competition where the previous Government failed to deliver. We are not kicking competition into the long grass. I am determined that this first annual energy assessment on competition should deliver by next spring.
The right hon. Lady talked about levies. The question is whether levies should be on bills or on taxes, and we are looking at that issue. Interestingly, she referred to a figure of “only” £112. I hope that people noticed that, because her energy freeze will deliver only £120—we think. So she is admitting that her energy freeze is actually the con that we have been saying it is all along.
I end by thanking the right hon. Lady for tabling an Opposition day debate on energy bills for next Wednesday. I want to debate energy with her every day of the week, because I want to expose Labour’s appalling record on energy and its appalling policies, which would feed into the big six that it created. Labour’s big six need competition, and we are up for it—Labour is not.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
I am delighted to welcome the fact that the Government support the Energy and Climate Change Committee’s call for a competition review and to press Ofgem on greater implementation of BDO’s recommendations on transparency. Will the Secretary of State confirm that the market reforms will end the exploitation of the inertia on the part of customers on existing tariffs, which leaves them languishing on uncompetitive tariffs?
Mr Davey
I thank my hon. Friend and the other members of the Committee, whose reports and their grilling of energy company executives have played a very important role and have showed the role that this House can play in holding those companies to account. Our competition reforms are aimed at helping people and preventing them from being stranded. That is what Ofgem’s reforms will do, but the Labour party does not support them, because it is so critical of Ofgem. I assure my hon. Friend that our aim is always to help the fuel-poor.
Glenda Jackson (Hampstead and Kilburn) (Lab)
As the stick of competition, to which the Secretary of State referred, shattered at the first blow into less than matchwood, will he at least now attack the energy companies and dispel their canard that bills are rising so astronomically due to green taxes?
Mr Davey
I agree with the hon. Lady that the evidence that green taxes are pushing up bills is quite weak. They are a cost to bill payers—we should not deny that and we should look at it as we are looking at every single part of the bill.
I regret that the hon. Lady attacks competition, because that is the way we are going to deliver. People are benefiting from competition and making huge savings on their energy bills now, and the Labour party ought to support it.
Mr Tim Yeo (South Suffolk) (Con)
I congratulate the Secretary of State on an excellent statement. Will he now consider the introduction of rising block tariffs to protect the poorest consumers against future price rises without any cost to the taxpayer and without damage to the prospects of urgently needed investment in new capacity, which would be the inevitable consequence of a Government-imposed price freeze?
Mr Davey
I am grateful for the hon. Gentleman’s question, which he also asked me when I appeared before the Select Committee a few months ago. I am afraid that my answer is the same: although rising block tariffs are attractive on one level, the problem is that low-income, high-user households—basically, large families on low incomes—would be hit by their introduction, so I do not think they would be the right move. We need to insulate their homes—that is the real way to help them get their energy bills down.
Frank Dobson (Holborn and St Pancras) (Lab)
Surely the Secretary of State understands that the public believe that the energy companies are giving Ministers, civil servants and Ofgem the runaround. Would it not be better if the public and pressure groups had access to the figures that clearly mesmerise officialdom and we applied freedom of information to the energy companies?
Mr Davey
I agree with the right hon. Gentleman on transparency. That is what I announced in my statement and it is why Ofgem is publishing a consultation on greater financial transparency—so that the accounts of these big energy companies can be properly exposed and we can see from where the profits are made.
Mr Christopher Chope (Christchurch) (Con)
VAT on household energy bills is now yielding the Government about £500 million a year. Why do the Government not abolish VAT on household bills? If they say that they cannot because the European Union will not allow it, is that not another good reason for leaving the EU?
Caroline Lucas (Brighton, Pavilion) (Green)
If the Secretary of State was serious about helping the fuel-poor, surely he would be acting to make the UK housing stock far more energy efficient, which is the only permanent way to bring down bills, according to the Child Poverty Action Group, Age UK and many other charities that support proposals to recycle carbon tax revenue into energy efficiency. That would bring nine out of 10 homes out of fuel poverty, quadruple carbon savings and create up to 200,000 jobs, so why does the Secretary of State continue to ignore calls for such ambitious policies?
Charles Hendry (Wealden) (Con)
Does my right hon. Friend agree that some of the levies on energy bills are particularly regressive, such as the energy company obligation and feed-in tariffs? People on low incomes still pay the charges, but it is often people who have much higher incomes who get the benefits. Will the review ensure that these important policies are delivered in the fairest way possible?
Mr Davey
My hon. Friend makes an important point. As we review the levies, and indeed the whole market, we must ensure that they work for the fuel-poor and the less well-off. I am particularly concerned, whether in the levy review or elsewhere, to ensure that we make competitive markets work for the poorest and most vulnerable in our society.
Dr Alan Whitehead (Southampton, Test) (Lab)
The Secretary of State will know that yesterday one of his Ministers said that all green and energy efficiency levies would be included in the review and another Minister said that the renewables obligation, contracts for difference and feed-in tariffs would not be included. Which of his Ministers was right, and will he be writing to the Prime Minister to warn him of the perils of making up policy on the spot?
Mr Tobias Ellwood (Bournemouth East) (Con)
There has been an awful lot of talk about the six big energy companies. Will the Secretary of State explain how we ended up with six companies dominating the market, and what is being done to bring more suppliers into the market?
Mr Davey
My hon. Friend asks a very good question. In 2000, we had 17 energy companies—three generators and 14 suppliers. After that lot on the Opposition Benches reformed the market, we were down to six. We are increasing the number of suppliers and generators because our competition policy is working. We are prepared to go even further. That lot would reduce competition.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
Despite the Secretary of State’s unwillingness to take on the big six energy companies, will he commend the work of Labour-led Cardiff and Vale of Glamorgan councils, which have launched a collective buying scheme to bring down the prices offered by the energy companies, with the support of the Welsh Labour Government?
Mr Davey
I am glad that those councils have caught up. It was this Secretary of State and this Government who introduced the idea of collective switching and purchasing through “Cheaper Energy Together”. In all their 13 years, the Labour Government did not use the principle of co-operative purchasing to help people. They betrayed their principles of collective action—what a shower!
Sir Tony Baldry (Banbury) (Con)
When John Wakeham and I privatised the electricity industry in 1990, we left more than 20 distributors and suppliers of energy. How is it that we ended up with only six after the last Government? Is it not a bit rich for the Labour party, which opposed privatisation and competition at that time, to call for the breaking up of the big six that it created?
Mr Davey
My hon. Friend is absolutely right. The reason I want to keep debating energy is that the more that people understand the history of what has happened, the more they will realise that it is the Opposition who are to blame for the problems. They left a black hole in our energy supplies and prevented competition. We are putting that right.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
The public will be appalled by the Secretary of State’s statement. He has announced a review that will report next spring and that will focus on switching. As my right hon. Friend the Member for Don Valley (Caroline Flint) said, the best deal in a broken market is not a good deal. When is the Secretary of State going to help the millions of households and businesses that will be crippled by huge energy bills this winter?
Mr Davey
The hon. Lady and her hon. Friends are doing their constituents a huge disservice. The truth is that people can get much better deals by switching. I was on “Watchdog” last night with Anne Robinson. She used three viewers as examples. They might have been the constituents of Opposition Members. One had saved £240, another had saved £400 and one person had saved nearly £950. The Labour party wants to take that option away from people.
Mr David Heath (Somerton and Frome) (LD)
I was pleased to hear the Secretary of State mention credit balances. Is it not clear that many people who pay in instalments are overcharged as a matter of policy by the utility companies? It is bad enough banking with the banks, but I do not understand why we have to provide interest-free credit to electricity companies as well. When will the Secretary of State bring that to an end?
Yvonne Fovargue (Makerfield) (Lab)
As stated yesterday, the recent uSwitch survey showed that on one or more occasion last winter 75% of people turned the heating off. As those over 75 are particularly vulnerable and least likely to switch supplier, will the Secretary of State back Labour’s plans to put all over-75s on the cheapest tariff automatically?
Mr Davey
We want to do more for those people, which is why we are pushing switching and collective switching. The hon. Lady has a distinguished record as a former chief executive of a citizens advice bureau, and I hope she would welcome our proposal for the big energy saving network. That is now operating, with the help of Citizens Advice, Age UK and National Energy Action, to help people in communities up and down the country get better deals.
David Mowat (Warrington South) (Con)
During her remarks, the shadow Secretary of State said that she believes “secret deals” were being done by the big six—those were her words. If she has that evidence, it is clearly a cartel, which would result in a fine equal to turnover. In the case of Centrica that would be £20 billion. Does the Secretary of State agree that the right hon. Lady should put that evidence to the House—if she has it—and get that £20 billion?
Mr Davey
My hon. Friend makes a good point. If the right hon. Lady knows of secret information, I hope she will confirm that she has told the competition regulator so that it can be investigated. She is not very good at answering questions. I have asked her and her right hon. Friend the Leader of the Opposition questions about their policy, but we have not had a single answer.
Mr Mike Weir (Angus) (SNP)
The Secretary of State made the point that much of the increase in bills has been due to increases in the wholesale price, particularly of gas, but many commentators, including Ofgem, have questioned whether that has been the case over the past year. What powers does the Secretary of State or Ofgem have to tackle the big six energy companies about their most recent rises, which do not appear to be driven by wholesale price increases?
Mr Davey
First, over a period it is absolutely clear that the wholesale price of gas has been pushing up bills, but there is a debate about whether in the past 12 months wholesale gas prices have gone up. If the hon. Gentleman looks at Ofgem’s clarification and the press release on its website, he will find that, depending on how it is measured, it admits that the wholesale price of gas has gone up by more than 8%.
Chris Heaton-Harris (Daventry) (Con)
Will the Secretary of State acknowledge that for too long his Department’s drive for expensive and intermittent renewable energy has driven thousands into fuel poverty? Indeed, a former Secretary of State—now the Leader of the Opposition—said in this place in January 2010 that
“yes, there are upward pressures on energy bills, and that makes life difficult for people, including those in fuel poverty, but it is right that we go down the low-carbon energy route.”—[Official Report, 7 January 2010; Vol. 503, c. 269.]
Surely now is the right time to examine the level of green taxes and how they adversely affect the fuel poor.
Mr Davey
I have to say that the hon. Gentleman is wrong about that. We are trying to ensure we help the fuel-poor with effective policies such as the energy company obligation and the warm home discount. The support in the Energy Bill for green energy is a small part of the Bill—as he knows—and it is helping the country prepare for the ever higher gas prices we are likely to see. If we do not go green, there is a real danger we will expose consumers and our economy to high, volatile fossil fuel prices in the future. We must have a more sensible and diverse energy mix.
Ian Lavery (Wansbeck) (Lab)
Not one measure in the Secretary of State’s statement will prevent the projected death of 24,000 people as a result of the hikes in the cost of energy. At the same there is emerging evidence, which has been mentioned, about a hidden, protected, secret sort of cartel trading scheme whereby companies are buying from each other at above the wholesale price, and knocking that cost on to consumers. Can the Secretary of State say, hand on heart, that he is not aware of anything like that happening and putting a huge burden on the consumer with huge prices from the energy companies?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. We must have very short questions in order to try to get everyone in. I understand how important this is.
Mr Davey
We are helping the fuel-poor and people who have problems with their bills through, for example, the warm home discount, which takes £135 off bills. We are publishing a guide. I hope that the hon. Gentleman and every right hon. and hon. Member will use it to help their constituents.
The hon. Gentleman talks about the wholesale market. The previous Government did nothing on competition in the wholesale market; they made it worse. This Government, with Ofgem, which Labour Members want to abolish, are taking measures to ensure there is far more competition in the wholesale markets. That is how to prevent the big six and their vertical integration models from pushing up prices. The Liberal Democrats are the party of competition; Labour is the party of the big six.
Christopher Pincher (Tamworth) (Con)
Most observers agree that, thanks to the previous Government’s omissions, we must invest a great deal of money—£110 billion—very quickly in our energy infrastructure. We want much of that money to come from the private sector. Does my right hon. Friend agree that another consequence of a price freeze would be that such private investment dried up, leaving the poor old taxpayer to foot the bill?
Mr Davey
My hon. Friend is absolutely right. There are many problems with Labour’s energy price freeze. First, it is a con because it will not help consumers. Secondly, it undermines competition. However, worst of all in many ways, it will kill the investment that we need both for green energy and to keep the lights on. People in the energy industry are saying that. The Leader of the Opposition has done one of the most irresponsible things ever done by a Leader of the Opposition.
Angela Smith (Penistone and Stocksbridge) (Lab)
The Secretary of State has nothing to say today about the Chancellor’s imposition of the carbon floor price, which undermines the competitiveness of our energy-intensive industries, which are crucial to the development of a low-carbon economy. When will the Secretary of State bring urgency to bear before more jobs are lost?
Mr Davey
My right hon. Friend the Chancellor produced, some time ago, a £250 million package to help energy-intensive industries—[Interruption.] The hon. Lady should wait. The first part of that package— £113 million—has state aid clearance, and £12.5 million has been paid out after 60 applications were received.
Dan Byles (North Warwickshire) (Con)
Does my right hon. Friend agree that Labour’s dishonest price con would help Labour’s big six by hitting smaller companies the hardest? It is not supported by the managing director of Ovo, and the chief executive of First Utility, which has just 195,000 customers, has said:
“Bluntly, it could put me under”.
Mr Dennis Skinner (Bolsover) (Lab)
The utilities were privatised between 20 and 25 years ago. They have had all that time to prove that they really are in competition, but plenty of evidence, especially the price increases in the past few weeks, indicates that they are acting like a cartel. That is what the Secretary of State ought to examine. That is why the public want us to have a price freeze when Labour gets in. He should have adopted that today. Secondly—this will almost certainly happen—he should take those utilities back into public ownership.
Mr Davey
Hon. Members were waiting for the hon. Gentleman’s last statement. I do not understand where Labour Members are on competition. They complain about cartels, but do not want to promote competition. If they are worried about cartels, they should join us and support what the Government have announced today.
Sarah Newton (Truro and Falmouth) (Con)
The Government have done far more than the previous one for the people living in the greatest fuel poverty—those living off the mains gas grid. Will my right hon. Friend confirm that, as the reviews continue, we will continue remorselessly to pursue the aim of helping people in the greatest fuel poverty, including those who live off the mains gas grid?
Mr Davey
My hon. Friend is absolutely right. The previous Government failed to do anything for people who are off the gas grid. The Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Sevenoaks (Michael Fallon), has been taking action, talking to the companies and the people affected. There is a new code of conduct and there are regular working group meetings. That is action, unlike what Labour did.
Barbara Keeley (Worsley and Eccles South) (Lab)
May I take the Secretary of State back to the issue of older people, who we know do not switch suppliers? I met a constituent recently who was dreading his winter quarter bill of £300 for a bedsit. Labour plans to put all older people on to the cheapest tariff and to freeze prices. What will the Secretary of State do for those older people?
Mr Davey
The hon. Lady should catch up, because the Ofgem reforms and the retail market review will put those people on the lowest tariff, which was backed by my right hon. Friend the Prime Minister. But she does have a point: some people are not using switching—not using the markets and competition—and some of them are older people. I take that issue seriously, and it is one of the reasons we want to use co-operative principles for collective switching, and why I am using third sector voluntary groups such as Citizens Advice and Age UK to deliver face-to-face advice to help exactly the people she is talking about.
Tessa Munt (Wells) (LD)
The Secretary of State will agree that the best way to cut fuel bills is to improve the energy efficiency of households. Would he care to comment on the fact that two of the big six energy companies—npower and British Gas—blame the energy company obligation, a measure designed to help the fuel-poor to cut their bills, for the increase in prices next year?
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
When can we expect the full roll-out of the mitigation policies in relation to the Chancellor’s imposition of the carbon floor price? I say that because this week Tata has announced 500 job losses and Sembcorp, near my constituency in Teesside, has also announced redundancies. When can we expect those mitigation policies to be rolled out in full?
Mr Davey
We are having a lot of applications in for the £113 million package that we announced. Money is now going out of the door to help those companies. Another part of our package for energy-intensive industries is still subject to state aid clearance in Brussels. We are trying to secure that as quickly as possible so that we can get the money to those companies.
Mr Peter Bone (Wellingborough) (Con)
The Secretary of State could become a national hero today if he announced the abolition of his Department so we would have no more silly green regulations and the savings could be passed on to the consumer.
Jim Fitzpatrick (Poplar and Limehouse) (Lab)
While anything that the Secretary of State can do to rein in the energy companies is welcome, surely the only reason that we have this recent welcome flurry of activity is Labour’s energy freeze policy and the alternative suggestion from a former Prime Minister of a windfall tax.
Mr Davey
That is not correct. The energy statement is made every year, and we have been working on many of the proposals that have been announced today for many years. We are having to put right Labour’s failure. I am delighted that the Labour party has woken up to the fact that energy bills are hurting people, but Labour Members have not yet apologised for creating the big six, which have caused most of the problem.
Julian Sturdy (York Outer) (Con)
My constituents will welcome the Secretary of State’s determination to ensure rigorous competition in the marketplace. However, the biggest driver of price volatility will be the security of our energy market—or lack of it. Can he assure me that the proper investment is going into that area? The lack of investment by the Labour party over 13 years in power is a disgrace.
Mr Davey
My hon. Friend makes an important point. If we do not have sufficient capacity, not only will that threaten security, but it will cause spikes in prices. The underinvestment that we had under the last Government has caused this problem, and we are having to run to catch up. We have seen £35 billion of investment since 2010, and we have a lot more investment in the pipeline. We have announced Hinkley Point C as the first nuclear reactor in a generation, but we will have to do more to put right the mess that Labour left us.
Nick Smith (Blaenau Gwent) (Lab)
Wholesale costs are up 1.7% but bills for households will go up by 9%. Does the Secretary of State think that is fair?
Charlie Elphicke (Dover) (Con)
Does the Secretary of State accept that Labour’s big six are an oligopoly that appears to operate as a price-fixing cartel? Is it not time to break them up?
Mr Davey
We would not be asking for an annual competition assessment if we were not concerned to ensure more competition. My hon. Friend is right: we have faced a market created by the last Government who created the big six. We have already taken many measures that are working to get independent suppliers and generators, and our liquidity reforms with Ofgem will make a big difference in the forward markets.
Bill Esterson (Sefton Central) (Lab)
A disabled pensioner couple summed up the views of many of my constituents when they told me that they pay more than £3,000 a year in electricity and gas, which will go up by another £300 after the price rises. My constituents would benefit from Labour’s plan to put all over-75s on the cheapest tariff. Why will the Secretary of State not do that?
Mr Davey
Again, the Labour party needs to understand that the retail market review in the Energy Bill will get people on the lowest tariff. I hope that the hon. Gentleman will read the new guide that we have published today because it is aimed at those who, like him, are talking to people like his constituents to ensure that they get the help that they need.
Martin Vickers (Cleethorpes) (Con)
My constituents will welcome the possible introduction of criminal sanctions if any company is found guilty of rigging the market. Although I note Ofgem’s powers of compensation, would it not be more appropriate if consumers were to benefit if price or market rigging were found? Can we take action to ensure that such money goes back into consumers’ bank accounts?
Mr Davey
The measures in the Energy Bill provide that, if an individual consumer has been done wrong by an energy company—mistreated or subjected to any other malpractice—the fine, thanks to this Government, will go to the consumer. The criminal sanctions I have referred to today would be applied for systemic anti-competitive practices or manipulation of the energy markets by an individual or company.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
One of my constituents took the Government’s advice and switched his supplier, but he found that after the initial attractive offer he was paying twice as much a month for his energy bills. He cannot switch back to his previous supplier because he is tied in to a minimum 12-month contract. He is now paying £60 a month more than he was previously. What will the Secretary of State’s proposals do for situations such as that?
Eric Ollerenshaw (Lancaster and Fleetwood) (Con)
I congratulate the Secretary of State on finally making the decision on nuclear, something that we have not had for 13 years. We still have subsidies for wind and biomass, we are an island country, and there are practical schemes for tidal barrages on the Severn and on the Wyre at Fleetwood in my constituency, so is there any chance of a national policy on tidal energy?
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Wales is a net exporter of electricity—we are an electricity-generation-rich nation. Can the Secretary of State explain, therefore, why electricity prices in my country are among the highest in the British state?
Mr Davey
We are pleased that Wales is making such a contribution. That is good for the Welsh economy and Welsh jobs, and I hope that the hon. Gentleman supports the fact that our policies are ensuring that the energy industry is strong in Wales. He knows that distribution costs vary across the country, and it is not only Wales that has higher-than-average bills. Ofgem keeps the issue under review.
Duncan Hames (Chippenham) (LD)
I am glad that the Secretary of State wants to make it easier for people to switch electricity suppliers. Will he also look at obstacles to switching suppliers of heating oil and LPG, which include tactics such as bills stating that tanks and cages outside homes do not belong to bill payers, which are designed to deter customers from switching? That would help those living off the gas grid.
Nic Dakin (Scunthorpe) (Lab)
Despite the Secretary of State’s answers to earlier questions, Tata Steel, which announced 340 job losses in my constituency this week, is still saying that the carbon floor tax, unilaterally introduced by the Chancellor, is putting its businesses in the UK at risk, compared with the rest of the European Union. Will the Secretary of Sate commit to working with the Business Secretary and the Chancellor to bring action forward rapidly to address that issue?
Damian Hinds (East Hampshire) (Con)
There are 10,000 off-grid homes in my constituency. What more can be done to help my constituents to access good deals, including the ability to buy at times of year when the kerosene price is at least a bit lower?
Mr Davey
There are two things that can help my hon. Friend’s constituents and others like them; first, collective purchase. There are heating oil clubs where people come together to get better deals, and that is helping some people. Secondly, I hope that he is aware of the campaign being pushed by the Minister of State, my right hon. Friend the Member for Sevenoaks, to get people to buy early. If people buy early, they can get heating oil much cheaper than if they buy it later, in the winter months.
Mr Philip Hollobone (Kettering) (Con)
Will the Secretary of State consider legislating for the re-separation of electricity generation from electricity supply, and gas production from gas supply, so that consumers can get the transparency they need in their bills, something Ofgem is not able to achieve?
Mr Davey
My hon. Friend should look at the Ofgem proposals, which have backing in the Energy Bill. They will make a big difference to those markets. I am keen to ensure that forward markets—not just the day-ahead market, but the six-month, 12-month and the two-year market—are far more liquid. We have an illiquid market and that is where the big six can exercise market power. The Government and Ofgem are tackling that. The Opposition are not.
Glyn Davies (Montgomeryshire) (Con)
Will the Secretary of State explain how it can be fair that the most vulnerable people in my constituency in mid-Wales have to pay through their noses for their energy to provide massive subsidies to giant wealthy wind farm developers who, alongside National Grid, are intent on destroying the environment and landscape of mid-Wales where we live?
Mr Davey
My hon. Friend knows that I cannot comment on the planning application that relates to a lot of what he has just said. If he has constituents who have problems with fuel poverty, we have introduced the warm home discount, which takes £135 off their bills, and there are other measures. He should look at the guide that we are publishing today.
Mr Robert Buckland (South Swindon) (Con)
On fuel poverty, is it not the case that, in the five years between 2004 and 2009, an extra 2.8 million people fell into fuel poverty? What further measures can we take to deal with this scourge of modern society?
Mr Davey
My hon. Friend is absolutely right. We are keenly focused on tackling fuel poverty through the energy company obligation and the warm home discount. Within the energy company obligation, there is the affordable warmth scheme. I have some good news: it is working an awful lot better than the warm front policy the Labour party introduced. It is more cost-effective and it is rolling out more quickly.
Robert Halfon (Harlow) (Con)
As well as high energy bills, motorists continue to face high petrol bills, on average paying £1,700 a year to fill up the family car. Will my right hon. Friend extend the principles of competition transparency and extend criminal sanctions for manipulating the market to the oil companies that are ripping off the consumer, despite the excellent Government freeze in petrol duty?
Mr Davey
My hon. Friend invites me to trespass on to the responsibilities of another Secretary of State. I think that would be ill-advised, particularly as the Secretary of State for Transport has just taken his place on the Front Bench. My hon. Friend the Member for Harlow (Robert Halfon) may wish to ask him that question, but he is right to say that the Government have an excellent record on this.
Oliver Colvile (Plymouth, Sutton and Devonport) (Con)
For 13 years, the Labour Government did little to deal with standing charges. Will my right hon. Friend tell me what impact standing charges have on pensioner fuel poverty, and will he ensure that they are included in the review?
Mr Davey
Ofgem’s retail market review looked at different approaches to standing charges, and there is a debate on them. However, there is a danger that taking them away will lead to a single unit price model—which some people think is better—that will hit low-income households that are high energy users. We therefore need to consider the full distributional consequences. We will keep these matters under review, as we should.
Neil Carmichael (Stroud) (Con)
Increasing capacity is definitely the key to this problem. Ensuring, through the Energy Bill, that we have more competition is part of the story, but would that not be reinforced by strengthening the role of a single energy market to attract more investment and drive even more competition into the system?
Mr Davey
My hon. Friend is right. My right hon. Friend the Prime Minister has been pushing the case for the single energy market at the European Council. Recently, I hosted a meeting of energy Ministers from northern European countries—the northern European energy dialogue—to consider ways to have better interconnections in the northern European grid, which will encourage downward pressure on prices.
Bob Blackman (Harrow East) (Con)
Thank you for the exercise, Mr Deputy Speaker. In the next five years, many of our power stations will close, therefore reducing supply. Will my right hon. Friend confirm how many power stations were built under the previous Government, and how many he plans to build under this Government?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Last, but certainly not least, I call Andrew Percy.
Andrew Percy (Brigg and Goole) (Con)
I can only assume it is because I am from Yorkshire, Mr Deputy Speaker.
The Energy Secretary rightly pointed out how Labour’s non-freeze con would cost jobs and investment. I and my hon. Friend the Member for Cleethorpes (Martin Vickers) heard from a local business—a big employer. We were told, with specific reference to Labour’s price freeze con, that it has lost a major contract. This is costing jobs and investment. The uncertainty that has been created in our energy market will not do anything for bills, but it will cost jobs.
Mr Davey
My hon. Friend is absolutely right, but I have to tell him that it is actually worse than he suggests. People from around the world who want to invest in the UK, and who welcome our strong policies to attract investment, are now worried because of the extra uncertainty created by the Leader of the Opposition and the Labour party. The Opposition’s policies are not just a con for consumers; they will undermine competition and are hitting investment and the economy. They should be ashamed.