South Western Railway Franchise
Ed Davey Excerpts(6 years ago)
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Sir Vince Cable
I thank the hon. Lady for that additional information, which is germane and extremely useful.
There have been a couple of serious and authoritative reports by the Office of Rail and Road. Sir Michael Holden was invited to carry out a study, and he has actually run railways, so we think he can be trusted for technical judgment. The analysis that is now available suggests that the following are the main sources of disruption. The first is that the franchise itself was not properly conducted. The company overbid or, to put it another way, underbid for subsidy and is now financially stretched. It appears to be struggling to maintain payments to its financiers, and the consequence is that passenger welfare is being sacrificed and the promised investment is not materialising. There are serious questions for the Department and the Minister about to how the franchise was allowed to take place and result in a serious deterioration of standards. The Government have plenty of experience of refranchising, and why they were allowed to disrupt what was a perfectly serviceable arrangement with the previous franchisee is unclear.
Sir Edward Davey (Kingston and Surbiton) (LD)
My right hon. Friend is right to say that the all-party parliamentary group that I set up is looking at this matter in detail. We have a draft report called “Passengers must come first” which focuses, among many other things, on the fact that South Western Railway does not have the money to do what is right for passengers. It is looking after the investors first, and it is not putting money in to deliver on what it promised in the franchise. Unless the Government act, either by taking the franchise away from SWR or by imposing a new contract, passengers are going to keep suffering under shocking performance.
Sir Vince Cable
That is a helpful intervention that anticipates what I am now going to say. Many of the problems do originate with the franchise and the franchisee, but there is some shared responsibility with Network Rail, which of course is a nationalised industry. Network Rail’s failings have been exposed throughout the network, but they are particularly serious here, because the decision was made several years ago to switch the control centre from Waterloo to Basingstoke. As a result, many staff were shed, and a disconnect was established between the running of the trains and the running of the crews, so at least part of the disruption is attributable directly to Network Rail. I think the common consensus is that the nationalised company suffers seriously poor management and many failures, among which is the fact that Network Rail has not updated any of its contingency planning since 2011. It is important to accept that it is not just the franchisee that is responsible for the many failures.
An additional problem is the lack of integration between Network Rail and the franchisee. Under a previous dispensation, the two things were run together. It would probably have been better if the original rail privatisation had properly integrated the franchise and the network, but that was done informally in the south western area under the previous franchise, and it has now completely broken down. There appears to be no integration at all, minimal co-ordination and just an instinct for blaming each other.
The combination of those all factors has led to the serious situation that we have at present, and I would hope that the Government recognise that. To prevent the situation disintegrating to the point at which we have another Southern railway scandal, the Government might intervene now to prevent the situation slipping further. There are several actions they can take, and my right hon. Friend has just summarised them. In relation to the franchise, there are essentially two options, one of which is to take the franchise away and replace the existing company with another—preferably a public service company, but there is a variety of options—and the other is to impose on the franchise a set of performance-related measures so the company is paid only when it delivers on its undertakings.
There are various ways of dealing with this problem. Unlike the Labour party, I do not believe nationalising the franchisee would necessarily help, but we have to find a mechanism by which it can be properly held to account and rewarded for success, rather than rewarded for failure.
The second area of activity that is needed is within Network Rail itself. It is fortunate that Network Rail has just appointed Andrew Haines as its head. I dealt with him extensively when he ran South West Trains, and he is generally thought to be a good manager. Whether he can personally turn this around, I do not know, but it would greatly help if there were proper integration of Network Rail and the franchise in this section of the system. I would be grateful if the Minister could indicate how he can help achieve all of that.
There are clearly questions for the Department to answer, notably on the franchise, how it has allowed this to happen and the options available to it to turn the situation around. Although Network Rail is a free-standing operation, though nationalised, it would be useful to have some indication from the Government on how they can push it in the direction of better management and better attention to the serious problems in this region.
Sir Edward Davey
I am grateful to my right hon. Friend for giving way a second time.
The point on Network Rail is crucial. Like my right hon. Friend, I have a lot of time for Andrew Haines given our mutual experience of him. However, Network Rail will not be able to get to grips with the challenges of an extraordinarily high level of emergency speed restrictions and temporary speed restrictions across the network. A decade or so ago, there were zero speed restrictions; now there are 70 or 80, which is because of the lack of essential investment. Unless the Department for Transport supports Network Rail with more cash to solve those restrictions, we will get nowhere near the level of timetable resilience that will prevent cancellations and delays, meaning that people’s trains actually run on time.
Sir Vince Cable
My right hon. Friend is absolutely right, and he leads me to my concluding point on the role of the Department itself.
The national rail review is looking at overall performance, and I hope it is able to look at the role of the Department and not just of the rail companies, but there is the additional and crucial point, as my right hon. Friend has just said, that a lot of this depends on available investment. Some of that, of course, has to come from the franchise company, but Network Rail ultimately depends on the willingness of the Treasury and the Department for Transport to make capital spending available in light of what is necessary.
The Parliamentary Under-Secretary of State for Transport (Andrew Jones)
I congratulate the right hon. Member for Twickenham (Sir Vince Cable) on securing this debate. He covered a lot of ground and issues in his short speech, and he has brought insight and local knowledge. He is right, as are other hon. and right hon. Members, to speak up for the passengers they represent.
The South Western Railway franchise is enormous, handling more than 400,000 passengers a day who rely on its 1,700 services. Indeed, more than 110,000 passengers pass through Waterloo in the morning peak alone. It is fair to say that service levels have fallen short of expectations, as we all know. That was perhaps most keenly felt on Monday 19 November, when serious disruption was caused on the network by overrunning engineering works, which the right hon. Member for Kingston and Surbiton (Sir Edward Davey) was keen to highlight. Those overrunning works meant that Network Rail was not able to open a number of lines into Waterloo until after 9.30 am.
Colleagues have asked what action is being taken. Since then, Network Rail has taken action to bring more operational experience to its executive team, including with a change of managing director on that route. People are rightly frustrated and angry with the delays and cancellations, but I want to assure the House that bringing performance back to acceptable levels is our highest priority.
Sir Edward Davey
I just want to make sure that the Minister and the House understand that although it was a shocking performance on that Monday when the works were not completed on time, the cancellations and delays have been going on for more than 18 months. This has been a long, sustained period of shockingly poor management and shockingly dreadful services, which our constituents are suffering daily. I have 10 train stations in my constituency. Most of my constituents rely on these services, and they have to be put right. We need to hear from the Minister about the actions his Department will take to do that.
Andrew Jones
Obviously I am coming on to that, but I wanted to highlight when the problems were at their most acute. I will press on now to make sure that some answers are given in the time available.
A key point is that South Western Railway and Network Rail understand the causes and have put a plan in place to turn performance around. The right hon. Member for Twickenham highlighted the report that was commissioned from Sir Michael Holden and his background as a senior figure in the rail industry. Sir Michael’s report highlighted that no one silver bullet will restore punctuality to previous levels. He cited the main cause for the decline as too little flexibility in the timetable, so that when things do go wrong, they go very wrong and it is difficult for the operator to get back on schedule. I think that is part of the problem that the right hon. Gentleman highlighted when he talked of a “concentration of misery”. It is a very tough thing for the operators to deal with. I visited the train operating centre in south Manchester a few days ago, when I witnessed a nine-minute delay in the Castlefield corridor having a consequential impact of 1,200 lost minutes through delay across the network of the north. We are talking about a network that is stretched taut, and there is little flex.
Sir Michael highlighted other causes: the intensively used, ageing infrastructure, and the ongoing industrial action, which is diverting management attention. Taken together, they have led to an unacceptable level of performance on the South Western Railway network. However, he also points out the potential performance improvement opportunities that a consistent suburban fleet would offer. South Western Railway identified that before the start of the franchise when it ordered a fleet of 90 modern trains. Those trains offer not only performance benefits but a range of features to improve customer journeys. This is an £895 million fleet to cover the entire suburban network, and it is due to enter service from late 2019.
Sir Michael makes 28 recommendations in his report for South Western Railway, Network Rail and the Department to take forward, and I am pleased to say that all have been accepted and are currently being progressed. A number of the recommendations are already complete, and all of his short-term recommendations will be complete by the end of this year.
The right hon. Gentleman highlighted the success of the railways in increasing passenger numbers, which have reached a record high of 1.7 billion. So we are dealing with an industry that is trying to cope with the challenges of growth. In order to deal with that, changes have been made to lengthen platforms on the suburban routes to accommodate 10-car trains. That work is part of the £800 million Wessex capacity enhancement programme, which has also seen major works completed at Waterloo to lengthen the platforms there. I am not sure whether he is aware that starting from Monday 10 December the services from Reading or Windsor & Eton Riverside that call at Twickenham station are scheduled to arrive at one of the four former Waterloo International platforms, which are being brought back into full use. I am sure he will welcome that. It should help relieve some of the issues affecting punctuality, especially in the peaks, because there are periods when trains are waiting outside stations for platforms to become available.
The changes to be introduced through the new franchise by December 2020 will mean an increase in peak capacity of about 30% at Waterloo, so we are talking about more space and less crowding for passengers. However, it is also fair to say that the challenge faced by Network Rail to maintain its assets in a reliable condition gets harder—that was a point made in a number of interventions. I agree entirely that the effect of that has been felt by passengers.
The right hon. Gentleman asked whether we are investing; well, we certainly are. We are seeing one of the biggest investments in our railway’s history, with £48 billion to be spent by Network Rail in the next control period, which starts next year and will run until 2024. That funding will make a real difference to the passenger experience, because it will go far more towards maintaining and renewing the infrastructure—
Andrew Jones
The right hon. Gentleman has had a very good run. Will he let me press on a little further?
In previous control periods, we have had a bias towards enhancements; this time it will be towards the maintenance and renewal of infrastructure and increasing reliability and punctuality. For South Western’s passengers, the Network Rail Wessex route will see funding increased by 20% compared with the past five years. Work will be taking place over Christmas and the new year, when Network Rail will be investing more than £148 million to improve the network throughout the country for a more reliable railway for passengers. Network Rail’s “team orange” will be out on the Wessex tracks replacing switches and crossings in the Waterloo area, strengthening bridges at Vauxhall and Guildford, and replacing track in the Westbury area. Are the Government acting? Yes, they are. Are the Government investing? Yes, they are.
The new franchise was highlighted—
Sir Edward Davey
I am extremely grateful to the Minister for giving way; he is being very generous. If he looks at the historical record of investment in the South Western Railway region—the Wessex region—he will see that it is shockingly low compared with the rest of the country. Although there is going to be a small increase, compared with the huge amounts being spent elsewhere the capital investment in the Wessex region is not good enough. Given the problems and the huge numbers of people in the area, will the Minister go away and consider the investment that is going to the region? It is simply not adequate.
Andrew Jones
Every single Member of this House comes to me and says that every other area is being advantaged ahead of their own—
Andrew Jones
I have obviously gone over the facts and we are looking at them, but the point is that we have a programme that is delivering new rolling stock and upgrading the maintenance budgets. It is the largest investment that any Government have made in our railways, so to suggest that the Government are not backing the railways is simply not true. I am just highlighting some of the new things that are coming in.
There were a few questions about the franchise. The winning bidder, First MTR, will be investing £1.2 billion over the course of the franchise. A significant part of that will go on the fleet of new trains that will provide services for the constituents of the right hon. Member for Twickenham and more widely across the suburban services. We expect there to be some significant improvements in passenger experience thanks to new and refurbished rolling stock and smart ticketing options, as well as improved wi-fi provision at stations and beyond.
The franchise performance was clearly of concern. With the new franchise, we have set challenging targets for performance, with a financial incentive that would reward the operator for exceeding those targets. As everybody has said and as we all know, performance is not at the levels that passengers rightly expect, and it is below the target levels in the franchise agreement. South Western Railway is now investing an additional £5 million across a range of initiatives to improve performance. Many of these initiatives are targeted at improving the fleet’s reliability and are designed to reduce instances of services being formed of too few carriages or cancelled.
The right hon. Member for Kingston and Surbiton asked about several issues, including declining performance, but let me first address disabled access on the line, which the hon. Member for Strangford (Jim Shannon) asked about. We are dealing with a Victorian rail infrastructure, and disabled access on parts of it is simply not good enough. I entirely agree with the hon. Gentleman’s point and hope he will understand that we are putting extra funding in between now and 2024. We have made nearly 2,000 stations throughout the country disabled-access friendly, but there is a long way to go and we need to keep up the pressure. The hon. Gentleman was clearly right.
Rail Update
Ed Davey Excerpts(6 years, 10 months ago)
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Chris Grayling
As I said earlier, my ideology is very straightforward: I want more investment in the railways, I want more trains and I want newer trains and new opportunities. Of course, the model the hon. Gentleman is articulating would mean less investment in the railways, because we would lose all the private investment in new trains, for example. I do not believe that that is what the public want.
Mr Speaker
We shall now hear from a Kingston and Surbiton knight—Sir Edward Davey.
Sir Edward Davey
Thank you, Mr Speaker—that was a difficult choice for you.
The Secretary of State has today acted when a franchiser overpaid, hitting its shareholders. Will he commit to the House that when a franchiser under-delivers, hitting the passengers, he will also act?
Chris Grayling
If a company is systematically failing to deliver, yes. However, in many cases—indeed, I suspect I know precisely what the right hon. Gentleman is talking about—the infrastructure is the problem, rather than the train company. I cannot blame one person for another person’s failings; what I can do is try to sort out the failings that lead to these problems in the first place. If we look at the Waterloo line, for example, where the problems last autumn were caused by a technical problem around the Waterloo works, which took about two months to get rid of, that is a good example of where Network Rail problems caused the issues. That is why we need that £20 billion investment in renewing those parts of the infrastructure that are too prone to fail.
Rail Update
Ed Davey Excerpts(7 years ago)
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Chris Grayling
First, let me be clear: I do not envisage a Devon and Cornwall-only franchise. That is not part of the plan. I am asking a legitimate question: should we go back to having, in effect, something like Wessex Trains and a franchise with its headquarters in the south-west, that provides regional services in the south-west and that could theoretically even do some of the long-distance services up to Paddington from Penzance? There are pros and cons to that. This is a consultation to ask the south-west what it thinks. It is no more and no less than that, and I want to get the right answer for the south-west.
Sir Edward Davey (Kingston and Surbiton) (LD)
I welcome today’s big message that our railways work better when track and train are operated together and the fact that the Secretary of State is now trying to correct the big mistake in the original rail privatisation, when his party separated track and train ownership. May I ask him, on behalf of my constituents in Surbiton, to consider the urgent safety case for a new staircase at platforms 3 and 4 at Surbiton train station, given how dangerously overcrowded they can become during the evening peak?
Chris Grayling
I am grateful to the right hon. Gentleman for his support for bringing back together the operation of track and train. If he wants to catch me offline, I would be happy to look at the issue he raises.
Cost of Living
Ed Davey Excerpts(12 years, 7 months ago)
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Caroline Flint
I am always pleased to talk about Labour’s record in government, but let us now talk about the other side of the debate about energy prices—that is, saving energy. As Ministers are fond of telling us, the cheapest energy is the energy that we do not use. I am very proud that over 2 million households were helped with energy efficiency and insulation under the previous Labour Government. Through Warm Front, we helped over 200,000 households each and every year. This year, only 40,000 people are getting help.
The last time we debated this matter, the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle (Gregory Barker), said:
“Warm Front does not deliver insulation”.—[Official Report, 11 January 2012; Vol. 538, c. 256.]
He obviously had not browsed his Department’s website, which states clearly:
“The Warm Front scheme offers a package of heating and insulation measures”.
With such insight into his Department’s policies, we can only hope that the job of deciding who was eligible for a Warm Front grant did not fall to him. However, that might help to explain why nearly 30,000 people who applied for help last year were turned down.
Let us reflect on the figures. Under Labour, in each and every year more than 200,000 households were helped by Warm Front. This year, under this Government, only 40,000 households received help and 30,000 were turned down. They were turned down even though there was an underspend in the Warm Front budget of more than £50 million. That is right: hundreds of thousands of families face higher bills next winter and every winter because of cuts to Warm Front, and tens of thousands of families and pensioners who applied for help last year were left in the cold because of the incompetence of the Secretary of State and his Department, while £50 million that is in the Government’s coffers is going back to the Treasury. We asked whether the underspend could be used to provide further help through the programme. The answer, which I received very recently, was that it is going back to the Treasury.
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
I will try to help the right hon. Lady, because her own Front Benchers are laughing at her. May I take her back to the comments that she made about the Leader of the Opposition? When he was doing my job, he was pressed on what the Labour Government were going to do about energy prices. In 2009, Andrew Marr asked him:
“When it comes to the price of energy…are we or are we not going to have to pay more?”
He responded:
“There are upward pressures on prices, yes”.
I am afraid that the right hon. Gentleman did very little on consumer prices. Labour had a record of failure.
Caroline Flint
We have not seen much of the Secretary of State since he took up his post. If that is the best he can offer after a number of absences from the Chamber, I worry about this Government and their handling of one of the most important areas for consumers and for jobs.
It is absolutely true that in reshaping the energy market to provide a low-carbon future, there are pressures. We have never denied that. However, today we are talking about the efforts to make the energy market more competitive; how we can ensure that a trail of energy companies is not investigated for mis-selling and dodgy dealing; and the increasing number of families who, under this Government, are paying more than they need to. The Government are stepping away from any responsibility to help the most vulnerable people in this country to tackle their fuel bills and keep their energy consumption down. It is possible to have policies on that, while recognising that there are pressures in the bigger scheme of things. It is a given that there are pressures—it is what a Government do about them that counts. This Government are doing nothing at all.
In government, we put tough obligations on all the big energy companies to use some of their profits to help poorer customers in deprived areas make their homes more energy-efficient. The community energy saving programme was meant to help 90,000 households. Two and a half years into the scheme—most of it under this Government—and with only a matter of months left, just 30,000 households have been helped. What are the Government doing about that? As far as we know, they are doing absolutely nothing.
We do know that the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle, had a meeting with all the big energy companies on 1 February this year. We also know that the energy companies are lobbying the Government to relax the obligations on them or to push back the deadline. The Minister refuses to tell us what exactly was discussed at the meeting, what was agreed and whether he has caved in to the companies’ demands. Why will he not tell us that? He will not share with us—
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
I am grateful to the Opposition for selecting a debate on the cost of living, which is a very important issue. There can be no doubt that many people in our country have been through, and are going through, some tough times, not least because inflation has cut into their living standards. I am sure that all of us pick that up in our constituencies. I do two advice surgeries a week for my constituents, and the cost of living comes up frequently.
When we talk to and listen to people, we find that the rising cost of electricity, gas and fuel has been hurting the most. We should all be concerned when we see pensioners and families worrying about basics such as food and fuel, groceries and gas. Despite the rhetoric that we have just endured, infused with the memory of an amnesiac, I wish to make it absolutely clear to the House that this Secretary of State and this Government understand those worries, share them and are acting to relieve them. Labour sometimes talks as though it had a monopoly on compassion and caring, but it never has, it never will, and to boot it does not have the record to show that it ever did.
The Government are committed to helping households cope with rising energy bills. We cannot control volatile global energy markets, and I think reasonable people understand that. However, we can act, and are now acting, to ease the pressure on consumers. In the short term, we are making it easier for people to get a better deal from their energy suppliers, about which I will say more shortly. In the medium term, we are making it easier for people to save money by insulating their homes. In the long term, we are making it easier for investors to build clean power plants here in the UK, protecting British consumers from global wholesale energy prices.
I want to set out the short, medium and long-term policies that are helping, and that will continue to help, consumers with their energy bills, not least by explaining the purpose of the energy Bill, as contained in the Gracious Speech, before its publication, which will come shortly. However, before I do so, it is only right to respond to the amendment and the speech of the right hon. Member for Don Valley (Caroline Flint). The key thing I have learned in my first few months as Secretary of State for Energy and Climate Change is that energy and climate change policies take a long time. They involve big infrastructure, huge shifts in the structure of the economy, and changing behaviours that have developed over years. Therefore, to get results, we must act decisively and strategically. This Government have been doing just that for the two years we have been in office.
We are introducing some of the most innovative and ambitious policies to bring forward billions of pounds of investment, which will be essential for our country over the next few decades. Such investment will help our growth, from the green investment bank to electricity market reform, and enable us to decarbonise our economy, especially our electricity generation sector, so we can tackle climate change.
The problem is that the previous Labour Government did not act decisively or strategically, but lurched from one White Paper to the next consultation document. Unable to make up their mind, they delayed and dithered. This Government have been left to pick up the pieces.
However, let me give the previous Government credit. They were very good at setting targets; they just never hit them. Even on fuel poverty, they set a target. However, Professor John Hills has examined their fuel poverty targets in detail, and it turns out that they could not set a target for fuel poverty competently—they could not even measure fuel poverty properly. This coalition will clear up the Labour Government’s legacy on energy as well as on the economy.
Let me therefore explain to the Opposition why living standards have fallen in the last year. It was partly down to high world prices for oil, gas and food, but it was also partly because they left the country poorer and borrowed to hide the truth. When the economy contracts in one of our country’s deepest ever recessions, when the country’s national income falls by 7%, and when the Government borrow to compensate, there must be a day of reckoning. The problem is that the Opposition are incapable of admitting that.
The right hon. Lady and others make out that the problems are all the Government’s fault because of the cuts to feed-in tariffs or because of lower take-up on Warm Front, but they simply do not understand their legacy or the changes we are making.
David Wright (Telford) (Lab)
I have been in the House for 11 years and have watched the right hon. Gentleman progress in his career. I remember him sitting on the Opposition Benches and consistently calling on the previous Labour Government to spend more. It is interesting that he now completely ignores that fact. What are his targets for reducing fuel poverty and how will he deliver them?
Mr Davey
I must remind the hon. Gentleman that the Chief Secretary to the Treasury of the previous Government left a message to say that there was no more money. That is the legacy this Government are dealing with. We will take fuel poverty seriously. My predecessor commissioned a report to ensure we have proper targets and measurements of fuel poverty. John Hills has produced a welcome report, on which we will consult—[Interruption.] We have plenty of policies to tackle fuel poverty and I will come to them, but we want to ensure we are tackling the real thing, not the fake one.
Mr David Ruffley (Bury St Edmunds) (Con)
Raising the personal allowance to £9,200 is worth about £220 in cash to the average basic taxpayer. It also takes many low-paid people out of tax altogether. Does my right hon. Friend agree that that is one way of protecting people, particularly the low paid, from the rising cost of living?
Caroline Flint
The Labour Government left office with 1 million fewer people in fuel poverty than we inherited in ’97. No doubt this is a complex area, but the truth is that in the last two years, according to Consumer Focus, there has been a sharp increase in the number of homes in fuel poverty in England and Wales—it has increased from one in five to one in four. What are the Government doing about that?
Mr Davey
The right hon. Lady ought to know that we saw a massive V-curve because of how fuel poverty was measured under the previous Government—fuel poverty came down earlier in their period of office and shot up dramatically as global gas prices increased. She is not living in the real world if she thinks that is the correct way to measure fuel poverty. That is why this Government are getting to grips with the problem. We are ensuring we measure the problem properly so we have the right policies, which the previous Government never did.
To return to feed-in tariffs, I remind the right hon. Lady that we have had to reform the scheme designed by the Leader of the Opposition so that huge windfalls do not go to a few people. Our reforms will ensure that many people benefit from solar PV. We are the party of the solar many; they are the party of the solar few.
On Warm Front, the right hon. Lady offered no recognition of the progress we have made to spend our budget; of the reality that a warmer winter last year reduced demand; or of the fact that the shameful scaremongering by Labour Members on Warm Front, who said the scheme was closing more than a year before it will, might just have put some people off applying.
When it comes to Governments being responsible for putting people’s bills up, the right hon. Lady ought to talk to the leader of her party. Let me refer her to the UK’s low carbon transition plan, published by the Leader of the Opposition when he was in my job. Let me further refer her to the analytical annex, page 66, table 9, and the estimate of the cost of the renewable heat incentive on people’s gas bills, as proposed by Labour. The estimated increase in gas bills by 2020 was £179, but this Government stopped that approach, because we were not going to put £179 on people’s gas bills. That is 179 reasons for not taking Labour seriously on energy bills.
Albert Owen (Ynys Môn) (Lab)
I welcome the right hon. Gentleman to his post. I am a member of the Select Committee on Energy and Climate Change, so we will have a bit of knockabout on some issues, but knockabout on fuel poverty is not right. Whether or not we are changing the measures, more people have found themselves in fuel poverty this year and last year, and the previous Government reduced the number by 1 million people. That is a fact, whether the curve is V-shaped or not. What measures are this Government taking to assist those people who have fallen into fuel poverty?
Sir Bob Russell (Colchester) (LD)
I congratulate my right hon. Friend on the measured approach he is taking from the Dispatch Box. Further to the previous question, does he agree that requiring the major energy suppliers to notify customers of the lowest tariff every year will help many of the people in fuel poverty with their cost of living?
Mr Davey
I was just about to come to that measure. My hon. Friend will know that our right hon. Friend the Deputy Prime Minister announced that package, which will be a big help, last month.
On our agenda for helping consumers in a practical way, I should like to highlight three things—they are part of our short-term approach to ensure that we help consumers and get more competition in our markets so we can make it easier for people to take advantage of good deals.
Mr Davey
I will in a second.
First, the consumer deal was agreed with the big six last month and announced by my right hon. Friend the Deputy Prime Minister. Secondly, I have pushed collective switching since becoming Secretary of State for Energy and Climate Change, following on from the work I did as Minister with responsibility for consumer affairs. Thirdly, Ofgem is working on tariff simplification. I will describe the detail of the practical measures that we are taking and that the previous Government never took after I have given way to my hon. Friend.
Angie Bray
Talking about energy is important, but I would like to draw my right hon. Friend’s attention briefly to another important utility in people’s lives—water. Water rates are a big cost of living and are particularly frustrating in London, given that we are under serious drought orders, despite the rain tumbling down almost every day. Particularly galling is the discovery that the very slow pace of plugging water leaks is apparently well within the target range set by the water regulator. If the water regulator is not on the side of consumers, who is?
Gavin Shuker (Luton South) (Lab/Co-op)
Will the Secretary of State give way?
Mr Davey
No, I will not.
Our first priority is to encourage consumers to switch suppliers, which could save households up to £200 per year. I am surprised that the right hon. Member for Don Valley was so negative about switching. The problem is that, despite rising prices, only one in six consumers switched their supplier in 2010. She was right that the number of people switching has been falling. There are several reasons for that, one of which, as she will know, is the plethora of energy tariffs. There are currently about 120 tariffs. We want fewer tariffs and much clearer pricing, so that customers can find a better deal more easily. That is the right approach. We support much of Ofgem’s work as part of its retail market review and will work with it to bring more transparency to the energy market.
Last month, my right hon. Friend the Deputy Prime Minister announced the deal that we secured working with the six big energy companies to give customers a guaranteed offer of the best tariff. From the autumn, suppliers will contact consumers annually to tell them which is the best tariff for their household, and if consumers call energy companies, they will have to offer them the best tariff. That is real progress—progress that Labour failed to make but which I have made in my first few months as Secretary of State.
Lyn Brown (West Ham) (Lab)
May I tell the right hon. Gentleman about a constituent of mine living in a two-bedroom flat with her daughter and grandson? She works as a teaching assistant in a local primary school and earns just £1,025 a month, of which she pays £201 on utility bills—nearly 20% off her income is spent on utility bills. She is already on the lowest tariff, and she is in massive debt and worried. What can the Secretary of State offer her from the Queen’s Speech?
Mr Davey
Actually, the hon. Lady’s constituent will be a big beneficiary of the coalition’s policy to increase the personal income tax allowance. She will benefit from that big income tax cut—bigger than anything that Labour did. In fact, I remember Labour taking the 10p rate away from people such as her constituent, costing them £236 a year. So I am afraid she has shot herself in the foot.
Caroline Flint
I thank the right hon. Gentleman for providing the House with more information about what the Government are attempting to do. The chief outcome of last autumn’s summit, however, was that the companies agreed to write to people to let them know that they should switch and save. Labour argued that the energy companies should be much more specific and make it clear to people what cheaper tariff they should be on. I take it from what he has just said, therefore, that we have a Labour policy gain today.
Mr Davey
That was a good try, but no one believes the right hon. Lady.
We are working with energy companies in a range of ways that Labour failed to do. For example, we are working to ensure that companies put special barcodes on energy bills, so that people can scan them, search for quotes and switch suppliers. We are also working with consumer groups to make it easier for people to band together, get the best deal and bring down bills without having to negotiate them. That is called collective switching. It brings people together to make a collective purchase based on collective, mutual and co-operative principles. One would have expected Labour to use those principles in government. It did not, we are, and it should be ashamed.
We have already seen the big switch campaign from Which?—the first big collective switching scheme—and I am delighted it was so successful. Through the big switch, people have saved £120 on average—but £200 if they have paid by cash and cheque. [Interruption.] The right hon. Member for Don Valley says we did nothing. Let me explain to her. As consumer affairs Minister, last April I published a consumer empowerment strategy, right at the heart of which were proposals to look at collective purchasing. While working on that strategy, I noticed that under Labour no work had been done on that. As a result of our work, we got Consumer Focus to work on collective switching and we talked to Which? and others, and that work is bearing fruit. She is on the wrong track again.
Simon Hughes (Bermondsey and Old Southwark) (LD)
My right hon. Friend knows that I greatly welcome his robust and clear attitude to these issues and the Government’s strong policy. I encourage him to be really tough with Ofgem and the big six energy companies, which have often had far too easy a time. May I put a suggestion to him? Every year, local authorities send out council tax bills and people address their council tax and housing benefit requirements. Will he see whether, within that same mailing, everyone—in all our constituencies—could be sent information about the cheapest tariffs? That would ensure that local authorities share the responsibility for spreading the news about how housing costs can be kept down.
Mr Davey
As always, my right hon. Friend has come up with an ingenious idea. The good news is that the Deputy Prime Minister, following my work with energy companies, is already on to that, through this annual communication that the big six will now send out to ensure that people know the best tariff for them. However, my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) is right that local authorities have a role—in the green deal and many other things. I am happy to talk to him in detail about that.
My right hon. Friend might also be interested to know that the collective switching schemes we are trying to promote through trusted third party intermediaries, such as Which?, are beginning to take off. Many social housing providers and councils are interested in seeing whether they can work with their communities to push these schemes, and People’s Power, a social housing provider, has pushed the huge switch after the big switch. That is exceedingly good news.
David Simpson (Upper Bann) (DUP)
One big issue facing all our constituents is the price of fuel for their vehicles. Is it not a sad state of affairs that it costs families more to fill up their cars than to put food on the table? Surely something needs to be done about the 3p increase and other increases.
Mr Davey
The Government have taken many measures to try to keep down the cost of fuel, but the hon. Gentleman will know that we do not control the price of oil globally. I am delighted, however, that we are not suffering from a tanker fuel dispute. The resolution of that dispute is extremely important. [Hon. Members: “No thanks to you!”] That shows how little Opposition Members follow these things.
I will shortly be holding a round-table discussion at my Department to continue the momentum building behind collective purchasing schemes. Together with our policies to make markets work better and to help consumers to get the best deal, we are also making it easier for people to save energy. As the right hon. Member for Don Valley reminded us, one of our mantras is that the most affordable energy of all is the energy we do not have to pay for—she is quite right about that—yet too many of our homes and businesses are leaking heat and wasting energy. Making them more efficient will help consumers and small businesses to cope with costs. We can cut those bills and keep people warmer for less.
Later this year, we will introduce the green deal, bringing energy saving within reach for millions of homes across the country. A new Government-backed scheme will enable householders to make energy efficiency improvements at no upfront cost. Trusted local and national brands will pay for the work with the costs recouped from energy bills, and the green deal will help householders to stay warm for less. We estimate, for example, that a three-bed semi could save £120 a year by installing wall cavity insulation.
When costs rise, the poorest are often hardest hit, so we are committed to helping the most vulnerable heat their homes more affordably. I mentioned the warm home discount in response to the hon. Member for Ynys Môn (Albert Owen). It will continue to assist about 2 million low-income households with the cost of heating their homes in 2012-13. Alongside the green deal, parts of the new energy company obligation will deliver heating and insulation measures to low-income vulnerable households, including those in some of the most deprived communities.
Caroline Flint
Will the right hon. Gentleman provide clarification on the energy company obligation? I understand that about 50% of the money will go to the most vulnerable families and the other 50% to those with hard-to-treat homes—we are talking about solid walls. Within the second group, is he prepared to consider prioritising the most fuel poor, rather than subsidising people on large incomes? We recognise that hard-to-treat homes are a problem, but we must ensure that that side of the budget prioritises the fuel poor and the vulnerable living in such homes and gets the subsidies to them.
Mr Davey
Since becoming Secretary of State, I have spoken to Professor John Hills, given all the work he did analysing fuel poverty, and I have made changes to the energy company obligations as originally designed. The Deputy Prime Minister talked about this issue recently. We will be laying regulations before the House for debate this summer which will contain all the details that the right hon. Lady seeks. I say to her in the nicest possible way that she needs to wait a little bit, but those regulations will be laid before this House.
Dr Alan Whitehead (Southampton, Test) (Lab)
Does the Secretary of State accept that unless action is taken on the interest rates charged by those providing the loans for the green deal, the green deal is unlikely to deliver what he says its likely benefit is? What action has he taken to get that right, and why is he doing nothing further to ensure that the interest rate is compatible with an effective green deal for the future?
Mr Davey
I have been looking at the financial arrangements of the green deal. When we are able to announce even more details than we have already, I believe that people will see that it is a very attractive offer. I also believe that there are many low-income households that will actually welcome the rate of credit that will be asked through the green deal, compared with some of the rates of credit that they have to pay other lenders.
Mr Davey
I will not give way, because I want to make some progress and address the Queen’s Speech.
We need to make dramatic changes to our energy policies in the longer term. The right hon. Member for Don Valley said, in a rather bizarre passage towards the end of her speech, that we were not really reforming the electricity market—but we are making the biggest reform of the electricity market since privatisation. It is the sort of reform that Labour Members failed to get their head around and failed to deliver, despite 13 years in power.
There are huge challenges for our electricity market, with 20% of our power plants coming offline during the next decade. There is an energy security issue. We will have to ensure that the infrastructure is brought forward in the most competitive way, otherwise there will be a big impact on bills. We will have to attract more than £110 billion of investment in a way that ensures that low-carbon technology can be introduced, so that we can meet our carbon budgets. That is a heck of a challenge, and this Government have developed the policies to meet it.
If we do not act now, we estimate that by the mid-2020s up to 2.5 million households will be affected by blackouts, costing the economy more than £100 million a year. Even without interruptions to supply, our consumers would be exposed to volatile global energy markets if we did not do anything. Wholesale energy costs already make up half of the average consumer bill. Last year, the winter gas price was 40% higher than the year before. That is the real reason why bills have been going up so dramatically. We have to act and make the strategic changes to tackle that issue.
Mr MacNeil
Following on from the point made by the hon. Member for Upper Bann (David Simpson) about road fuel, what stage are the Government at in introducing a fair fuel regulator, which was much talked about while the two coalition parties were in opposition?
Mr Davey
I am sure that my right hon. Friend the Secretary of State for Transport will touch on those issues. This Government have done far more on petrol duty than the previous Government did. However, I will not pretend that we can isolate ourselves from world oil prices—the hon. Gentleman will know how high the price of oil has gone internationally.
We will do everything we can to insulate consumers from such price spikes. That is why, as stated in Her Majesty’s Gracious Speech, the Government will introduce legislation to reform the electricity market. The measures in the forthcoming energy Bill will ensure that we have secure, reliable low-carbon electricity supplies. We want to build a diverse portfolio of clean-energy technologies, including nuclear, renewables, clean coal and gas, and let them compete on cost.
Jim Shannon (Strangford) (DUP)
Is the Secretary of State aware of the proposed 15% increase in gas prices? There is much talk about the increase in oil prices and other prices, but gas prices are also going to cause real hurt. What steps can the Government take to help those who have gas as their sole source of energy?
Mr Davey
The hon. Gentleman is right to say that there are people predicting that wholesale gas prices will go up later this year. We had the announcement from Centrica last week, and we also had the announcement from E.ON. I am sure that other providers will be competing on price. However, I have already laid out some of the measures that we have been taking, whether it is the discussions that we had with the energy providers on gas and electricity bills, the collective switching or the work that Ofgem is doing on tariff simplification. All those measures make up quite a strong package to try to help the constituents he has just mentioned.
Returning to the energy Bill, there are four parts to our reforms: new long-term supply contracts to provide stable incentives to invest in low-carbon electricity generation; a capacity mechanism to ensure that we can keep the lights on; an emissions performance standard to keep carbon emissions from new fossil fuel plants down; and a carbon price floor to give investors certainty to commit capital to low-carbon projects. These reforms will attract the investment that we need to secure our electricity supplies. The investment will bring real rewards: up to 250,000 jobs in the construction and operation of new power plants, 19 GW of new electricity capacity, and an energy system that is fit for the future.
This is one of the biggest delivery programmes that this Government will oversee. It will stimulate growth, support new skilled jobs, upgrade our ageing energy infrastructure and bring down consumer energy bills. Our latest analysis shows that over the next two decades the average household energy bill will be 4% lower than if we did nothing. If we do not act now, we face a higher risk of blackouts and more exposure to price spikes, and higher consumer bills for both homes and businesses. That is not a future that this Government are willing to consider, so we will take the right decisions for the long term. The provisions in the forthcoming energy Bill will keep the lights on and our carbon emissions down, at the lowest cost to the consumer.
Dr Whitehead
As the right hon. Gentleman has made specific mention of the consumer benefit that will arise from electricity market reform, would he care to place on the record this afternoon how many consumer-based levies are in his energy market reform proposals, and what price effect their implementation will have on consumer bills?
Mr Davey
When we publish the draft Bill for pre-legislative scrutiny, I will set out a range of details, with a lot of technical documents. What I can say to the hon. Gentleman ahead of that is that there will be fewer levies than Labour planned. Labour planned a levy on bills for carbon capture and storage, which I believe would have cost consumers £9 billion. We are not going ahead with that.
This is a difficult time for many households. I am sure that Members on both sides of the House have heard from constituents who are struggling to pay their bills or keep their businesses afloat. Promises from politicians will not make the end of the month come any sooner, but the Government are doing what they can to help. We are making it easier for people to get a better deal from their energy suppliers; we are bringing energy efficiency to the mass market, making homes in every corner of the country cheaper to heat; and we are reforming our electricity system, to protect consumers from a more unstable and more expensive energy future. These three objectives share a common cause: not only will they insulate our consumers from energy price rises, but they will deliver a cleaner, more secure and more affordable energy system for generations to come. This is government for the long term, and that is what this coalition stands for. We are taking action where the last Government delivered inaction.
Malcolm Wicks
I will give way to all sorts of people shortly.
We need to draw on some of the experience of Sweden and other Scandinavian countries. We need parental leave which—almost in a social engineering way—enables and encourages dads as well as mothers to take parental leave.
Malcolm Wicks
I will give way to the Secretary of State. Perhaps he is going to answer my question about nuclear energy. He has had enough time in which to think about it.
Mr Davey
I have been listening closely to the right hon. Gentleman’s speech. Before I became Secretary of State for Energy and Climate Change I was in charge of employment relations in the Department for Business, Innovation and Skills, and, indeed, did the work that took place before the announcement in the Queen’s Speech of legislation on flexible parental leave, and I can tell the right hon. Gentleman that that legislation will deliver many of the developments for which he is arguing. For instance, it will ensure that dads and members of extended families can be more involved. Shared parental leave, the extension to all of the right to request flexible working, and an increase in unpaid parental leave will tackle all the issues that he has raised. Those are the most radical proposals that have been made in this area, and they derive from the best practice in the world, which I believe is found in Sweden and Germany.