Gas and Electricity Costs

Edward Leigh Excerpts

Tuesday 18th January 2022 Westminster Hall

[Anne Marie Morris]

The hon. Gentleman makes a very fair point—this is a real problem. The hon. Member for Caithness, Sutherland and Easter Ross made the clear point that the answer and solution has to be found now.

I look at my constituents—indeed, I was on a telephone call just this morning—and I see that the food banks are doing great business. Increasingly, I am hearing that the people who are using them are not the usual attendees. We are in a state of crisis, which needs to be addressed right now. I have constituents—mostly pensioners—who are ringing my constituency office, and are very concerned. They are worried because of the cost of living and because of everything they hear about the energy costs that they will be facing.

For me, it is that uncertainty that is most challenging, because although the Government, to their credit, recognise the problem, the real issue is that to deal with that fear, we need an answer, a commitment and a solution. Looking at what we might or might not do in April is not soon enough. I am sure that even you, Sir Edward, will have looked at the barometer as you got up this morning. It is now that we are seeing minus temperatures. It is now that people need their heating at night. It is now that they need hot food.

Clearly, it is not the Government’s fault that there has been a global challenge in terms of energy prices. Indeed, they have risen to the challenge and recognised that security of domestic supply has to move further up the agenda. I welcome their investment—or promised investment—in more nuclear. But the real challenge is that despite all those good words and despite the concept of a price cap, which was effectively intended to protect consumers from very challenging prices, consumers are not being protected.

No scheme is perfect, but what happened here is that when it became clear that the prices meant that some of the smaller suppliers would go out of business, those customers were picked up by the bigger players but were inevitably put on the highest tariffs available. Those individuals, having done the right thing by seeking out good policies and good schemes, suddenly found themselves in the worst possible position. Then we hear—understandably, on one level—that the cap will not hold and that we expect that there will be an announcement on 7 February that it will increase substantially, as the hon. Member for Caithness, Sutherland and Easter Ross has already indicated—it will be an extra £700 per household, taking the average bill to £2,000. Suddenly energy costs will be going up 50% overnight.

When the Government set their energy retail market strategy for the 2020s, they set two objectives. The first was that there should be a sustainable retail market, whereby it was easy and rewarding to go green. However, that is not what is actually being delivered. Although they were well intended, many of the tariffs to try to encourage—to nudge, if you like—greener use have effectively pushed people further and further into fuel poverty.

The second objective was that all consumers would pay a fair price for their energy and would be protected from excess charges. Although I appreciate that those are charges for production rather than the other elements—the tax and the levies—it has all come together in a horrible, nightmarish mix, whereby, because of the global cost increase, the Government are now scrabbling to try to honour what I think was their intended commitment to make energy prices affordable by considering some of the things that they can move, which clearly will be taxes and levies, as opposed to some of the things that they cannot move, which include the global price of gas.

Therefore, for me, Government intervention is not optional. As has been said, the number of households in fuel poverty is increasing from 4 million to 6 million. That will affect a very large number of my constituents. The Government have a number of options. They can mix targeted initiatives and universal ones. The comment in the media is that the Government are uncomfortable about solutions that are more universal in nature.

This energy crisis—this energy cost—comes on top of a huge increase in the cost of living. We know from figures out today that people’s wages are not going up to meet those costs, and therefore it is not just the usual smaller percentage of the population that is suffering; it is actually a much larger percentage of the population. People at all levels make commitments, and they are struggling to meet them. They have to meet their mortgages; that is not negotiable. They have to pay their rent; that is not negotiable. Businesses have to pay business rates; that is not negotiable. To be reluctant to reduce, and to resist reducing, VAT from 5% to 0%—the most obvious, quickest and easiest universal solution—is perhaps a little disingenuous. It seems to me that at least 60% of the people who would benefit from that actually deserve it.

The other universal approach is what we do about universal levies. That is something that we will have to review, and we will have to look at how the burden can be moved to general taxation. We need to recognise that those levies are subject to a number of contracts, which means that they cannot be the first thing that the Government fix. None the less, they need to be in the bag of solutions.

The obvious targeted solution—I think that it is an “as well as” rather than an “instead of”—is expanding the warm home discount, changing the eligibility, taking it beyond winter and looking at how we might make it generally taxpayer funded rather than funded by those that contribute to it.

How are we going to pay for this? Of course, it is right that the Government consider that. A number of things have been looked at, including a windfall tax on the oil and energy industry. Only this morning, there have been suggestions that fraudulent covid payments claims, which the Government have committed to claw back and at the moment are estimated at £4.3 billion, would go a long way to covering the most urgent and easiest solution, which is to reduce VAT from 5% to 0%. The VAT bill that the Treasury would have to cover would be somewhere between £1.7 billion and £2 billion. Affordable is the wrong word, but it is the right thing to do, and it is entirely affordable given the likely income that the Government can expect as the economic forecast improves across the country—although, sadly, not in my constituency—and what they might get back from the covid claims.

Of course, the people who are most impacted are the ones who are most vulnerable: the over 65s on fixed incomes and those in poorly insulated houses, which is definitely the case in my constituency. Those people are the most important, but they are not the only ones. I ask the Government not just to look at this as a matter of money, but to ask what is the right thing to do. What is the timeframe in which they must act? It is now—it is cold now. I ask the Government not only to acknowledge that there is a problem but to put forward steps now, before the new cap is introduced—and certainly long before April.

[Sir Edward Leigh (in the Chair)]

Will Members now keep to about five minutes, so that everybody can speak?

--- Later in debate ---

[Greg Hands]

No. I have only two minutes left. The hon. Lady asked a question about storage, and I repeat that the current issue is not a question of supply. Storage helps if there are supply issues, but we have an issue relating to price. Storage does not protect, generally, from price shocks if the supply is secure, and I have already said that our supply is secure.

The hon. Member for Oxford West and Abingdon (Layla Moran) made an extraordinary speech, in which she said, I think, a windfall tax would be a powerful message to Moscow. I thought the intervention by the hon. Member for Kilmarnock and Loudoun slightly exposed that. If the hon. Member for Oxford West and Abingdon can show me how to design a windfall tax that would clobber Gazprom, I am all ears. Bearing in mind that our imports of gas from Russia are almost entirely liquefied natural gas and only less than a handful of percentage points, if the hon. Lady can show me how her Robin Hood tax would have an impact on Gazprom, I am all ears. We are not dependent on—she said “rogue states”. More than half of our gas imports come from Norway. I do not think anything she is proposing is going to protect us from rogue states.

The hon. Member for Kilmarnock and Loudoun made a number of familiar points on supplier of last resort costs. SoLR is there to protect customers when their energy supplier ceases to trade, so that they can transfer their account.

[Sir Edward Leigh (in the Chair)]

Order. Minister, do you want to give Jamie a few seconds?

[Greg Hands]

Okay, I will give him a few seconds, Sir Edward. On oil and gas and nuclear, I am constantly baffled by the SNP’s policy. It is anti-oil and gas. It is anti-nuclear. It is hard to know what it is actually in favour of in Scotland when it comes to supporting Scotland’s energy customers and energy suppliers. Finally, I note that we have not heard anything about Labour energy policy in the week since the party’s disastrous four-page, convoluted student union motion in the main Chamber last Tuesday. I thank everyone for participating in the debate, and I look forward to further engagement.

[Sir Edward Leigh (in the Chair)]

Order. We have to move to the next debate, I am afraid. There is a strict time limit.

Motion lapsed (Standing Order No. 10(6)).