Gavin Shuker
Main Page: Gavin Shuker (Independent - Luton South)(12 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
I want to make some progress and I will come to my hon. Friend in a moment.
The Government’s policies combine competition and energy saving, and are designed to drive a wedge between rising world energy prices and the actual energy bills that people in Britain end up paying—decoupling bills from prices. If tougher competition in the UK energy market can take the sting out of rising global prices, and if we can help people to use less energy, we can cushion families and firms.
In many ways, the right hon. Member for Don Valley (Caroline Flint) said similar things. She talked about competition and markets, and it was music to my ears. Where we differ, however, is in the detail, and in particular on how to generate the extra competition that she spoke eloquently about.
Mr Davey
No, I will make some progress and give way later.
When we consider competition in energy markets we must first separate the retail side from the wholesale side—or, in English, competition between firms that sell us energy and firms that generate it. There are, of course, many firms that are on both sides of that equation, just as there are policies to help on both sides.
Let me start with the suppliers, the retailers, the people to whom we pay our bills. We can drive competition in that area in two ways: by making the existing bigger players compete harder to keep their customers, and by enabling more firms to enter the market and grow—something on which the right hon. for Don Valley is rightly keen. Switching has, of course, been the principal way to do both those things, which is what happened by letting customers choose their supplier and forcing energy firms to offer better deals to hold on to customers. As the right hon. Lady rightly said, however, that system has not been working well, and switching has not helped the vast majority of people. In fact, it seems that switching rates have been falling just as prices have been rising. That bizarre finding seems to be the result of the virtual end of door-to-door selling which, as many of us know from our constituencies, was fraught with problems. Switching rates appear to have fallen in recent years, and those who continue to switch tend to be the internet savvy and often the more well-heeled, leaving the less well-heeled and less internet savvy out in the cold when it comes to getting the best deals. In essence, it is a very unsatisfactory situation.
The policy question is about whether we can promote competition through switching in other ways, or whether switching is simply not the way to go. I am delighted because it seems from the right hon. Lady’s speech that the Opposition have not given up on switching, and in fact they seem to be copying some of the policies that I first articulated. Since imitation is the sincerest form of flattery, I take that as a vote of confidence. For Members who may have missed that neat trick from the Labour Front Benches let me explain. The right hon. Lady talked about her commitment to collective switching, and she mentioned Labour’s “Switch Together” scheme. The Government support collective switching because we talked about it first. The right hon. Lady knows that the Labour party could have pushed that idea when in government, but it did not, and it was this coalition Government who got it.
When I was the Minister responsible for consumer affairs in the Department for Business, Innovation and Skills, I pushed the general notion of rekindling the spirit of co-operatives into different retail markets, and, in league with Co-operatives UK, I set up a competition to stimulate new ways for communities to buy things together. From that work, energy co-operatives emerged as among the most promising. That is because gas and electricity are pretty similar commodities, wherever and however people buy them, and because people are increasingly worried about their bills. However—this is crucial—many people find it too difficult to switch by themselves, and I have been addressing that problem. I have talked to a range of people about the barriers to collective switching, and I have got people—including Ofgem, the large energy companies or firms, and organisations capable of managing a collective switch—round the table where we have made real progress.
Regulatory barriers are coming down. Last week, we announced a nationwide competition, in which the winners, whether councils, community groups or others, will get seedcorn cash to help them get going. That national competition—not a Labour party competition—is called Cheaper Energy Together and should provide a boost to awareness and learning that could transform switching in the UK, not least because winning bids must show how they would involve the fuel poor in their schemes. If we are to see a revolution in switching, with collective switching, I will insist that the most vulnerable are part of that.
It must be slightly embarrassing for Labour Members to know that when they were in government, they did not use the collective principle to help people. It must be embarrassing because, although the current Government are using the collective principle to tackle fuel poverty, the Labour party did not. I am, however, genuinely delighted that the Opposition have overcome their embarrassment, and taken up our idea.
Mr Davey
The only way to ensure greater transparency is to have more liquid markets. That is the whole point of liquid markets. Without them, people cannot compete or buy and sell their electricity forward, and we cannot ensure price transparency. That ought to be welcomed by the Labour party. I would be worried if it set its face against greater liquidity in the forward market. It would be a very odd position to take.
I have spent some time explaining how our various policies will promote fiercer competition and help cut bills, and I have set out why I think the Opposition’s proposals are fundamentally flawed.
Gavin Shuker
What social obligations does the Secretary of State feel would be appropriate to place on energy companies?
Gavin Shuker (Luton South) (Lab/Co-op)
I am extremely grateful to be called to speak in the debate, Mr Deputy Speaker.
I do not take my energy from one of the big six, so in a sense, for the first time in my life, I am not one of the 99% but one of the 1%, but I recognise that most of us do not even know which of the big six we are with, because someone else in the household deals with that, and many of us do not look regularly to switch. It was interesting to hear the Minister so keen to talk about switching, as though it were the be-all and end-all of energy reform, but we all know that a range of measures is needed.
I intend to make three brief but, I hope, helpful points. We need a short, a medium and a long-term approach. Looking at the short term, where do we stand today? Many of our constituents face a real cost of living crisis: their bills are going up and their wages are stagnant—if they have a job, that is. Despite the recent changes in the economy, unemployment continues to be persistently high. Young people have to pay for energy, but youth unemployment is high. Times are tough for everyone, whatever their economic position—commuters’ rail fares are going up, water bills are increasing, and the cost of living generally is quite high—and energy must be viewed in that context. There is a specific reason why the current energy price increases are so egregious: it is a matter not just of the figures, but of the economic backdrop.
Growth is flatlining. Since the review two years ago, the economy has shrunk by 0.4%. One of the best ways to deal with the problem is, of course, to get economic growth going and get a rise in real-terms living wages for people, but that is not happening at the moment. Against that backdrop, it becomes all the more important that we, this House, convince the energy companies that we are serious when we say we want change and we want consumers—our constituents—to benefit in the same way as the companies have benefited. That is why the botched announcement by the Prime Minister last week was so serious: it was an example not just of the shambles and U-turns that seem to be happening, but of the Prime Minister not understanding his power to put pressure on the energy companies.
A year ago, when the state of the market was similar—prices were going up but not coming down sharply enough—the Government clearly believed that by putting indirect pressure on the energy companies, they could get change. The former Secretary of State for Energy and Climate Change, the right hon. Member for Eastleigh (Chris Huhne), gathered the big six together for a Downing street gaggle. That resulted in a series of announcements, but a year down the line, the problems have only got worse. The short term is important.
In the medium term, we need market reform. Energy is an incredibly powerful resource. I do not mean only the energy that allows us to manufacture or to heat our homes. I mean the word in the purest political sense, which includes big and powerful entities. It is not for no reason that in recent times we have fought and drawn ideological lines about where energy companies should sit and where the means of manufacture should reside politically.
We need to get suppliers to pool power generation. We need Ofgem—or its successor body, if my party wins the next general election—to achieve real change in the industry. It must carry a stick as well as a carrot and be able to say, “We need proper market reform.” We also need a debate about the social expectations we have of energy companies. I feel uncomfortable about the Government directly subsidising the fulfilment of many of the social responsibilities to which the energy companies, which have had a very good run over the past 20 to 25 years, should be responding themselves. It cannot be all about switching, although I welcome the Labour party’s “Switch Together” initiative. Fair markets are the key to customer buy-in, which is essential if the energy companies are to have a sustainable business model. Doing the right thing is therefore good business sense.
Right hon. and hon. Members know the long-term challenges. Often we do not get caught up in talking about them and instead focus on the short-term politics, but there is a clear and consistent direction of travel: climate change and our domestic energy security require us to make significant changes to our markets. Building on the previous Government’s success, this Government have introduced a range of initiatives, including energy efficiency measures and the green deal. Although we have expressed our concerns about the green deal, we welcome the Government’s direction of travel.
Most important of all, though, is how we achieve our aims while also achieving affordability. There is only one answer: to make sure that energy markets and energy reform are such that there is customer buy-in and confidence, measured by the bottom line on their bills. Switching alone is not sufficient to achieve that. That is why I believe radical action is needed and why I welcome the radical action being taken by those on my party’s Front Bench.