Ian Swales
Main Page: Ian Swales (Liberal Democrat - Redcar)(9 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
I join the right hon. Member for Don Valley (Caroline Flint) in congratulating the hon. Member for Totnes (Dr Wollaston) on her election as Chair of the Health Committee.
The right hon. Member for Don Valley began by wanting to reach consensus and, to be fair, it is not the first time that she has done so. Right hon. and hon. Members might be surprised to learn that she talked warmly in a speech last week about the consensus on energy policy in the UK. They might be even more surprised to learn that I agree that there is consensus on some aspects of energy and climate change policy. The Labour party has accepted the coalition’s major reforms of Britain’s electricity market. Labour voted for the Energy Act 2013 and backed its centrepiece—contracts for difference—which will be crucial in creating the world’s first ever low-carbon electricity market. Labour appeared to be backing our measures that are driving the massive increase in energy investment from which the UK is benefiting, including the more than doubling of renewable electricity. Labour seemed to be backing the measures that we are introducing to keep Britain’s lights on, such as the plans for a capacity market and National Grid’s supplemental balancing reserve.
I am fairly confident that there has been a consensus on energy security and climate change for some time, because the right hon. Member for Don Valley never questions me about our climate change or energy security policies. I am grateful for her support, however tacit. It would be nice to have more opportunities to explain by how much renewable investment has risen in the UK. According to Bloomberg New Energy Finance, the UK had the highest level in Europe in 2013. It would be nice to have a chance to tell the House in detail how we have turned around the legacy of under-investment that we inherited, which was threatening Britain’s energy security.
To be clear, I am more than happy, instead, to be debating energy prices again. I will deal with the right hon. Lady’s core argument head-on, because energy prices are of concern to people and businesses. Even on energy prices, there is some agreement between us. We agree that Britain’s energy markets need to be reformed. If we are to get a better deal for people, whether in terms of prices or customer service, there needs to be change. There needs to be some form of intervention to improve the markets.
The differences between us start to arise over what sort of intervention will work. What is it, exactly, that the Government and the regulator can do that will help the consumer most? The right hon. Lady believes that the change we need is regulation—price regulation. Labour now wants two regulatory interventions on prices. First, it wants legislation so that the Government can fix prices through a temporary 20-month price freeze. In addition, she now wants the energy regulator to intervene when retail prices do not quickly follow changes in wholesale prices. Such price control would be a massive, permanent state intervention.
Ian Swales (Redcar) (LD)
Does the Secretary of State share my surprise that the motion talks about the importance of passing on wholesale cost changes as quickly as possible, while also calling for a price freeze?
Mr Davey
My hon. Friend has spotted a point to which I will return. There is a bit of inconsistency there.
The historians among us might note that the two proposals for price control regulations are particularly interesting because they reverse the policy that Labour backed in government. In 2002, under Labour, Ofgem abolished all price controls on gas and electricity. Is it not interesting that, even though there is now more competition than in 2002, Labour has done a U-turn and wants price control regulations back?
Mr Davey
I have already said that I believe that there is a problem—Ofgem and the competition authorities told us that in the report I commissioned. I think there is a need for intervention—that is what I have been saying. The question is: what is the right intervention? Is it the price regulations proposed by Labour—the quite big interventions that I shall explain when I describe how they would work—or is it to ask the independent experts from the competition authorities to ensure that our markets work for consumers. The latter is what we are doing, and I think it is the right approach.
The Leader of the Opposition tells the Government all the time that we should stand up to the energy companies. That leads me to the not unreasonable conclusion that he must have stood up to the energy companies—that he must have a proud record of taking on energy firms at some stage. So I did some more research to find out what tough action the leader of the Labour party took. I was convinced that he of all people, faced with much larger falls in wholesale prices than we face today, would have acted. I therefore commissioned the research on what action Labour’s leader, when Energy Secretary, had actually taken on wholesale energy prices—what announcements he had made.
The research has come back, so let me read it:
“You asked for any statements of information provided by the last government on the link between wholesale and retail energy prices”—[Interruption.]
The right hon. Lady should listen to this:
“I’m afraid there was no substantial policy in this area by the previous government and as a result no announcements.”
There was nothing. The Leader of the Opposition simply did not have the same great ideas as the right hon. Lady.
Perhaps I am being too harsh. Perhaps the Leader of the Opposition was not advised to take the various actions we have taken, such as our support for a reference of such problems to the independent competition authorities—in other words, the experts. My research, however, suggests that the Labour party was told to act when he was doing my job. In fact, we have found that he was told to act on at least three occasions.
The Leader of the Opposition was asked three times to refer the issue of energy prices to the Competition Commission, and three times he refused. On 5 March 2009, he said:
“I do not think that at this stage a referral to the Competition Commission is the right way to go”.—[Official Report, 5 March 2009; Vol. 488, c. 983.]
On 7 December 2009, he said:
“It is better to look at policy options…rather than at a lengthy Competition Commission investigation.”—[Official Report, 7 December 2009; Vol. 502, c. 45.]
Of course, he did not actually take any policy options. On 25 February 2010, he was still in denial:
“I am not in favour of referring these matters to the Competition Commission”.—[Official Report, 25 February 2010; Vol. 506, c. 444.]
That is what Labour’s then Energy Secretary said, so my advice to the right hon. Member for Don Valley is this: stop embarrassing your leader.
For the sake of debate, let me accept another Labour U-turn on energy policy. Let me imagine that the Labour leader has thought more about it, listened to the right hon. Lady and changed his mind. Let me examine their proposals for two new price controls and how they would work.
As set out in the motion, Labour now has two competing ideas. The first is a temporary energy price freeze for 20 months, which is a policy to lock in a price, regardless of what happens in the wholesale markets. If wholesale prices go up, the smaller energy suppliers that cannot soak up the losses will go bankrupt. We have never received an answer to that. If wholesale prices go down, companies hedging against the freeze will have to maintain their prices and customers will lose out. The right hon. Lady is shaking her head, but companies that hedge against a freeze will lose money and potentially go bankrupt under her policy. She does not understand how markets work.
Ian Swales
Does the Secretary of State share my concern that the chief executive of First Utility, the largest independent supplier, says of the prize-freeze proposal:
“Bluntly, it could put me under”?
Mr Davey
My hon. Friend is absolutely right. All the new independent suppliers who are coming into the market and taking on the big six companies created under Labour do not like the policy, because they know it would undermine competition, put them out of business and be bad for consumers. Although we have debated many times the price-freeze intervention proposed by the right hon. Member for Don Valley, she still has not convinced anyone. We have shown time and again that it is just a damaging con.
The second, and latest, price control is proposed legislation to force energy companies to pass on variations in the wholesale markets more rapidly, which is sort of the exact opposite of a price freeze. Rather than keeping prices the same, this price regulation seems to want them to change more frequently and more rapidly, mirroring the wholesale markets.
That is interesting, because if we look at what has happened recently, we will see that wholesale prices can go up and down on a daily basis. A fortnight ago, wholesale prices were falling: day-ahead electricity prices fell by 7% and the natural gas spot price fell by 12%. Last week, however, the day-ahead electricity price went up four days out of five, ending up at almost 6% by the end of the week, and the natural gas spot price was up 10% by the end of the week. In other words, the spot prices on the wholesale markets go up and down—they are very volatile and fluctuate all the time.
The price regulation proposed by the right hon. Lady is a rollercoaster approach to energy price freezes. I call it Labour’s bungee-jumping approach to energy prices, and one would be hard pressed to think of a more incoherent and inconsistent approach. It is a populist, opportunist, soundbite approach to energy policy that would not just hit investment but leave consumers worse off. In other words, yet another con.
John Robertson (Glasgow North West) (Lab)
In a debate for which we have two and a quarter hours, the Secretary of State has spoken for half an hour. He spent his time attacking what the Labour Government did six years ago. That is outrageous. Once again, we have seen the reinvention of history. The Secretary of State is so out of touch with the people of this country that it is a disgrace that he is still in office. If he had any decency, he would throw the towel in and go and get a job that he can actually do something in.
We are here today to talk about prices and costs. That has nothing to do with the reinvention of history and nothing to do with the previous Government—although the previous Government gave the Secretary of State the job he has today. If it had not been for the previous Government, we would not be talking about energy and climate change. It was the previous Government who set that up with, I have to say, help from Her Majesty’s Loyal Opposition at that time. His own party, the Liberals, were against having a balanced energy policy, because they did not like the balance. Let us put everything in perspective: if the Liberals were honourable, they would not take up a post in the Department of Energy and Climate Change, because they were totally against what the Labour party and the Conservative party wanted at the time. Our parties worked together to meet the needs of the nation. It seems now that the agreement we have had over the years has gone out of the window. I blame the Secretary of State for that. Until he came into the job there was still a friendship between the parties to ensure that energy was in place to meet the needs of the nation.
The cost of electricity and gas has gone down. That is a fact, otherwise Ofgem would not be trying to get in touch with all the companies to ask them what they are going to do. We have been in this position before, and companies were fined for not bringing down the price quickly enough. I have a lot of constituents in fuel poverty. The Secretary of State and the hon. Member for Redcar (Ian Swales), who asked questions from his party brief, might not have any people in fuel poverty in their constituencies, but I have plenty. I have to support them and look after them, and I want prices down to where they should be. The Minister of State laughs and says we are out of touch. I am sorry Minister of State, but we are so much in touch with the people we represent. It may be time for those on the Government Front Bench to have a reality check.
On prices and the amount of money that has been, shall we say, siphoned off by energy companies, the Secretary of State talks about transparency. There is no transparency in the energy companies. He talks about having a look and seeing where the money goes. The Select Committee has tried that. We asked experts to try to look at the books and understand what energy companies do with their money, but they cannot work it out. At a meeting with EDF yesterday, I told them that until such time as they get their act together and become totally transparent—showing the books for us to be able to read and understand—people will not trust them. Until they do that, we will still be calling for price reductions. To prove that they do not deserve to have their prices reduced, they will have to open the books and make them totally transparent to Parliament. We have to be able to say, “Yes, they are right and they should not have to have a reduction.” They deliberately do not do that. I have to conclude from that that they do not want it to happen and are hiding something. This is for the Government to pursue, but they have not done so.
Ofgem has done a particularly poor job—let us be honest. I agree that it is not as bad as a lot of people think, but, having said that, it has not done a particularly good job. It is so slow at doing things it is not true. Perhaps a stick of dynamite somewhere might be helpful, but I expect that stick of dynamite to come from the Secretary of State—not from me and not from the Opposition, but from the Government. It is time the Secretary of State got his act together and sorted out Ofgem. He still has some time left before the general election. When the Labour party wins the election we will obviously have to sort it out.
Let me give the House an example. A reduction in wholesale prices managed to give the chief executive of Scottish and Southern Energy, Alistair Phillips-Davies a £2.7 million annual salary. That is obscene, and it does not include his bonuses. That is the kind of thing we are subsidising. We are subsidising chief executives receiving lots of money. We are subsidising money being invested who knows where. At one stage, ScottishPower was taking £800 million from Scotland through Spain to the United States. We should not allow that to happen.
If the Secretary of State stands up and has a go at Ofgem, I will be right behind him to help him, but with the best will in the world, he does not seem to be looking after the needs of the nation at this time. I want him to do so—it is important that he looks after the needs of the nation. If that means that energy companies have to tighten their belts, they can join the rest of us doing so Everybody else has to tighten their belt, so why should they not cut back a wee bit on their profits for the needs of the nation, rather than siphoning money away from the UK to Germany, Spain or France? That is not right and I expect our Government to look at it.
The companies have tried to blackmail us. They said that if we freeze energy prices, all hell will be let loose, but then one company said it will freeze its prices. The idea of freezing is to sort the problem out. The idea is not to put prices up or down, but to stop people getting ripped off the way they have been over the years, and to ensure that our Government look after the people who are important.
John Robertson
I am not interested—I have only a few seconds left.
It is important that the Government remember the people who are in fuel poverty instead of attacking people because of policies that happened years ago.