Cost of Living Increases: Pensioners

Debate between Jerome Mayhew and Alan Brown

Monday 21st March 2022 Commons Chamber

[Alan Brown]

I completely agree. I thank my hon. Friend for highlighting that point; he has been at the forefront of the campaign to highlight the effects of increased energy costs on those who are off the gas grid. That threefold increase in fuel costs is completely unsustainable and really does lead people to the choice between heating and eating.

Let us look at conventional households covered by the energy cap. Next month, the cost of energy for the average household will have increased by 75% compared with April 2021, a rise of more than £800 a year. Pensioners spend more time in their homes and are more likely to feel the effects of cold or damp, so increased energy costs disproportionally hit the elderly. Not being able to afford to heat their homes puts their health more at risk. There are already something like 10,000 premature deaths a year due to fuel poverty, and that was before the huge energy cost increases. It is truly shameful that in an energy-rich country, or group of nations, people are dying prematurely because they cannot afford to heat their homes.

National Energy Action has estimated that the cap increase will have caused a 33% increase in fuel poverty rates. If this rise continues without Government interventions, come October we will be looking at some 8 million fuel-poor households in the UK, with perhaps between 2.5 million and 3 million of those households containing pensioners. When we look beyond the phrase “heating or eating”, we see that the grim reality for people faced with that choice is starving or freezing or suffering in damp houses, and that brings us back to the possibility of more people dying prematurely. It is truly shameful.

The interventions that the Government have announced to date clearly do not go far enough. Even worse, the removal of the triple lock is taking more than £500 a year from the pockets of pensioners, as the Government’s own Red Book demonstrates. Earlier today and this evening, Tory Ministers were arguing that wage increases were a false measurement owing to the partial recovery from covid. They have used that to justify breaking the triple lock. Just four months on, however, we have evidence that a much larger pension increase than 3.1% is required. The facts are clear: the spring statement in two days’ time will provide the one opportunity to reinstate the triple lock, or at least, as a bare minimum, to introduce a mechanism for increasing pensions by 6.1% in line with the current rate of inflation and what the Scottish Government are doing with benefits.

It was good to hear the Secretary of State guarantee that if inflation is at 7% or 8% later in the year, at the point when calculations are being made for the purpose of future uprating, pensions will rise by that amount. I hope that the Government stick to that, and it is not just bluster at the Dispatch Box. We all know who pulls the strings; it tends to be the Chancellor, so I hope that the Secretary of State is lobbying the Chancellor, because we know that inflation is not going to go down any time soon.

While I am talking about inadequate measures, let me point out that the £150 rebate on council tax will not catch all pensioner households in terms of bandings; and, as the shadow Secretary of State said, many pensioners living alone or in receipt of pension credit already receive a full or partial council tax discount, and are therefore unlikely to benefit from the new council tax rebate measure unless the Government do something about it. Making others who have avoided debt all their lives take out a £200 loan to pay back later is also morally wrong. That loan should be converted to a grant for all, and certainly, as the bare minimum, for pensioners and those on benefits.

The Secretary of State spoke about the warm home discount, but, as she knows, the Government put no money into that scheme, although too many Ministers do not even understand that; it is actually paid for by other bill payers. While I welcome the extension of the discount to 3 million households, only 10% more pensioners will receive it. The Government should extend it further, but, in doing so, should provide some direct funding rather than imposing the funding on other bill payers. They should also consider extending the energy company obligation scheme so that more homes become energy-efficient, but that too should involve direct funding rather than other bill payers having to foot the bill.

Apart from the £150 funded rebate, the only direct Government intervention to date on energy has been the allocation of £1.7 billion for the development of Sizewell C. Not content with Hinkley Point C being the most expensive power station in the world, the Tories are determined to build another more expensive one. In their own impact assessment for the Nuclear Energy (Financing) Bill, the upper estimate of the capital and financing costs of the Sizewell C development is £63 billion. How will that help people who need energy costs to come down? And why did Labour vote to commit bill payers to that amount for a new nuclear power station? The money could be spent so much more wisely. There really needs to be a rethink on this nuclear policy.

There are other cost increases to be considered. For instance, the cost of food is rocketing.

[Jerome Mayhew (Broadland) (Con)]

I note the hon. Gentleman’s opposition to the gaining of low-carbon energy from nuclear. He has also told us that this is an energy-rich country. What does he think the Government should do with the Cambo oilfield? Should we open it up to reduce energy prices for pensioners?

[Alan Brown]

The hon. Gentleman is not comparing like with like. Cambo means more fossil fuel extraction, and there needs to be a proper assessment to establish whether this could be done in a way that is compatible with net zero. That is a test that the Government are refusing to apply. Apart from that, they should be investing much more in floating offshore wind, in tidal stream, in which Scotland leads the world, and in pumped- storage hydro, which is a dispatchable low-carbon technology. That scheme is ready to go, but the Government have not agreed a pricing mechanism. Then there is carbon capture and storage at Peterhead, in which respect Scottish customers have been let down again. So much more could be done in energy, and it would not cover even a portion of that £63 billion that has been allocated to nuclear. More energy efficiency reduces demand, and therefore reduces the need for new power generation. I hope I have answered the hon. Gentleman’s question.

[Jerome Mayhew]

Yes.

[Alan Brown]

Yes!

Returning to fossil fuel, obviously petrol and diesel prices have increased massively at the pump. They have gone up by between 35p and 40p a litre compared with a year ago—a 30% increase. That also means that while people struggle to run their cars, VAT returns to the Treasury have increased massively. The current rates compared with last year mean that the Treasury is getting something like £3 billion a year extra in VAT returns, but that should be recirculated to support hard-pressed people, especially pensioners. It seems that the Chancellor may respond to calls to cut fuel duty, but if he does, he will be demonstrating the folly of a 12-year duty freeze. When we had lower prices, that was the time when bolder action could have been taken to raise fuel duty, so that when fuel prices increased in the way they have, fuel duty could have been decreased. That would have created a much smoother curve, instead of peaks and troughs, and the Treasury would have had a far more stable income as well.

Carbon Emission Charges

Debate between Jerome Mayhew and Alan Brown

Monday 1st November 2021 Westminster Hall

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate the petitioners on bringing forward the petition and the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) on presenting the debate and making some key points. It is a worthwhile time to debate this subject, given that COP26 is taking place in Glasgow as we speak, and how we achieve net zero in the fairest way is something that needs serious discussion. It is a slight disappointment that there were not more Back-Bench contributions, but so be it.

I completely agree with the three key points made by the hon. Lady. Obviously, we need to generate the shift to low-carbon technologies, but it is critical that we protect the most vulnerable and stop carbon leakage. The hon. Member for Broadland (Jerome Mayhew) also made that point. He made an interesting contribution, and I will try to summarise it. I think he said that although he is a proud free marketeer, he is not really a free marketeer because interventions need to be taken. That is quite an interesting dynamic. He also seems very much to be a protectionist when it comes to imported goods—but again for the right reasons, because we are talking about carbon border adjustments.

[Jerome Mayhew]

I want to make it absolutely clear that I am not a protectionist. If a CBAM is to be successful, it is important that we ban the P-word. The tariff has to be applied at exactly the same level as that used in the domestic economy.

[Alan Brown]

It is possible that I was being slightly flippant when I used the word “protectionist”. I take his point that if we are going to do this correctly, it will have to be in collaboration with other countries. I agree with that.

If we believe in the basic principle that the polluter pays, a carbon tax makes sense. If we are serious about achieving net zero, we need to give serious consideration to carbon taxes. However, as has already been said, any such taxation needs to be fair. It cannot be structured in such a way that companies feel obliged or rewarded for relocating to other countries, therefore defeating the purpose. Critically, it must also not lead to the poorer in society paying a bigger burden, especially if a tax is levied on gas bills. The reality is that the more affluent will be able to switch to heat pumps, but those struggling to pay their energy bills will have no chance of doing so. We cannot leave the most vulnerable to pick up the carbon tab for others as the energy sector transitions to net zero.

The recent Government policy of £5,000 grants for heat pumps is still insufficient for most people to be able to afford the installation of a heat pump. The unit cost of a heat pump is still in the price range of £6,000 to £10,000. A £5,000 grant goes only part of the way, but it does not make up for all the additional work that is also required. We need to have proper energy efficiency measures, which are welcome but cost money, such as a new water tank, possibly new radiators, decommissioning boilers, and then there is decoration works that need to be done to a property once all that work is completed. That £5,000 grant is clearly not the pathway to increasing the number of heat pump installations from current figures of 30,000 per year to the Government target of 600,000 a year. Going forward, we need to look at that in the mix. Before a carbon tax is introduced, we need to ensure that it does not create more people who are fuel poor, and also look at how we use the revenues from the carbon tax to help get heat pumps and energy efficiency measures for those who need them most.

At the moment, decarbonisation of the power sector is being paid for by levies from our electricity bills. The UK Government have acknowledged that that is unsustainable, because roughly a quarter of electricity bills are made up of those levies. That needs to change; there needs to be a fairer system. That is where carbon taxes could be looked at, but—I am repeating myself—it is important that the most vulnerable are protected.

In wider industry, cost-effective decarbonisation solutions need to be available to industry when a carbon tax is introduced, and taxation must be structured so that it is fair and equitable across the UK. Recently, the UK Government opted to fast-track two carbon capture and storage clusters in the north of England but, disgracefully, they have made the Scottish cluster a reserve cluster. That means that, despite the Scottish cluster being the most advanced in project development and deliverability, it is estimated that the two other clusters will proceed at a faster rate.

It would be inherently unfair for the Government to support, either via direct taxation or consumer levies, some industries in some areas of the country while potentially slapping a carbon tax on another area just because they have not been progressed at the same rate. These things have to be looked at in the round. The Scottish cluster takes in the two biggest carbon dioxide emitters in Scotland—Peterhead gas station and the INEOS facilities at Grangemouth. As the biggest polluters, they have to pay to remedy that—that is where we are right—but will they make that investment? They need that assistance, and they must not be disadvantaged when others are getting support.

Revenues from a carbon tax must be reinvested in green initiatives targeted at the most vulnerable and the hardest sectors to decarbonise. They must also be completely transparent. We have had a carbon tax in the airline industry for years: air passenger duty, which is supposed to follow that basic principle of polluter pays, in relation to aircraft emissions. The actual reality is that, over the years, APD has become nothing more than a Government revenue stream. It is not ring-fenced or reinvested; it becomes part of the “money in” column and is added to the mix of Government expenditure.

It is outrageous that over the years, so-called environmental taxes have been levied and never ring-fenced and reinvested in the way they should have been to reduce emissions. Last week, the Chancellor made the crazy announcement of lowering APD on domestic legs of return journeys. We need a serious debate about support for the airline industry and the wider travel industry, but a reduction in air passenger duty should apply only to airlines that use sustainable aviation fuel, which costs more money. At least companies would be incentivised to lower their emissions, with the offset reward of reduced APD. It makes no sense in the current climate to do a blanket APD cut.

In the aviation industry as a whole, for years consecutive Governments of different colours have maintained a policy that aviation fuel is duty free. We pay our petrol duties at the petrol pump for domestic use in our cars, but all these years, aviation fuel has been duty free. That makes no sense. It needs to be looked at in the round. I do not want to kick the airline industry when they are down and make it harder for them, but we need a system that is fair for everyone on carbon taxes, emissions and incentivising behaviour to drive change. The Government need to look at that.

In the oil and gas sector, £350 billion of revenue has come from Scotland over the years. Those were carbon taxes, but that money has never been ring-fenced or reinvested. A sovereign wealth fund has never been created. Most countries across the world have created sovereign wealth funds, which they are using now, in these tough times, either to help their economy, stimulate their economy, or do green initiatives on the path to net zero. But the UK Government have never done that. It is to their shame that we do not have that money, as a legacy, to go forward.

Today, I actually managed to attend a COP26 panel event before I got on the train to come down to Westminster. There was a representative at the event from Louisiana; he was explaining how for years it has used its offshore revenues to pay for climate adaptation measures along its coastline. Obviously, Louisiana is one of the areas most affected by coastal erosion. That shows us what can be done with long-term thinking, but it needs the initiative to look at revenues that are coming in and how to use them wisely. That is what I am calling for. If there is carbon taxation coming in, it must be transparent and it must be available to be reused to fight climate change.

In a similar vein, I represent a former coalfield area. Carbon taxes had been applied to the extraction of coal over the years, but a few years ago, when the open-cast coal industry collapsed in my constituency, it left massive craters that needed reinstatement work at a cost of millions of pounds. Carbon taxes came from my constituency to the Treasury, but they just went into the black hole. When we asked for assistance for restoration work on those abandoned coalmines, the answer that came was, “No. Too bad. That money came in and it has been used. There is no money coming back to your constituency. It doesn’t work that way.” That shows the folly of not ring-fencing a tax for the purpose that it should be ring-fenced for. Again, transparency is utterly critical if we are to go forward.

I would also say on transparency that the Treasury will have to develop these taxes following open consultation with industry, non-governmental organisations and charities. I also suggest that it would be worth the UK Government’s following the lead of the Scottish Government and having a just transition commission that is able to advise the Government on fairness, look at policies across the board and advise the Government accordingly. Equally, the Treasury cannot be left with the power to introduce exemptions from carbon taxes without robust and transparent procedures, or else it is a lobbying exercise and it becomes open season for donors and cronies to lobby the Government and possibly get exemptions. Again, anything that comes forward needs to be transparent.

I have just one further warning about the money not becoming a Treasury income, because that nearly happened post Brexit. The Department for Business, Energy and Industrial Strategy had devised an emissions trading scheme, which was agreed with all the devolved nations, but at the eleventh hour the Treasury wanted to throw away all that work and replace it with the introduction of a carbon tax. That was clearly just because the Treasury saw it as an income stream. That cannot be allowed to happen; the Treasury cannot have carte blanche to do what it wants. It also shows us that carbon taxes have to be developed in conjunction and consultation with the devolved nations.

In Scotland, we have our own net zero by 2045 target. We have, as I said, the Just Transition Commission. We are working with our own policies, so it is only right that carbon taxes be introduced in such a way that they do not adversely impact our direction of travel.

I am getting near my conclusion, Mr Robertson. I have some concerns about a carbon tax, but largely I do favour the concept. I pay tribute to the work done by the Zero Carbon campaign, which has illustrated and highlighted the fact that surveys prove that such a tax is generally popular with the wider public. They understand the need for net zero; they understand the benefits of a carbon tax being introduced, but again, the critical question is whether that is being done fairly. Scotland’s Climate Assembly has had similar findings with the delegates who have participated in the assembly.

Things can be done to resolve the concerns. Again, that is about transparency. It is about targeted reinvestment. Ireland is already doing that: it targets top-up social welfare payments. That is something that this Government could look at, especially with the cost of living and the fuel and energy cost crisis at the moment. They could put more money into supporting electric vehicles as we try to transfer away from the internal combustion engine.

Something that the Scottish Government are doing is interest-free loans. They have extended interest-free loans to the second-hand market to try to extend affordability, but the UK Government are cutting the grants available. If we are going to have carbon taxes, we need to further stimulate the electric vehicle market and ensure that some people are not left behind.

The decarbonisation of our heating systems is absolutely critical. It would be good to step up energy efficiency installations, treat energy efficiency as a capital infrastructure programme and speed up the upgrading of all properties to EPC––energy performance certificate––band C. That would reduce emissions and fuel costs. What could be a fairer way of using the carbon taxes that are levied?

I agree with the two contributions so far about introducing a broader carbon adjustment to minimise leakage or offshoring. We know that carbon taxes can be successful in changing behaviour. We know that they seem to have wider support if they are introduced fairly and transparently, so let us continue with this serious discussion. Let us find a way to introduce them but ensure that it is done in a way that helps us get to net zero and is part of a just transition.