Fuel Poverty

Jim Shannon Excerpts

Tuesday 14th March 2017 Commons Chamber

[Paul Scully (Sutton and Cheam) (Con)]

The UK has one of the largest economies in the world, growing quicker than many of its neighbours. We have record levels of employment and a welfare system that, despite differences of opinions across the political divide, provides an effective safety net in most cases and stacks up well in comparison with several countries around the world. However, we still have a number of vulnerable people, including children and the elderly, who make incredibly difficult choices about whether to eat or heat each day.

It is estimated that around 2.4 million households in England are in fuel poverty, the definition of which varies somewhat. In the past, the Government considered a household that needs to spend more than 10% of its income to maintain an adequate heating regime to be in fuel poverty. That is still the case in Scotland and Northern Ireland. However, I can see the Government’s concern that that definition is too loose, with “income” and “adequate heating regime” meaning different things to different organisations. That is why fuel poverty in England is now measured using the low income, high costs indicator, whereby a household is considered to be fuel-poor if its required fuel costs are above the national median level and it would be left with a residual income below the official poverty line were it to spend that amount. Admittedly it is more technical and less snappy, but LIHC allows for a more focused approach to identify those in most immediate need.

The different methodologies make it more complicated to compare numbers across the UK, but the best estimate is that a total of 4 million households are in fuel poverty.

[Jim Shannon (Strangford) (DUP)]

Fuel poverty is an important issue for us in Northern Ireland. The hon. Gentleman will know that 17% of people across the UK are in fuel poverty, but in Northern Ireland the figure is 42%, which is massive. Does he agree that any fuel poverty strategy and funding allocation must take a co-ordinated, UK-wide approach to address that shocking statistic, which speaks more of fuel poverty levels in a developing country than in the United Kingdom of Great Britain and Northern Ireland?

[Paul Scully]

I am glad that the hon. Gentleman has had a chance to air that important point, because I understand the situation in Northern Ireland.

Governments have recognised fuel poverty as a problem and have put strategies in place. The numbers affected by fuel poverty have reduced over the past decade overall, but slowly, by around 1%. Cavity walls now insulated have doubled over that period, and Government figures clearly show that houses with solid walls and in which portable heaters are used, rather than central heating, are far more likely to be in fuel poverty. There are still some 600,000 houses without central heating. People who are privately renting are twice as likely to be in fuel poverty than those in local authority or housing authority properties. However, all the numbers are still too high.

There is regional variation, as we have heard, with the north-east of England having the highest proportion of households in fuel poverty despite also seeing the largest percentage decrease, some 5% over the past 11 years. However, there are also many hidden cases. The London Borough of Sutton is a relatively prosperous borough, but it has pockets of deprivation that can easily be overlooked when considering London on a macro level. Within those pockets live people who get stuck between the cracks when it comes to low pay, welfare support, high energy prices and homes that are not energy efficient. That is likely to include older people on a small fixed income who are living in a large house that may be difficult to heat. Downsizing may or may not be an option, but it is one part of the solution.

Age UK has calculated that there have been 2.5 million avoidable deaths among older people in England and Wales due to winter cold over the past 60 years. Cold weather causes a massive spike in associated health problems, such as heart attacks and strokes, and there is a strong relationship between poor insulation and inadequate heating of houses, low indoor temperatures and excess winter deaths among older people. Age UK goes on to estimate that, each winter, one older person dies every seven minutes from the cold weather. Age UK has a number of advice guides that I strongly recommend colleagues share with constituents, particularly the elderly.

Beyond the impact on the frail and elderly, we all know from our casework that children living in damp and mouldy homes are particularly at risk. They are almost three times as likely to suffer from coughing, wheezing and respiratory illness. Evidence also highlights that infants living in cold conditions are at greater risk of admission to hospital or primary care facilities. In turn, living in such conditions also affects educational achievement, either through increased school absence due to illness or because children are unable to find a quiet, warm place to study at home.

Financial stress about energy bills causes huge anxiety that can exacerbate mental health problems, leading to depression and, unfortunately, potentially suicide. Currently, more than one in four adolescents living in a cold house is at risk of multiple mental health problems. There are three particular variables that affect the figures: income levels, energy prices and the energy efficiency of people’s homes.

The Government have sought to tackle low incomes by addressing the underlying causes of poverty, rather than by using cash transfers that just lift people over an arbitrary threshold in the short term. Rising tax thresholds have taken 1.3 million of the lowest paid out of income tax entirely since the start of this Parliament and have allowed others to keep more of what they earn. The introduction of the national living wage, which is due to reach £9 by 2020, is delivering a pay rise for millions of low-paid workers. The lowest-paid workers saw their pay go up by more than 6% in 2015-16, well above inflation, through those and other measures. Working parents are also benefiting from increased support with childcare costs.

There are a number of reasons why energy prices remain stubbornly high, including the fact that oil prices have doubled from their low point since early last year. SSE has become the last of the big six energy companies to review its current prices, with 2.8 million of its standard tariff customers facing a 6.9% increase. On Thursday, my hon. Friend the Member for Weston-super-Mare (John Penrose) will lead a debate in the Chamber in which he will call on the Government to introduce a relative price cap that brings the worst-value standard variable tariffs within a margin of the best-value fixed deals. His premise is to maintain competition by not introducing a strict cap, while seeking to end the exploitation of loyal customers—the set of people who, in a properly functioning market, would be the first to be rewarded.

Price-wise, it is important to address prepayment meters, which are used by many people in or around the fuel poverty category. The best way to keep prices low is to switch more—through competition—but that is often easier said than done. Although the number of people who switched rose by 30% last year, around two thirds of bill payers are still on the worst-value standard tariffs, despite Energy UK data that suggest that energy switching rates in Britain are the highest of any large energy market in the world.

Together, the big six energy companies have a commanding share of the market, in spite of their losing market share in both domestic and non-domestic supply. Between April 2015 and March 2016, 14 new licensed suppliers became active in the domestic market. The new entrants have a variety of business models, such as not-for-profit, renewable and local supply schemes. The increase in competition is to be welcomed, with small and medium-sized suppliers growing to account for 14% of the domestic market in March 2016.

If I may be parochial for a moment, I should point out that not every alternative small supplier adds to the liberalisation of the market. The London Borough of Sutton, my home borough, has launched an initiative called SDEN—the Sutton decentralised energy network—which takes the energy generated by a new, unpopular incinerator in Beddington on the Croydon border and pipes it to a new estate of houses that is currently under construction in nearby Hackbridge. Although few residents in Beddington wanted an incinerator as their new neighbour, the concept of using recovered energy in new homes seemed reasonable at first glance. However, last year our local paper, the Sutton Guardian, reported a proposed tariff that was some 21% more expensive than Sainsbury’s Energy was charging at the time. Such a decentralised network, piping energy in this way, prohibits residents from buying their energy from any other source, thus forcing them to take it up and locking them into a contract without the possibility of switching—the very opposite of liberalisation, and from a Liberal Democrat-run council.

Smart meters have been touted as a way to reduce energy use and fixed costs and to allow easier switching. They allow energy companies to harvest a lot of data and remove the costs of meter readings from their bottom line, but will they serve the customer well? The first generation of smart meters, SMETS1—smart meter equipment technical specification 1—worked while the customer was with the particular supplier that installed the meter, but they were not flexible enough in their interoperability. The next generation, the SMETS2 meters, are meant to solve that problem, but unfortunately the roll-out date has been delayed.

An open system will allow for the greatest flexibility. Apps that can nudge customers into energy reduction and more efficient use of their appliances and heating can be of huge benefit. Time and again we see how open source means better, faster and more flexible innovation. A few years ago, Windsor and Maidenhead Council put its money where its mouth is and fitted very visible meters on council buildings to show its energy use, leading to considerable reductions in energy consumption. That is nudge theory working really well. That could and should happen in domestic settings, too, with technology used to highlight high usage and so change behaviour, rather than people getting a shock from a high bill sometime later down the line.

The Government are working to improve the energy efficiency of homes throughout the country. Households that struggle with their bills are eligible for insulation measures, including solid wall insulation, through the energy company obligation scheme. Homeowners and those in privately rented homes who are on specific benefits may also be eligible for support through heating improvements, including oil-fired boiler replacements, through the ECO affordable warmth scheme. I welcome the fact that more than 2 million energy efficiency measures have been installed in more than 1.6 million homes since 2013, and the Government have made a commitment to insulate a further million homes by 2020.

I further welcome the fact that a greater focus of this support for low-income households will be on working families, and that the Government will continue to ring-fence a proportion of delivery for rural areas. The warm home discount scheme continues to help ensure that households at risk of fuel poverty can afford to heat their homes. This helps more than 2 million households a year with £140 going towards their energy bills. Pensioners also get further help through the winter fuel allowance.

The Government retain the goal of insulating 1 million more homes by 2020. However, I remain concerned that the Committee on Fuel Poverty, which advises the Government on this matter, raised serious doubts in September 2016 that the 2020 and 2025 fuel poverty energy efficiency milestones can be achieved. It believes that, over time, the £2.1 billion per year spent on fuel poverty programmes such as the warm home discount and winter fuel payments needs to be better targeted at those most in need of assistance.

The WHD will be reviewed in this Parliament and, currently, only 15% of it is targeted towards those in fuel poverty. The winter fuel payment is universal and so clearly not targeted, but it is also committed until 2020. The Committee also believes that the Government should seek to attract new sources of funding to assist in meeting the fuel poverty strategy milestones. Examples it cites include modifying existing legislation to require private landlords to upgrade the energy efficiency levels of their properties; giving the same priority to improving household energy efficiency as to generating new renewable energy; and modifying existing legislation to attract more third-party capital. I would be grateful to the Minister if he commented on those thoughts in his response.

I was motivated to raise this matter after hearing about an initiative by the local Sutton business, MaximEyes. This energy consultancy has succeeded in winning a number of awards by working with its clients on energy management and efficiency as well as utility infrastructure and procurement. Its core business is about the best use of energy, so it is well placed to examine and help tackle fuel poverty as part of its corporate social responsibility. It approached me to help identify households in need that it could help to turn around as part of its Fuel the Change initiative.

The company aims to take 1,000 homes out of fuel poverty by 2020 as its business develops. It has created a solid partnership with the Foundations Independent Living Trust, which has the expertise and infrastructure to ensure that the funding is used in the most efficient way and that it reaches those who are most in need.

Businesses that address issues to which they can relate directly tend to have more effect. Writing a cheque gives bosses a warm, short-term glow, but using a company’s resources to tackle something connected to its core business, market or interests can have a far bigger effect on the beneficiaries.

I am delighted that a Sutton business is taking a lead, encouraging other businesses to join it and to put something back, especially in an area that can really save lives. I hope that Members will join me in the Macmillan Room next Tuesday at 1 pm to speak about this further with the MaximEyes team and with representatives of related businesses. Businesses can, and should, be a force for good. I know that the Minister and my Government colleagues take this matter seriously. There is much to commend them for in the way that they are tackling low pay. We need to continue to improve competition in the energy market and look at how we can grow our investment in our housing stock to ensure that homes are energy efficient. We must also use emerging technology, such as apps, to influence behaviour; battery storage, such as Tesla’s Powerwall; and of course renewables. We must also work with the construction industry and allied businesses to ensure that they play their part. I look forward to my hon. Friend informing this House about what more can be done in the future by Government, energy providers, businesses such as MaximEyes, charities and individuals in this really important area of fuel poverty.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)]

What a delight it is, Mr Deputy Speaker, to see you in the Chair. I thank my hon. Friend the Member for Sutton and Cheam (Paul Scully) for selecting such an important issue for debate this evening. I am very grateful to him not just for his interest in fuel poverty, but for his leadership in hosting a discussion in the Palace of Westminster next week. You may have detected, Mr Deputy Speaker, the subtle way in which he wove in the details of the time and place into his speech on how we can support efforts to tackle fuel poverty in the UK.

The Government recognise that fuel poverty is a significant issue, affecting households throughout the United Kingdom, as the Committee on Fuel Poverty rightly highlighted in its 2016 report. I massively welcome the insight and challenge to Government that the committee brings. I also welcome the fact that it can help us, by those means, to deliver a suite of solutions for those who need help that is as effective as possible. Only this morning, I spoke to David Blakemore, the chair of the committee since November last year, and I look forward to working with him and the committee over the coming years.

As my hon. Friend has said, fuel poverty is measured in England by the low income, high costs indicator. According to that indicator, a household is fuel poor if it has an income below the poverty line and, at the same time, higher than typical energy costs. It is a relative indicator that is essentially a balance of two averages. It is fair to say that the total number of households living in fuel poverty has been relatively static over the past few years. However, there has been a fall over time between 2010, when there were just under 2.5 million households in fuel poverty in England—as my hon. Friend will know, this is a devolved matter—and 2014, when the latest official statistics record 2.38 million households. Those households face an average fuel poverty gap of some £371, which is itself a measure of the severity of the problem.

Perhaps I can assure my hon. Friend that, as he has rightly acknowledged, the Government are committed to helping households in fuel poverty, or on lower incomes and living in homes that are expensive to heat. I congratulate him on rightly highlighting the broader measures that the Government have taken in recent years by raising income tax thresholds and introducing the national living wage. Both those things are, at the broadest level, important contributions to solving the problem. He also rightly focused on the significant public concerns about recent announcements of price increases by the energy suppliers. I am glad that, as a result of action by the Competition and Markets Authority, in February this year Ofgem announced details of a cap on the amount that suppliers can charge prepayment meter customers. This will take effect from April and will help to protect those customers from high energy costs.

Energy suppliers have delivered nearly 700,000 measures in 500,000 low-income and vulnerable households since the energy company obligation began in 2013. That is part of a total of some 1.6 million homes that have been improved over that period, but this Government are going further to take action to tackle the root cause of fuel poverty, recognising that improving household energy efficiency is the most sustainable long-term solution to tackling the problem. Next week, the Electricity and Gas (Energy Company Obligation) (Amendment) Order 2017 will be debated in both houses to extend the scheme from 1 April 2017 to 30 September 2018. The measure will seek to reform ECO so that 70% of the support under the scheme will now be directed at low-income homes. That represents an increase from £310 million to £450 million a year that will be invested in improving the energy efficiency of homes that most need support. We expect that the reformed ECO will improve about 500,000 homes over the coming 18 months, and the Government have made a commitment to insulate 1 million homes over the life of this Parliament.

Recognising the fact that people also need immediate support with energy bills, we also have in place the warm home discount, which my hon. Friend recognised. The scheme provides more than 2 million low-income and vulnerable households with a £140 rebate off their energy bill each winter, when temperatures are lowest and bills highest. Together, the schemes mean that there will be at least £770 million of support for low-income and vulnerable consumers over the period 2017-18.

[Jim Shannon]

In my intervention on the hon. Member for Sutton and Cheam (Paul Scully), who introduced the debate, I mentioned having a co-ordinated plan across the whole of the United Kingdom of Great Britain and Northern Ireland so that we can collectively—in all the regions—take on the energy companies and work together. Has the Minister given any thought to how we could progress that?

[Jesse Norman]

As I have said, this is a devolved matter, so that does not specifically bear on it. However, on the wider question of whether there is scope for more joined-up thinking, I would absolutely welcome the hon. Gentleman’s suggestions, or indeed suggestions from the Northern Ireland Executive, as to how those things could be done, and we would give them a very warm interrogation. I am not sure what would come out—we would have to see the suggestions—but the warmth and the interest from our side are certainly there.

I should add that the role of regulation will also be important as we take action to ensure that tenants can live in a home that keeps them comfortably warm. The private rented sector regulations will target the least efficient, F and G-rated properties from 2018 by requiring landlords to improve those properties to at least a band E, unless a valid exemption applies. My Department is considering options for the implementation of the regulations, with a view to ensuring they can be implemented effectively by April 2018.

Of course, there is more work to be done. One important area will be to improve targeting on the households most in need—a topic my hon. Friend rightly raised. The Digital Economy Bill, which is going through Parliament, will be important in that regard, as it will make available better data on householders and properties. That, in turn, will reduce the costs obligated suppliers face in identifying households that are most in need, and it will allow more measures to be installed for the same cost.

I hope my hon. Friend will agree that the Government are taking this matter with the appropriate level of seriousness, but what I have described are all Government-led actions, whereas fuel poverty is a problem for all of society, and the Government cannot tackle it alone, as he rightly said. That is why partnership is a key theme of the fuel poverty strategy. It is important for the Government to play a leadership role, but it is also important for them to work alongside initiatives from local government, businesses, individuals and the charitable sector. Only by making the most of the varied skills and resources of each of these partners—the collective resources of society as a whole—can we collaboratively tackle the long-term social problems of fuel poverty.

In that context, I welcome the Fuel the Change initiative, which is due to be launched next week, and which my hon. Friend mentioned. I am looking forward to hearing the outcomes from the discussion led by my hon. Friend and Baroness Verma of how businesses can support the fight to tackle fuel poverty in the UK. This debate, and my colleague’s excellent speech this evening, are important contributions to that further conversation.

Question put and agreed to.