Energy Prices

Debate between John Healey and Sarah Newton

Wednesday 19th October 2011 Commons Chamber

[John Healey]

I do not know whether there is anything peculiar about the contractors and suppliers in St Ives, but that is not the general experience or track record of the scheme throughout the country, and it is not the experience of most hon. Members on both sides of the House.

[Sarah Newton]

Will the right hon. Gentleman give way?

[John Healey]

I will not give way for the moment.

The third way in which the Government are failing is that they are letting consumers down by allowing the huge hike in energy costs and bills, which are up 20% in the past year, as we have heard. In six months, there has been an increase of £175. The Secretary of State, who knows the cost of speeding, is not in the Chamber at the moment, but for his benefit, £175 is the price of about three speeding tickets. Every time a family in this country switches on the heating or the lights, the Government are letting them down—and those with the lowest incomes and the poorest households are being let down the most.

Mr Tomes, who could afford £10 a week on his gas, found that he was paying £3 a week just for the gas debt charge, which was taken directly through the meter. The average cost for using the gas each week was £2.30, but the standing charge was £3.31. In other words, he was paying more for his standing charge than for the gas that he used. Why is the system penalising the poorest and benefiting the better-off? Why is it failing those whose consumer power is weakest while reinforcing the market position and choices of those who have money and confidence and can get online? In particular, why is it penalising low users of energy while rewarding higher users? Why are low users, such as Mr Tomes, paying more and losing out more?

The answer is that all the major energy companies have a two-charge system. They justify it by saying that one charge covers the fixed costs of supply while the other covers the variable costs. That means that every major energy company either has a standing charge plus a unit rate or a higher-tier tariff up to a certain threshold and then a lower-tier second tariff beyond that. As a result, the less energy used, the greater the part of the bill that goes to the standing charge, fixed part or higher-tariff component of the costs, which means that low-use households pay more for each unit of energy that they use. Which? has calculated that low-use households pay 23% more for their gas and 15% more for their electricity, and of course low-use households generally tend to be low-income households as well. The system is therefore socially and environmentally regressive. Its reform is well overdue, and it is time for the Government and the regulator to act.

The action needed is clear: we should require energy suppliers to recover a far greater proportion of their costs from the unit rate of energy. To make energy bills clearer and fairer, I propose to the Minister a five-point plan—[Hon. Members: “Hooray!”] They are in vogue at the moment. First, we should abolish variable tariffs for the same energy supply. Secondly, we should require all tariffs to have the same format—a daily standing charge plus a clear cost per unit, including all the discounts. Thirdly, we should restrict standing charges only to cover the costs of the gas and electricity network. Fourthly, we should cover all other costs, including the costs of the Government’s climate change or social policies, through the variable charge, not on a per-customer basis, as is currently the case. Fifthly, to make these changes, we should use Ofgem’s current powers to regulate standing charges, under licensed conditions, plus the energy company obligation.

Those changes would make the system clearer, making it easier for people to compare suppliers’ prices at a glance, and also fairer, so that low-income, low-use households would not have to pay significantly higher prices for the energy that they need. Those changes would be right in practice and right in principle, because climate change and social equity policies are best and most effective when they are more specific and selective in their application rather than having a general application. The costs of climate change should bite more strongly on heavy users, while the cost of supporting poor households should be borne more heavily by higher-using households that earn higher incomes.

Ultimately, people do not have the choice not to consume energy. As a service in a full-scale market, energy is a special case. That places a special responsibility on the Government to do more to protect consumers, who must have the energy that we all depend on.

NHS Reorganisation

Debate between John Healey and Sarah Newton

Wednesday 17th November 2010 Commons Chamber

[John Healey]

We still have a lot further to go. There have been big improvements in international comparisons, but we must go further. It beggars belief that the Government have decided not to press ahead with plans to give patients a guarantee of, for example, receiving test results within one week, especially as hon. Members on both sides of the House recognise the importance of early diagnosis for cancer, and the cancer specialist, Mike Richards, said that this contribution to early diagnosis could save 10,000 lives a year.

Instead of building on those great gains, I fear that the NHS will again go backwards under this Tory-led Government. It is already showing signs of strain. The number of patients waiting more than 13 weeks for diagnostic tests has trebled since last year, 27,000 front-line staff jobs are being cut, and two thirds of maternity wards are so short-staffed that the Royal College of Midwives says that mothers and babies cannot be properly cared for.

This is not what people expected when they heard the Prime Minister say that he would protect NHS funding. In fairness, a proper, long-term perspective is needed on NHS financing. Year-on-year funding just below or even 0.1% above inflation is way short of the 4% average increase that the NHS has had over its 60 years. During the last Labour decade, it averaged 7% in real terms.

There are, and have been for many years, built-in pressures on the NHS: the cost of staff, drugs and equipment rises by about 1.5% above general inflation, and the demands of our growing and ageing population adds £1 billion to the bill each year just to deliver the same services.

[Sarah Newton (Truro and Falmouth) (Con)]

It is interesting that the right hon. Gentleman omitted from his list any mention of the escalating costs of administration in the NHS. Does he agree with us that what is really important is to reduce the cost of administration?

[John Healey]

The hon. Lady is right, and there is plenty of scope to do that. We recognised that, and we had plans to take out many of the managerial costs. I will come to that later, but it is hard to understand how creating three or even four times as many GP consortiums doing the same job as primary care trusts is likely to reduce rather than increase bureaucracy in the NHS. My right hon. Friend the Member for Leigh says that in Wigan there is one PCT, but it is set to have six GP consortiums. The same job will be done six times over in the same area. How is that a cut, or an improvement in the bureaucratic overheads and costs of the NHS?

In the spending review, the NHS is set for the biggest efficiency squeeze ever. On 12 October, the NHS chief executive, David Nicholson, told the Health Committee:

“It is huge. You don’t need me to tell you that it has never been done before in the NHS context and we don’t think, when you look at health systems across the world, that anyone has quite done it on this scale before.”

Money is tight, and something must happen, but that can be done by building on Labour’s big improvements in the NHS over the last decade. It will be tough, but I will back the Government, as long as all savings are reused for better front-line services to patients.