Energy Prices

John Robertson Excerpts

Wednesday 19th October 2011 Commons Chamber

[Caroline Flint]

We are clearly on record as saying that we need to reform this distorted market. We need openness and transparency, and we need simpler tariffs. It is not enough just to tell people to navigate themselves around the increasing number of available tariffs that are no good. This is also about breaking up the big six and opening up the energy market to new suppliers. We are clear about that, and today we are forcing the Government to tell the House whether they, too, are clear about it.

[John Robertson (Glasgow North West) (Lab)]

Has my right hon. Friend had a chance to look at John Hills’s report on fuel poverty? He talks about the thousands of people who will die from hypothermia this winter. Does not that make any arguments about who is at fault completely superfluous? The fact is that we have to prevent those people from dying. What are the Government going to do about this? Are they going to put profit before people’s lives?

[Caroline Flint]

I was pleased to be able to have a meeting with John Hills this morning to discuss his report. I would not want to make a direct comparison in this regard, but it is telling that more people die of cold in the winter than die on our roads. This is about recognising that, while certain actions will take time, we need to determine what can be done here and now. The sad thing is that Ministers are lecturing families and firms about insulating and saving, even though they have cut Warm Front by 70% and will not give anyone any information about their green deal for homes, which will not be ready for another year anyway. Labour invested more than £300 million in Warm Front during our last year in office, helping families to keep warm and save energy. We helped home owners on modest incomes to modernise their heating systems, but today that scheme has a budget of just £110 million, and it is due to end in April 2013. The Government could take action right now: they could also stand up to the energy companies and tell them to help people to help themselves. In doing that, they could perhaps save some lives.

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[Caroline Flint]

What will be the cost if we rely on fossil fuels for ever more? What difficulties would that create, in terms not only of fuel costs but of security of supply? I refer the hon. Gentleman to a report that I believe came from both Ofgem and the Department of Energy and Climate Change last year, which outlined that something less than 5% of the price of bills was connected to investment in renewables. Of course we have to look for a balance, but I am focusing on something that we should all be concerned about. Even the Government have admitted that people are paying too high a price for their bills because these tariffs are sold in a misleading way so that people do not get a decent deal. On top of that, we have only the six big energy giants in the market, which needs to be broken up and radically reformed. That is something we should focus our attention on, along with help to people and businesses to make their homes and businesses more energy-efficient so they can pull down the costs of energy over time. There is no going back, however, to an old system of energy supply; that will not help anyone.

[John Robertson]

What does my right hon. Friend say to people in the poorer parts of my constituency where energy efficiency will not work? People can do nothing with the housing they have got, but they have to live somewhere. The thing that makes the biggest impression on them is the price. If they are going to get screwed by the price from the energy companies, they are going to have to work out how they are to live. What do we do with people like that? We can talk all we like about efficiency, but it does nothing for these poor people.

[Caroline Flint]

We stand up for them. We stand up for them when they are not getting the best deal they can for their energy. We also stand up for them by ensuring that low-income homes are supported through Government schemes, whether that is Warm Front or the winter fuel allowance for older people, but those are being cut by the Government. That is what we do and what we look at. In the long term, we look at how we live our lives and where we live and, with Government leadership and support, we help business to do the right thing to help people not to be behind the curve on energy efficiency and lowering bills. We also look at what happens now, which is why our motion demands that energy companies use some of their profits to help people, particularly the most vulnerable in our communities.

The Government do not understand the reality for families who struggle to pay the bills at the end of the month or the reality for vulnerable people who must make choices about whether to heat their home or have a hot meal. The same applies to families who believe in greening their homes, do their recycling, have low-energy light bulbs and have insulated their homes, yet still find that under the complex, distorted tariffs they pay more for every unit of energy they use—not to mention the businesses trying to keep their head above water because of an austerity programme that is not working for Britain.

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[Chris Huhne]

I do not agree with the hon. Gentleman on that. I care as passionately as he does about consumer rights on this issue. I spent some time on the board of Which?, the consumer association, so I will not be second to anyone on those particular issues. My experience—perhaps his differs—is that many of my constituents go first and foremost for advice on these issues to their citizens advice bureau, so that is an appropriate place to situate such advice.

When the coalition took office, some 400 separate tariffs were available. That is also part of the legacy we inherited from the time when the right hon. Lady’s boss was Secretary of State for Energy and Climate Change. This coalition Government have, in our Energy Bill—now the Energy Act 2011, as it received Royal Assent yesterday—taken powers to force companies to give straightforward information about cheaper tariffs. We are also working with Ofgem to cut the number of tariffs and make it easier to compare them. According to Ofgem, only 15% of households switched gas supplier last year and only 17% switched electricity supplier. Switching should be fast and easy, and we are cutting the time it takes to switch to just three weeks—that is another change that this Government have introduced. In addition, Citizens Advice and Ofgem announced record funding from suppliers for the “Energy Best Deal” campaign, which helps vulnerable consumers to shop around for the best deal.

[John Robertson]

rose—

[Chris Huhne]

I cannot resist, although I hope that the hon. Gentleman will be raising a matter concerning fuel poverty. I wish he would because I will be able to respond.

[John Robertson]

My speech is full of stuff on fuel poverty, but I wish to pick up on one of the points that the Secretary of State made. He said that Sweden was using less energy than the United Kingdom, but that is wrong. According to the Swedish Government’s own figures, Sweden uses twice as much energy as this country does, and the cost is more. In addition, according to the International Energy Agency, Sweden’s energy use is substantially higher than that of the UK. I do not suppose he meant to mislead the House, but I think he must get his facts right.

[Chris Huhne]

The hon. Gentleman needs to examine the situation for households. It is clearly the case that Sweden has a lot of hydroelectricity and a lot of industries are very dependent on it. My point was about households and the household use of heating, which is key.

Millions of households could save just by switching tariffs or payment method. From now on, suppliers will write to customers to tell them about these savings—that is another outcome from Monday’s energy summit.

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[John Robertson (Glasgow North West) (Lab)]

I will try not to use the whole 12 minutes available, as in many ways my contribution will be a repeat of a speech I gave in an Adjournment debate not long ago. I have listened intently to all Members who have spoken, particularly the hon. Member for East Antrim (Sammy Wilson), who said that he wanted honesty in the debate. Having heard history being reinvented and regurgitated so many times by Members on both sides of the House, I think that honesty is sometimes the first thing that goes out of the window.

I declare an interest as chair of the all-party group on nuclear energy. Interestingly, Labour Members used to raise the issue of nuclear energy much more often than the then Opposition, who ran away and hid every time the word “nuclear” came up. I am sure that the hon. Member for Angus (Mr Weir) will say, “And I wish it had just stayed that way.”

I can tell the Secretary of State, who unsurprisingly is not in his place, that doing nothing and giving up on things is just not an option for people. My predecessor in representing my constituency, the late Donald Dewar, once said:

“Cynicism, together with unrealistic expectation, are the two great bugbears of politics.”

Those words were ringing in my ears when I heard about the energy summit at Downing street. The cynicism is to think that there is nothing we can do to regulate prices, and the unrealistic expectation is the Secretary of State’s thought that asking those in fuel poverty to use less energy is a solution to the situation; it obviously is not.

The average household has seen energy costs rise by about £300 in the past year, and Ofgem announced last week that the profit margin for energy companies has risen to £125 per customer, from £15 in June. With 13,500 pensioner households in my constituency alone—it has one of the highest concentrations of pensioners in Europe—and with the highest number of single women pensioners in the entire country, according to the Library, Members will understand why this issue is of grave importance to me as a local MP, and why I raise it today as I have on other occasions. As Members can imagine, my constituency surgeries are currently dominated by this issue.

According to official figures, 65% of single pensioner households and about half of small pensioner households in Scotland were classified as poor in 2009, making them more likely than any other type of household to be affected by rising energy prices.

When I was first elected in 2000, four out of five single pensioner households in Scotland lived on an annual income of £15,000 or less; today that figure is 60%— admittedly lower than the percentage when I was elected, but the level is still unacceptable. According to Scottish Government figures, almost one quarter of single pensioner households and one fifth of smaller pensioner households in Scotland are deemed to be in extreme fuel poverty, which means that they spend more than 20% of their disposable income on heating their homes. In addition, in Scotland 8% of pensioners live in absolute poverty and one in 10 over-65s are classified as materially deprived. Members will therefore understand why I keep telling people that we are on the verge of a fuel poverty crisis.

What causes fuel poverty? There are three root causes: low incomes, poor housing and, most of all, high energy prices.

[Nick Smith (Blaenau Gwent) (Lab)]

My constituency is 1,200 feet above sea level, its winters can be bitter, and the latest figures show that it has 40 excess winter deaths every year. Does my hon. Friend agree that the Government have failed to stop the super-profits of some energy companies, and do not have a coherent plan to help families with their fuel bills this year?

[John Robertson]

I thank my hon. Friend for his intervention, and I will come on to the points that he makes, but to answer his last point, I sometimes wonder whether the Government are helping the energy companies make those obscene profits, rather than stopping them.

[David Mowat (Warrington South) (Con)]

I hear the hon. Gentleman’s comment on super-profits, but perhaps he will tell the House which way he voted on the windfall tax proposed on this side of the House on those same energy companies. They are making a 60% return on capital employed in a medium-sized field in the North sea, while the people whom he criticises today in the retail sector are making much less. Which way did he vote, and why has he changed his mind?

[John Robertson]

The hon. Gentleman is talking about a completely different area. I will talk about windfall taxes later, but suffice it to say that that proposal would have stifled what we were trying to do at the time. The hon. Gentleman thought that that was a good idea, but that is because he was on his side of the House and I was on my side of the House.

Eradicating fuel poverty involves tackling all three of the root causes that I mentioned. I have some sympathy with the energy companies as regards prices rising as a result of the influence of the wholesale energy market. As a member of the Energy and Climate Change Committee, I am fully aware that wholesale prices have risen by 30% this year, but I am also aware that they are lower than a few years ago. According to Bloomberg, in autumn 2008 the wholesale price for our gas hit prices of 70p a therm, compared with 59p a therm today, showing that wholesale gas prices have dropped by 15% since then. Similarly, prices in the wholesale electricity market reached £120 per megawatt-hour in autumn 2008; today, they are £51.20 per megawatt-hour, which is less than half the price back then.

As a result, there is great suspicion by many, including Ofgem, that the big six have not been passing on wholesale market price reductions. Surprise, surprise! As far as I am concerned, these are anti-competitive acts, especially towards smaller energy companies. Chapter II of the Competition Act 1998 prohibits the abuse of dominant position in a market by one or more undertakings which may affect the trade within the UK. According to the competition law guidelines,

“Conduct may be abusive when, through the effects of conduct on the competitive process, it adversely affects consumers directly (for example, through the prices charged) or indirectly (for example, conduct which reduces the intensity of existing competition or of potential competition). A dominant undertaking is under special responsibility not to allow its conduct to impair undistorted competition.”

I have previously accused the big six of acting like a cartel on many occasions. That is supported by the nature of the recent price rises, whereby tacit collusion appears to be taking place as the big six followed one by one in raising prices at a similar rate, following a price leader. Overall, it is debatable whether that accusation would be upheld in a court of law, but it is a fair political point to make.

The Government have not pursued every angle on energy prices, especially as one of their current positions is to say that pensioners in Glasgow and the rest of Scotland should use less gas and electricity this winter. According to the findings of the Hills fuel poverty review, which is out today, 2,700 people will die in England and Wales as a result of this year’s energy price rises by the big six energy companies. Should these people really take the advice of the Prime Minister and his Secretary of State to use less energy? I am sure that the Minister will have a copy of the review, and I suggest that he study it. The fact that so many people will lose their lives as a result of energy price rises means that we have to consider this seriously. I do not make that as a political point but as a point about human beings.

[Ian Lavery]

It was said earlier that probably 36,000 people died last year as a result of cold-related illness. My hon. Friend said that 2,700 people will die because of the price increases. Is that in addition to the 36,000?

[John Robertson]

Yes. According to the Hills report, that will happen because of the increases. My right hon. Friend the Member for Wentworth and Dearne (John Healey) said that that means that in every constituency in the country, four people will die for that reason. That bears thinking about.

I would like VAT on utility bills to be zero-rated, but as far as I am aware there is an EU law against that. It is a matter for next week’s debate—perhaps it will be raised by Conservative Members—which I will probably ignore of course. I should like the Government to reverse the cut in the winter fuel payment. We heard earlier that they were going to maintain the level established by the previous Government. However, the previous Government had a record of consolidating the money at the end of the financial year, and we will never know whether they would have consolidated the £100 level because we did not win the election, unfortunately. As a result, elderly people in this country are now suffering.

Early-day motion 2279, which I signed last night, asks the Secretary of State, or Ofgem at the very least, openly to consider imposing a financial penalty on energy suppliers for anti-competitive behaviour in the energy market—or at least to remind energy companies of their social and competitive responsibilities and the consequences if they forget them. At times it feels as though Ofgem and the Government offer too many carrots and not enough sticks to the big six. Ofgem can impose a maximum financial penalty of 10% of an energy company’s turnover if it is seen to act anti-competitively. I suggest that it has been proven that that is happening. However, in its 11 years of existence, Ofgem has not once levied the maximum fine on an energy company.

If such a fine was imposed, the money could be collected by the Treasury and put in the Consolidated Fund, and the Prime Minister could tell his Chancellor to redistribute it to the hard-pressed customers in our constituencies this winter. How much would a 10% financial penalty raise? According to the Library, using the revenue figures for 2009-10, we could raise £9.5 billion from just three of the big six, with £2.4 billion coming from British Gas alone. Alternatively, a collective penalty levied on the total sales of gas and electricity to the domestic sector, which were £27 billion in 2010, would raise £2.7 billion. Clearly, money could be raised to help people this winter not through a windfall tax, but by using the enforcement powers that are already there. However, there needs to be the political will to do that, and to ensure that our irregular regulator is doing all it can.

Furthermore, I strongly suspect that behind these price rises we will find that the companies have grossly failed to stockpile energy reserves and to hedge adequately against future price rises. There may be a number of reasons for that, but I think that one is ineptitude. I also think that the answer lies in the fact that they have no incentive to do so.

I try to represent my constituents at all times. There is a group of people in my constituency who cannot access the internet in any way. Glasgow has the lowest uptake of internet access of any city in the country. We also know that very few elderly people are connected to the internet. Therefore, despite the calls from the Secretary of State and the Prime Minister for people to go and find something cheaper, those people are left with what they have got, particularly those who live in houses made of concrete blocks that cannot have cavity wall insulation or any other energy efficiency measures installed. There are 400 tariffs for them to choose between, if they can understand them. The Minister could not, and I am not surprised. Left to their own devices, those people will have either to continue as they are or to switch the heating off. Consequently, 2,700 people in England and Wales will be added to the statistics, including people in my constituency.