Pre-Paid Meters (Level of Debt)

John Robertson Excerpts

Wednesday 5th September 2012 Commons Chamber

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

I beg to move,

That leave be given to bring in a Bill to require the Secretary of State to raise the level of debt below which pre-paid meter customers may change their energy supplier; and for connected purposes.

I raised this issue in Parliament before through an oral question to the Secretary of State for Energy and Climate Change on 26 January 2012 at column 401 of Hansard, and again in a written question on 1 May 2012 at column 1506W. On the first occasion, the right hon. Gentleman said that he would ask Ofgem to look at the matter in detail, and on the latter, he said that it was to be dealt with by Ofgem. In the interests of hundreds of thousands of energy customers, I am presenting the Bill today to get some actual movement.

Through raising the level of debt at which pre-paid meter customers may change their energy supplier from £200 to £350, around 200,000 customers could escape crippling energy tariffs. It is a tiny change, but it would make a huge difference. I have mentioned time and again how the cartel-like big six have too much power. By trapping disadvantaged customers into extortionate tariffs, they are proving once again that they need to be shown what it means to be fair and responsible.

The profits of the big six energy companies have gone up almost a third since 2008, and payouts to shareholders increased across the board an incredible sixfold since 1999 in the case of Centrica, which owns British Gas. This is the time for it, and others, to give something back.

If each of those 200,000 customers were to save a maximum of £138 a year, it would cost energy companies a combined £27.5 million. That sounds like a lot until we realise that last year, British Gas alone made 12 times that amount in profit. Furthermore, the money saved by those 200,000 people would be spent on paying back debts to energy companies, so it is not that bad. I have spoken with Ofgem about this matter. It agrees with me in principle, although as usual it moves at snail’s pace. I would like to see it move quicker on this simple solution to the debt of hundreds of thousands of people. Let us work together to get a fair deal for prepayment customers.

In January 2010, Ofgem changed its policy so that customers with a debt of £200 or less were able to switch energy supplier as long as the new supplier was willing to take on that debt, which in most instances was the case. More people were able to take advantage of greater savings to be made by switching supplier, which meant that they could pay off their arrears more easily, cutting short a spiral of mounting debt. The £200 debt level worked then, but we could and should do more now.

More than 1.5 million electricity and gas customers are currently in debt, and almost 1 million of those can switch supplier to get a better deal on their energy tariff. The Bill would add 200,000 people to that figure and ensure a fairer system. Importantly, those 200,000 people are among the most disadvantaged in our society, and chose a prepayment meter as a way of responsibly managing their weekly budget. About a quarter of prepayment meter customers are thought to be fuel poor, and they are disproportionately represented in the social housing rented sector. People are three times more likely to be in debt if their income is in the lowest quintile, and it is evident that the 200,000 people I have mentioned are among those struggling to pay rising food and housing costs, and, of course, energy bills.

According to Which?, 84% of people are worried about their energy bills. Consumers spend one week a year worrying about their finances, and people with less debt are often happier. What do our outdated regulations do? They add extra worry to people who are already concerned about job security and a double-dip recession. There are examples of people fiddling their meters to try and reduce their energy bills, and the number of people doing that has risen 30% since 2007. I do not say that that is right—it is not and there is a price to be paid—but I understand why they are doing it.

I am even more concerned about people who reduce their energy usage in order to save money to pay off their debt. The number of pensioners dying from cold has nearly doubled in five years. Last winter, Save the Children found that half of all families planned to turn the heating off for longer to keep their bills down, leading to problems such as children in cold homes being twice as likely to suffer from respiratory problems. I would not be surprised if some people are cutting down their energy use in order to pay off their debt, which is completely unacceptable. We can tackle the problem by giving 200,000 people the freedom to make their debt more manageable by switching to a cheaper tariff or company.

Some people are very badly affected by their debt, and it is sad that it is so easy for them to get into such a position. For example, they may not have been identified as vulnerable by energy companies, and been placed on a prepayment meter after racking up hundreds of pounds of debt while struggling to pay astronomical energy bills on a credit meter. Energy companies need to take responsibility for such confusions and mistakes, and allow people to switch suppliers to help them pay off their debts.

For my more business-friendly opponents and colleagues, I will also outline the benefits of this proposal to the energy companies themselves. As it stands, £478 million is owed to energy companies, and by making it easier for a large proportion of customers to pay that back, energy companies can recoup their losses. uSwitch estimates that pre-paid meter customers could save £138 a year just by switching, so a £350 debt could be paid off in just over two years without them making any sacrifices. Both customers and energy companies would be better off; it would be a win-win situation.

Those are arguments for increasing the debt level, but why should we increase it from £200 to £350? First, the £100 limit was increased to £200 in 2010 to reflect higher energy bills and debt levels, but times have changed. Energy bills have increased by 140% in eight years and by 20% in the last two years. They have risen seven times faster than household income and continue to rise. SSE announced a price hike of 9% on 22 August, despite a 7.7% rise in its pre-tax profits over the past year. I am sure there are more price rises to follow and that history will repeat itself: when one company raises its prices, the others are never far behind. The average amount of debt is now around £350. That is the average and not the maximum. In the past two years, severe cuts have led to a double-dip recession, making it even harder for those involved. Ofgem agrees that the level is currently too low, but we need to speed up the process.

Secondly, £200 is not what it used to be. Its value has decreased by more than 10% since the level was set. It would not buy an iPhone or a BlackBerry or any of the company phones that the energy company executives walk around with. It would not buy a return ticket to EDF’s global headquarters in Paris, E.ON’s global headquarters in Düsseldorf or Scottish Power’s global headquarters in Bilbao, and yet for energy customers in debt who are unable to switch their tariff, paying the money back can be demanding and tiring. If we can agree on that, we will have the chance to make a small change to an outdated regulation that will make a huge difference to hundreds of thousands of people. Those are the people we need to help most, because they are vulnerable to debt and in fuel poverty.

I have taken the lead with help from my supporters and colleagues. All who work on energy issues have made such efforts at some point or another. This should be a lesson to Ofgem. Its job is to look at these issues and ensure customers have a fair deal. As I said, I began asking this question back in January. If Ofgem had sorted the problem out at that time, I would not be standing here today. I could have stopped at that point and left the matter with Ofgem, but the sad fact is that I did not feel I could leave Ofgem to get on with dealing with it quickly. I am therefore introducing the Bill to ensure that the debt level is changed before the winter, before other people die because of their energy costs.

Question put and agreed to.

Ordered,

That John Robertson, Mr Tim Yeo, Albert Owen, Laura Sandys, Dr Alan Whitehead, David Simpson, Mr Mike Weir, Jim Sheridan, Mr Alan Reid, Cathy Jamieson, Ian Lavery and Sir Robert Smith present the Bill.

John Robertson accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 18 January 2013, and to be printed (Bill 65).

[Chris Bryant (Rhondda) (Lab)]

On a point of order, Mr Speaker—you do not have to smile.

In 1624, as I am sure you are aware, the House decided that no Member could resign their seat. In 1680, we decided that we would invent the legal fiction that a Member appointed to an office of profit under the Crown is deemed to have resigned their seat. At the beginning of August this year, Mrs Louise Mensch— I make no criticism of her whatever—believed she had resigned her seat, but was not appointed to an office of profit under the Crown for a further three and a half weeks. Consequently, she described herself as a “resigned MP”, but was none the less a Member of Parliament, because a Member has not resigned their seat until the Chancellor appoints them to the office.

I raise this matter as a point of order because there is an important matter of precedent here. I am not aware of any time in the past when there has been such a delay, other than in 1842 when the Government refused for party political purposes to appoint a Member so as not to allow a by-election.