Household Energy Debt

Debate between Kenny MacAskill and Amanda Solloway

Tuesday 23rd April 2024 Westminster Hall

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Amanda Solloway)]

It is a great pleasure to serve under your chairmanship, Sir George.

I thank the hon. Member for East Lothian (Kenny MacAskill) for securing this debate on such an important issue, which I care deeply about. He mentioned what it is like to live in fuel poverty. I assure him that I personally understand exactly what that is like, having known the difficulty as a child of using something as simple as a washing machine, and latterly having a mother with chronic obstructive pulmonary disease and having to make decisions about using oxygen. I reiterate that I fully understand the situation that we are talking about, which is why I take this matter incredibly seriously as the Minister for Affordability.

As the hon. Member for East Lothian pointed out, levels of consumer energy debt have risen in recent years, which the Government recognise as an important and growing problem. Energy debt can harm consumers in several ways. It can encourage them to self-ration energy, leading to cold or damp homes, or cause households to cut back in other ways. The Government expect suppliers to do all they can to support customers in debt, particularly vulnerable customers. I encourage anyone who is concerned about keeping up with bills to contact their supplier. They should also contact organisations such as Citizens Advice, which may be able to provide support.

Last year, I met energy suppliers to outline our expectation that they do all they can to support those in debt and to help other consumers avoid falling into debt. I also meet regularly with stakeholders such as Citizens Advice to discuss how we can work together to best support consumers. I welcome Ofgem’s ongoing call for input on affordability and debt. For the reasons that the hon. Member for East Lothian set out, it is right that Ofgem takes a detailed look at the issue. I look forward to understanding its next steps to ensure that consumers can be better protected and that the debt burden does not leave us in an unsustainable position.

Despite high levels of consumer debt, energy prices have fallen significantly since last year. The price cap has fallen by nearly 60% since it peaked last year, including by £238 in April. Over the last two years, the Government have demonstrated a commitment to supporting vulnerable people with one of the largest support packages in Europe. Taken together, the total support provided between 2022 and 2025 to help house- holds with the cost of living will be worth more than £108 billion—an average of £3,800 per UK household.

Millions of vulnerable households have received up to £900 in further cost of living payments, with an extra £150 to those eligible for disability benefits. These payments are in addition to the established financial support available to low-income and vulnerable households through the winter fuel payment and the cold weather payment, which provides £25 during very cold weather. An extra cost of living payment of up to £300 was paid to pensioners’ households through the winter fuel payment, while the Government continue to provide support through the warm home discount, which provides low-income households with a £150 rebate off their energy bill every winter.

Although the Government are doing a lot to help households, I am concerned that some customers remain in energy debt. Suppliers should do all they can to support these households and ensure that consumers do not fall into debt. Last year, Energy UK announced a voluntary debt commitment with 14 energy suppliers, which collectively committed to go above and beyond current licensing conditions to help households with energy bill debt over winter. Those energy suppliers committed to providing immediate assistance to those in debt, as well as arming people with knowledge and resources to empower them to manage bills more efficiently. However, this is an ongoing issue, and it is also important that suppliers provide quality customer service to support consumers before they fall into debt, and quickly help those who are already in debt.

The hon. Member for East Lothian raised the issue of prepayment meters, which, of course, can be a useful tool for some consumers and their energy suppliers to manage their debt. It is important, however, that the rules around their use are sufficient to protect consumers and are enforced properly. Involuntary installations should be used only as a very last resort. Ofgem has strengthened its licensing conditions for suppliers to conduct involuntary prepayment meter installations, with exemptions in place for households with vulnerable individuals, such as people who are 75 or older.

The hon. Gentleman’s constituents will also have been in contact about standing charges, which, as he will know, remain a matter for Ofgem. Ofgem launched a call for input on standing charges, which ended in January and received just over 30,000 individual responses. It looks at how standing charges are applied to energy bills, and at the alternatives that can be considered. Ofgem is currently analysing those responses and will publish its response in due course. In March, the Secretary of State and I wrote to Ofgem to outline the Government’s expectation that standing charges should be kept as low as possible, or reformed if necessary, to make them fairer for consumers.

The Government have already committed to further support for households. In the autumn statement, we announced the biggest increase in the national living wage, which is worth around £1,800 for a full-time worker and will benefit around 2.7 million workers. We also announced the next generation of welfare reforms, with benefit payments increasing by 6.7% and pensions by 8.5%. In the spring Budget, we also cut national insurance by a further 2%, meaning that someone on an average wage has the lowest personal effective tax rate since 1975. We have also extended the household support fund until September 2024, with an additional £500 million in funding, and we have been working across Government and with Ofgem and suppliers to better identify customers who are getting into problem debt and to ensure that households are properly supported. I understand that this is a complex matter, and one that is very important to the hon. Gentleman.

[Kenny MacAskill]

Would the Minister clarify whether there is an element in an individual’s bill that is factored in by Ofgem that relates to the debt servicing of suppliers?

[Amanda Solloway]

The hon. Gentleman makes a good point. He will know that there was an announcement of a one-off price cap adjustment of £28 per household for direct debit and standard credit customers. As I mentioned earlier, we are looking at the standard charges system as a whole and whether it should be reformed.

I am happy to meet the hon. Gentleman. I am always very keen to meet hon. Members across parties, to work across Departments—for example, with the Department for Work and Pensions—and to meet stakeholders, because we can only really tackle this issue together. To reiterate, we must remember that we are talking about individual people and their individual lives, so I am incredibly happy to meet and discuss it further.

This is a complex matter, which is important to the hon. Member for East Lothian and other hon. Members. I hope that I have provided some reassurance about the action that is being taken by the Government, Ofgem and suppliers to help all consumers. I give my assurance that, as the Minister for Energy Consumers and Affordability, it is uppermost in my mind that we should never be making vulnerable people more vulnerable. I thank the hon. Member for East Lothian again for bringing forward this debate.

Question put and agreed to.