Energy Bill [ Lords ] (Sixteenth sitting)

Kerry McCarthy Excerpts

Committee stage
Tuesday 27th June 2023 Public Bill Committees

[Alan Brown]

Okay, so we go back to my monologue justifying why the Government should accept some of our new clauses, including new clauses 1 and 2.

Clearly, we should be grateful that energy prices are starting to fall, but the reality is that the cap on energy bills for an average household was set at £1,138 in April 2021. This month, Ofgem has set the cap at more than £2,000, so energy bills are still nearly double what they were two years ago. The reality is that many people are struggling badly with their energy bills, even though prices are falling, and those struggling the most are those with prepayment meters. People with prepayment meters can access credit of only £5 or £10. If they reach that credit limit, the lights go out—it is as simple as that. They cannot turn on the gas or electricity, and it is a real difficulty for people. It also means that if people cannot get out of the house for whatever reason—if they are ill or have just had a newborn kid—and have reached the threshold, they lose access to their energy by virtue of not being able to top up their meters.

It is unfair that people with prepayment meters pay higher standing charges. Frankly, it is an outrage that people who pay in advance for their energy are paying a premium to access it, whereas people like us in this room, who pay by direct debit, have access to credit and cheaper tariffs. As I say, the reality is that if someone is on a prepayment meter, they are going to struggle to pay their bills, they will pay more and they will face the difficulties associated with a lack of credit.

As End Fuel Poverty states:

“Imposition of a pre-payment meter is disconnection by the back door. When you can’t top up the meter everything clicks off”.

Forcing people to have prepayment meters means that those who are already struggling are put on to a system whereby they will be forced to ration, automatically disconnected when the credit limit is reached and more likely—this is the rub—to have a cold, damp home, with the long-term health implications that that brings, as well as the short-term heating and eating dilemmas.

It is estimated that 19% of housing stock across the UK is damp. The proportion rises to nearly a third, or 31%, for those on prepayment meters. In other words, if someone is on a prepayment meter, they are 65% more likely than the average person to live in a damp house. Some 51% of prepayment customers have health conditions or disabilities, so in many ways the existing system is punishing those who are more likely to require more energy in the first place. That, in a nutshell, is why a social tariff is needed for those with prepayment meters.

Research by Utilita indicated previously that as many as 14% of the 4.5 million households with prepayment meters did not choose to be on such tariffs, and what has been happening during the cost of living crisis is outrageous. For example, an investigation for the i paper revealed that since the end of lockdown energy firms have secured almost 500,000 court warrants to forcibly install meters in the homes of customers who are in debt. Freedom of information requests showed that in the first six months of last year there were 180,000 applications for such warrants.

We then had the bombshell coverage of an undercover reporter working for bailiffs, which exposed the cruelty of some bailiffs for what it was: revelling in the forced installation of prepayment meters, no matter the vulnerabilities of the customers. The officers of that debt company were working on behalf of British Gas, which of course said that it was shocked and that it did not advocate such a policy.

The rub is that some utility companies are using debt collection agencies routinely as part of their process to collect money that they believe they are owed. That set-up relieves utility companies of the burden of debt collection. More importantly, it stops them providing debt advocacy and interacting with customers, which is what is required. Meanwhile, the debt collection companies add their own fees just for reissuing bills to customers.

All that is why we tabled new clauses 1 and 2. Voluntary codes for prepayment meters will never be enough. It is quite clear that we will never know how many people were forced on to prepayment meters against their will, especially when smart meters can be switched remotely to prepayment mode without people even realising initially.

New clause 1 sets out the need for legacy prepayment meters to be switched to smart meters as long as consent is given. This is an enabling aspect, as smart meters will make it easier to implement the provisions of new clause 1(3), which will end the practice of so-called self-disconnection. The provisions include the consideration of a social tariff, and, most importantly, mechanisms to allow customers to access credit and not be cut off immediately as they would be with a £5 or £10 credit limit.

New clause 2 restricts the forcible use of prepayment meters. It does not prevent informed consent and agreement for people to move to prepayment mode, because some customers like it as a way of managing their debt, but what is important is consent and an understanding of what prepayment means. The provisions also give access to impartial debt counselling services before the switch to prepayment mode is needed. Subsection (2)(c) places a duty on the Secretary of State to assess and define customer vulnerabilities, because the current definition is too narrow and does not cover some people who should be classed as vulnerable. Lastly, subsection (3) confirms that switching smart meters to prepayment mode is considered the same as a legacy prepayment meter.

Too many people have been forced on to prepayment meters. We cannot allow that to continue and we cannot allow the door to reopen for energy companies. No matter what they say here and now when there is an immediate storm and a backlash, we need to protect people for good going forward, which is what new clauses 1 and 2 will do.

According to recent Government figures, £120 million-worth of the vouchers issued for customers in prepayment mode were still unclaimed at the start of June. There are only four days left until the deadline on 30 June, so I hope the Minister will update us on the outstanding balance of unclaimed prepayment meter credit vouchers. Having nearly 20% of vouchers unclaimed at the start of the month is indicative of a failed policy that does not support the most vulnerable in our society. Again, that is why we need new clauses 1 and 2 to protect those who sometimes cannot protect themselves.

[Kerry McCarthy (Bristol East) (Lab)]

As always, it is a pleasure to see you in the Chair, Ms Nokes.

I rise primarily to speak in support of new clause 38, but it has quite a lot of overlap with new clause 2. Our new clause 38, on the restriction of the use of prepayment meters, says:

“The Secretary of State may by regulations restrict the installation of new prepayment meters for domestic energy use.”

It makes provision to ensure that consumers have full and informed consent on the installation of a prepayment meter, and that vulnerable customers are not put on to prepayment meters. We heard from the hon. Member for Kilmarnock and Loudoun some of the reasons why we have shared concerns about that. Some of my points will be very familiar to the Minister if he followed the debate earlier this year, when it reached crisis point.

Citizens Advice estimates that the number of people moved on to prepayment meters reached 600,000 in 2022, up from 380,000 in 2021. We know that that comes at a cost to them. There is a poverty premium on some of the most vulnerable, and on people on the lowest incomes, because of the shift to prepayment meters, and their use should be restricted as a result. Those with prepayment meters are more likely to be in fuel poverty and facing significant debts already. We find ourselves in a situation in which those requiring the most support are being forced to pay the most and are given the least help.

Citizens Advice revealed at the start of the year, at the height of the energy crisis, that someone was being cut off from their energy supply every 10 seconds, with millions unable to afford to top up their prepayment meters. We also know that so-called voluntary self-disconnection was a thing. People simply could not afford it, so they would not necessarily feature in the numbers. Labour’s call for a moratorium on the forced installation of prepayment meters was dismissed until the March Budget. The Secretary of State told the House on a number of occasions that he was talking to Ofgem and that plans were in motion, but during that period we were still hearing horrific stories about forced entry to people’s houses, warrants being issued and energy companies continuing to go down that path.

Our view was very much that it was the Government and the energy regulator’s responsibility to ensure that people were not left at home in the cold and the dark, yet we had to press incredibly hard before anything was achieved. Over the winter, more than 130,000 households that included a disabled person or someone with a long-term health condition were being disconnected from their energy supply at least once a week because they could not afford to top up. The same report also said that

“63% of PPM users who had disconnected in the last year said it had a negative impact on their mental health. This rises to 79% of disabled and people with long-term health conditions.”

Really good work was done by organisations such as Citizens Advice, but it also took tireless investigations from UK newspapers to expose the scale of the crisis. An investigation by the i in December showed that magistrates were batch processing hundreds of warrants in the space of a few minutes to allow the forced installation of prepayment meters, with one court in the north of England approving 496 warrants in just three minutes. At some point, we were given reassurances that people’s circumstances and vulnerabilities were being taken into account before the warrants were issued, but if nearly 500 are issued in three minutes, clearly they are not taking any information into account; it is very much a rubber-stamping exercise.

An undercover report by The Times in February highlighted how British Gas was employing debt collectors to break into people’s homes. Among them were customers described in the staff notes as a woman in her 50s with “severe mental health bipolar”, a woman who

“suffers with mobility problems and is partially sighted”,

and a mother whose

“daughter is disabled and has a hoist and electric wheelchair”.

We heard in debates at the time that many MPs had their own stories of constituents who were affected by the forced installation of prepayment meters; hopefully we will hear from some today to back up what we are calling for.

It was therefore a relief when action was taken in April, and a code of practice was introduced by Ofgem, but we have to wonder why the scheme is voluntary rather than compulsory. Just yesterday, the Committee on Fuel Poverty, in its annual report, expressed disappointment with Ofgem’s code of practice, stating that it is

“disappointingly limited in ambition”.

We have to wonder what the Government’s role is in that. I argue that Ofgem has proven incapable of dealing with the situation and it is up to the Government to step up and take control. That is what we seek to achieve with the new clauses.

The code’s voluntary nature still leaves too much power and judgment in the hands of energy suppliers, and the vulnerable and the voiceless should not be exposed to the dangers that prepayment meters pose, so I call on the Minister to give us some assurance that he accepts that it is the Government’s responsibility to act in this case—we cannot continue to leave it to voluntary codes of practice—and to support new clause 38.

[Andrew Bowie]

It is an absolute pleasure to serve under your chairmanship again, Ms Noakes, for sitting 16 in the final week before we conclude our proceedings in Committee. I thank Members for tabling their new clauses.

New clause 1 places a duty on the Secretary of State to ensure that all legacy prepayment meters are replaced with smart meters before the end of 2025. The Government have been clear that our aim is for as many households as possible to benefit from smart metering, including those that prepay for energy, which is why we have set minimum installation targets for suppliers until the end of 2025. To ensure effective scrutiny and transparency, large suppliers are also required to publish their performance against their targets, broken down by credit and prepayment mode. That ensures that they have strong incentives to deliver.

Although we agree with the hon. Member for Kilmarnock and Loudoun that smart prepayment is highly superior to legacy prepayment meters, it is also true that those customers who would benefit the most from prepayment meters can be among the hardest audiences to reach and the most vulnerable in our society. It is therefore critical that we tread carefully and do not place unrealistic targets in statute that may cause unintended consequences.

As drafted, the new clause could result in the prioritisation of the replacement of traditional prepayment meters. That may inadvertently deprioritise smart meter installation for credit consumers, many of whom are in vulnerable circumstances. Data from Ofgem indicates that around 70% of those with disabilities pay by direct debit and may therefore benefit from the automated readings that smart meters deliver.

Let me turn to the requirement to end self-disconnections within six months of the Bill becoming law. It is critical that the market delivers a fair deal for consumers, with an energy market that is resilient and investable over the long term. Ofgem’s recently published code of practice on prepayment is clear that when self-disconnection occurs, suppliers must make multiple attempts to contact the customer to understand the reasons for self-disconnection and offer appropriate support, including additional support credit. If frequent or prolonged periods of self-disconnection are identified, energy suppliers should assess whether a prepayment meter remains a safe and practicable option for that consumer.

As announced in the 2022 autumn statement, His Majesty’s Government have committed to work with consumer groups and industry to consider the best approach to consumer protection from April 2024, as part of a wider retail market reform. In addition, as announced at the spring Budget, we are keeping the energy price guarantee at £2,500 for an additional three months from April to June. That means we have covered nearly half a typical household’s energy bill through the energy price guarantee and energy bill support schemes since October, with a typical family saving £1,500. That is in addition to the expanded warm home discount scheme, which has been extended until 2026 and provides £475 million in support per year in 2020 prices.

New clauses 2 and 38 would allow the Secretary of State to restrict the use of prepayment meters, especially in relation to vulnerable consumers or where consumers are not aware that they are being moved to a prepayment mode. It is of course critical that our most vulnerable energy users are protected. The findings in The Times regarding British Gas customers were shocking and completely unacceptable. The Government acted quickly to tackle that issue of inappropriate prepayment meter use, and the Secretary of State wrote to energy suppliers insisting that they revise their practices and improve their action to support vulnerable households.

Following that intervention, all domestic energy suppliers agreed to pause the forced installation of prepayment meters and the remote switching of smart meters to prepayment mode. Ofgem rules are clear that suppliers can install a prepayment meter to recover a debt only as a last resort. They also require energy suppliers to offer a prepayment service only when it is safe to do so, with clear obligations on energy suppliers regarding support for customers in payment difficulty. The Secretary of State has called for more robust Ofgem enforcement on those issues, and Ofgem has responded by announcing a further review of supplier practices relating to prepayment meter customers.

[Kerry McCarthy]

The Minister may be about to come to this point, but I am wondering how it is going—does he know how many warrants are now being issued by the courts? Is he aware of statistics on how many prepayment meters are now being installed or on the type of customers who are being put on them?

[Andrew Bowie]

I do not have the exact numbers at my fingertips, but I am happy to write to the hon. Lady with that information. I can tell her that the senior presiding judge has ordered magistrates courts to immediately stop authorising warrants for energy firms to forcibly install prepayment meters while the process by which suppliers bring forward such applications is being reviewed.

--- Later in debate ---

[Alan Brown]

I beg to move, That the clause be read a Second time.

I shall potentially continue my losing streak here. This new clause is about setting up a just transition commission. The Committee may be aware that the Scottish Government set up a just transition commission a couple of years ago, which is effectively world leading. It brings together independent academics, and representatives from trade unions and right across industry. It advises the Scottish Government on policy implications and what is needed as we move forward to a just transition to ensure that workers are not left behind and do not lose their jobs, to be effectively left on the scrapheap.

This important body came together and has brought transparency to the Scottish Government, and I want to see that replicated at Westminster. It would be good for the Government as a way to work across the sector and the industry, with trade unions and academics to provide expertise. I look forward to hearing the Minister’s thoughts on that, explaining why they are probably not going to do this in the short term. I will be happy to be proved wrong on that.

[Kerry McCarthy]

We certainly need more focus, and to hear more from the Government about ensuring that this is a just transition. We know that we cannot reach net zero without the skilled workforce to deliver it, and without decisive action to ensure that no community is left behind. It is illustrative to look at what Joe Biden is doing with the Inflation Reduction Act in the United States, where a lot of focus is on energy-intensive states such as Texas to ensure that, as they move away from fossil fuel exploration, the jobs are still there. We all know what happened, as we debated earlier in this Committee, when the coalmines were closed with the lack of a strategy to ensure good, decent jobs for people left behind. We saw whole communities abandoned and, in some parts of the country, turned into basic commuter villages, rather than having a home-grown industry.

It has rightly been said that net zero is the economic opportunity of the century, but it represents a potential threat to those who, at the moment, rely on traditional industries. That is not because oil and gas extraction will immediately cease, or because coal-fired blast furnaces will suddenly be switched off. It is because our reliance on the old way of doing things will gradually decline and, as a result, the skills required will evolve.

Workers in those industries need to know that there is a plan. As I said, we cannot allow the mistakes of the 1980s to be repeated. We need a forward-looking industrial strategy, to make it clear that the transition to net zero is an opportunity to reinvigorate our industrial heartlands and coastal communities and to make it clear that that means a higher quality of work, better regulation of employment practices and greater diversity in the sector. This is quite a complex task. Some of it will be industry-led, but we know, particularly when we get further down the supply chain to those clusters of jobs that will be based around the traditional industries, that those smaller companies will need support to diversify as well.

--- Later in debate ---

[Alan Brown]

The hon. Lady will be aware that procurement rules and contracts for difference auctions, for example, are reserved to Westminster, so the Scottish Government do not have control of that. There is a whole supply chain aspect that is not developed, and that is partly because of these procurement rules—the fact that the cheapest price takes all. We want that amended at some time.

[Kerry McCarthy]

I was about to move on to that, because it is important. On the Government’s lack of action on developing a strategy, I have been trying to ask questions about the Green Jobs Delivery Group, such as when we will actually see some delivery and outcomes and how that will feed through into a skills strategy and an industrial strategy, but I have been getting very little by way of response.

Friends of the Earth Scotland has called on both the UK Government and the Scottish Government to ensure greater worker representation in their transition planning through existing bodies such as the UK’s Green Jobs Delivery Group and the Just Transition Commission in Scotland. It says that at the moment there is little support provided for high-carbon workers to find alternative jobs, to facilitate retraining where necessary, or to lighten the financial burden of training currently borne by the workers.

Last month, the Climate Change Committee briefed that the

“Government has policy levers at its disposal to support workers during the transition”

but warned that

“clearer plans are needed to harness the potential of the transition and to manage its risks.”

Work has been done. As I said, my concern is about focusing on setting up a commission rather than just calling on the Government to actually come forward with a clear strategy, a clear road map, particularly on the skills front, and to link that up. I do not know whether the Minister will accept my analysis of the situation, but it seems very fragmented. It is left, in large part, to big companies in the supply chain to try to ensure that the workers of the future are there as they transition. There is not a strategy for the smaller companies in the supply chain unless the big companies are leading that.

[Alan Brown]

I understand what the hon. Lady is saying about wanting the Government to get on with it sooner, but does she not agree that commissioning a body of experts will provide better advice, enabling the Government to develop their strategy better?

--- Later in debate ---

[Kerry McCarthy]

As I said, the Government have had their green jobs taskforce, and now they have the delivery group. They are also doing things on the nature side. I would argue that they should have had all the information and expert advice; it is all available out there.

What we need are more incremental steps. Rather than setting up a body, we need something concrete from the Minister on what the Government are doing, for example, to ensure that further education colleges are tying up with the potential needs of businesses in their areas. Some incredibly good further education colleges are working on that—going into schools, working with businesses and encouraging young people to look at those careers—but as I said it is piecemeal and depends on the quality of the college, and the relationship with other agencies in the local area. I sympathise with focusing on a just transition, but I have concerns about whether setting up another body is the way to do it.

[Andrew Bowie]

I thank the hon. Members for Kilmarnock and Loudoun and for Bristol East for their contributions. The Government agree with the intention behind the new clause; however, we already view transition as a consideration embedded across all Government policy actions. We are committed to managing the transition to net zero in such a manner that the positive opportunities are maximised for the economy and the population, while protecting individuals, communities and the economy.

Given that the majority of the low carbon economy lies outside London and the south-east of England, Government action to deliver our net zero commitment and build a low carbon economy will help to level up the UK and spur on the transition. That is demonstrated through the North sea transition deal agreement in March 2021, through which the UK became the first G7 country to agree a landmark deal to support the oil and gas industry’s transition to clean, green energy, while supporting 40,000 jobs in industrial heartlands across the UK.

Since delivering a net zero workforce transition needs joint action by Government, industry, and the education sector, the Government have established the green jobs delivery group. The group is headed up by Ministers and business leaders to act as the central forum for driving forward action on green jobs and skills, and has committed to publishing a net zero and nature workforce action plan in 2024, which will consider the workforce transition. We will continue to join up across the devolved Governments, who have already made excellent progress, with the Welsh Government having launched their net zero skills plan in March 2023, and the Scottish Government and Skills Development Scotland having launched their climate emergency skills action plan 2020-2025 in 2020.