Energy Rebates: Highlands and Islands

Kerry McCarthy Excerpts

Wednesday 6th March 2024 Westminster Hall

[Kerry McCarthy (Bristol East) (Lab)]

It is a pleasure, as always, to see you in the Chair, Mr Paisley. I thank the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) for bringing forward this debate, as well as all four Members who have taken part and highlighted the specific circumstances that mean fuel poverty is even more of an issue in their constituencies than in the rest of the UK.

We know that overall the average fuel poverty gap increased by 66% between 2020 and 2023. We know that 3 million people are in debt to their energy providers. We know that the Government are struggling to roll out their home insulation scheme; we saw figures the other day showing that in the first eight months of the Great British insulation scheme, only 2,900 houses had benefited from measures meant to benefit 300,000.

Obviously, in areas such as the ones represented by the Members present, home insulation is even more of a challenge. That is partly because of the nature of the homes—they are older buildings that are difficult to retrofit—but also because there is a much smaller retrofit-skills market. The scattered nature of the housing and its isolation means that the economies of scale from rolling out an insulation scheme would be far more difficult to implement. Unless local skills and finance can be mobilised, the areas are unlikely to be first in the queue to benefit from national schemes.

All Members in this debate have spoken eloquently, partly about the conditions that mean that fuel poverty is more of an issue: the longer darker nights, the cold, and the rain that “comes straight at you”, as the right hon. Member for Orkney and Shetland (Mr Carmichael) described. The hon. Member for Inverness, Nairn, Badenoch and Strathspey said that a third of people are living in fuel poverty, and a fifth of people are living in extreme poverty.

One of the things that I am grappling with is the debate about prepayment meters. We know about forced disconnection, when people simply cannot afford to carry on paying for their electricity. What is more difficult to ascertain is the extent to which people, while not going to those extremes, are living in very cold conditions because they have cut back on paying bills. We know that when there is energy bill support, and when prices come down, their energy use will go up, which implies that they were using less energy than they needed to keep themselves warm. A point was made about the impact on the health of children, older people and people with disabilities. People with disabilities have higher energy costs.

[Drew Hendry]

I am grateful to the hon. Member for underlining that there are big impacts on health, as well as the point that where there is a rebate and some funding to help people, it has a measurable impact. The whole point of the proposal on the highland energy rebate is to put that in place. It is an excellent point to underline and I am grateful that she has brought it to the table.

[Kerry McCarthy]

I would say that we do need to look at this in the round. Hopefully, the Minister will enlighten us a bit more, but Ofgem did a call for input on standing charges, which I think closed at the end of January. As far as I know, the outcome has not yet been published, but I think that it is for the Minister to give us some more details about the balance between standing charges, unit prices, and indeed the discussions about the social tariff. We are certainly looking at all those things.

As the hon. Member for Inverness, Nairn, Badenoch and Strathspey has said, the fact that the highlands and islands lack access to the gas grid means that they are in a particularly difficult situation. It was mentioned that 62% of properties in mainland Scotland were off the gas grid; I think I have that figure too. However, some places are almost entirely off grid, as I think the hon. Member said. That obviously leads to significantly higher costs because oil is often then used as a fuel, or heating is entirely electric.

Again, we have very much taken on board the point about decoupling from gas prices, but this all means that those people do not benefit immediately when wholesale prices do come down. I have figures here from Lochalsh & Skye Housing Association, which says that households in the area pay an additional £1,000 a year on energy bills compared with an average-sized home in the rest of Scotland, amounting to a 76% premium. That is just one figure illustrating the problem.

The point was very well made that Scotland is home to a huge amount of old and new generation energy generation. As the right hon. Member for Ross, Skye and Lochaber (Ian Blackford) asked, where is the benefit for Scotland from that? I was reading through a report from Changeworks on fuel poverty in the region in advance of this debate, and there was a quote from an energy adviser that really stood out:

“The annoyance of being a 321% net generator of green electricity to the rest of the UK, all from renewables, yet we have no access to the polluting fuel which is mains gas and the price of energy is four times the cost.”

Again, we know that renewable energy is going to be way cheaper than fossil fuels, and that is one of the reasons why Labour is committed to the “clean power by 2030” mission—because we know that that will help bring down energy prices. However, I can appreciate how absolutely galling it is to be somewhere where so much energy is generated—I think the right hon. Member for Ross, Skye and Lochaber talked about an economic renaissance for the highlands and islands linked to renewable energy—yet to be last in the queue to actually benefit from that. We absolutely need to tackle that unfairness.

I do not know whether anyone wants to intervene on this, but my understanding is still that the SNP is opposed to a windfall tax within our proposal. It is telling that we have this debate today, with the upcoming Budget; I hope that we see firm action from the Chancellor on tackling fuel poverty and recognising many of the unfairnesses that have been raised. There is some talk— I think we have actually heard most of the Budget already, which is not normally the case—about movement on a windfall tax on oil and gas. Labour is calling for an increase in the rate on the energy profits levy to 78%—

[Drew Hendry]

Will the hon. Lady give way?

[Kerry McCarthy]

Sorry, I will just finish what I was saying. And we are calling for an extension of the sunset clause to 2029, which would raise billions of pounds for the green transition, cutting household energy bills in the process.

[Drew Hendry]

I apologise if I got it wrong, but I thought that the hon. Member was inviting an intervention on that subject.

[Kerry McCarthy]

I was, but I just wanted to get my bit in first, otherwise I would have lost track.

[Drew Hendry]

Yes, of course. The point—I think I have to underline it again and again in this debate, and I think that the hon. Lady understands this—is that there is already a windfall tax, and other taxes coming from the highlands and islands through renewable energy, and we are getting nothing back. We are already seeing the effect of money being taken out, and it is not going back into the pockets of the consumers who are being punished in this way.

[Kerry McCarthy]

To do justice to the issues that hon. Members are raising, I will not go down the path of having an argument about the windfall tax, because we want to focus specifically on fuel poverty in constituencies.

[Drew Hendry]

The hon. Lady did actually raise the issue of windfall tax, so to say that she does not want to debate it is rather perverse. Let me try to help her a bit: over the past two years, oil prices rose to extraordinary levels and, as a result, many oil production companies made excess profits and have engaged in large-scale share buybacks. It is pretty simple and straightforward: in effect, it is a return of capital to shareholders, but it is untaxed. The Labour Opposition and the Government missed the opportunity to recognise the one-off nature of the situation. A one-off tax on share buy-backs could have alleviated the impact of higher energy prices, but both the Government and the Opposition missed the chance.

--- Later in debate ---

[Kerry McCarthy]

We have been calling for a windfall tax for quite some time. We have also been challenging the generosity of the investment allowance that goes to oil and gas companies, which I think is 91p in the pound. Not least because my voice seems to be slightly failing me, let us keep to the topic—[Interruption.] I will draw my remarks to a close.

Scotland’s huge potential for renewable energy generation shows the need for a place-based approach that allows people to feel that they are part of the transition and are directly benefiting. It is particularly galling that Scotland is responsible for so much of the new renewable energy generation, but is not benefiting. In some ways, it should be benefiting more than other parts of the country because it is doing the generation.

What Joe Biden has done with the Inflation Reduction Act in the States very much demonstrates a place-based approach to the green transition. I think that about 70% of the investment has gone into Texas, which is traditionally an oil-producing state but has been keen to embrace the benefits of the green transition not just for jobs, but for the community. Labour’s local power plan is partly about community energy generation and how communities can directly benefit from renewables and use them to serve their needs, but an element of it is about lifting places up because they have made a contribution to the rest of the country.

I suspect that the Minister will tell us she cannot say anything about what is being announced in the Budget today, but I would like some reassurance that she recognises the geographical disparities whereby some parts of the country are being hit harder by fuel poverty. There is an overarching need to tackle the fuel poverty that affects millions across the UK. Could the Minister say something about the geographical disparities? Could she also give some indication of where the Government are on the fairness of pricing, on the impact of standing charges versus unit prices, and on prepayment meters? I look forward to hearing from her.

--- Later in debate ---

[Amanda Solloway]

The hon. Gentleman is right. He has made that point clearly on several occasions, and I am prepared to discuss more fully the highland energy rebate paper that I have been sent.

I turn to energy prices and support. Despite the rise in standing charges, energy prices have fallen significantly since the winter of 2022-23. The 2024 quarter 2 price cap of £1,690 is 60% lower than the 2023 quarter 1 price cap peak. It is important to note that the Government reacted quickly to support households last winter. About £40 billion was delivered to support households and businesses, an average of £1,500 per household between October 2022 and June 2023. We delivered £40 billion to support households and businesses last winter, with a typical household receiving £1,500 in support between October 2022 and June 2023. Many highlands and islands households off the gas grid also benefited from the £200 alternative fuel payment schemes.

Despite the fall in energy prices since the winter of 2022-23, the Government have continued to support households. We are delivering a package of support worth £104 billion—an average of £3,700 per household—between 2022 and 2025.

Debt is an incredibly important challenge at the moment. Although we are doing a lot to help households, we know that some have fallen into energy debt. We want to support them to ensure that consumers do not fall into further debt. Last year, Energy UK announced a voluntary debt commitment: 14 energy suppliers announced their collective commitment to go above and beyond the current licensing conditions to help households with their energy bill debt. Those energy suppliers will aim to provide immediate assistance to those in debt and will arm people with knowledge and resources to empower them to manage their bills more effectively. For assurance, I regularly meet stakeholders such as Citizens Advice to discuss what can be done to address consumer debt. I welcome further input from hon. Members on the issue.

[Kerry McCarthy]

This week, I met some academics who are doing some research into debt levels. As I understand it, the average is about £1,000 per household, but I do not know the extent to which some people are in only £100 or £200 of debt and others are in five-figure debt. Do the Government have analysis of that? Does the Minister have figures she could share with me or put in the House of Commons Library?

[Amanda Solloway]

It is important that we consider the different levels of debt. It is quite complicated to get those figures because the suppliers have them, but I have pushed to see whether we can get a flavour of them. One of the things that I would advise households struggling with their bills to do is to speak to their supplier before going into debt, to receive help and support as soon as possible.

We have talked about prepayment metres, which can be a useful tool for consumers to manage their budgets and for energy suppliers to manage debt. However, it is important that the rules around their use are sufficient to protect consumers and are properly enforced. Involuntary installations should be used only as a last resort. Ofgem has strengthened its licence conditions for suppliers to conduct involuntary prepayment metre installations with exemptions in place for households with vulnerable individuals, such as those with people over 75 or children under the age of two.

The Government have already committed to supporting households past April 2024. Though I obviously cannot comment on today’s Budget, in the autumn statement we announced the biggest increase to the living wage and an increase to benefits of 6.7%. Earlier this year, we also cut national insurance for 27 million people, worth £450 for the average worker. As hon. Members have noted, in the autumn statement we also committed to giving communities living nearest to electricity transmission infrastructure up to £1,000 off their electricity bills for the next 10 years. That will apply across England, Wales and Scotland, including the highlands and islands, and they may be able to benefit from the scheme. We will also publish guidance this year on the wider benefits for local projects and provide an update on the electricity bill discount scheme.

As hon. Members have mentioned, many households in the highlands and islands are off the gas grid, which means they rely more on electricity. I also understand that many highlands and islands residents will use more energy and subsequently pay more for their energy bills due to the inclement weather, colder temperatures and poor insulation, but also due to having older and larger properties, which are harder to heat. To address that, the Government have already introduced several domestic energy efficiency schemes for all households in Great Britain to help lower bills and reach net zero targets. As an example, the Great British insulation scheme is delivering low-cost and free insulation to the least efficient homes in lower council tax bands, including many vulnerable households. The scheme will run until March 2026 with a value of £1 billion.

Since it was launched in January 2013, the energy company obligation has delivered around 3.8 million measures in approximately 2.5 million homes. Across ECO schemes, around 31,600 measures have been delivered to 23,100 households in local authority areas in the Scottish highlands and islands since 2013. As hon. Members will know, fuel poverty is devolved, with the Scottish Government responsible for the matter in Scotland. However, the ECO and the Great British insulation scheme are delivering energy-efficient measures to the least efficient low-income homes in Scotland. We are currently reviewing the fuel poverty strategy for England and will engage with the devolved Administrations as part of the process.

I understand this is a complex matter and one that is important to all hon. Members here. I thank them for bringing it to the debate. I would be happy to meet people further to today’s discussion. Finally, I want to touch on lived experiences and the impact on health. Having been brought up in a household that was fuel-poor, I know what it is like. I know the impact that that can have on someone’s health, especially as my mum suffered with chronic obstructive pulmonary disease and we found it incredibly difficult to manage all those challenges. My commitment is therefore to do the very best I can to support all those energy-poor households.