Domestic Gas and Electricity (Tariff Cap) Bill

Lee Rowley Excerpts

2nd reading: House of Commons
Tuesday 6th March 2018 Commons Chamber

[Lee Rowley (North East Derbyshire) (Con)]

Thank you, Mr Speaker, for this opportunity to speak. It is a pleasure to follow my hon. Friend the Member for Stirling (Stephen Kerr), who made an excellent case and, as ever, argued with vim and vigour.

I welcome this important debate because it is the role of the Government to step in when markets do not work effectively. Although I am instinctively a small state Conservative, I know that it is important that the Government recognise when markets have not worked effectively and take appropriate action, as we propose in this legislation, which I support. The right hon. Member for Don Valley (Caroline Flint), who is not in her place, said that to expose market failure is not to try to weaken or be against all markets. That is a key point. Exposing market failure is vital for Government Members. Markets exist to improve people’s lives and make things more efficient. They provide outcomes and ensure that we can deliver things for consumers. If they are not working, it is important that those of us who stand up for free markets and capitalism point that out and take action accordingly.

I am instinctively cautious about caps, as are some of my friends, given their comments today. I support the statement of my hon. Friend the Member for Wells (James Heappey), who said that he hoped that the cap was an incursion into this area, rather than a wholesale annexation. He expressed my view much more pithily that I can. I do, however, accept the need for temporary measures to find ways in which we can make the market more competitive, and my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) spoke so eloquently about that in his speech.

It seems that there are two issues: supporting vulnerable customers, and the general stickiness of a market that is lacking in energy, vigour and the ease to switch. I hope that we can continue to put in place more support, protection and cover for vulnerable people, as we look to make the market more competitive. However, we have to recognise that there is an element of agency. People have the right to make and not make decisions, and we have to find that balance carefully.

There are some signs of improvement in the market. There has been a large increase in switching over the past year or so. The market share of the big six has reduced from over 95% in 2012 to around 80%; it is just not happening quickly enough. There is no doubt, however, that the market is broken. There are too many people on standard variable tariffs who do not benefit from the other tariffs as they could do. The price differential of £300 between the highest and lowest tariffs—or between the highest average and other averages—is too high. There is a clear disconnect between wholesale prices and the retail prices that people pay.

There is a strong suspicion of tacit co-ordination between the big six. Anybody who looks at the graphs in some of the briefings that we have all received will see how the price movements of the big six over a decade have so closely mirrored one another. There are clearly high barriers to entry. There is a real stickiness of customer movement, as well as stubbornly high market shares, which happily are slowly starting to float down. There is a clear problem.

I welcome the opportunity, in the next few years, for this competition and change to take place. I hope that some of the things that are proposed on improving communication, getting better data and improving the switching process also take place. I accept the interim changes, but hope that we can reboot the industry over the next few years, so that we do not need a cap in future. I hope that we can ensure that there is a competitive and successful energy market that serves the needs of its customers, so that we do not have to do some of the other things that none of us wants to do.