Energy Prices

Lindsay Hoyle Excerpts

Wednesday 14th January 2015 Commons Chamber

[Mr Iain McKenzie (Inverclyde) (Lab)]

It is a pleasure to follow the hon. Member for Elmet and Rothwell (Alec Shelbrooke), although he seems a bit out of touch with what is actually happening.

I welcome this debate, which further highlights problems with energy costs across the country. Energy demand by consumers must be met with reasonable prices for energy. Prices should reflect any reductions in the cost of energy as soon as possible. Labour has asked for the energy regulator to be given the power to take immediate action to ensure that reductions in wholesale costs are passed on to consumers immediately.

Only last week, the Government accepted that the energy market was broken. That should not come as news to them. It is certainly not new, because they were told about the practice in a report by the energy regulator in 2011. In stark contrast to what the Secretary of State said about his hyperactive approach, the Government seem to prefer to sit back and trust the large energy companies to do the right thing on pricing. We want big changes in our energy market. As Opposition Members have said, we want a price freeze until 2017—to allow energy prices to fall, but not rise—and we can then fix the market.

As we know, hard-working families are now struggling to meet their energy costs, especially at this time of year. Remembering that the next bill will cover the winter period, they fear that it will again be difficult to pay for their energy. At this time of year, families see their energy consumption rise. It will rise dramatically for families up and down the country this year if the weather that we have suffered in Scotland over the past few weeks is anything to go by. Families especially use the basics of life, such as washing machines, more regularly in the winter months, and tumble dryers will be on constantly day in and day out, which will run up their energy bills dramatically. Energy companies are fully aware of that, I am afraid, and are taking full advantage. The cost of energy is now one of the largest demands on household income.

We have touched on the direct debit payments that never seem to be adjusted down. Energy companies continue to take the same direct debit payment month after month, only for people to discover that they have overpaid by quite a sum. However, it never seems to be returned unless people demand it.

In the time I have left, I will speak about the new i.HEAT project in my constituency, which has been set up to tackle fuel poverty in communities across Inverclyde, where we are seeing a dramatic increase in fuel poverty. The project assists householders not only to access hard measures such as insulation, but to make changes in their energy consumption through behavioural changes. It provides step-by-step guidance on changing suppliers. Anyone who has tried to change suppliers knows that it is not an easy process. Some elderly households and families need to be taken through the process step-by-step to ensure that they get the best deal. Community participation is vital in engaging with householders and building links with registered social landlords. Community groups are brought into the equation to identify vulnerable households and offer them assistance with energy-related issues.

The project offers free impartial advice and advocacy support to anyone across Inverclyde. It has had a significant effect. In its brief few months, it has already pulled almost £1 million into my community to tackle fuel poverty. It is going a great deal of the way towards ensuring that households have energy-efficient homes and the benefits that they bring, as well as the support that they need to meet their increasing fuel bills. I am always amazed at the lack of energy efficiency that is built into new homes. That is an ongoing problem.

Equally, businesses suffer from high energy costs. Low energy costs will attract businesses and jobs to the area. It is like back to the future in Inverclyde, where we are looking at hydro projects to support businesses and subsidise their energy costs.

Today, Labour is challenging the Government to back our plans—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order.

--- Later in debate ---

[Mr Mike Weir (Angus) (SNP)]

For those of us who have taken part in a few of these debates, there seems to be a depressing familiarity to the arguments that are put forward. Today, the Secretary of State has told us that switching is the answer. To my mind, and based on my experience, switching supplier is subject to the law of diminishing returns. Someone might get a better deal the first time they switch, but they will not get a much better deal the second or third time. Switching is a limited answer to some of those problems.

The right hon. Gentleman mentioned new entrants to the market. Yes, there are new entrants, but many are internet based and depend on direct debit, and the very people whom we most need to help with lower fuel prices are those least able to take advantage of those deals. Many perhaps do not have a bank account or may already have a debt with an existing supplier that means new suppliers will not take them on. The idea is a fallacy. Switching to new entrants in the market will not address the problems that we face with energy prices. As the hon. Members for Glasgow North West (John Robertson) and for Wansbeck (Ian Lavery) mentioned, fuel poverty is at the root of this issue, and we must do something about it.

I talk about Scotland because that is what I know best. The Scottish Government have invested £300 million since 2009 on a raft of fuel poverty and energy efficiency programmes, and they will spend a further £94 million this year and next. Figures from Energy Action Scotland show that in 2013-14 an average of £36.48 central Government funding was invested in energy efficiency programmes for low-income households in Scotland, compared with £31.31 in Wales, £27.55 in Northern Ireland, and a paltry £3.52 in England.

The number of households in fuel poverty continues to be a disgrace. The 2013 Scottish house condition survey shows that 39.1% of Scottish households were in fuel poverty. Last year, despite the many schemes aimed at reducing fuel poverty, that number increased by 100,000 to reach 940,000. That increase is appalling, and it is almost entirely down to the rise in fuel prices. Indeed, it has been estimated that the fuel poverty rate for 2013 would have been 11% rather than 39%, if fuel prices had risen in line with inflation between 2002 and 2013. That demonstrates a fundamental failure of the UK regulated energy market.

The UK Government’s approach is to give lectures on switching, but that will not fix the problem. In Scotland there is a more determined attempt to approach the issue through home energy efficiency programmes, which also helps combat climate change—I do not accept anything said by the hon. Member for Monmouth (David T. C. Davies) on that issue. However, all that is being wiped out by the inexorable rise in fuel prices, and the changes made by the UK Government to the energy companies obligation have impacted Scotland adversely.

I understand Labour’s position on a freeze or cap, or whatever it now wishes to call it, but there may be difficulties with that approach. Having said that, I am prepared to ask my colleagues to support the motion since I am becoming fed up with the actions of energy companies. I have often said that energy companies offering deals for insulating homes and so on is perhaps not the best approach, because people no longer trust energy suppliers—hardly surprising, given what is happening with some of them. We must do all we can to assist vulnerable customers, but wholesale prices are falling and that has not been adequately reflected in the retail price of energy.

The motions wishes to put a statutory duty on the regulator, but as I said in an intervention, my experience of regulators does not fill me with confidence that that would happen quickly, even with a statutory duty. Indeed, I fear that it would end up being kicked into the long grass as the regulator takes its time, holds an endless investigation into the matter, considers the factors leading to increases, analyses price movements and so on—we all know what Ofgem and the Competition and Markets Authority are like. We might all have retired before we have a decision, and matters will have moved on to a new price cycle by then. If we are going to impose such a duty, we must ensure a strict and short time limit for considering the issue and coming to a decision, so that people get the benefit—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order.