Domestic Gas and Electricity (Tariff Cap) Bill

Lord Field of Birkenhead Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 30th April 2018 Commons Chamber

[Dr Whitehead]

Indeed, but both have equal merit, and I would not want to distinguish between them in what they would add to the Bill. They both have the central concern that vulnerable customers should not be treated adversely as a result of the overall tariff cap coming in. That is the point that I wish to pay attention to. I am sure that my hon. Friend the Member for Leeds West (Rachel Reeves) will also want to do so when she speaks to amendment 9.

[Frank Field (Birkenhead) (Lab)]

Without wanting to enter into a beauty contest regarding whose amendment is best, will not my amendment 1 be quite consistent with what the Government wish to achieve, which is to require Ofsted—I mean Ofcom—[Hon. Members: “Ofgem.”] Yes, Ofgem—or Ofcap, perhaps. The Government wish to require Ofgem to write to companies to ensure that those who are poorest and least likely to change have been offered the best deal by their provider. I promise that by the time I speak to my amendment, Madam Deputy Speaker, I will know which regulatory body it is.

[Dr Whitehead]

Yes, there is certainly merit in that idea. It is true that some of the amendments take some of the specific actions that may be taken a little further than is suggested in amendment 7. However, whichever of the amendments one wishes to pin the first-place rosette on to, the key point is that vulnerable customers need to have proper protection as the tariff cap comes forward.

It is in the Government’s interests, I think, to clarify exactly what they intend the Bill to do regarding that protection. That can easily be done by the Minister clearly stating today, as I hope she will, that vulnerable customers will not lose the current safeguard tariff as the overall tariff cap comes in. Indeed, if the overall price cap consumes the safeguard tariff, vulnerable customers could see their prices could go up by more than £30 as a result of the difference between the safeguard and the absolute tariff. That would, as I am sure she will agree, be a perverse outcome that she would be anxious to disavow.

The Minister will have to clarify for us that the Bill means that Ofgem can bring forward the extended safeguard tariff at the same time as the standard variable tariff cap; that the extended safeguard tariff can continue after the absolute cap has ended; and that she will bring forward the necessary secondary legislation before the summer to enable the data sharing needed to extend the safeguard tariff. I am sure that she will be able to reassure us on these points. I look forward to what she has to say about all the amendments before us.

Amendment 8 seeks to introduce to the Bill the symmetry in architecture that appears to be missing from what Ofgem must consider in introducing the cap. As hon. Members can see, the Bill lists a number of matters to which Ofgem should have regard in setting the cap, which relate to

“protecting existing and future domestic customers who pay standard variable and default rates”.

However, when we cast our eyes forward in the Bill, we see that those conditions are wholly absent from the matters that Often is required to consider when it reports to Government on whether circumstances exist that allow the cap to be terminated, as it is required to do by clauses 7 and 8.

Indeed, there is no guidance in the Bill at all on what Ofgem will have to take into account, except, alarmingly, for one consideration: the extent to which progress has been made in installing smart meters, a provision that, if taken too literally, might mean that the cap will be with us until the end of 2023. Our amendment essentially seeks to place in the outbox—the point at which Ofgem reviews the expiry of the cap—the same considerations that it is required to pay attention to in its inbox when it sets the cap.

Finally, we seek in new clause 1 to start the process of introducing what needs to be in place to ensure that the market works well for customers and does not recreate the anomalies that have led us to where we are today. I have no doubt that there will be a number of such provisions, but in our view one of them should be that the arrangement of tariffs by energy companies should not continue as it is.

That is also the substance of amendment 2, tabled by the hon. Member for Weston-super-Mare (John Penrose), whom I salute for his unflagging work in bringing the idea of a price cap to this point. He introduces in his amendment the suggestion that tariffs should have a piece of elastic on them for each company, to prevent companies from introducing customers to apparently low tariffs initially, only to place them on much higher tariffs when the first offer expires and relying on their loyalty to gain a lot of profit and cause an unfair outcome for customers. That is essentially the instrument that his amendment would introduce, but it is cast as a relative price cap. We do not think it is a satisfactory mechanism for a price cap, but he will no doubt argue his corner. The relative nature of a tariff range restriction means that it can be introduced at any price and is not therefore a cap as such. It is, however, a vital means of keeping prices and fair dealings with customers on a steady trajectory.

--- Later in debate ---

[John Penrose]

Much would depend on the size of the cap on the gap proposed by Ofgem, and much would depend on the rest of the pricing structure of the energy firm in question with regard to where it chooses to put its default tariff. Many of these things are, as my hon. Friend points out, yet to arrive. They are starting to be introduced, but they are a relatively new innovation, with small but growing penetration. He is absolutely right that we need to make sure that we do not disincentivise such tariffs. They certainly will not be to everybody’s taste, but they may be to the taste of an increasingly large number of people.

I would prefer to start from a simple cap—capping the gap—and then have to make a couple of adjustments, rather than making even more complicated something that is, as I have described, already hideously complicated. If we manage to take care of all the complexity and bureaucracy by establishing a link to the competitive switching market—hey presto!—we will have driven a stake through the heart of the rip-off tariffs. Switching supplier would still be worth while, and there would be far fewer jobs for bureaucrats, lawyers and lobbyists. The customer would be king.

My amendments would make a relative cap either possible or required, depending on which version was chosen. I do not expect or intend to press the amendments to a Division, but I want everybody to realise that there is a more competitive, more flexible, less bureaucratic, more customer-friendly and generally better alternative, and that at the moment we are not taking it.

It is not just free market Tories such as myself who think that capping the gap is the right way to go. The Labour Front-Bench team, as we have heard, have tabled an amendment that proposes something similar. They might disagree with my description of it, and they have a fancy-schmancy name for it, but, broadly speaking—as my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) pointed out earlier—the wording is very similar and the amendments would effectively do the same thing.

Labour Front Benchers and I disagree over timing, however. The effect of their proposal would be permanent, whereas ours would be temporary while we fixed the underlying anti-competitive problems in the market. There is, none the less, clear cross-party consensus on the principle, at the very least, so why does the Bill ignore this cross-party opportunity? Why are a notionally pro-competition Conservative Government choosing the less competitive, more bureaucratically inflexible and more complicated version instead? Why are we snatching defeat from the jaws of what ought to be a famous free market victory? I look forward to hearing the Minister’s answer.

[Frank Field]

I will not press my amendment to a Division either, but I am very happy to speak to it for 30 seconds. It is designed to request an undertaking from the Minister that she will ask Ofgem to look at the poorest consumers on which it has data and offer them an automatic switch to the lowest rate that suits their expenditure pattern. On that happy note, because I am sure the Minister will give way later, I shall sit down.

--- Later in debate ---

Amendments 1, 7 and 9 bring us to the extremely important point of how we ensure that the cap does not in any way reduce price protection for the most vulnerable customers. I am proud to say that those customers have, over the past few years, been protected through the prepayment meter cap and through the extension of that price to customers in receipt of the warm home discount. We all believe that that is absolutely vital. Indeed, as the hon. Member for Leeds West said, it would be perverse for the cap to come in and for prices to go up for those customers. The requirements in the Bill for Ofgem to pay attention to its existing powers, which of course include a duty to protect the most vulnerable, are sufficient, and the Bill is in addition to and does not replace or replicate those duties. I am extremely keen to examine the point further without amending the Bill, so I will take it away and consider it to see whether there are other messages that we might convey to Ofgem to ensure that this extremely valuable point is not missed.

[Frank Field]

Might the Minister meet people to discuss amendment 1 further?

[Claire Perry]

There has been a huge amount of scrutiny, and I am hoping that we can get the legislation through to the other place, but my door is open. We want a well-functioning energy market that works for everybody and provides competitively priced energy.

I was asked an important question about the statutory instrument, which is also going through the House, that enables data sharing between the DWP and others. It has completed its pre-legislative scrutiny and will be introduced during the passage of this Bill. It is a vital and necessary part of ensuring that the powers in the Bill work.