Energy Policy and Living Standards

Matt Hancock Excerpts

Wednesday 10th December 2014 Westminster Hall

[Dr William McCrea (in the Chair)]

One hon. Gentleman is standing, but convention demands that a Member has the permission not only of the Member who has secured the debate, which is Mr Carswell, but of the Minister, and he needs time to respond, so is the Minister willing to give a couple of minutes to the hon. Gentleman?

[The Minister of State, Department of Energy and Climate Change (Matthew Hancock)]

Of course.

--- Later in debate ---

[The Minister of State, Department of Energy and Climate Change (Matthew Hancock)]

I congratulate the hon. Member for Clacton (Douglas Carswell) on securing the debate and on choosing energy as the subject for his first Westminster Hall debate in his new iteration in this Parliament. My central response to his argument is that it is important to look at the facts and have a rational debate about the matter. Central to his big-picture hypothesis was the argument that energy costs have been rising since the early 2000s, before which they had gradually declined. He went on to say that wholesale costs were falling as a proportion of the total cost. However, the wholesale price has risen sharply during that period, and the wholesale price—the amount that is beyond the control of any Government—is a central driver of energy costs. Without acknowledging that core fact, it is difficult to have a rational debate on the subject, which I think we would all value.

[Mark Reckless]

The Minister says that the price is beyond the control of any Government, but Saudi Arabia has had quite a big impact on price by not increasing its oil production, and the US has done likewise by allowing and facilitating exploration for shale gas and oil, which we have held back so badly in this country.

[Matthew Hancock]

Nobody has direct control over wholesale costs, although I entirely take the point that Government policy that has an impact on the supply of energy, particularly hydrocarbon energy, can have an impact on price. I share the hon. Gentleman’s enthusiasm for shale, and the Government’s proposals will ensure that exploration for shale gas can happen as long as it is done carefully and within a regulatory framework that ensures that it is safe. I hope that he, his colleague the hon. Member for Clacton and all colleagues in his new party will support the local extraction of shale gas; his view is not shared by members of his party across the country. I welcome the support of the new establishment party for shale gas.

It is absolutely essential to ensure that we have security of supply at the lowest possible cost, while living within our international climate obligations. Perhaps there is a point of difference, because the risk of climate change is real and must be taken seriously, but the question is how we deliver on that in the lowest-cost way. On that, I think that the hon. Member for Clacton and I share some analysis. For instance, ensuring that taxes remain as low as possible is an important element of the Government’s programme. Even with the incredible deficit that we inherited, we have managed to keep petrol and diesel prices 20p lower than they would have otherwise have been. I pay tribute to my hon. Friend the Member for Harlow (Robert Halfon) for the work he has done on that, which is widely recognised. As oil prices fall, I support him in the call for those reductions to be passed on to the motorist at the pump now, not later. The work that he has done, including on the front page of today’s Sun, is an important contribution to this debate.

[Mr Jim Cunningham]

How will the Minister persuade oil producers to pass on the reduction in oil prices to the consumer? Price rises hit a lot of poor families because of their impact on public transport and the cost of living in general. Have the Government had any discussions about that, and how do they intend to achieve it?

[Matthew Hancock]

The Government have had discussions about that. Ultimately, those changes can be best driven by competition. I share the disdain of the hon. Member for Clacton for prices and incomes policies in energy. Indeed, I think that he has missed some of the changes that we have made over the past couple of years, not least in the Energy Act 2013. For instance, he argued for more competition between different technologies so that those with the most potential can drive down costs and improve the situation for consumers. By switching from a regime in which, as he described, subsidy is given out to whatever renewable technology was brought forward to a regime in which a controlled pot of subsidy is auctioned to ensure that we get the best possible value for money, we have made a change towards a market-oriented system.

[Douglas Carswell]

In the United States over the past five years there has been a 26% reduction in wholesale gas prices and gas prices to consumers. Does the Minister have something to learn about public policy from America?

[Matthew Hancock]

I have no doubt that the massive expansion of the extraction of shale gas in America has had a downward impact on gas prices. Allied to that is the fact that America did not have many export terminals—it is now building them—which meant that it had a relatively closed market. We are working hard to get shale gas extraction going in the UK, where I think that it has huge potential. The Infrastructure Bill, which is currently before the House, proposes changes to make it easier to get shale gas out of the ground in a carefully regulated and safe way. I welcome the hon. Gentleman’s support for that.

The capacity mechanism and the changes to make our energy system more driven by competition are designed to ensure that we get that security of supply as well as the cheapest possible cost. That is best done through a market mechanism, but the market must have a strong framework around it, because we must ensure continuity of supply in order to keep the lights on.

[Robert Halfon]

Will the Minister make a brief comment about the continued problem of the big energy companies charging a premium to vulnerable people who do not pay by direct debit?

[Matthew Hancock]

That is something that I am actively looking into, and I look forward to working with my hon. Friend to take it forward.

[Albert Owen]

One area in the energy market where there is no competition at all is distribution. The regions have monopolies, and the differential between them is some 6% of the bill. Does the Minister welcome Ofgem’s review of that subject, so that we can have proper, fairer pricing across the United Kingdom?

[Matthew Hancock]

Of course I welcome Ofgem’s review into the matter, and I think it is an important question. If we simply socialise prices across the whole of the UK, somebody has to pay those prices. The key question is how we can sort that out in a way that represents the best value for money. We have always had a relatively market-based approach, but the central point of Government policy is to move even more in that direction. The other important point is that without the action that the Government have taken, the average household dual-fuel bill would have been £100 higher this year.

Energy efficiency is the most effective way to drive down costs while cutting emissions and to bring down electricity bills for people, families and households. I am focused on that, and on ensuring that we get the best possible value. The Government have expanded energy efficiency enormously. Home insulation has been expanded and the green deal has reached hundreds of thousands of people. Those changes will ensure that we get the best possible value for money and that people pay lower bills, as far as is consistent with security of supply and our international obligations. That is the Government’s goal and we have made progress, but I have no doubt that there is more to do.

Question put and agreed to.