Fuel Poverty and Energy Price Caps

Matthew Pennycook Excerpts

Thursday 19th November 2020 Westminster Hall

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to serve with you in the Chair, Ms Rees. I congratulate the hon. Members for Linlithgow and East Falkirk (Martyn Day) and for Ayr, Carrick and Cumnock (Allan Dorans) on securing the debate, and thank the Backbench Business Committee for granting it.

As all hon. Members have said, the scale of fuel poverty, which is present in every part of the UK, is staggering. I say that as a Member representing a constituency less than 10 miles away in which 5,500 households are in fuel poverty—this problem affects every part of the UK. The point about methodology and the consequent difficulties in making comparisons across the four nations was made, but the headline estimated rates show approximately one in 10 households in England and Wales are fuel poor, one in five in Northern Ireland, and one in four in Scotland. Those figures should be a source of shame for each nation. We have heard about the negative impacts that fuel poverty has on health, mental health, and morbidity.

The debate is timely as this issue affects millions across the country. Older people bear the brunt of it, but families—particularly single-parent families—and increasing numbers of younger people are also affected, and the issue has been exacerbated by the coronavirus pandemic. The impact has been felt not just because of sharp reductions in income, job losses, and people being furloughed or having to manage on some form of financial support from the state, but, as has been mentioned, because more time at home as the weather turns colder means much higher bills. In the context of the near standstill on the installation of smart meters and of the distinct lack of progress on energy efficiency, there is concern that this winter could see even higher numbers of deaths linked to cold homes.

That more can and should be done to address fuel poverty is, in my view, beyond dispute. A number of schemes already aim to tackle the problem, but they operate with varying degrees of effectiveness, and more attention needs to be paid to making them work better and over a long time. In the short term, we really need clarity on how those schemes will operate in the months and years ahead.

The warm home discount scheme was rightly extended by the Government last month, but we still have no idea about what that means for the amount of the discount or whether coverage will be extended to customers who sign up with smaller energy providers, for example. We need urgent clarity on how that scheme will work going forward.

In its last iteration, the energy companies obligation, which the hon. Member for Linlithgow and East Falkirk referred to, focused almost exclusively on low-income and vulnerable households. We know that it can make a contribution to reducing fuel poverty through energy efficiency measures, and hence lower bills for at-risk households. However, the ECO is now scheduled to run only to 2022. We need urgent confirmation from the Government that it will be extended beyond that date, and that the cuts made to its overall funding at the time when its focus was revised will be restored.

Beyond the targeted schemes that exist, the best way in the long term to combat fuel poverty is to design it out—to systematically insulate and make more energy-efficient the homes in which those in fuel poverty live, which are largely, it has to be said, in the private and social rented sectors. In most European countries, not just those with more temperate climates, the concept of fuel poverty is largely alien because the underlying efficiency of their housing stock is such that bills are entirely manageable by the vast majority of households. That is not the case across the UK, where we still have some of the worst insulated and least energy-efficient housing stock in Europe.

As the Scottish National party spokesperson mentioned, the manifesto on which Conservative Members stood in the last general election contained a commitment to spend more than £9 billion on uprating energy efficiency in homes, including a £2.5 billion home upgrade grant scheme and a £3.8 billion social housing discount fund. We have yet to see any sign of either measure or, I would argue, any real commitment to rapidly overhauling and upgrading the UK’s housing stock.

Although the amount allocated to the recent green homes grant is welcome, as an emergency measure lasting only for this financial year, and with some real questions about how effectively it can be delivered over that period, there is a real risk that it will ultimately have very little effect. Current statutory energy efficiency commitments require all fuel-poor homes in England to be levelled up to the energy efficiency standards of a current new-build home. At present, the Government are a very long way away from meeting those commitments, and we need urgent action to get us back on track.

So far I have focused on general issues relating to fuel poverty, but the title of the debate invites us to pay particular attention to the role of the energy price cap. The Opposition very much welcomed the price cap when it was introduced in January last year. After all, it was an idea—as the Minister may recall, labelled a semi-Marxist proposal by his party—that we put forward in our prospectus in the 2015 general election.

There was a clear need for a cap to address the issue of companies overcharging consumers, manipulating the goodwill of loyal customers and exploiting so-called sticky customers, many of whom are among the most vulnerable in the population. There is no doubt in my mind that the price cap has saved the poorest households considerable sums of money. It is estimated that the amount is in the order of £75 to £100 for those households on the default price tariffs.

However, as hon. Members will know, and as has been mentioned, the cap was introduced only as a temporary measure until such time as it could be proven that conditions for effective competition in the market existed. Those conditions clearly still do not yet exist. We were pleased that the cap has been extended for a further year after Ofgem reported as much to the Government, but issues of concern remain. The hon. Member for Linlithgow and East Falkirk spoke about the really important one of pre-payment meters.

We know that people on pre-payment meters are often fuel-poor customers. The energy price cap has folded into it the previously existing pre-payment meter price cap, which will lapse at the end of this year. Although protection for those who access their energy in that way will continue to some extent through the default tariff price cap, I hope the Minister agrees that we have to ensure that they are afforded long-term protection when the cap as a whole is lifted, as it inevitably will be.

This has been a good and important debate, albeit an under-subscribed one for the reasons that the SNP spokesperson mentioned. There is a huge amount of interest in this problem, as there should be given its scale. The Opposition urge the Government to devise a more comprehensive strategy on fuel poverty—one that addresses price, efficiency and problems of coverage and access, as well as the root causes. I hope that the Minister can provide the House with some reassurance that his Department is at least thinking along those lines.