Fuel Poverty

Michael Fallon Excerpts

Tuesday 11th February 2014 Westminster Hall

[The Minister of State, Department of Energy and Climate Change (Michael Fallon)]

I, too, congratulate the hon. Member for Brecon and Radnorshire (Roger Williams) on securing this debate on fuel poverty and cold homes. Like the hon. Member for Sunderland Central (Julie Elliott), I note that all the Back-Bench speakers were from Wales. I make no complaint about that at all; these are important issues. I note that fuel poverty, as a subject, is a devolved matter. I am not trying to escape responsibility—I will try to answer a lot of these points—but perhaps some questions should also be addressed to the Welsh Government and their spending decisions.

Let me begin by saying a little bit about fuel poverty, something on the retail market and prices and something about the off-grid issue, which a number of hon. Members mentioned. I will then try to answer some points made by hon. Members in their speeches. I hope that they will allow me to write to them if I do not cover every point that has been mentioned.

I hope that hon. Members welcome the fall in the last reported fuel poverty figures as much as I do. Of course, that followed a period in which fuel poverty rose between 2004 and 2009, reaching a peak of 5.5 million households. I put that on the record as a criticism not of the previous Government, but of how fuel poverty was measured. To help us meet the challenge better, with the new more accurate measure that we are introducing, which deals with low income and higher cost together, we will be better able to design and deliver effective policies that can cut bills and increase comfort for those on low incomes who live in the very coldest homes. I am pleased that the House agreed to the Energy Act 2013, which allows us to bring in the new definition.

[Chris Williamson]

Does the Minister understand the scepticism out there about the Government’s changing how fuel poverty is calculated? People want to see significant investment in energy efficiency, to ensure that the shocking increase in excess winter deaths last winter is not repeated in future. Fiddling around with the measurement of fuel poverty will do little to address that. People see winter deaths rising and fuel poverty increasing, but they see spending on tackling it falling. The Government need to deal with that, rather than simply changing the definition of what constitutes fuel poverty.

[Michael Fallon]

I am a little disappointed about that. We all deplore any excess deaths arising in the winter months, but in terms of fiddling with the figures, the new definition of fuel poverty that we are securing was reached by agreement with fuel poverty action groups that have welcomed the new focus, which, as I say, is on low-income households as well as high-cost households. The problem with the previous definition was that it essentially picked out large houses and wealthy people can be living in large houses. That was not the right way to tackle fuel poverty. It was also a measure that kept moving; people kept moving in and out of the definition.

We are now moving to a better definition, with the agreement with those who work in the area. That will form the foundation for a new fuel poverty strategy that we will publish later this year, which will be deliverable and on which the public can hold us to account.

[Albert Owen]

The Minister makes an important point. There will be issues about whatever calculation we use. However, now that we have moved to a different definition of fuel poverty, will DECC, the Government and other Departments ensure that there is a comparison with the old figures, so that people are not as sceptical about the change for change’s sake? I agree with the Minister that drawing wealthy people into this is not the way forward, but for people to have confidence in the new calculation, there needs to be a comparison over the transition period.

[Michael Fallon]

That seems to me a reasonable point. I will see whether we can set the tables side by side. Of course, I have to tell the House that the figure was not dreamt up by the Government; it was the work of Professor Hills, who consulted widely on it. It has been supported by those who work in this area.

We had already moved, under the 2013 Act, to ensure that the energy market, with its confusingly large number and range of tariffs, which had not been serving the consumer as well as they might, could make it much simpler for consumers to understand prices and ensure that everybody is put on the cheapest tariff that meets their preference. I am glad, too, that that seemed to secure all-party support, as the energy legislation went through the House.

We were confronted in the autumn with some quite unacceptably large price increases, by some major suppliers, of 8%, 9% and 10%. We moved immediately, as would be expected of a listening Government, to consider what could be done to reduce the bit on the bill—the green levies—that the Government have control over. We have secured an average reduction of some £50 per household. That is important. People do not have to wait for an unworkable price freeze. This Government take action immediately to ensure that people see a reduction in their bills as quickly as possible.

[Julie Elliott]

Although we would welcome any reduction in bills, does the Minister acknowledge that the average consumer will still pay about £60 more this winter than last winter?

[Michael Fallon]

No, I do not think that is the right figure. In any case, the hon. Lady would be advised to go a little bit further back and see the scale of the increase under the final years of her Government. This debate, so far, has been reasonably good natured. I am not sure how useful it is to tempt her back on to previous ground, but I will come to some remarks that she made.

I want finally to say something about off-grid and then deal with hon. Members’ individual points. Four million households are off the gas grid and face higher than average energy bills. Of course, winter is a particularly expensive time for them. One of my first duties as Energy Minister was to chair the off-grid gas round table, not least at the instigation of the all-party group on off-gas grid, which has been working on this issue. I launched, at the all-party group’s request, the Buy Oil Early campaign in September and promulgated a better code of practice for oil suppliers, so that people pay the price advertised, and so on.

The group meets every six months, and we will reconvene in May to learn the lessons of this winter. We will have the regulators, the advisory bodies, the charitable bodies, people who have worked in oil-buying clubs and representatives from Northern Ireland, where there have been real difficulties. We will learn the lessons of this winter again to see what more can be done to improve the security and affordability of the off-grid fuel supply and to share best practice. One of the things on which we are working is how we can better pool data between Government agencies to ensure that we better understand which off-grid households need the most help.

[Roger Williams]

I welcome the Minister’s insistence that people are sold, for instance, heating fuel at the price quoted by the supplier, but will he also try to insist that the supplier includes VAT in his quote? When the supplier trades with other wholesalers, he might do so at a price that is minus VAT, but VAT is included in the price that the consumer has to pay.

[Michael Fallon]

I will take up that point. It is important for those who are off-grid that there is as much transparency as possible, so that they understand what the costs are likely to be.

I will now address some of the individual points that have been raised. The hon. Gentleman drew our attention to harder-to-treat homes, which probably lie at the core of the long-term challenge. Getting energy efficiency measures into harder-to-treat homes lies at the heart of solving the problem and catching up with the progress that has been made elsewhere in Europe. I accept that those comparisons are not encouraging for us as one of the wealthier member states.

The hon. Gentleman asked about hypothecating some of the carbon taxes towards this objective. If that were to involve additional spending, the revenue from those taxes would have to be produced from elsewhere, or else we would become involved in additional borrowing. None of that is easy at a time when we still face a deficit of more than £100 billion. He asked specifically about extending the gas grid, and the grid is being extended in the current seven-year period that runs from 2013 to 2020. The aim is to connect some 75,000 off-grid homes each year. Those homes will be reasonably close to the existing grid, but that is expensive and a contribution has to be made by the householder, by some other agency or by the local authority. I do not want him to be under the impression that nothing is happening. I will take his points back to the transmission operators and the companies, including his view that more should be done. The aim is to connect more homes to the grid in each successive year.

[Chris Williamson]

I am grateful to the Minister for giving way again. Extending the grid is welcome, but is not the key actually to reduce energy demand? Surely, a huge uplift in investment is needed to address fuel poverty—in other words, properly insulating people’s homes—using the money that is already in the system. Unless we can do that, extending the grid will not address the problem of fuel poverty for millions of people.

[Michael Fallon]

I understand that this problem must be addressed across a number of fronts. The hon. Gentleman is right that energy efficiency has a huge part to play, which allows me now to address the energy company obligation. The ECO has been criticised, so I will first address the suggestion that some of those who work in the ECO scheme have run out of budget. I am advised that, by the end of November 2013, published figures from Ofgem showed that approved ECO measures accounted for some 60% of the affordable warmth obligation that was to be delivered by March 2014, so there is still work to do. There are still affordable warmth targets out there for 2015, and we are now extending the scheme to run through to the end of March 2017. We are also ensuring that, having considered the working of the scheme, it is better targeted at lower-income households.

I welcome the support of the hon. Member for Ynys Môn (Albert Owen) for shale gas, and I am sorry that he will not be able to demonstrate that support for any application in his constituency at the moment. No application has yet been made that would allow him to campaign more openly on the scene of an application, but I note what he says. We simply do not know the full potential for shale, so we are not able to estimate the likely revenues, which is what he was homing in on. I am sure that if shale takes off here, as it has taken off in the United States, there will be many claims on the additional revenues that it brings in. The revenues will, of course, not only simply be brought into the Treasury and reallocated outwards to public services; they will also be brought into local communities through the local community benefits package that the industry has already agreed.

The hon. Gentleman asked about the green deal. Some 130,000 assessments have now been made through the green deal, and it is perfectly true, as I think he said, that not all have taken up green deal finance, but the green deal is being taken up. More and more assessments are being made, and the scheme is proving successful.

The hon. Member for Ceredigion (Mr Williams) welcomes the warm home discount, and he asked about eligibility. He will be pleased to know that 2 million households get the warm home discount each year, but we have committed to extending the scheme not simply for 2015-16, but with an additional spend of some £320 million. More than 1 million additional low-income households will therefore receive the payment, without having to take any action at all.

The hon. Gentleman also asked about oil syndication, which we are pursuing through the twice-yearly round table that I chair. We will pick up experience from his constituency and from other constituencies to see what the Government can do to encourage syndicates. There are some good examples of syndication and oil buying in the north-east of England, in Ceredigion and in Northern Ireland, and I want to see what role the Government can play in incentivising that form of syndication.

The hon. Member for Sunderland Central said that she is proud of the previous Labour Government’s record, but she then outlined the reforms that she wants to make. I am not sure why she should be both proud of Ofgem and determined to abolish it. Her Government set up Ofgem, and now they are going to abolish it. I am not sure that she should be proud of that or of having started with 14 energy suppliers and ending up with the big six. She must develop her policy for a future Labour Government, if there is ever to be such a thing, in her own way.

I preferred the hon. Lady’s earlier remarks, in which she said that the Labour Government did not get everything absolutely right. That is probably a good motto for any Government. I am not pretending that the current Government have all the answers on fuel poverty, which is a deep-rooted problem. A lot depends on the state of our housing stock, which needs to be addressed. The hon. Member for Derby North (Chris Williamson) is right that we need to do more on energy efficiency, but we also need to measure the problem better to ensure that the data that we have are properly matched so that, with all the different schemes, we get help to those who need it most.

I am sure, Mr Sheridan, that you would like me, on behalf of all the hon. Members who have spoken, to thank the hon. Member for Brecon and Radnorshire for bringing this important subject to the House today. I assure him that the Government will respond to him and the other Members who have spoken on all the points that have been raised. This is a serious subject, and we are grateful to him for raising it.