Cost of Energy

Debate between Michael Shanks and Angus MacDonald

Tuesday 11th February 2025 Westminster Hall

[Michael Shanks]

I had a segue planned in my speech that was going to get me to the hon. Gentleman’s point, but he pre-empted me, and he is quite right to do so. He is right. This is a real challenge. The switch-off is the right thing for us to do in the long term—I think that everyone agrees that as a system that is outdated—but we do need to be absolutely certain that no one is left behind.

The Minister responsible for energy consumers, my hon. Friend the Member for Peckham (Miatta Fahnbulleh), has already had a number of meetings with Ofgem and with industry to make sure we speed up the roll-out. The service ends in June, as the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) said, and the taskforce that has been put in place to roll it out is now moving at pace. I think it is fair to say that it should have been moving faster up to this point, but they are very aware of the issues and we will keep that under review; it is of course essential that people are not left behind when the signal is switched off.

Moving on to short-term support, we recognise that by 2030 the clean power system will be crucial to bringing down bills in the long term, and to protecting consumers from the price spikes that we have faced in recent years. However, short-term support is important for households that are struggling with their bills while we are in that transition. That is why the Government continue to deliver the warm home discount, which gives a £150 rebate off energy bills for all eligible low-income households, and it is expected to support 3 million households across the country this winter.

The Minster for energy consumers has worked with energy suppliers to agree a £500 million industry support commitment to help specific customers who are struggling this winter. We also extended the household support fund until March 2026 with an extra £742 million, with additional funding for the devolved Governments as fuel poverty is devolved through the Barnett formula.

A number of hon. Members raised the question of a social tariff. My hon. Friend the Member for Northampton South made a passionate case for it, and we are looking at what bill support could look like in the future, including the possibility of a social tariff. I acknowledge that there is a broad consensus on the idea of a social tariff. The challenge is that it means different things to different people. One of the challenges that we are grappling with is how we define a social tariff, and how we can reach, in a very targeted way, the people who need it the most.

Part of that is the issue of data sharing, which a number of hon. Members have raised—that is, how we bring together the information that the Government have about the individual people who could most benefit from such a scheme. The Minster for energy consumers is leading that work, alongside industry bodies such as Energy UK and stakeholders. They are looking at how we can improve affordability and accessibility, and they are working with the Department for Work and Pensions on how we might be able to share some of the data that it has.

The question about levies has been raised by a number of hon. Members, and I think the Conservative party is now pledging to abolish levies entirely. It is an incredibly complex subject, but it is something that we want to grapple with, and we need to be very mindful.

I return to the point made by the hon. Member for Bath at the beginning of the debate. While the wholesale price will come down as we put more renewables on to the system, and as we squeeze off gas as the marginal price, if bills do not come down because levies remain high, people will not see the benefit. It is really important to bring communities with us. The truth is, it is a complex issue. I am not going to stand here and say that we can just abolish levies, or that we can just transfer them entirely on to taxation. Neither option is possible in completion, but we are considering how we look at the future of levies, and we are open to suggestions from all parties on how we do that.

On the point about rebalancing—how we move electricity costs, in particular, on to gas—that is also a challenge. We want the number of people who use gas to decline in the coming years, as we decarbonise. The challenge will be making sure that we do not put charges on to a dwindling number of customers. Potentially and inadvertently, some of the poorest people in the country might be those who are the last to convert from gas to alternatives. I do not, for a second, dismiss the points that have been raised; they are incredibly important. However, I want to be very clear that we are working relentlessly in this Parliament on how we reduce the wholesale costs, and we want to make sure that it follows through on to consumers’ bills.

Related to that, of course, is the point about standing charges on bills, which, as many hon. Members hear from constituents, seem to be such an unfairness because they are not based on consumption or on particular customers’ circumstances. We are committed to looking at the future of standing charges. In December, Ofgem provided an update on reform. It included quite a radical proposal for introducing a new zero standing charge option under the energy price cap, which would give consumers greater choice in how they pay for their energy bills. It is for Ofgem now to consult on that proposal, which it will do this year. The driving force behind that will be making sure that any reforms are fair to all customers.

To underline that this is not straightforward and we cannot just simply abolish levies, I note that there would be unintended consequences if we were to transfer some of the costs on to other people. We could inadvertently find ourselves raising bills for some people without that being the policy intent. We are committed to reforming standing charges, but we want to do it in a way that is fair.

[Mr MacDonald]

Would the Minister spare a minute to talk about community benefits?

[Michael Shanks]

indicated assent.

[Mr MacDonald]

Thank you very much.

[Michael Shanks]

I was not expecting the hon. Gentleman to stop at that point. I saw him in his place earlier and knew that I would talk about community benefits. I will turn now to the points about community energy and community benefits; both are important.

On community benefits, in all of this, we want to bring communities with us on this journey. That is important. We have made a very clear case that this Government intend to build the energy infrastructure we need, the transmission infrastructure we need, the homes that people need and the industry that people need to grow our economy, which is important. For far too long, this country has not built the infrastructure it needs. In doing so, we want to streamline the planning process so that applications are dealt with far more efficiently and far faster, but we want to bring communities with us. That is absolutely vital.

We will be saying much more very soon about community benefits on several fronts. The first will be how we expand some of the community benefits for particular technologies. That process is already well established in Scotland, for example with onshore wind. The absurd policy of the onshore wind ban in England means that it has not developed as much, but we can look to Wales and to Scotland for advice on that. We also want to expand that to other technologies, particularly solar, which does not have the same community benefits at the moment, and to network infrastructure. I have always said that, if we build network infrastructure and a community is hosting that infrastructure that is essential for the country, it is doing a favour for the rest of the country and should feel some benefit from it. We will announce a package of community benefits shortly.

On the wider point about community infrastructure, we do not only want communities to benefit—we want them to actually own the infrastructure that gives social and economic benefits as well.

Fuel Poverty

Debate between Michael Shanks and Angus MacDonald

Wednesday 6th November 2024 Westminster Hall

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

I thank all right hon. and hon. Members for participating in the debate. I particularly thank the right hon. Member for Orkney and Shetland (Mr Carmichael) for securing the debate and for his commitment on this issue in debates over many years. I know that it is a considerable issue in his constituency, where I think 31% of households are in fuel poverty, and he is right to raise it in this House. I always appreciate conversations with him, including our recent conversations on many of the topics that have been raised today.

I agree on the importance of this debate on tackling fuel poverty, although I should say at the outset that fuel poverty is devolved across the UK. Certain things that I will speak about relate to the UK Government’s responsibility for fuel poverty, which focuses on England. In the Budget last week, a considerable amount was assigned to the devolved Administrations, including one of the biggest devolved settlements for the Scottish Government in many years. I am sure that the right hon. Gentleman will raise these issues with colleagues in the Scottish Parliament to get much-needed funding to projects in Scotland as well.

On devolution, it is also important to say that we measure fuel poverty in very different ways across the country, with different metrics and targets for how we identify it. In Scotland, the metric for fuel poverty is the same as that used in England to measure energy affordability. It includes deeming a household fuel-poor if it has to spend a certain proportion of its income after housing costs on energy, which is a slightly different figure from the one used in Scotland.

Nevertheless, much of what we have heard today is true across all parts of the UK. Many hon. Members made the point that the choice between heating their home and feeding their family or paying other bills is a stark one for any family. In a country as wealthy as ours, that should not be a choice that families have to make.

I welcome the point made by the shadow Minister and others that we can all work together to move forward on the issue. However, we need to take more action than has been taken in the past 14 years. That is why our manifesto committed to slashing fuel poverty and delivering our warm homes plan. We have already taken the first steps in delivering that. In the Budget last week, the Chancellor committed £1.8 billion to support fuel poverty schemes, helping over 225,000 households to reduce their energy bills by over £200. We have announced that we will consult this year on increasing the minimum energy standards in the domestic private rented sector: 35% of all those in fuel poverty in England are in the private rented sector, so it is vital that we provide as much support as we can.

I will pick up on several points raised during the debate, but the critical point was about trying to bring all the different policies together into a cohesive fuel poverty strategy. That is indeed what the Government have committed to publishing in due course, to ensure not only that we have a clear focus on tackling fuel poverty but that the whole Government are aligned on delivery. That is the approach that the new Government have taken on a range of issues; in my Department that includes clean power by 2030. We making sure that all Ministers, wherever they are—in whichever Department and with whichever responsibility—come together to make the situation better.

I want to provide a little bit of context. I repeat that much of fuel poverty policy is devolved. In 2023, an estimated 13% of households—just over 3 million—were in fuel poverty in England, under the metric that is used here. That remains effectively unchanged since 2022. The Committee on Fuel Poverty, which advises on the effectiveness of policies and scrutinises them in England, stated that progress towards tackling fuel poverty has effectively stalled. In England, the target is to ensure that as many fuel-poor homes as possible achieve the minimum energy efficiency rating of band C by 2030, but 46% of all low-income households in England were still living in a property with a fuel poverty efficiency rating of band D or lower. That shows the sheer amount of work we have to do on the issue.

We are therefore working on a number of policies. In reflecting on the point made by the hon. Member for Mid Dorset and North Poole (Vikki Slade), I accept that there is an urgency to moving forward on all these issues. We have inherited quite a lot of issues that require urgent action. I ask for just a little patience, but I absolutely recognise the point that for someone living in fuel poverty, the impending winter is a crisis. The Government are therefore moving as quickly as possible on the issue.

The warm homes plan, which we announced in our manifesto and on which we are moving forward, is about transforming homes right across the country by making them cheaper and making energy clean to run, rolling out upgrades from new insulation to solar and heat pumps. We will partner with local and combined authorities, and the devolved Governments where possible, to roll out the plan. That was in the Budget speech last week, in which an initial £3.4 billion was announced towards heat decarbonisation and household energy efficiency over the next three years. That includes £1.8 billion to support fuel poverty schemes, which, as I said, will help more than 225,000 homes.

The right hon. Member for Orkney and Shetland raised several points. He rightly notes that the radio teleswitch service situation will be a worry to many people, particularly in rural communities. As he said, a roundtable was held, which was important and brought together the key stakeholders. Ofgem has updated its action plan to make sure that we are pushing forward and in particular that we are putting pressure on the energy companies responsible for delivery, to make sure that the upgrades are made and that targets are in place, including some key milestones that they must meet early next year.

Several hon. Members mentioned community benefits. This is a debate that we have had in this Chamber and across the House before. It is extremely important that if communities are hosting energy infrastructure such as the Viking wind farm in the right hon. Gentleman’s constituency, which I visited not long ago, there should be some benefit. We certainly do not want the communities that host vital energy infrastructure to be those that are most likely to be in fuel poverty. We are therefore doing a lot of work, building on the previous Government’s consultations, on what community benefits might look like. We want to make sure that communities and individuals get a genuine benefit, because some community benefits do not currently deliver quite the change that we would like.

[Mr MacDonald]

Will the Minister allow humble servants such as myself to get involved in that? I have spent several years working with the Highland council and others on community benefits, and I would appreciate a meeting.

[Michael Shanks]

I am always willing to take help from any Member. If the hon. Gentleman can take some of this work off my plate, I will be very happy to work with him. Of course, we will first have to work out the answer to the question of where God comes from, but if we can settle on the fact that it is self-evidently Rutherglen in the central belt, I will be happy to work with the hon. Gentleman. That spoils the joke I was going to make about his comparison of temperatures, which is that seeing him wear a very woolly jumper this morning in London made me wonder what he wears in Skye, but that is for another debate.

Genuinely, though, we want to have an open and collaborative approach, and we want to make this work. The consultation that the previous Government carried out and the feedback we have from a number of partners show that there are really good examples of community benefits working well, along with a lot of examples where they are not working well. If we could build on that approach together, I would very much appreciate it.

While we are discussing the hon. Gentleman, he made a very good point about remembering the different types of fuel that households use, and the real issue for off-grid homes—particularly in the north of Scotland, but right across the UK. Again, fuel poverty is devolved, so some of those questions are for the Scottish Government to answer—I know that the questions will be put to them—but we are aware that in England, for which the Department for Energy Security and Net Zero is responsible, 12% of rural households are in fuel poverty, and those are the ones with the largest fuel poverty gap. Tackling those particular challenges in the rural context is therefore really important.