Domestic Gas and Electricity (Tariff Cap) Bill

Patricia Gibson Excerpts

2nd reading: House of Commons
Tuesday 6th March 2018 Commons Chamber

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

I have long expressed concern and alarm at the way the energy market simply does not seem to work for consumers. I have worked with Members from other parties, most notably the hon. Member for Weston-super-Mare (John Penrose), to try to ensure action is taken on this issue.

The fact that the Bill will impose a cap on the price of the standard variable and default tariffs, at least until 2020 and possibly longer, is good news for consumer, particularly those who do not switch for a whole variety of reasons. The Competition and Markets Authority’s investigations found

“a lack of engagement in the markets on the part of many customers, which suppliers are able to exploit by charging high prices.”

Indeed, some 34% of domestic energy customers had never considered switching supplier, with 56% saying that they did not know whether it was possible or did not know whether they had done so in the past.

As we have heard, consumers on standard variable tariffs are much more likely to be older, disabled, on low incomes, living in rented accommodation or without internet access. Those on standard variable tariffs have not seen their bills fall by much when the cost of providing energy has fallen. Such savings as are available are passed on only to consumers who were active switchers, as we have heard. We have to understand that not all consumers can engage in the switching process, so suppliers clearly need to do more to ensure that customers are not trapped in poor deals. The poorer someone is, the more likely they are to be on the more expensive standard variable tariff, subsidising cheaper electricity deals for the better-off. That cannot be right, and is essentially what has brought us to this point.

People in my constituency of North Ayrshire and Arran are overpaying on energy bills by £5.5 million a year. That illustrates the need for action in the market, but that action is much more urgent than the mooted timetable of winter 2018 would suggest. I absolutely welcome the cap, but I am extremely disappointed that Ofgem has said it will need five months to implement it. We have been told that the cap will be in place for winter 2018, but why not sooner? I am afraid that the perception again raises its head that Ofgem is dragging its feet.

The Bill is indeed welcome, but the focus hereafter must be on fixing this broken market. We must have easier and faster ways to switch suppliers, for those who can and do; we need more transparent energy bills for consumers; and we need to create the conditions for a much more competitive market. Some people propose that we should consider scrapping standard variable tariffs altogether and prohibiting all tariffs without an end date, as they inhibit consumer engagement, but that prompts the question what energy suppliers can and will do to increase consumer engagement, because the figures for switching and the CMA investigations have shown that consumer engagement is severely lacking, for a whole variety of reasons.

Is it not interesting that, since there has been political focus on this matter, with a commitment from all parties to tackle the standard variable tariff rip-off, we now see some energy companies withdrawing this tariff, or seeking to introduce new measures to prevent customers from languishing on it? That shows that, so far, there has been a lack of will to deal with this issue on the part of the bigger companies in particular. However, it is clear that political focus in itself can help to drive change.

I echo the view that was expressed earlier: we must take care that the action taken in this Bill, welcome as it is, does not lead to higher prices in the longer term. We cannot have a situation in which energy providers offset initial price reductions with increases once the cap is removed. We also need to ensure that consumers who are on a cap default tariff do not lose out as market conditions change in the future. When the cap is lifted, we need to ensure that we know what the conditions and criteria for doing so are and that, in the end, we are left with a more competitive and fairer market for consumers. We need to know what the impact of this cap is and to ensure that there will be no adverse impact on a competitive market.

What is done by the Government and the regulator for the period during which this cap is in place really matters. I am keen to hear the Minister’s thoughts on this, as we cannot begin too early to prepare for what comes after this cap—whenever it is lifted. We need to know how we can continue to protect consumers and ensure that they have energy deals that are right for them and that they are not ripped off as they have been. We cannot go back to business as usual after the cap is removed. We need real and lasting change, and this period when the cap is in place is an opportunity to make that change happen.

--- Later in debate ---

[Patricia Gibson]

Will the hon. Lady give way?

[Antoinette Sandbach]

I must sit down soon; I have taken many interventions.

We must make data far more available to allow more competition in the market. That is where the Government’s policy differs from that of the Labour party.

--- Later in debate ---

[Drew Hendry]

Yes, absolutely. There needs to be an acceptance that this is just one measure and there are many more measures—including on energy efficiency, which should have had much more attention from the Government.

There remains a need to remove legislative obstacles to data sharing for vulnerable customers to give them better consumer protection. There also remains—

[Patricia Gibson]

Will my hon. Friend give way?

[Drew Hendry]

Yes.

[Patricia Gibson]

I will make a very brief intervention if I may, Mr Deputy Speaker. As I said in my speech, we are having this debate because of the loyalty penalty that people pay. We see this in the energy industry, the insurance industry and a whole range of industries. Does my hon. Friend agree that we need more Government regulation across industries to stop people being punished for being loyal to their providers, whatever the market?

[Drew Hendry]

I absolutely agree. To assist, Mr Deputy Speaker, I will take no more interventions during the rest of this speech.

As I said, we need data sharing for vulnerable customers to give them better protection. There remains a risk, as was highlighted by the hon. Member for Rugby (Mark Pawsey), who is still in the Chamber, that suppliers may just increase their lowest prices to maintain profit. We will all be watching carefully to see how they react.

So what must now be done? In Scotland, the SNP Government are providing resources for financial health check-ups to help pensioners and those on low incomes to make the most of their money and to secure the best energy tariffs. The UK Government will, I hope, follow suit.

We call on the Government to place a new duty on energy companies to set out a clear timetable for reducing the number of people on prepayment meters, to implement the Competition and Markets Authority’s call to reduce the costs for households and to introduce a requirement for energy companies to prioritise the roll-out of new-generation smart meters to households at risk of fuel poverty. That can all be done in short measure.

When it comes to disabled people, even more action is needed. Disabled people face higher energy costs because of issues related to their impairment or condition. Those extra costs have a detrimental impact on disabled people’s financial resilience and ability to fully participate in society. The price cap goes some way, but the UK Government must now put in place longer term plans alongside the price cap to improve support for disabled consumers, including increasing accessible communication and digital inclusion and, as I mentioned earlier, building on more effective data use.

The challenges for disabled people are that they have no choice but to consume more. They have limited mobility, use more heating to stay warm and run additional technology and equipment. Over a quarter—27%—of households with a disabled person spend more than £1,500 a year on energy, and nearly 800,000 households across the nations of the UK spend more than £,2,500.

There must be a different way to deal with this. In Scotland, the Scottish Government have announced a publicly owned energy company, supporting efforts to take fuel poverty and climate change targets seriously. We will provide people, particularly those on low incomes, with more choice and the option of a supplier whose only job is to secure the lowest price for consumers and who looks after the wellbeing of those who lack the confidence or ability to engage effectively in complex energy markets. That will also allow us to deliver on broader energy ambitions for renewable generation and the maximisation of community benefit. By the end of this parliamentary term, the conditions will be in place to meet the set-up challenges.

In welcoming the Bill, I once again stress that this action comes too late in the day for many. Progress on helping hard-pressed consumers must now be much more rapid and effective, especially for those who are hurting the most.