Gas and Electricity Costs

Patricia Gibson Excerpts

Tuesday 18th January 2022 Westminster Hall

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

I begin by thanking the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) for securing this debate, and for his excellent introduction to the issues involved. Our constituents are genuinely worried about their gas and electricity bills. In Scotland, 640,000 people —one in seven—find that their energy bills are unaffordable at the moment, and those bills are only going to rise. The energy crisis and the cost of energy have once again thrown into sharp relief the glaring inequalities in our society. Inflation is expected to rise to 6%, energy costs are doubling and the national insurance hike is about to kick in, so there is huge concern. Alongside and because of that, we face a debt time bomb as credit card lending jumped by 41% in recent months. Much of that borrowing was to pay for household essentials.

As things stand, 6 million people will slide into fuel poverty because of the rising cost of energy. That will impact on the wider economy, driving up the cost of food, goods and other services. As petrol prices increase, consumer prices will continue to rise, and at a faster rate. Alongside that, we can expect the cost of mortgage repayments to rise as well. We need Government action to tackle this. It is real, and it is crushing my constituents in North Ayrshire and Arran.

We have heard today about the need to cut VAT on energy bills and on the warm home discount, to offer some respite to those who are struggling right now. In 2016, the now Secretary of State for Levelling Up, Housing and Communities, the right hon. Member for Surrey Heath (Michael Gove), said:

“If we vote to leave the European Union, we can cut VAT on domestic fuel to zero and that would save households about £60 a year… that would help the poorest families most of all.”

Let us ask the Minister to do what his Government promised they could and would do. We need action on that.

It is time for the Government to listen to the calls to provide loans to energy companies, which are teetering on the brink, rule out a future rise in the energy price cap and reintroduce the £20 universal credit uplift. Households need help right now. The Scottish child payment could be replicated across the UK, and we could deliver a low-income energy payment, introduce a real living wage and raise the level of sick pay. There are a number of things that the Government could do to help families who are struggling right now.

We heard earlier that there are real, genuine and well-founded worries about cold-related morbidity this winter. In this day and age, in a state as rich as the UK, that is a cause for embarrassment and shame. Even the Secretary of State for Business, Energy and Industrial Strategy, the right hon. Member for Spelthorne (Kwasi Kwarteng), has admitted that it was a “mistake” to close off the storage sites, which the Government withdrew support from. Although these issues are global and there are many global factors at play, not having sufficient storage for energy leaves the UK much more exposed to price shocks than it needs to be. We have the lowest storage capacity in all of Europe—1% of all of Europe’s capacity. Any kind of protection we might have had from dramatic price shocks has been given away by this Government. That is really not acceptable.

The UK is going through this whole situation while suffering from the worst levels of poverty and inequality in north-west Europe; in-work poverty is at record levels this century. We really need to get a grip here and listen to our constituents’ problems. We need fundamental and radical measures to protect our constituents. Some have no idea how they are going to cope with the price rises hitting their doorsteps. We have heard about the differentials in energy transmission costs. Those need to be tackled, but when will they be? We need an equitable energy policy that works for all consumers, and I am really looking forward to hearing the Minister’s response.

--- Later in debate ---

[Greg Hands]

That is exactly what we are doing. The new contract for difference auction that was launched in September is as big as the previous three auctions, when it comes to renewables. Our dependence on foreign gas is less than 20%. Our dependence on gas from Russia within that is less than 3% or 4%. That is action that we have already taken.

Our long-term strategy is about finding effective replacements for fossil fuels, which are reliable and do not expose us to the volatility of international commodity markets. We already have the world’s largest capacity in offshore wind, but we are not resting on our laurels, because we are going to quadruple that over the course of the next decade. That is all a major step towards delivering the Government’s increased ambition on renewables.

In answer to the hon. Member for Strangford (Jim Shannon) on new technology, it is both renewables and nuclear, to which I will turn briefly, which is a key plank in the Prime Minister’s 10-point plan in the energy White Paper and the legislation that is passing through the House of Commons. I will return in a moment to the comments from the hon. Member for Kilmarnock and Loudoun (Alan Brown).

In the brief time of six minutes available to me, I will answer some of the points raised. The hon. Member for Caithness, Sutherland and Easter Ross referred to his constituent, the businessman Andrew Mackay. I am happy to engage with the hon. Member on behalf of his constituent. Business bills tend to be set on long-term contracts, which give a certain insulation from volatile prices, at least until the point where the contract comes up for renewal.

On rural support, 15% of the energy company obligation—ECO3—must be delivered to households in rural areas. We consulted in the summer of last year on its successor scheme—ECO4—for delivering energy efficiency heating measures in off-grid homes in Scotland and Wales. We are already extending the warm home discount from about 2 million to 3 million households, from £140 to £150. It is worth pointing out, as the hon. Member for Kilmarnock and Loudoun knows well, that the warm home discount is not a zero-cost option. There are people who have to pay additional money on their bills to support recipients of the warm home discount, so it is not something that we can just take action on with the stroke of a pen, like the Labour motion last week—the trebling—without considering the consequences.

The hon. Member for Newton Abbot (Anne Marie Morris) is absolutely right on cost-of-living issues, but let us look at a lot of what is happening in this country. We have record figures for those in employment. We have the national living wage increase. We have beneficial changes in the universal credit taper rate and so on. All these things are providing support for people facing cost-of-living issues. I totally appreciate and am totally with the hon. Lady on the impact that energy bills may be having and will be having later this year. On levies and on the heat and buildings strategy, we said that we would publish a fairness and affordability call for evidence, which will set out the options to help rebalance electricity and gas prices and to support green choices, with a view to taking decisions in this year—2022.

The hon. Member for Bath (Wera Hobhouse) said that we are scrapping the ECO scheme. No—as I have already pointed out, we are moving from the ECO3 scheme to the ECO4 scheme. I guess, Sir Edward, technically you may describe that as scrapping it, but we see it as improving it and building on it. The hon. Lady called for a windfall tax. She praised German energy company E.ON for doing a great job, and it does do a great job, but she and other Members have to be careful when they call for a windfall tax while also praising those investing in the energy sector. She has to be mindful of what impact any windfall tax would have on those investment rates.

The hon. Member for Makerfield (Yvonne Fovargue) made a very moving speech about the situation for low-income households and prepayment customers. There are 4 million prepayment customers. Ofgem obviously put in place licensing conditions to protect prepayment customers at risk—particularly of self-disconnection—including dedicated helplines for prepayment meter customers. There is a lot of support in place, but the issue of PPM customers is something that we keep a very, very close eye on in the Department for Business, Energy and Industrial Strategy, and I know Ofgem does as well.

The hon. Member for Strangford (Jim Shannon) wanted an indication of what the Government are doing to help. We are doing a lot. We have in place winter fuel payments of between £100 and £300. I have already discussed the warm home discount. There are the cold weather payments. There is the £421 million household support fund. There is a lot of support. I say that while recognising Northern Ireland’s particular status as regards electricity. Obviously, a lot of that is devolved to the Northern Ireland Executive.

The hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) called for a VAT reduction. That is obviously, as she rightly pointed out, a matter for Her Majesty’s Treasury. It is not a very targeted way of supporting vulnerable customers. We heard from the hon. Member for North Ayrshire and Arran (Patricia Gibson). I do not think this is really the right place for a Brexit debate, but she said that leaving the EU allows us to cut VAT on domestic fuel. Her policy of rejoining the EU would surely negate that policy.

[Patricia Gibson]

Will the Minister give way?

[Greg Hands]

No. I have only two minutes left. The hon. Lady asked a question about storage, and I repeat that the current issue is not a question of supply. Storage helps if there are supply issues, but we have an issue relating to price. Storage does not protect, generally, from price shocks if the supply is secure, and I have already said that our supply is secure.

The hon. Member for Oxford West and Abingdon (Layla Moran) made an extraordinary speech, in which she said, I think, a windfall tax would be a powerful message to Moscow. I thought the intervention by the hon. Member for Kilmarnock and Loudoun slightly exposed that. If the hon. Member for Oxford West and Abingdon can show me how to design a windfall tax that would clobber Gazprom, I am all ears. Bearing in mind that our imports of gas from Russia are almost entirely liquefied natural gas and only less than a handful of percentage points, if the hon. Lady can show me how her Robin Hood tax would have an impact on Gazprom, I am all ears. We are not dependent on—she said “rogue states”. More than half of our gas imports come from Norway. I do not think anything she is proposing is going to protect us from rogue states.

The hon. Member for Kilmarnock and Loudoun made a number of familiar points on supplier of last resort costs. SoLR is there to protect customers when their energy supplier ceases to trade, so that they can transfer their account.