Energy Company Charges

Debate between Philip Davies and Robert Halfon

Tuesday 4th February 2014 Commons Chamber

[Robert Halfon]

My hon. Friend makes an important point, and I am sure the Minister has heard his remarks.

[Philip Davies (Shipley) (Con)]

I totally understand my hon. Friend’s point, but my only concern about the thrust of his arguments is that people are being charged less for paying by direct debit rather than being charged more for not doing so. If we stop that differential payment scheme, energy companies might equalise charges upwards rather than downwards and charge everybody more for their bills, in which case nobody will benefit and some people will lose out even though everyone will be paying the same.

[Robert Halfon]

I thank my hon. Friend, with whom I have discussed the issue. I will come on to it later, so I hope he will bear with me for a moment.

Some companies’ levies are extraordinary. I spoke last night to the managing director of Spark Energy, which says that it has a special tariff system and that the majority of its customers are tenants. Some 10,000 of Spark’s 80,000 customers, those who do not pay by direct debit, are charged up to £390 a year extra. The managing director told me that that was purely down to costs. I will make this point later, but what is to stop another company coming along and saying, “It’s £450 or £500 and that is down to costs”? We need transparency.

Let me make three points: first, I believe that these charges effectively act as a stealth tax on the poor; secondly, I want to rebut the arguments used by energy companies to defend such practices; and thirdly, I will say what I think the Government should do about them.

The excessive charges often hit those we should protecting the most, and just like my constituent, it is often the elderly who are affected. Many pensioners do not like paying by direct debit because they want to be in control of their finances. Over the past few weeks I have been inundated with letters from pensioners. One said:

“We are from the old school—brought up to put our bills money away every week. Never to be in debt. But because we prefer not to have direct debit, we are punished.”

Another wrote that

“as members of the older generation, we are very aware that keeping a careful eye on budgets and control of finances is very important, and we have always been in favour of paying bills as and when they arise—budgeting year by year for increases and ensuring that we have money to cover such expenses. In this way we avoid becoming overdrawn and incurring bank charges.”

That is exactly the sort of fiscal responsibility we should encourage, and it is not exclusive to pensioners.

Understandably, anyone on a low income might be concerned that a direct debit could be taken at a moment when they are not able to pay for it. They might be waiting to get paid a day later, for example, and missing a direct debit payment would incur a heavy bank charge. It also does not take into account those who struggle to get access to proper banking facilities. Some 1.9 million households in the UK do not have a current account and there is no facility for them to have an overdraft. Half a million of those households do not even have access to a basic bank account that can accept direct payments. Such people are incredibly vulnerable and have very little choice over their payment methods, yet they are being penalised for that and are often those who can afford it least.

This is not just about finances because, crucially, many people, particularly the elderly—certainly in my constituent’s case—enjoy the social aspect of going to the post office to pay their bills. Many pensioners have contacted me to say that they do not trust direct debits and feel that companies discriminate against them because they cannot use computers. As one person rightly pointed out, direct debits and credits are always susceptible to human error on the part of the recipient, and mistakes take an enormous amount of time to sort out. All echelons of society should be catered for, not just computer and smartphone users, credit card holders and the technologically literate generation.