Fuel Poverty (Rural Britain)

Robert Smith Excerpts

Wednesday 7th July 2010 Westminster Hall

[Dr Coffey]

I recognise that there are issues such as competition, and the impact made by Calor Gas was a successful change. The Office of Fair Trading is monitoring the situation to assess its effectiveness. At some point in the near future, we should like a review to see whether that change has worked, or whether people are still in what is effectively a false market. From speaking to some of my constituents, I understand that the change has allowed them an element of choice, whereas before they were handcuffed to one supplier.

My constituency of Suffolk Coastal has 17% fuel poverty, which is slightly lower than the national average where about one in four rural households face fuel poverty. I should perhaps declare—although I was told that it was not a declaration—that I am off the gas grid and reliant on oil for central heating in my rented cottage in Westleton. I want to focus on people who live with no access to the gas mains, even though 20% of them live within a mile and a half of national gas connections, and I welcome some of the efforts made by the National Grid Company to start connecting more households. All hon. Members share concerns about people who are reliant on oil, solid fuel and liquefied petroleum gas, as that is where the problems lie.

In 2009, in a parliamentary question, the Government were asked what they were doing to tackle fuel poverty, and the answer was Warm Front. However, I am afraid that Warm Front is not working in areas that are difficult to reach, and that is reflected in the evidence gathered by various organisations. Time and again, people in my constituency—or other hard-to-reach areas, such as the constituencies of some Members in the Chamber today—are losing out in such schemes. There has been limited success, and I recognise that some energy companies have been kicked and told that they must start doing something about the situation, but these are early days and we need to kick even harder.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

I congratulate the hon. Lady on bringing this subject before the House. She makes an important point about the difficulties and challenges in rural areas. Is not one of the added challenges the fact that so far, schemes have tended to come up with the simplest way of making a house more efficient? It is right to make efficiency a priority because relying on prices proved a mistake for the previous Government. However, in rural areas, much of the housing stock is not constructed in such a way that it is easy to make it more efficient. Any scheme must be far more robust and long-term to transform such houses into places where people can live without fuel poverty.

[Dr Coffey]

My hon. Friend is absolutely right. The extent of solid-wall housing is a particular issue that cavity insulation fails to address. It is mainly prevalent in rural areas, but also in London where the challenge is damp Victorian houses. Instead of national schemes, I would like the Government to consider more local schemes and ensure that any grants available address local needs. My constituents, and many others, would then be able to access help that is relevant for them, rather than being told either that they do not qualify for a scheme, or that a scheme is useless for them. Such local schemes would be welcomed by people who feel that they are on the fringes of society when it comes to Government help on this issue.

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[Albert Owen (Ynys Môn) (Lab)]

I congratulate the hon. Member for Suffolk Coastal (Dr Coffey) on initiating this very important debate. It is also timely, given the election of a new Government. I have already been in correspondence with the Department of Energy and Climate Change and I shall come to that in a moment.

I want to start by pointing out that this issue is about rural Britain—the periphery areas of Great Britain and Northern Ireland. The periphery area that I represent in north-west Wales suffers from a double whammy: most of the household customers pay extra for their fuel, but they also pay extra fuel costs for their transport. We have had a number of debates on the issue in this Chamber, and I appreciate what the Chancellor of the Exchequer said in the Budget about looking at rural areas and pilot schemes whereby transport costs and the price of petrol at the pump can be considered. Pilot schemes should also consider rural areas on the periphery of the United Kingdom when it comes to energy prices and energy costs as well. That is what I believe the hon. Lady was developing in her argument.

Periphery areas are a special case. I do not accept that in the 21st century, areas on the periphery should have to pay much more in fuel costs. I know from having the port that is the gateway to Ireland and Wales in my constituency that Northern Ireland’s problem is compounded by fuel smuggling from the Irish Republic. Fuel is smuggled in and out of the United Kingdom via the south of Ireland. There are huge problems that we need to grapple with.

I have campaigned to reduce both the cost of petrol at the pumps and the cost of energy supplies to homes. People living in periphery areas and rural areas are being ripped off. The hon. Lady says that she wants to give the companies a kicking. I will join her and I think that all of us should, because mass profits have been made by many of the companies over a long time and the people who are paying for it predominantly live in the rural areas of Britain. The market is letting people down badly in those areas.

All that my constituents and those of the hon. Lady and every other hon. Member in the Chamber are asking for is a level playing field. Yes, they want reduced costs, but they want to pay the same as people in urban areas and other parts of the United Kingdom, and importantly they want choice. Quite often in isolated rural areas, people just have the choice of propane gas, coal or other things. Off-grid areas do not have access to mains gas and are losing out. The market says that it will provide choice to customers, but in rural areas they simply do not have that choice and they are penalised for it through the price that they pay. That limited choice and paying more for fuel is a huge problem.

I said that I had already raised the matter in correspondence with the Department, and I first did so at business questions, when I asked for a debate on the issue. A debate in Government time would be very much welcome in addition to this important Adjournment debate. I have had, over many years, helpful responses from Energy Ministers and progress has been made. Warm Front is a good national project that has helped an awful lot, and good energy efficiency measures are available. I am certainly familiar with what has been done by the Welsh Assembly and I know that other devolved Administrations are working on the issue, too. This Parliament, local government and the Welsh Assembly can work together with the distribution network to ensure that we get better services to people in these areas.

In the very helpful reply that I received from the Minister of State, Department of Energy and Climate Change, the hon. Member for Wealden (Charles Hendry), he said that he recognised that more needed to be done. One option that he came up with was a further roll-out of energy efficiency measures. I disagree with the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), who said that we have been concentrating just on price. Huge amounts of money have been invested in energy efficiency measures. In my constituency, most of the houses have been done, and to a very high standard, but the price is the issue.

[Sir Robert Smith]

The hon. Gentleman is right to say that the price is the issue. The problem was that in the early days of the previous Government, because of the way in which the market was working, prices for domestic gas were falling so dramatically that people were coming out of fuel poverty and it seemed as if the job was being done. Then the price started to go up relentlessly and it became clear that much greater work should have been done in the good times to make the housing stock more efficient, rather than responding after the fact.

[Albert Owen]

I agree partly with what the hon. Gentleman says. It is easy to be wise after the event. He will remember that at the time we were in the “dash for gas”, gas was relatively cheap across the whole United Kingdom and our eye was off the ball, because people were getting cheap fuel. Yes, more could and should have been done then, and it should have been done over the past 13 years. I hope that more will be done over the next few years to ensure that we alleviate fuel poverty in rural areas.

The Minister told me he was involved in the option of promoting renewable heating, which is another important way forward. Although I shall argue for the gas network to be extended throughout the United Kingdom, we need, particularly with the low-carbon economy that we are moving towards, to consider renewables. Geothermal energy is important in many areas. It would be helpful if new estates and new housing, including affordable housing, such measures installed at the construction stage.

In my constituency—I am sure that other hon. Members have experience of this—many of the problems are not just with stone houses that are a century old or more, but with estates that were built in the 1960s and ’70s, where the developers simply did not put gas mains in and did not provide for up-to-date fuel, leaving people on the periphery of the gas mains area. I am sure that at that time people would happily have paid for access to the gas mains from those properties, and it would have been a selling point for the builders, who were very short-sighted.

When I talk about areas off the grid, I am talking about not individual isolated properties but more often about small villages, towns and hamlets that are a short distance from the mains. There are issues about getting the pressure to the level needed but, again, I am sure that in the 21st century that can be done relatively simply.

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[Mr Mike Weir (Angus) (SNP)]

I am very pleased to take part in the debate and I congratulate the hon. Member for Suffolk Coastal (Dr Coffey) on obtaining it. This is an important issue. I was interested in the concept of building a new Jerusalem in Suffolk Coastal.

I have raised the issue of fuel poverty many times in Parliament and the stock answer that I normally get from Ministers about off-grid gas is that they are taking action to ensure the extension of the gas grid. However, in reality, many of my constituents will never have access to the gas grid. It will never go to the glens of Angus, or to many other parts of rural Scotland, especially the islands, however much it is extended. There is no option for those constituents but to rely on liquefied petroleum gas, home fuel gas or some other alternative fuel. It has been estimated that some 4.3 million consumers—mostly, but importantly, not exclusively in rural areas—are not on the gas network. In some areas, although the gas network is technically available, the cost of connection to it is prohibitive and people cannot do it.

Consumers who are off the gas network face particular problems. A typical gas bill is now rising to around £1,000 a year, but it has been estimated that those who are off-grid face bills of about £1,700 a year. That is a significant difference. I refer hon. Members to the table in the report on fuel poverty produced just before the general election by the Select Committee on Energy and Climate Change. It relates only to England, but it shows the extent of the problem of cost between different fuel sources.

[Sir Robert Smith]

Does the hon. Gentleman think that the differential could become a more serious problem? Given the changing nature of the world market for natural gas, with shale gas and liquefied natural gas potentially bringing the price down in Europe, and if we ensure that the market works and those on the gas main get the benefit of a lower gas price feeding through, it will be all the more important to tackle the situation for people who do not have mains gas, because fuels such as oil and coal are not necessarily following the market down.

[Mr Weir]

The hon. Gentleman makes an excellent point, but there are other pressures, not least climate change, against the extension of the use of gas. The Government are only now considering the decarbonisation of the gas supply and generation from gas. Many issues arise in connection with that.

There are many excellent schemes to help with insulation and energy efficiency, and many homes in rural areas are hard to treat, which exacerbates the situation. The Select Committee report noted that Ministers in the previous Government said that they were very enthusiastic about innovative technologies to tackle the problem, but we expressed disappointment at the slow pace of implementation. I do not think that the Government have yet responded to that report, and it will be interesting to hear what the new Minister has to say.

As has been mentioned, people who are off the grid do not have the same access to the social tariffs as mains gas customers. I accept to some extent that they have access to electricity tariffs, but many off-grid consumers use home fuel oil or LPG as the main fuel for heating their homes and water, and that is likely to be the major part of their energy spending. They do not get the full benefit that others do for those things.

The Department’s annual report on fuel poverty statistics for 2009 states:

“The highest proportion of fuel poverty is amongst households without gas, where nearly 23 per cent of households are fuel poor, compared to around 17 per cent of both standard credit and pre-payment meter customers.”

In Scotland, the situation may be slightly worse because of geography and the lack of a grid in the highlands and islands. The latest Scottish house conditions survey states:

“Households that use electricity, oil or other fuel types (such as coal or peat) are around twice as likely as those who use gas to experience fuel poverty. Also, those who use... ‘other fuel types’ (not gas or electricity) are more than twice as likely to experience extreme fuel poverty than gas users”.

I understand that the number of off-grid customers in fuel poverty in Scotland is around 116,000—about 47% of all who are off-grid.

There are other problems than price. For example, in many areas customers have to make an up-front payment to get a supply—and many suppliers demand a minimum supply quantity. That can be a substantial sum, and those on low incomes cannot afford to pay up front. That causes another problem—people may be forced to go without as a result.

Those who use gas or electricity will have pipes and so on coming to them, but those who use some of the alternative fuels find in bad weather that it is difficult to get a supply. It is interesting to note that in the recent harsh weather the Department for Transport had to allow a derogation from the driving hours regulations to enable deliveries to be made in many parts of Scotland and northern England. However, this is a long-running issue.

At the conclusion of consideration in Committee of the Energy Act 2008, the Energy Minister, the former Member for Stafford, arranged a meeting of representatives of the various bodies concerned with the matter. There seemed to be a willingness to consider things, but frankly the problem lies in difficulties caused by the nature of the market, which has already been touched on. That market is very different from that for domestic gas and electricity, and we need to find ways around the problem because those consumers have fallen through the cracks.

The domestic electricity and gas market is dominated by the six big energy companies, and it is easy to get social tariffs from them. The market for other fuels is much more diffuse and difficult to regulate. However, in many areas I would question whether there is real competition, as there is effectively only one supplier. With recent amalgamations in Scotland, the situation is getting worse. We need radical solutions to tackle the problem.

The Minister may remember that, during consideration in Committee of the Energy Act 2010, I suggested how the matter might be dealt with. Section 10 of the Act allows the Secretary of State to introduce a reconciliation mechanism, such that if one company had more fuel-poor customers than the others, it would not be particularly badly hit. The burden would be spread among all companies and, as far as possible, each would meet an equitable amount of the cost of meeting their obligations under the social tariff.

That principle is a good one, and it could be extended to cover all fuel suppliers, allowing a general sharing of the cost of meeting the obligation to help the fuel poor. Because of the difficulties in that particular market, it would not be easy to introduce individual social tariffs, but a general reconciliation mechanism would bring suppliers within the ambit of the scheme. Allowing the overall cost to be shared between all the energy suppliers would enable us to make progress and extend the social tariff concept to that disadvantaged group.

That is a radical way to deal with the problem. Otherwise, it will always be filed under the “too difficult” heading and nothing will be done. Such a mechanism would ensure that the cost were shared more widely—as the benefits would be. It would ensure that all energy suppliers could operate equivalent social tariffs for all their customers, whether they used electricity, gas or other forms of fuel. In what the hon. Member for Westmorland and Lonsdale (Tim Farron) said are troubled times, Ministers might be attracted by the fact that it would have a revenue-neutral approach for the Treasury. It would not impose a greater burden on the taxpayer, but I can already hear the howls of protest from the major energy companies. However, it would deal with what has become a most intractable problem.

As was suggested by the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), the problem will get worse. Whether we like it or not, the price of fuel will continue to rise as we try to move to a low-carbon economy. We will effectively be subsidising various renewables and possibly—and unfortunately—nuclear power, which will have an impact on all electricity bills. I ask the Minister to consider the suggestion.

In another aside—I realise that this is strictly not within the Minister’s brief—the Select Committee report suggested that we should consider how the winter fuel payment is made. It is paid in the winter, the most expensive quarter. For many off-grid customers, winter is not the best time to be given that money. If they were to receive it earlier in the year, they could buy oil or other fuels in bulk when they were cheaper. That would allow them to stockpile for the winter. Staggering the payment for off-grid customers would allow them to take advantage of cheaper prices. Again, importantly, it would be revenue-neutral for the Treasury.

I am trying to be helpful to the Minister by not simply calling for more spending; I am calling for us to consider things in a new way and to look at more radical solutions. If we do not, we shall continue to file the problem under the heading “too difficult” and nothing will happen to help those people. That would be a wasted opportunity, and fuel poverty would continue to increase in rural areas throughout the United Kingdom.