Energy Price Support: Northern Ireland

Stephen Farry Excerpts

Wednesday 16th November 2022 Westminster Hall

[Stephen Farry (North Down) (Alliance)]

I beg to move,

That this House has considered energy price support to households and businesses in Northern Ireland.

It is a pleasure to serve under your chairmanship. Sir Gary. I welcome the opportunity to have this debate and I am pleased that the Minister has joined us. The main purpose is to focus on energy cost support for households and businesses in Northern Ireland, with a focus on the urgent delivery of the £400 energy support scheme and the payments to those using home heating oil.

I am extremely concerned about the impact of delays in support for Northern Ireland households, and the ongoing lack of clarity around when that support will arise. The UK Government have yet to clarify whether the £400 energy support and the £100 in support for oil-reliant households will be made available to Northern Ireland.

I will give a few words on the broader context. I appreciate that the current energy cost crisis reflects a range of international and domestic factors. Beyond the short-term energy support interventions, there are clear imperatives around insulation and other energy-efficiency measures, and diversification of energy supply, especially in relation to renewables.

Northern Ireland has some of the most challenging rates of poverty and other social and economic indicators in the United Kingdom, including low productivity, high economic inactivity and reliance on benefits. It also has a different energy market from the rest of the UK, with different suppliers and a different profile of energy sources, and with its connectivity on the island of Ireland. Most notably, almost 70% of Northern Ireland households use home heating oil, compared with less than 5% in the rest of the UK.

Northern Ireland is already facing a series of unprecedented risks. Our political institutions have collapsed. There are huge challenges to consumer and business confidence, creating enhanced risks to the economic outlook.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Member for North Down (Stephen Farry) on securing this debate. It is a great subject for us back home. The welfare of our local businesses is extremely important. He will know that our family-run and smaller businesses are the backbone of our constituencies—his, mine and those of other Members here—making them unique.

A local Japanese restaurant in my constituency that has only been open for about six months has seen an increase in its electricity bills of £900 to £3,000 per month. Should this remain an issue, it is clear that jobs will be lost and the business forced to close. Does the hon. Member agree that more consideration must be given to the long term—not just the next four months, but beyond—because businesses are clearly on the brink of closing?

--- Later in debate ---

[Sir Gary Streeter (in the Chair)]

That was not brief.

[Stephen Farry]

By Jim’s standards, it was. I am grateful to the hon. Member for that intervention. I agree with him about the looming cliff edge that will come next year. It is also relevant to stress the issue of spending power in the economy, particularly in the run-up to Christmas for the hospitality sector.

Delivery of energy support should have been implemented by the Northern Ireland Executive. Normally, Northern Ireland would receive Barnett consequentials, based around equivalent spending in Great Britain, and would therefore have the scope to design or modify schemes to address local circumstances. Delivery of the £400 payments would have been implemented by now in those circumstances.

Furthermore, the size of the Barnett consequentials may well be significantly greater than the value of support that comes from direct provision from the UK Government to households and businesses. The Government have recognised that it would have been much easier for delivery to have been through a devolved Executive. However, in a political vacuum, it has fallen to the Government to intervene. I acknowledge the need for that, given the circumstances.

The energy price guarantee is now in place for Northern Ireland. That said, there are concerns about the scale and duration of the support, particularly what happens from next April onwards. The hon. Member for Strangford (Jim Shannon) has already touched on that point. For today, the most pressing issue is clarity on the timescale for the delivery of the £400 energy support payments, and how that will be phased, plus the implementation of the home heating oil support.

Despite those pressures, unlike in England, Wales and Scotland, households in Northern Ireland have not yet received a penny of the £400 energy support. There had been indications that we would receive that support in November, one month after the rest of the UK, yet it is now looking increasingly unlikely to be delivered this side of Christmas. We are also hearing that the payment might now be staggered, which means that households will have to wait even longer into next year.

[Claire Hanna (Belfast South) (SDLP)]

I thank the hon. Member for securing this debate on such an important issue—he is always current. I do not know of any suppliers that will deliver less than 200 litres of heating oil, so the £100 support that was proposed would not even get a tank filled—people will have to put in about £150 before they can even avail themselves of it. Does he therefore share my concern about what would happen if that support were staggered or delivered in a piecemeal way?

[Stephen Farry]

Absolutely. There are huge issues in recognising the subtleties of what is efficient for making deliveries in the home heating oil market and the minimum size of delivery, and £100 pounds will not cover the minimum order volume. It is also worth stressing that there are economies of scale. The larger the order, the cheaper it is proportionally, so the households that are struggling most will be hit doubly by that pressure point.

[Paul Girvan (South Antrim) (DUP)]

Another big problem that we have in Northern Ireland is supply and the volume of storage. Kerosene works out around 7p a litre more expensive than in any other region of the United Kingdom.

[Stephen Farry]

I am grateful to the hon. Member for that intervention, which again highlights how the situation in Northern Ireland is different from the rest of the UK, and reinforces the importance of trying to tailor solutions to address our very particular circumstances.

It also emerged this week that the UK Government’s joint taskforce responsible for delivering the scheme into Northern Ireland has met only twice. While households across the rest of the UK are being insulated from the worst effects of the crisis, families in Northern Ireland are still waiting for this lifeline and have no clarity about when it will arrive. It is not tenable to argue that, because the money will be coming next year, Northern Ireland will not be missing out. There must be a real urgency for getting this resolved now.

Disposable incomes in Northern Ireland are being particularly eroded by rising energy costs. This represents a grave threat to the wellbeing of households. People in Northern Ireland are also being left behind in terms of their ability to access energy support and are suffering as a result. A survey by National Energy Action in Northern Ireland in June indicated that 45% of Northern Ireland households were already spending more than 10% of their total household income on energy costs. This will be even higher now. That has resulted in dangerous coping mechanisms. Some 80% of Northern Ireland homes admitted to rationing their use of central heating in an effort to reduce costs, and one in 10 households has resorted to skipping meals to ensure that they have enough money to pay for their energy.

[Jim Shannon]

The hon. Gentleman is being incredibly generous, and I thank him for that. Some figures I got from Northern Ireland today indicate that an estimated 12% of Northern Ireland families live in absolute poverty—it is even worse than normal poverty, if there could be such a thing. Does that not support his case for why we need urgent help in Northern Ireland now?

[Stephen Farry]

I am grateful again to the hon. Member for his intervention. Households are facing, in effect, destitution, which is taking poverty to the nth degree in terms of their ability to cope. Similarly, reliance on food banks has increased by 76% in Northern Ireland over the past three years, which is way in excess of the increase in any other UK region. We cannot afford to see households tipped into poverty, more children going hungry, or more pressure on the national health service due to worsening physical and mental health.

These behaviours put households at significantly increased risk of detrimental impacts on their health and wellbeing, and people in 75% of households admitted to being stressed, anxious or worried about paying for the cost of their energy, either at present or over the winter months ahead.

Fuel poverty organisations in Northern Ireland are already overwhelmed by demand. NEA in Northern Ireland has seen significant rises in the number of households seeking emergency support. Indeed, it was forced to suspend its referral system temporarily in October because of unsustainable levels of demand on the service, a trend that has now been replicated across other organisations in the sector.

There will also be a knock-on consequence for consumer spending. Potentially £300 million of spending power is at risk. This is particularly crucial in the run-up to Christmas, with many businesses, which are struggling themselves, depending on Christmas trade to survive. It is make or break time for them.

Northern Ireland is also suffering because we have a very different energy market from the rest of the UK, and the UK Government’s energy price guarantee does not reflect that. Although households using gas have been protected from price rises through the Government’s energy price cap, those who use oil are yet to receive the paltry £100 of support. That is a mere £100 in heating assistance, which applies to almost 70% of Northern Ireland households. Therefore, the vast majority of homes in Northern Ireland have not received a penny in support for heating cost pressures so far—that is, those households that do not use their electricity for heating.

We know that oil prices have not risen as much as gas prices. Nevertheless, £100 is simply not enough, particularly given the up-front costs of filling an oil tank. The Consumer Council for Northern Ireland estimates that it now costs £460 to fill a typical 500-litre tank, compared to £269 this time last year. In practice, as the hon. Member for Belfast South (Claire Hanna) has already mentioned, there is not a supplier in Northern Ireland that will provide a tank fill for less than 200 litres, meaning that households need to find an additional £150 before they can even avail themselves of support. Orders for oil need to be larger in order to access those economies of scale.

We also still do not know when or how this £100 will materialise in Northern Ireland. Not only is the assistance for Northern Ireland households late, but it is lower than the assistance provided to those in the rest of the UK, if we make that comparison between oil and gas costs.

There are also problems and distortions that come from the use of electricity bills to help oil customers. It is likely either that those people will end up with a credit on their electricity bill that they cannot access at this time of greater stress, or that this will lead to people switching from oil heating to using electric fires, which are potentially more expensive, pose greater health and safety risks, and put further strain on the electricity grid.

Finally, I am also worried about the looming cliff edge that is faced not only by households but by businesses next April. Recent research by Danske Bank indicates that energy prices rank highly among the key concerns for businesses in Northern Ireland. The latest data from the Office for National Statistics shows that 58% of businesses in the food and drink sector say that their energy prices were their main concern in November, up from 39% in October. Businesses are also extremely concerned about the risks associated with consumer spending, and the current impasse on the energy assistance for Northern Ireland puts local businesses at a direct disadvantage in that respect. I urge the Government to acknowledge that most businesses will likely need continued support, and to confirm that they will cast the net widely in that regard.

In summary, the human costs of this energy crisis are very real. I suspect that the ongoing uncertainty about post-April assistance will only serve to fuel the economic costs, as consumer spending and business investment will be constrained as a result. I urge the Government to provide assistance and greater clarity as a matter of extreme urgency, for the good of the people of Northern Ireland, the business community and indeed the broader economy, all of which will ultimately have fiscal consequences for the UK Government if conditions further deteriorate.

I am grateful to the Minister for his presence today. I will focus on the most pressing questions that I hope he will respond to, among other comments that he may wish to make. When and how will households receive the £400 of energy support? Will the Government review their calculation and the level of home heating oil support, and how is that support to be delivered?

--- Later in debate ---

[Kevin Hollinrake]

I totally understand that. We have to get this right. There are some complications in terms of timing, which I will set out. I wish I could give the hon. Gentleman a firm date. I get frustrated, too, in debates like this. I am slightly sitting on the fence in not giving a firm date, but I guarantee to him and other Members that the measure will be implemented as quickly as possible. I had meetings with officials earlier today. They are fully cognisant of the issue and keen to deliver quickly.

There are a number of complications. There is no central register either in Great Britain or in Northern Ireland for people who do not use the gas grid for their heating. We are working rapidly with stakeholders on the best way to identify those who merit support. Households that are eligible but do not receive alternative fuel payments because they do not have a relationship with an electricity supplier will receive the £100 via the alternative fuel payment alternative fund, which will be provided by a designated body.

[Stephen Farry]

I am grateful to the Minister for giving way and for what he has said so far. May I press him on the data on customers who use home heating oil? If we take the entirety of households in Northern Ireland and subtract those currently using gas, we can use the dataset that remains and assume that they are using home heating oil. That will give the Minister 99% accuracy. Similarly, I hope the £400 energy support will come shortly. Will the Minister explain the technical issues to the people of Northern Ireland, who are slightly confused as to why it is taking so long? We appreciate that the companies in Northern Ireland are different from those in Great Britain and that there might be question marks over their viability, but, to our minds, they are well-established and secure companies, so there should not be any real doubt about their ability to deliver the Government scheme.

[Kevin Hollinrake]

I will go on to explain some of the complications. The hon. Gentleman’s points have been well made and heard by me and officials, so we will do what we can. In the discussions that I had this morning, it sounded as though there was a solution. We just need to roll it out as quickly as we can.

The energy bill relief scheme for Northern Ireland will apply to all eligible non-domestic electricity and natural gas customers, including businesses, charities and the public sector, which receives its gas or electricity from licensed suppliers. Discounts will be automatically applied by suppliers to the energy bills of eligible customers, covering energy usage between 1 October 2022 and 31 March 2023. The scheme, as has been said, will run for an initial six-month period. The exact discount applied will depend on the type of contract a customer is on and when it was agreed. Although the scheme applies to energy use from 1 October, savings applied to October bills are typically received in November, which means businesses in Northern Ireland start to feel the benefits in November.

The Government announced on 21 September that we will also provide support to non-domestic consumers who use alternative fuels in Great Britain and Northern Ireland. Further information will be provided shortly. The schemes are supporting millions of households and businesses with rising energy costs, and the Chancellor made it clear that they will continue to do so from now until April next year.

Beyond April, the Prime Minister and the Chancellor—this applies to the whole of the United Kingdom—have agreed that it would not be responsible for the Government to continue exposing the public finances to unlimited volatility in international gas prices. A Treasury-led review is considering right now how households and businesses will be supported after April 2023 and will publish its findings by January 2023. The objective is to design a new approach that will cost the taxpayer significantly less than planned while ensuring enough support for those in need. It is very important that non-domestic customers that are less likely to be considered vulnerable to energy price increases, particularly larger businesses that are not energy-intensive, use the six months we have to identify measures they can take to protect themselves against high energy prices.

On support already received, low-income households received a cost of living payment in July of £326 and will receive another payment of £324 by 23 November. The energy bills support scheme launched in Great Britain in October provides eligible households with a discount of £400—that is the key point in front of us—that is being paid in six-monthly instalments in the UK.

Energy policy is devolved to Northern Ireland, but the issue has now been put back to the UK Government to deal with. The hon. Member for North Down referred to the taskforce. The reason it only met twice was that its job was to determine the best way to address this issue, and it determined that the UK Government should do it. The issue is now with officials and Ministers in my Department to make sure that we deliver the scheme in a way that accounts for the differences in Northern Ireland, and we are working with suppliers to get this across the line as quickly as possible.

Detailed work is under way to establish how suppliers can use their systems to pass funds on to consumers in a way that is consistent with the Government policy intent, while ensuring that public money is properly protected. We will of course use our experience thus far in the scheme in the rest of the United Kingdom, and we will work with the Utility Regulator in Northern Ireland to deliver the scheme.

We have already acted to resolve one of the barriers to delivering the scheme in Northern Ireland by taking new powers in the Energy Prices Act 2022, which received Royal Assent only on 25 October. We now need to provide clarity on timings on when the scheme will be finally rolled out to households in Northern Ireland.

Some households in Northern Ireland who do not have a direct contract with an electricity supplier or a meter of their own, for example park homes, cannot receive the £400 discount directly via an electricity supplier. We will also support those households under a separate arrangement called the energy bills support scheme alternative funding.

The Government have delivered and will continue to deliver comprehensive support for energy consumers across the United Kingdom to overcome the extraordinary challenges we are facing. We are delivering support to households and businesses in Northern Ireland through the EPG and the energy bill relief scheme already, but we fully recognise the need to provide further clarity on when these measures will be delivered to consumers in Northern Ireland and are working at significant pace to do so.

I cannot give a firm date, but I can give the commitment that we are trying to expedite payments by every possible means. We have listened to the points made by the hon. Gentleman and others, particularly about off-grid homes, which is an issue not just in Northern Ireland but across the country, and we are working to make sure that the payments are at the right level. I am very grateful to the hon. Gentleman for raising this important topic today. I will continue to work with him to try to make sure that we get the money out of the door as quickly as possible.

Question put and agreed to.