Energy Social Tariffs

Steve McCabe Excerpts

Thursday 23rd November 2023 Westminster Hall

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

It is a pleasure to see you in the Chair, Sir George. I congratulate the hon. Member for Motherwell and Wishaw (Marion Fellows) on securing this important debate.

It is pleasing that the Ofgem chief executive has called for a “serious assessment” of an energy social tariff and that energy suppliers are saying they stand ready to work with the Government to deliver one. That leaves me curious to know what the hold-up is. Surely it cannot be that difficult if water companies and broadband businesses already use this very approach. We are not used to congratulating water companies in this place, but I am aware that Severn Trent and, I believe, all the other water companies in the country use a scheme called WaterSure, which is a social tariff to cap water bills for vulnerable households. Ofcom goes out of its way to advertise social tariffs for broadband and phone packages for those on benefits—the very people I assume the Chancellor expects to work from home on pain of losing their benefits.

As we have heard, in last year’s autumn statement we were told that the Government planned to consult this summer on long-term measures, including a social tariff. Perhaps I missed the Chancellor’s update yesterday, but I would be grateful if the Minister could update us on what has happened to the consultation on the energy social tariff and when she expects to announce some progress.

This is a particular issue for disabled people and those with long-term medical conditions. A survey for the disability equality charity Scope, which the hon. Member for Motherwell and Wishaw mentioned—it is very active in Scotland and throughout England—found that in the west midlands, the region I represent, the number of disabled people getting into debt because of energy costs was double that of non-disabled households, and around 37% of disabled people said they were reduced to buying lower-quality food, skipping meals and often eating less than they felt they needed. There are numerous reports—I recall questions in the House and a debate on this—of people who need their homes at constant temperatures because of their medical conditions. Those who suffer from severe arthritis would be a good example, as would those who rely on medical devices to keep them alive. Those people are having enormous difficulty paying bills.

I assume the Minister will tell me that there is an NHS electricity rebate scheme for some kinds of equipment—I think dialysis machines are one example—but she will also be aware of recent research that suggests that that support is reaching only a relatively small proportion of eligible consumers, and often fails to reflect the costs of running the relevant technology. The problem is that it not only threatens their health but impacts on their general wellbeing and quality of life. In too many cases, as I think Scope puts it rather well, people cannot thrive because they are too busy trying to survive. There are even accounts of people having to give up their pets—their dogs and their cats; sometimes their only companion—because they have to choose between looking after them and trying to pay excessive energy bills.

The hon. Member for Motherwell and Wishaw touched on this, but I reiterate that four groups in particular would benefit from an energy social tariff: people who receive means-tested benefits, people who receive disability benefits, those who receive the carer’s allowance, and those who are struggling with bills but are just below the criteria for support from the welfare system. Poor pensioners who just miss out on pension credit would be a particularly good example. I am sure that the Minister will have come across the same kind of people in her constituency as I have—pensioners who just fail to meet the threshold for pension credit but are struggling by all other metrics to survive.

The Work and Pensions Committee, on which I serve, recently inquired into the cost of living payments and concluded that the £150 disability payment is just not enough to support disabled people during this cost of living crisis. The Committee advised that the Government should increase the financial support for those with disabilities in proportion to the additional costs that they actually incur. It would have been nice to have heard some recognition of that from the Chancellor yesterday. There are things the Government could do in the interim. They could, as we have heard, reinstate the warm home discount for 300,000 disabled people, who lost it when the Government changed the eligibility criteria. You will remember, Sir George, that they rearranged it so that it was determined by the size of the property, which meant that many people who had previously qualified lost access to that support.

The Government might also consider extending the proposed ban on prepayment meters to cover homes where there is a disabled person, and permit households where one has already been installed to have it removed. More than 30% of those in energy debt are on prepayment meters. As we have heard, in the absence of a scheme that, with the best will in the world, almost certainly will not be available this winter, the Government could extend the energy price guarantee for disabled households until such time as a social tariff is introduced. I do not doubt for a second that the Minister shares my concern about the struggles the people I have referred to are experiencing, but it would be good if she could reassure us that the Government have listened and will act to address the issue.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I will not go into great detail this afternoon on behalf of the Opposition on the background and the need for a social tariff, or a similar instrument, because the hon. Members who have taken part in the debate have made the case for one excellently. I congratulate the hon. Member for Motherwell and Wishaw (Marion Fellows), who introduced the debate, not only on the debate, but on the comprehensive way in which she presented the case for social tariffs and urged the action that needs to be taken.

I very much commend the contribution—thoughtful, as always—from the hon. Member for Waveney (Peter Aldous). On other occasions, I have said that he is virtually an hon. Friend on these issues. I commend him for the forthright and detailed way in which he not only made the case for social tariffs, but also talked about what we ought to be talking about this afternoon, which is what happens after we have concluded that this is the right thing to do. He covered the fact that the onus is on the Government to take action and what considerations we have to undertake to secure not just a sticking-plaster solution for perhaps one winter, but something that applies long term and targets the right people in society, giving them the help that they need to keep their energy bills affordable.

I also very much commend the contribution of my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe), my actual hon. Friend. Among other things, he set out the groups of people involved. In particular, he talked about those in very difficult circumstances that have not just arisen from the energy price shock that we had a little while ago, but that affect their daily living requirements on a longer-term basis. They are the people who would very much be eligible and we should think very seriously about ensuring that those people have that long-term social tariff support.

That point is very much underlined by Ofgem’s very recent announcement on the energy price cap. The announcement underlines—if underlining were necessary —just what a difficult situation the people we are talking about continue to find themselves in. The price cap comes to just under £2,000 for a dual fuel tariff. Of course, that is not the actual bill that anyone will pay; it is an average of the sort of bill that people can expect to pay under the price cap. A lot of people—particularly those in disadvantaged and difficult situations—will pay a huge amount more, either because of their need for constant heat, because of their circumstances, or because they have other issues such as a combination of difficult living circumstances, inadequately insulated homes and high heating bills all at the same time. The price cap is the very least indication of where a lot of those people will be. Not only that, but we know from projections that the cap will be something like that for a very long time to come.

The price cap is not a way station in the downward curve of energy bills for the future. All the projections we have, particularly from Cornwall Insight, are that it is likely to remain at the same level, certainly throughout 2024 and probably going into 2025, and that they will not dip much below about £2,000 on average. As recently as April 2021, the price cap was precisely half that amount.

The people we are talking about are faced with the prospect of paying twice as much as they were as recently as two years ago for the next two or three years, with all the affordability issues that that will continue to bring into play. That underlines the point made by hon. Members this afternoon. It would be great if we had a social tariff this winter that could effectively continue the price support that has been applied previously, but that energy price support is coming to an end. After this winter, at the latest, it is not being replaced. That underlines the fact that a social tariff should not just be for Christmas—it needs to endure in providing assistance and help for those groups in society.

That is the problem with the other key point that has been mentioned this afternoon—namely, where is the consultation? It is not that the Government have said that a social tariff is a terrible idea that will never be done by Government ever. It is difficult to remember exactly which Minister of State for Energy it was, because they keep changing, but in January the Minister said:

“we will look at a social tariff and at how vulnerable people are looked after, but we have to look at it in a considered manner.”—[Official Report, 25 January 2023; Vol. 726, c. 1031.]

On 18 April, the then Secretary of State for Energy Security and Net Zero said:

“We do think that things like a social tariff could be very helpful”.—[Official Report, 18 April 2023; Vol. 731, c. 111.]

Then, in May, the Government stated, in response to a petition:

“The Government is considering potential approaches to consumer energy protection post-April 2024. The Government intends to consult on options in summer 2023…Government officials are considering potential options, including discounted tariffs, for a new approach to consumer protection in energy markets that will apply from April 2024”.

They have said all these things. They have said that there will be a consultation. What has not actually happened is a consultation.

It is difficult for us in this Chamber to home in on what a social tariff might look like, because the Government have not said anything about the sort of area that the social tariff would fall into as part of any consultation. We do not need just a consultation; we need to see the substance of that consultation and what the Government are minded to do about the commitments they have already made. That is completely lacking at the moment.

We can speculate to some extent on why there has been no consultation. Personally, I think the Government were rather hoping that this energy price crisis would be completely a thing of the past by now, and that instead of the energy price trajectory going down and flattening out, there would be a more straightforward downward price trajectory so that we would return to the position in 2021, when prices were about £1,000. Then the Government could say, “Well, actually, we don’t need a social tariff because it is much more affordable for everybody now, and we can tweak various other forms of assistance to make sure that life is good.” That has not happened. The data from just the past few days shows that it has not happened and will not happen in the near future, which should concentrate minds about what solutions need to be proposed.

This may be a little bit of speculation, but perhaps the Government are thinking, “Well, maybe we do need a social tariff.” But as hon. Members have mentioned, where will that be funded from? Will it be smeared across customer bills? Will it come from general taxation or some other arrangement? Of course, because there is no consultation, we do not know what the Government are thinking.

I could see the Government thinking, “Ooh, we’ve spent all this money on price support during the height of the crisis. Do we want to commit ourselves to another fairly substantial amount of taxpayer support for energy bills for the future?” Many of us would say the answer is yes, they should. But the Government may have other views and, indeed, there may even have been tension between Departments on the enactment and funding of that policy. I do not know, but that could have been the case.

There are ways of establishing a social tariff—the hon. Member for Waveney alluded to this—that do not actually cost the amount of money that the Government perhaps think it will. They involve changes in how the energy retail market works, but can deliver very solid back-up arrangements for social tariffs on a sustainable basis, which is what we all want, without that necessary and apparently large chunk of money coming from the Treasury. Again, as was the case for the hon. Member for Waveney, it would be inappropriate to expatiate on that at great length this afternoon, but I think that there are interesting ways we can examine it.

[Steve McCabe]

I am extremely grateful to my hon. Friend, who is making a very valuable point. It would be very helpful if the Minister could tell us what discussions the Government have already had with the energy suppliers and the director of Ofgem, since they have both indicated that they are in favour of a social tariff. Some of the work referred to by my hon. Friend must have been done—we just need to hear what has been discussed.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Amanda Solloway)]

This is an incredibly important issue, and I thank hon. Members from across the House for their contributions to the informed, interesting and heartfelt discussion. I particularly wish to thank the hon. Member for Motherwell and Wishaw (Marion Fellows) for raising this important topic for debate and for the previous conversations that we have had on this subject—I have had similar such conversations with many Members across all political parties. I also thank the hon. Members for Birmingham, Selly Oak (Steve McCabe) and for Southampton, Test (Dr Whitehead) and my hon. Friend the Member for Waveney (Peter Aldous) for their valuable contributions to this important debate.

As the Minister for energy, consumers and affordability, I am working really hard to try to bring down bills for households and to tackle fuel poverty as it is clearly the most important thing on my mind. I recognise the challenges that families face and continue to stand firm behind energy consumers.

Last winter, as Members will know, we spent £40 billion on an unprecedented package of support for households and businesses. That meant that a typical family have saved £1,500 through the energy price guarantee and energy bill support scheme since last October.

The hon. Members for Motherwell and Wishaw and for Birmingham, Selly Oak both raised the important issue of support for disabled people, particularly those with in-home medical equipment. The Government’s support package assists the most vulnerable with rising energy bills, including charges incurred by patients dependent on medical equipment and devices as part of their homecare. I am reminded of my mother who suffered with chronic obstructive pulmonary disease and who sadly died at the age of 67, so I am very conscious of the kind of care that we should be giving to this important group of people.

We have certain specialised NHS services, which include the provision of financial support to offset increased energy costs faced by patients using medical equipment at home. Home oxygen suppliers, as I have previously mentioned, also reimburse patients for the cost of electricity that is required to run oxygen-concentrate devices in a patient’s home.

As the departmental ministerial disability champion, I am aware that energy prices are a major concern for those with a disability or a long-term health condition. I am proud of the support that the Government offer to those with disabilities. That includes, for example, more than 6 million people across the UK eligible for extra costs disability benefits who have already received the £150 disability cost of living payment. It also includes the personal independence payment, which pays up to £172.75 a week to those with the greatest additional needs. Our national disability strategy, published in 2021, sets out the actions that the Government are taking to improve the lives of disabled people.

Members have my assurance that I continue to discuss with charities how we can best tackle fuel poverty and other such issues. I have had many recent meetings with Mencap, Scope, the Motor Neurone Disease Association and Citizens Advice, as well as many other stakeholders.

We set out in our 2022 autumn statement that we were exploring the best approach to consumer protection as part of wider retail market reform. The outlook has improved significantly since then, with the Ofgem price cap more than halving since its peak earlier this year. However, even with prices dropping, energy bills represent a challenge to many low-income and vulnerable households, leading to debt and self-disconnections. We have taken additional steps to support those households. The term “social tariff” means different things, but ultimately it is about providing financial support to those who struggle to afford bills, for one reason or another. We are approaching that in three ways. First, we are working closely with Ofgem, which I have very regular meetings with, and suppliers—of course, as the hon. Member for Southampton, Test asked, I have meetings with suppliers —in relation to those facing energy issues such as debt. Secondly, we are supporting those who face challenges particularly linked to energy—for example, because they live in a poorly insulated home. Lastly, we are supporting those with cost of living pressures.

However, it is important to consider any further energy support in the context of wider changes to incomes and Government support, including that which my right hon. Friend the Chancellor of the Exchequer set out in yesterday’s autumn statement. Although prices have stabilised, they could rise in the future. It is important that any new approach can respond to a future price spike. I was listening to all the hon. Members when they talked about long-term solutions rather than just putting a sticking plaster over this. That is one of the challenges that we face.

The energy price guarantee will remain in place until the end of March 2024 to have protection in place should energy bills increase significantly during this period. The Government have also ended the prepayment meter premium by providing a discount to prepayment meter customers through the energy price guarantee. As laid out in yesterday’s autumn statement, the Government continue to invest in infrastructure and will deliver more than £600 billion of planned public sector investment over the next five years, underpinning our future growth and supporting energy security, net zero and, of course, vital public services. We have also highlighted proposals to offer electricity bill discounts for properties close to electricity transmission infrastructure. That could be up to £1,000 per year over 10 years for those properties.

In the past year, we have worked with Ofgem and energy companies to ensure better treatment for energy consumers. I chaired a supplier roundtable on 24 October. I have of course had previous discussions, but at this meeting we discussed how the energy market can work better for all consumers, including the most vulnerable. We have already taken steps to stop prepayment meters being forcibly installed where they should not be. Suppliers are no longer permitted to forcibly install prepayment meters in households with certain categories of vulnerabilities, including people over the age of 75 and those who may be medically dependent on a continuous source of energy or heating.

[Steve McCabe]

I acknowledge the work that the Government have undertaken on prepayment meters. Would the Minister be willing to consider extending that to households in which a disabled person is living?

[Amanda Solloway]

I thank the hon. Member for that intervention. Of course, from a prepayment meter point of view, one thing that we really wanted to ensure was that we were not penalising those who were vulnerable. I am always very happy to consider anything that would help and enable us to ensure that.

We also welcome Ofgem’s new rules to ensure that all consumers get the service that they deserve. Suppliers will now be required to prioritise vulnerable customers first when they request help, offer timely repayment plans for those struggling with bills and make customer ratings easy to find on their websites. Furthermore, the Government and Ofgem have been working to progress towards a shared priority services register, which could make things easier for customers and better prioritise services to vulnerable consumers who are dependent on a regular energy supply.

Overall, the best approach to consumer protection is to have an effective retail market. That is why we are pursuing retail market reforms that will set us on a path to unlocking competition, investment and innovation, which will empower consumers and enable suppliers to succeed and usher in new business models.

The Government are reviewing the fuel poverty strategy for England. Under the current approach, we see energy efficiency as the best way to tackle fuel poverty as it contributes to the long-term reduction of energy bills, as well as reducing carbon emissions in line with net zero. There are multiple targeted schemes in place in England to deliver efficiency measures to low-income and fuel-poor households. Targeted energy efficiency support is provided to fuel-poor households in England, Wales and Scotland through the energy company obligation.

Last winter, we extended and expanded the warm home discount scheme, which supported fuel-poor households by taking £150 directly off their energy bills. For this winter, we expect over 3 million households to receive a rebate under the scheme. As the hon. Member for Birmingham, Selly Oak said, following a public consultation in 2021 we reformed the scheme in England and Wales to better target households in fuel poverty and provide the vast majority of rebates automatically. Last winter, around 95% of eligible households received their rebates automatically, without having to take any action, under this element of the scheme. The remaining 5% received their rebates after confirming their details to the Government’s warm home discount helpline.

Under the reformed scheme, we have focused the support to households in receipt of means-tested benefits who are living in properties that we estimate to be relatively costly to heat. We have used data on benefits and property characteristics to identify eligible households, and we estimate that the reformed scheme should enable around 560,000 more fuel-poor households to receive a rebate, including around 160,000 more households with a person who is disabled or has a long-term illness. At the time of the Government’s response to the consultation, we assessed that the proportion of rebates received by households with a disability or long-term illness should remain higher than the proportion of the fuel-poor population with a disability, and higher than the proportion of the overall population with a disability. Although the reforms were not possible in Scotland, because of differences in Government-held data, we implemented an expansion of the scheme in Scotland to support more fuel-poor households. The scheme obligates energy suppliers to provide additional energy-related and financial support, known as industry initiatives, to households in or at risk of fuel poverty. The industry initiatives may include benefit entitlement checks, energy advice, energy efficiency measures, financial assistance and debt write-off, and can be given to households regardless of their eligibility for a rebate.

The Government are also assisting households’ and individuals’ rising cost of living. That assistance will total over £94 billion for 2022-23 and 2023-24. For 2023-24, it will include providing over 8 million households on eligible means-tested benefits with additional cost of living payments that total up to £900, over 6 million people on eligible extra-costs disability benefits with a further £150 disability cost of living payment, and over 8 million pensioner households across the UK with an additional £300 cost of living payment.

The Government continue to stand firm behind energy consumers, especially our most vulnerable households. The Government are determined to drive down cost of living pressures, having already met our goal to halve inflation. As set out yesterday in the autumn statement, lower wholesale energy prices have been the main driver of lower inflation, but we recognise that we must continue to monitor the situation closely. We are committed, and I particularly commit, to delivering a fair deal for consumers, and most of all for vulnerable households.