Energy Price Freeze

Tom Clarke Excerpts

Wednesday 6th November 2013 Commons Chamber

[David Mowat (Warrington South) (Con)]

We all agree that there is a real problem here and that the real problem is energy bills and fuel poverty, not just for consumers, but for industry, too. We hear about energy-intensive industries closing all the time.

It is refreshing that we are here talking about reducing energy prices. In a lot of energy debates, I usually go through the Division Lobbies trying to stop the Opposition from increasing energy prices. We have divided, for example, on the decarbonisation target and on a perfectly respectable and reasonable proposal from the Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), to reduce the solar tariff from six times grid parity to four times grid parity. As I mentioned earlier, Labour tabled an amendment in the House of Lords last night that will increase bills. Let us agree, however, that we are on the same side, at least in terms of our objective—we want to decrease bills.

Before I explore that further, let me highlight an inconvenient truth that is at the heart of this debate. That inconvenient truth is comparability with other countries in the EU. I heard the shadow Secretary of State make two observations about other EU countries. I think she said that Spain already had a cap. That is true; she is right. Spain’s energy prices, however—for gas and electricity—are higher than ours. I do not think there is much point in having a cap if energy prices are higher than ours. The right hon. Lady also mentioned Scandinavia and its pool as a model for her pool. Again, if she looks at the gas and electricity prices in Denmark and Sweden, she will see that they are the highest in the EU—considerably higher than ours. We need to be careful, therefore, to look at these things in the round. [Interruption.] The shadow Secretary of State intervenes from a sedentary position; if she wants to intervene, I will be far more generous than she was.

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

The hon. Gentleman mentioned comparative prices and specifically mentioned Denmark. Is not one of the problems the fact that consumers here in Britain have to pay higher prices because much of the responsibility for conservation is being placed on those who purchase power—consumers—rather than on others whose main concern seems to be to deliver to their shareholders?

[David Mowat]

I am going to talk about progressive versus regressive ways of paying. Let me make the point again that among the 27 countries in the EU, our gas prices are the 26th highest. If a cartel is being operated, it is not a very good cartel. That is not to say that consumers are not in real difficulty now. One of the big issues, and one of the distinctive features of our energy market, is not so much the unit price as the fact that our housing stock is spectacularly poor in terms of energy insulation.

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[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

This is the first time I have had the privilege of speaking under your chairmanship, Madam Deputy Speaker, and I am delighted that you are a Deputy Speaker.

We have had an interesting debate. I am sorry that the Secretary of State has left the Chamber, but I note that he apologised for doing so. I found it astonishing, however, that he asked for consensus, but went on to make one of the most provocative speeches that I have ever heard in the House, particularly on a subject where he is on a weak wicket. I can imagine going round my constituency speaking to elderly folks and people with disabilities, and people—far too many—suffering from fuel poverty and saying, “Well, we’re not doing anything about the cost of energy, but we’ve reached consensus.” I do not believe that consensus can be reached because, like many of my hon. Friends, I have been involved in these issues for more than 10 years. If right hon. and hon. Members have a minute or two, they might want to study the debate that I secured in Westminster Hall on this subject on 23 January 2007, in which the hon. Member for Wealden (Charles Hendry) made a good speech. I have to say, with respect, that I do not recall quite the emphasis on investment that we heard today; nevertheless, I cannot take away from him the points that he made on that occasion.

A few weeks later I put a question to our own Prime Minister, Tony Blair, on 7 February 2007, and by a remarkable coincidence prices fell the next day. I am not sure that this speech will have the same effect, but I will make the points that I want to make and that, I am sorry to say, are not new because I and others have made them so often. That is why I do not believe that consensus is possible.

I support the motion before the House and the proposition from my right hon. Friend the Leader of the Opposition and colleagues on the Front Bench. It resonates with long-suffering consumers. The commitment to a price freeze is absolutely right, and the fact that it is new, even from those on my own Front Bench, whether in government or in opposition, does not take away from its validity.

[Mr Jim Cunningham]

Does my right hon. Friend recall that under the previous Conservative Government a big battle went on in the House one Friday morning, especially among Members of the governing party, in relation to an increase in cold weather payments that the then Government would not concede? Does my right hon. Friend recall that it was a Labour Government who created the Department of Energy and Climate Change, which the Minister represents? The Government say that the Labour Government did not take these matters seriously. We did, and we introduced housing insulation for the less well-off.

[Mr Clarke]

As always, my hon. Friend makes a valid point. I know that he represents Coventry South, but as he comes from Coatbridge, I am not surprised at the logic that he introduces to the debate.

I support the motion before the House. I do not believe that some of the ideas that we have heard from Government Members, including from the Secretary of State, about tinkering around the edges, transferring green taxes to general taxation and other measures that have been mentioned for over a decade would necessarily work. We heard yet again about switching. Well, I hope it works this time. On previous occasions the experience of my constituents has been that no sooner did they switch to one company than that company put up its prices. There was therefore very little point in them taking that advice. I question whether switching will work now.

Given the seriousness of the problems, there is a call for transparency. The veil of secrecy that exists in the energy industries is wholly unacceptable in the modern world, with the massive profits of energy companies and increasing fuel poverty. The energy markets are utterly broken. Surely we as a Parliament are not prepared to accept that without protest, and why should our constituents do so?

In the Government’s response to today’s debate a great deal of faith was placed in the regulators, but I do not share it—not for one second. In the debate that I mentioned at the start of my speech I had quite a lot to say about the regulators.

[Mr Nigel Dodds (Belfast North) (DUP)]

Rural areas and places such as Northern Ireland are heavily dependent on home heating oil, which means that energy bills are 50% higher on average than even the high bills that people in Great Britain are suffering, but there is no regulation of that sector of the energy market. Does the right hon. Gentleman agree that something needs to be done to help those families who are particularly hard hit by very high energy bills?

[Mr Clarke]

The right hon. Gentleman makes an excellent and very valid point.

That part of the motion relating to the regulator is very important. I do not believe that Ofgem has done the job it was expected to do, no matter who set it up. I have met Ofgem, written to it and listened to what it had to say. It responded to one of our representations on 1 January 2007, the day after Hogmanay—Scots Members will understand what I mean—by issuing a press release stating that if the energy companies, the big six, continued what they had been doing, in its view they would have “jam on their fingers”. Given the figures on hypothermia even then—I will mention those later if I have time—it should have spoken much more strongly.

We are entitled to ensure that the public are no longer duped about the actual cost of energy. I would have expected that to be the role of a proactive regulator. For example, the four major companies that have raised prices blamed wholesale prices, green levies and network costs for the latest bill increases of between £100 and £150, which have led to an average bill of £1,400 a year. In 2010 npower’s electricity wholesale prices fell by 13%, but that was not passed on to the consumer, and the average wholesale price fell by 4% in 2011 and rose by less than 2% in 2012, yet the company increased retail prices by 5.1%, 7.2% and 9.1% respectively in those years, and E.ON and EDF behaved likewise. More recently, wholesale energy prices rose by 1.7%, but consumers are facing an increase in their bills of 11.1%.

How can that possibly be justified? How can it be said that the market is working and that if we leave it alone things will work out? I do not know about the word “cartel”, but I know that there appears to be a measure of collusion, and certainly a measure of delivering price demands to customers that cannot be defended. I do not believe that Ofgem is best placed to act in our interests.

I support the commitment to a price freeze and think that it is very welcome. It is right that my right hon. and hon. Friends on the Front Bench should demand action now. I accept that it will take time to sort things out. If we have not done it in the 10 years to which I have referred—we certainly have not—then 20 months is not a very long time to have the kind of open debate and consultation about energy that I believe the British people are entitled to expect. I also congratulate North Lanarkshire council on its commitment to its house insulation programme.

I realise that many of these things are happening because of the austerity that exists in Britain today. Nevertheless, unless we have an energy strategy that is fair about prices, the environment, markets and proper regulation, our people will suffer. I do not believe that it is in the interests of right hon. and hon. Member, to allow such a situation to develop or beyond the wit of this Parliament, and indeed this Government, to do something about it now.

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[Mr David Anderson (Blaydon) (Lab)]

Ever since the Leader of the Opposition made his speech in Brighton and we came back to Parliament, this issue has dominated the parliamentary system, especially in the Whitehall farce we see every week that is allegedly called Prime Minister’s questions, but should really be called Prime Minister’s deflections. We have had a series of throwaway remarks from the Prime Minister about the price freeze issue. He said last week that the problems could be resolved if everybody did what our leader did and switched companies. The Government have blamed the price rise in wholesale gas, but last week the Prime Minister came back and asked, “Who created the big six?”, as if he had not spent the last 42 months in power doing nothing about the power of the big six. That is all good knockabout, music-hall stuff, but I bet the people of Oldham, Liverpool and Washington, who have been spoken about in the last half hour, are not laughing as they sit at home shivering and wondering how they will pay the bills over the next few months.

Let us look at the Prime Minister’s case. Last week he had a go at our leader for switching electricity suppliers. Well, our leader is a canny lad and he might have saved himself £500 a year. But we need £110 million of investment, and it is a farce for the Prime Minister to point to an amount of £500 as a reason why we should not do something. He has blamed wholesale prices and said that the Government cannot control the markets, but privatisation was supposed to transfer the risk from the state to the private companies. Instead, it has transferred the risk directly to the people who cannot afford to pay—our constituents.

This is also a question of trust. Are we being told the truth about wholesale prices?

[Mr Tom Clarke]

I welcome the fact that my hon. Friend refers to wholesale prices. Does he believe that the regulators are as transparent as we would expect them to be when they examine something as important and influential as wholesale prices?

[Mr Anderson]

The regulator clearly admits not being fit for purpose. My hon. Friend the Member for Liverpool, Wavertree (Luciana Berger) mentioned the report from 2008. Ofgem said then that it had not been transparent. The actual gas wholesalers are not transparent. I do not know whether hon. Members are familiar with the Henry hub, which is a pipeline and hub in Louisiana that distributes the vast majority of natural gas in the United States. It is also used as the name for the pricing point for gas prices on the markets in New York. Those prices are set in dollars per million BTUs—British thermal units. In April 2012, 1 million BTUs cost $1.95. In June 2008, they cost $12.6. So the cost was six times lower in April 2012 than it was in June 2008. Even now, it is only $3.62 per 1 million BTUs, yet we are told it has to go up because the price has gone up. How can we trust people who manipulate the figures?

On 6 September 2013, the US Energy Information Administration stated:

“The 36% decrease in the average natural gas price paid by manufacturers between 2006 and 2010, from $7.59 to $4.83…was large enough”—

but—

“Since that survey was conducted, natural gas prices have fallen further.”

The people responsible for energy in the US are saying that prices have gone down, but we have been told that bills have had to go up so much because wholesale gas prices have gone up so much. Are we being misled? Is there a cartel? People say that there is not, but have we forgotten about OPEC? Have people forgotten what happened to us in the 1970s, when people literally had us over an oil barrel? Why should we expect more today from the same people?

The Prime Minister’s other deflection was about who created the big six. I will accept some responsibility, because I believe that my party did not do enough in government to control the energy market. Up until 2008, we did not get our act together and the huge price increase seemed to wake people up. The Conservative party, however, cannot get away from its history. It created the big six by its decision, in the 1980s and 1990s, to privatise the utilities industries. The Conservative Government started by dismantling the most technically advanced coal industry in the world, an industry that was leading the world on clean coal technology—could we not use some of that now? They then went and told Sid to buy shares in gas, electricity and water. They were actually using public money to bribe people to get themselves back into power. It worked very well for them, but the chickens are coming home to roost and the people feeling it are sitting at home at night wondering if they dare put the fire on. We have left billions of tonnes of coal under our feet to lie dormant, while we are being held to ransom by gas and oil companies. We have to bring energy into this country from the most unstable places in the world.

There has been a lot of talk in the past few years about carbon capture and storage. I had the pleasure of sitting in a Committee with the Minister and discussing how wonderful the green deal was going to be. That all led to nothing. The price freeze is welcome—it is a step in the right direction and people need it. What is also required is proper regulation by Ofgem, or whatever takes its place.

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[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

I am glad for the opportunity to make a few comments in this debate. As for all colleagues—at least on the Opposition Benches—who have spoken, the issue of rising energy prices comes up every week in my surgeries and public meetings. It is utterly complacent for the Secretary of State to lecture us about rising disposable incomes, as if that were the solution to the problem and energy prices did not really matter. He should try and tell that to people who, on top of rising energy prices, have been forced to accept a drop in hours, a wage freeze or rising housing costs, which is the reality for millions up and down this country.

To date, the Government’s measures have not worked, as they have implicitly recognised, because if they were working, why would the Prime Minister have announced, on the hoof, his two major changes in energy prices? Last year, came the promise to put everyone on the cheapest tariff, which then became a promise to simplify tariffs, from which millions of energy customers will not benefit; then, this year, came the sudden review of green levies, which has now become simply the transfer of some energy efficiency measures into general taxation, or so it would appear.

The Government’s policies have not worked to date because they rely on claimed features of the energy market that, by themselves, have not and cannot bring about the required level of market reform and apply downward pressure on energy prices. First, as my hon. Friends have said, the Government are relying on competition, but as even the Secretary of State would seem to accept, competition is not bringing down prices. After all, given that the prices charged by the major energy companies all seem to rise at roughly the same time and at roughly the same rate, we may be excused for being sceptical about competition. We now seem to be relying on switching, but after three and a half years in power, the Government have realised that it is not as easy to switch as they suggested, so they are going to introduce measures to make it easier.

[Mr Tom Clarke]

I regret that I did not have time to refer to small businesses in my speech. Does my hon. Friend agree that small businesses do not welcome being asked to switch, in addition to all the other bureaucracy they have to deal with?

[Mark Lazarowicz]

That is a good point. One problem with relying on switching is that the Government’s measures do not tackle the problem of people switching and then finding it does not bring the expected advantages and so deciding to switch again. I have experience in my constituency of people who are tied into a year’s contract that they cannot get out of. Conservative Members gave the House examples of people making wonderful savings by switching, but I wonder whether those consumers will still find switching to be advantageous in a year’s time. I accept that switching is important, but it is ridiculous to suggest that it is a panacea, as the Government seem to be doing.

The Government are also relying on simpler tariffs to solve the problems. Unfortunately, the simplification is proving to be of much less benefit than first promised. Many customers are now worse off because of the simplification measures. I have highlighted the impact of the way in which Ofgem encouraged a return to the use of a standing charge—in order, it said, to simplify the charging system. This has resulted in many customers with low energy usage, who are often on low incomes, facing sometimes substantial increases. To be fair to the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker), he agreed to meet me when I raised this issue, and we were due to meet today. The meeting had to be postponed because of this debate, but I shall certainly press him on this issue in due course.

The Government know that their policies are not making an impact on energy prices, and that is why the Secretary of State and the Government as a whole have been running round like headless chickens trying to come up with a response to the clear set of policies outlined by my right hon. Friend the Member for Doncaster North (Edward Miliband), the party leader, and by my right hon. Friend the Member for Don Valley (Caroline Flint) at the Dispatch Box today.

The Government appear to be relying for a solution on the transfer of some of the cost of energy efficiency measures to general taxation, which will have some limited impact on energy bills. A move in that direction might have some theoretical merit, although we would all want to see how it would be worked out in practice and, above all, how it would be paid for. As my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) has just pointed out, however, none of these measures would have been put forward by the Government, were it not for the plans announced by Labour.

The Government’s proposed measures will have only a limited impact. They, and the similar measures that the Scottish National party have proposed for Scotland if it were to be independent, also suffer from a big weakness—namely, that transferring the cost to general taxation would let the energy companies off the hook. That would lessen the pressure on them to keep prices down. It would also create the risk that the limited saving to customers would gradually be eaten up by price rises imposed by the companies to take up the slack—unless such measures were accompanied by Labour’s price freeze or a similar measure to prevent the companies from taking advantage of the price cut.

Labour’s proposals for an energy price freeze are clear, coherent and comprehensive. They would make a real difference to consumers, households and businesses up and down the country, and that is why I support the motion. I hope that some Government Members will join us in the Lobby, but that seems unlikely, given that so many of them appear to regard this issue as so unimportant that they have not even taken part in the debate. Their constituents will certainly not hold them in high regard for being absent from a debate on such an important issue.