Gas and Electricity Costs

Wera Hobhouse Excerpts

Tuesday 18th January 2022 Westminster Hall

[Wera Hobhouse (Bath) (LD)]

It is a pleasure to serve under your chairship, Sir Edward. I reassure you that I will be brief. I congratulate my hon. Friend the Member for Caithness, Sutherland and Easter Ross (Jamie Stone) on securing this urgent debate. In Bath, in north-east Somerset, more than 10% of households are already living in fuel poverty and, as we have heard, that is likely to increase dramatically.

The council is working hard to provide a local household support fund, with grants of £250 to help the least well off with their energy costs this winter but, again as we have heard, energy costs are likely to rise by about £600. That grant is something, but it is clearly not what is needed. Many more of my constituents are worried about their next heating bill. What have the Government done to protect them? They have scrapped the programmes to insulate our homes, which would have reduced bills long ago. They have cut universal credit and increased the UK’s dependence on imported gas, rather than investing in renewables: green energy homemade in the UK—something the Minister knows I keep saying in these debates. That is what should have happened a long time ago.

I hear reports that the Treasury is scrapping the energy company obligation scheme, which has been a powerful driver in reducing household emissions. The Government must not touch that scheme. Instead, they should double and extend the warm home discount, as has been said. It cannot be right that gas companies are profiting from record prices, way up from where they were last year, when millions cannot afford to heat their homes. The Liberal Democrats are calling for a one-off windfall tax on the profits of oil and gas firms, to fund support for those who are struggling. Seventy-one per cent. of people support that move, as do 75% of the Government’s own voters. Why are the Government not severely and sincerely looking at the proposal of a windfall tax on the profits of oil and gas companies?

We need a long-term plan to prevent another energy crisis. Where is the urgent plan for a long-term home insulation programme that will cut bills permanently? This is a particular challenge for my constituents in Bath. Bath and North East Somerset Council proposes that the Government require landlords to bring housing up to an agreed energy certification standard, and I urge the Minister to look at that. The Government’s heat and buildings strategy was a missed opportunity for real ambition in this area. We have one of the oldest, least energy-efficient housing stocks in Europe. It is an emergency, and the Government should finally treat it as such.

Liberal Democrats are committed to reducing most emissions by 2030, which means a massive expansion of renewables and the replacement of the gas grid. In the context of this debate, we all know that there are some energy companies leading the way. Companies such as E.ON pride themselves on the fact that nearly all of their electricity is generated from renewables, but the shocking fact is that, while the price of renewables falls continuously, the customers of E.ON and other renewable electricity companies will find that their electricity bills go up by just as much as those of customers who buy electricity from burning gas. I have asked E.ON directly—

[Craig Mackinlay]

The hon. Lady has a high number of listed properties in her constituency of Bath, as I have in mine. Sandwich is the oldest medieval town in the country. Has she considered how old buildings, which are listed or in conservation areas and structurally virtually impossible to insulate, can be dealt with in a way that is affordable or achievable?

[Wera Hobhouse]

I thank the hon. Gentleman for his intervention. We have had a debate on listed buildings and how we can help owners. It is complicated, but I do believe it is important that owners of listed buildings get proper support, including help from the council to change the structure of their buildings to make them more energy efficient.

As I said, it is shocking that those trying to do the right thing by buying from companies getting their electricity only from renewables are facing the same cost rises as those buying their energy from companies making electricity from burning gas. It is a massive failure of Government, who have set the terms of the wholesale market to ensure that everybody pays when gas prices go up, even if they do not use gas. That is shocking and unforgivable. The Government must urgently look into how this issue can be fixed now.

--- Later in debate ---

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

I congratulate the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) on securing the debate. I think the best way to sum up this afternoon’s debate is to call it a united front. I was going to say a cross-party united front, but the party that was going to be in that united front is now no longer in that party—the hon. Member for Newton Abbot (Anne Marie Morris) had the Whip removed for daring to say that there should be a VAT reduction on bills as a result of the energy crisis. I commiserate greatly with her. It is shameful that she has had the Whip withdrawn under these circumstances. I would have expected hundreds of her colleagues to vote with her on that occasion, because we all know that we have to do something urgently about the perfect storm in energy prices that is coming towards us. It is a perfect storm because it will be added to the ending of the universal credit uplift and other cost of living increases.

As my hon. Friend the Member for Makerfield (Yvonne Fovargue) eloquently put it, millions of people in this country are spinning plates every day to keep their bills, rent and other costs under control. To have a £600 increase in their bills coming their way very shortly—the decision may well be made within a couple of weeks—will inevitably cause those plates to come crashing down across millions of households. This is a crisis emergency that we absolutely have to tackle with equal emergency and resolution as the crisis unfolds.

Hon. Members have talked about both the causes of the crisis and the things that could be done about it. I acknowledge that one of the key bases of the crisis is the unprecedented increase in wholesale gas prices coming into the country, which has had a knock-on effect for electricity prices and bills. Of course, the crisis does not involve a spike in price; it is likely to be a price dome rather than a spike, and it will probably last a couple of years.

The Government are not responsible for that, but they are substantially responsible for making the crisis much worse, as a number of hon. Members have talked about. The Government have managed the retail markets with extraordinary negligence over recent years, allowing a large number of companies to come in and sell us gas and electricity, with no hedging and no serious support behind them. Some 28 of those companies have now gone bust, leaving the customer to pick up the bill, and not just for the transfers that they had to undertake.

About 4 million people have lost their supply and are having to transfer to other companies at the price cap, rather than at the prices they were previously charged, so there is an additional increase on their bills. The companies are potentially having to bear the costs, at about £100 per customer, for the carnage that has taken place with the energy companies that have gone bust and the cost of putting those companies into “supplier of last resort” arrangements.

The Government have also been negligent by allowing gas storage effectively to disappear in this country in 2016, putting us at risk, to a much greater extent, of volatility in the markets, as we have seen recently. There are a number of things that can be laid directly at the Government’s door for their stewardship of the energy economy over the last few years, in addition to what we know are the problems of world prices. That is a double reason why the Government have to act now to put right a number of the things that they have so negligently allowed to happen.

Many hon. Members have mentioned the idea of reducing VAT for an extended period while the crisis in gas prices runs through. That could easily be afforded because of the increase in VAT that the Government have received recently. A windfall tax on companies that have been supplying the gas is an important idea. After all, whether it is supplied to the UK from the UK sector, from the Norwegian sector or from liquefied natural gas, the price that it is sold for is the same in the end. International spot prices are the same, whatever the origin of the gas. That is why a number of companies supplying within the UK sector have made super-profits from this episode, and it is right that they should be subject to a windfall tax that can be clawed back for customers to reduce the level of prices that they are likely to pay.

Hon. Members mentioned increasing the level and extent of the warm home discount, which would be a particularly targeted way of ensuring that those who can least afford it—the real plate-spinners in our society—have an additional plate to spin in the shape of a much more generous warm home discount, and one that expands its range.

[Wera Hobhouse]

Will the hon. Member pick up on a point that I made? Customers who wanted to do the right thing and bought their energy from renewables only should not be subject to energy price rises when renewable prices are falling because energy supply companies can lump the prices together.