Energy Market Reform

William Bain Excerpts

Wednesday 24th October 2012 Commons Chamber

[Mr William Bain (Glasgow North East) (Lab)]

With the economy and real wages having shrunk over the past two years, no issue is more important for the living standards of my constituents, and indeed those of all right hon. and hon. Members, than electricity and gas prices. As my hon. Friend the Member for Wansbeck (Ian Lavery) points out, average fuel bills have risen as high as £1,310 a year over the past five years. Prices over the past two years alone have risen by £200, high gas prices could, without adequate action, add £175 to bills by 2020, and wholesale gas costs added £290 to average energy bills between 2004 and 2010. Under the Government’s present policies, the number of tariffs stands at 430; it has risen by 70 in the past year. We have soaring fuel poverty; as many as 3 million elderly people across the country are now affected by it. There are 6,400 over-75s in my constituency alone who would benefit right now from a change of Government and a change of policy to ensure that they are on the lowest possible tariff and have a £200 saving on their electricity and gas bills this year.

The Government have shown in the debate that they simply do not get that a more comprehensive reform of the electricity market is required. They simply do not understand that 54% of the average electricity bill is affected by wholesale energy costs. Our constituents ask, “Why is it that when wholesale energy costs fall our bills do not fall, but when they rise our bills immediately go up?” There is something broken in the electricity supply market. The Government, in their remarks today, simply show no inclination to tackle it.

Sadly, the Government’s policy is marked by shambles and confusion. It seems that the Government are now suffering from the reverse Midas touch; they cannot produce a Budget that stands scrutiny for 24 hours, they cannot run our trains properly and they have made U-turns on forests and on badgers. The joke is that the ghost of John Major is now stalking the Government, and I do not mean the amiable, spectral presence of the Chief Whip, which graced the Chamber a few moments ago. This policy, and the way the Prime Minister mishandled it last week, shows that this is a Government in a state of shambles and breakdown.

Sadly, I must also strike a discordant note with the hon. Member for Angus (Mr Weir), because the Scottish Government are unfortunately letting down my constituents on the issue of fuel poverty. Dr Brenda Boardman, who did so much to coin and develop the concept of fuel poverty, described the Scottish Government’s policies as

“feeble, inadequate and namby-pamby”

and said that they are now putting 800,000 Scots in record fuel poverty. That is at the same time as they are cutting the budget for fuel poverty, which is an area devolved to Holyrood. It is small wonder that Dr Boardman accused the Scottish Government of failing to back up their weasel words with proper actions—something we have seen a lot of in the past few days from the First Minister and Deputy First Minister.

We are also seeing confusion in this Government’s policy. The industry is losing confidence in the Government’s ability to commit to green investment. It is small wonder that we have seen little improvement in our energy mix, as the Chancellor wages an ideological crusade against green investment and make outrageous references to the green Taliban. He refuses to capitalise the green investment bank properly and his failure on growth and debt means that the bank will not have proper borrowing powers by 2015. We see shambles, confusion and a disjointed Government.

At the same time, our market is not being reformed. The Institute for Public Policy Research recently produced evidence showing that the least efficient company spends twice as much per customer on its operations as the most efficient company. Some people pay £330 a year more for their electricity and gas than their next-door neighbours, as many as 5 million people across the country are being overcharged and the number of switchers is at an historic low of 15% a year, the lowest since records began in 2003. If the market worked at the moment, competition would ensure convergence on operational costs, but that is not happening at all. In fact, those costs have risen, not fallen, in the past three years, as the IPPR has shown.

We need a radical change of course. We need an arrangement that brings in proper pooling, a new regulator and a much stronger link between the wholesale gas and electricity market and the prices paid by domestic consumers.