Jamie Stone (Caithness, Sutherland and Easter Ross) (LD) I beg to
move, That this House has considered the cost of gas and
electricity. It is a pleasure to serve under your chairmanship, Sir
Edward. Obviously, the debate is very dear to my heart, because I
represent the part of the United Kingdom that every year seems to
have the lowest temperature recorded in any community: the village
of Altnaharra in Sutherland. Much of what I am about say is
blindingly...Request free trial
(Caithness, Sutherland and
Easter Ross) (LD)
I beg to move,
That this House has considered the cost of gas and
electricity.
It is a pleasure to serve under your chairmanship, Sir Edward.
Obviously, the debate is very dear to my heart, because I
represent the part of the United Kingdom that every year seems to
have the lowest temperature recorded in any community: the
village of Altnaharra in Sutherland.
Much of what I am about say is blindingly obvious, but I want to
roll out a few statistics. It is a fact that household
electricity and gas bills are predicted to rise in April by
around 45%. That would see the price cap reach £2,000 a year, or
£165 a month. I would suggest that without Government
intervention, this rise could take the total number of households
in fuel poverty to no less than 6 million. The high level of
global gas prices affects the whole economy; it does not impact
only on energy retailers, suppliers and household customers. It
could mean between a 1% and 2% inflationary increase across the
whole UK economy, which would result in more than £10 billion a
year in additional Government costs from indexing debt to
pensions, salaries and other payments.
Some 33% of households in rural Scotland are in extreme poverty,
with a further 9% in ordinary fuel poverty. That makes a total of
42%. The figure is even more acute in the far north and my
constituency, where, as I have already said, temperatures are
regularly the coldest in the United Kingdom.
(Na h-Eileanan an
Iar) (SNP)
I congratulate the hon. Gentleman on securing the debate. He is
absolutely right about Altnaharra, and the fuel poverty that is
shared by his constituency and mine. The UK Government talk about
levelling up, but one of the best things that could be done in
that regard would be to tackle the differences and inequities
between distribution costs of the electricity network, as well as
the transmission costs to generate. I note that our part of the
world is a net generator and contributor of electricity,
particularly to the grid.
My highland colleague makes a sage and wise point.
[Interruption.]—with all due reference to my right hon. Friend
the Member for Orkney and Shetland (Mr Carmichael).
The figure that I have outlined compares with 24% of households
living in poverty in the rest of Scotland, which is still a high
figure. I believe that fuel poverty is a clear priority issue for
remote rural constituencies but, overall, I would suggest that is
an unacceptable blight across society.
(North East Fife)
(LD)
My hon. Friend has talked eloquently about the hardship of fuel
poverty experienced in rural Scotland, and particularly in the
highlands. I want to talk about disabled people, who are also
disproportionately suffering as a result of the energy crisis.
They have higher energy costs because of the equipment that they
often need for assisted living. Just living from day to day is
simply more expensive for them, so does my hon. Friend agree that
the Government should be putting in place additional
support—similar to the warm home discount—for families of
disabled children and for disabled people of working age?
My hon. Friend must be clairvoyant, because she has anticipated a
point that I shall make in due course. I thank her for her
intervention.
There are two major contributory factors to fuel poverty in
Caithness, Sutherland and Easter Ross: the absence of mains gas
supply to many properties, and the comparative price of
electricity, which costs four to five times more than mains gas
and domestic oil per unit. Both of these power sources are often
used to heat things that we rely on—for instance, water. Rural
and remote households are more exposed to rising household costs
due to paying an extra premium.
I suggest that energy policy in the UK is fundamentally broken.
Consider this: the highlands and islands, to which the hon.
Member for Na h-Eileanan an Iar () referred, produce
more than 300% of their electricity demand from renewable
sources—we produce three times more than we use. We export the
rest to other parts of the UK, but as the hon. Member pointed
out, a highland or island household pays more per unit of
electricity due to the transmission charging regime, which pushes
up energy bills even further. This is fundamentally wrong. Root
and branch reform is required to design a UK energy policy that
is fit for the 21st century, and that, most importantly, puts
consumers at its heart.
Turning to business, energy price hikes are having a serious
impact on the viability of businesses in the far north and,
indeed, across the UK. I will quote two examples. Sitting at the
back of the Public Gallery, I witness today Mr Andrew Mackay, my
constituent. He and his brother own three hotels in Caithness
known as the Caithness Collection—excellent hotels. They are
facing an annual increase in electricity costs from almost
£77,000 to—can Members believe?—nearly £130,000, which is a 70%
rise.
Also in Caithness, we have a local engineering company, JGC
Engineering, which is owned by the Campbell family and makes
excellent pieces of stainless steel for the nuclear and other
industries. The company’s annual electricity bill runs into six
figures. The owners have been forced—they had no choice; it was
the best deal they could get—to sign a deal that, believe it or
not, means an 80% increase in costs starting in March 2022. To
enable sustainable economic growth and—to borrow an expression
from Her Majesty’s Government—to level up the United Kingdom, it
is imperative that measures are put in place to protect consumers
and businesses from crippling energy costs.
Looking ahead at the UK’s future energy mix, it is crucial that
investment in renewables is kept up to pace. However, I believe
that the Government can also look seriously at novel solutions to
age-old problems. In terms of nuclear power, small modular
reactors, such as those being designed by Rolls-Royce, could
provide districts with heating and electricity in areas where it
is costly to receive utilities on the national grid.
This kind of out-of-the-box thinking could reduce the cost of gas
and electricity, reduce reliance on fossil fuels, and ensure the
economic future of areas that consider themselves left behind,
such as Caithness.
(Kilmarnock and Loudoun)
(SNP)
Is there an estimated cost for these modular reactors? How much
will it cost overall? Is there a policy for how nuclear waste
will be dealt with?
A conversation with Rolls-Royce would be rewarding for the hon.
Member. It is working up the proposals, but has some interesting
thinking; I think we would be unwise not to take a good look at
it.
Solutions do not stop there. Governments could soften the impact
on consumers in the short term by providing loans up front to
energy suppliers to cover the costs incurred from the significant
rise in global wholesale prices for gas. I suggest constructively
to the Minister that the Government could remove VAT from energy
bills, or double and extend the warm home discount, taking £300 a
year off the heating bills of around 7.5 million vulnerable
households.
Her Majesty’s Government could introduce a new social tariff for
those in fuel poverty—perhaps double the winter fuel allowance,
giving up to £600 a year to 11.3 million elderly pensioners who
currently face a £208 real-terms cut to their state pension next
year, due to the Government’s decision to scrap the triple
lock.
The Government could also implement a one-off windfall tax on oil
and gas companies’ super-profits—the extra profits. This would
not impact companies’ usual profits and thereby keep jobs secure,
and would target the unprecedented extra profits that they have
made in the last six months.
(Orkney and Shetland)
(LD)
Does my hon. Friend agree there is also a role for the energy
companies in all this? I suspect that he will have as many
constituents as I do who, over the years, in order to compensate
for the lack of access to mains gas, have taken other options,
including storage heating and going on to tariffs such as “total
heating total control”, which is now being used by SSE to keep
their customers prisoner because it is impossible for them to
switch. Does he join me in calling on companies such as SSE to
treat their customers, who have been loyal for generations across
the highlands and islands, rather better than that?
I have no hesitation in joining my right hon. Friend in making
that plea. His points are well made.
I hope that in getting this debate under way today, we start a
dialogue with energy companies, Her Majesty’s Government and all
concerned parties—not least those people who stand to be faced
with crippling debts. I think of a young mother I know, who lives
in the village of Balintore in my constituency. She tells me that
she has to budget absolutely to balance the books; it is just a
few pounds between surviving and going into the red. She says to
me that if the electricity bill or the cost of diesel for her car
goes up, she is in trouble. To square the books, she would then
have to cut down on her expenditure. In turn, that hits the local
shops, the local chemist and so on, in the seaboard villages of
my constituency. I hope there will be a dialogue.
There have been, in what I have said, a lot of “coulds”,
“shoulds” and “woulds”. What we really need from the Government
is real, urgent action. I would suggest that they have failed
millions of hard-working families and thousands of pensioners, at
a time when energy bills are going through the roof. At this
stage, the nation is plummeting further into a fuel poverty
crisis. As far as I can see, there seem to be no plans to tackle
it, but I await the Minister’s comments with great interest and
expectation. At the end of the day, old people, single parents
and people on very limited incomes are wondering how the heck
they will get through the next period, because we all dread
getting into debt.
Members from across the House have put forward suggestions to the
Government on how to stop this disaster in its tracks. I
respectfully suggest to Her Majesty’s Government that we stop the
dither and delay, get talking, and do something about it.
(South Thanet) (Con)
I thank the hon. Gentleman for securing this debate. It is a fact
that all economies are facing an energy price rise, for
international reasons. The hon. Member has not mentioned gas at
all. No matter anyone’s views on gas, it will be part of our
energy mix for a generation. I wonder if he might agree that we
have been uniquely silly in diminishing our storage capacity,
with the closure of the Rough field. Mother nature has given us a
gift in this country: a lot of gas. No matter anyone’s view on
the path to net zero, a super report by the House of Commons
Library charts the reduction in our gas use over the years, and
shows that we have reduced our gas capacity and production even
faster, leading to imports. Does the hon. Member agree that it
might be sensible to increase our domestic supply while gas is
such an important part of our energy mix? That might give a
longer-term solution to price volatility.
I will conclude in just a moment or two. I thank the hon. Member
for his intervention. The bottom line is that if we care about
the people I have mentioned, who are petrified of getting into
fuel poverty, then we must look at all possible solutions. There
will be a mix to the answer. I would not rule out anything that
the hon. Member said. We will take a look at it.
Of course, if we get hydrogen production right, that also makes
enormous sense, because it is absolutely neutral for the
environment. Hydrogen is a gas, and we should be thinking about
that as a possibility. I conclude my remarks there, Sir Edward.
Thank you for your forbearance.
2.44pm
(Newton Abbot) (Ind)
The cost of gas and electricity has been a real challenge for my
constituents. Although the hon. Member for Caithness, Sutherland
and Easter Ross () makes a good point about the
rural communities in Scotland, it is not just in Scotland that
this is a challenge.
Down in the south-west, we have one of the lowest-wage economies,
a very high cost of living, and a disproportionate number of
over-65s with complex comorbidities. Our economy depends heavily
on hospitality and tourism, and that has been decimated. The hope
for recovery over the Christmas period went with plan B.
The hon. Lady is making a very good speech and she is absolutely
right—it is not just the north of Scotland that is affected,
although I, like the hon. Member for Caithness, Sutherland and
Easter Ross (), would argue that that is
where things are most acute.
House of Commons Library figures for all the neighbouring
countries in north-west Europe show that 11.7% of people in the
UK are living in relative poverty by the OECD’s definition, and
of the 13 countries that were looked at, the Gini coefficient of
inequality is highest in the UK. That puts this problem firmly in
the Government’s ballpark; they really have to get to grips with
it.
The hon. Gentleman makes a very fair point—this is a real
problem. The hon. Member for Caithness, Sutherland and Easter
Ross made the clear point that the answer and solution has to be
found now.
I look at my constituents—indeed, I was on a telephone call just
this morning—and I see that the food banks are doing great
business. Increasingly, I am hearing that the people who are
using them are not the usual attendees. We are in a state of
crisis, which needs to be addressed right now. I have
constituents—mostly pensioners—who are ringing my constituency
office, and are very concerned. They are worried because of the
cost of living and because of everything they hear about the
energy costs that they will be facing.
For me, it is that uncertainty that is most challenging, because
although the Government, to their credit, recognise the problem,
the real issue is that to deal with that fear, we need an answer,
a commitment and a solution. Looking at what we might or might
not do in April is not soon enough. I am sure that even you, Sir
Edward, will have looked at the barometer as you got up this
morning. It is now that we are seeing minus temperatures. It is
now that people need their heating at night. It is now that they
need hot food.
Clearly, it is not the Government’s fault that there has been a
global challenge in terms of energy prices. Indeed, they have
risen to the challenge and recognised that security of domestic
supply has to move further up the agenda. I welcome their
investment—or promised investment—in more nuclear. But the real
challenge is that despite all those good words and despite the
concept of a price cap, which was effectively intended to protect
consumers from very challenging prices, consumers are not being
protected.
No scheme is perfect, but what happened here is that when it
became clear that the prices meant that some of the smaller
suppliers would go out of business, those customers were picked
up by the bigger players but were inevitably put on the highest
tariffs available. Those individuals, having done the right thing
by seeking out good policies and good schemes, suddenly found
themselves in the worst possible position. Then we
hear—understandably, on one level—that the cap will not hold and
that we expect that there will be an announcement on 7 February
that it will increase substantially, as the hon. Member for
Caithness, Sutherland and Easter Ross has already indicated—it
will be an extra £700 per household, taking the average bill to
£2,000. Suddenly energy costs will be going up 50% overnight.
When the Government set their energy retail market strategy for
the 2020s, they set two objectives. The first was that there
should be a sustainable retail market, whereby it was easy and
rewarding to go green. However, that is not what is actually
being delivered. Although they were well intended, many of the
tariffs to try to encourage—to nudge, if you like—greener use
have effectively pushed people further and further into fuel
poverty.
The second objective was that all consumers would pay a fair
price for their energy and would be protected from excess
charges. Although I appreciate that those are charges for
production rather than the other elements—the tax and the
levies—it has all come together in a horrible, nightmarish mix,
whereby, because of the global cost increase, the Government are
now scrabbling to try to honour what I think was their intended
commitment to make energy prices affordable by considering some
of the things that they can move, which clearly will be taxes and
levies, as opposed to some of the things that they cannot move,
which include the global price of gas.
Therefore, for me, Government intervention is not optional. As
has been said, the number of households in fuel poverty is
increasing from 4 million to 6 million. That will affect a very
large number of my constituents. The Government have a number of
options. They can mix targeted initiatives and universal ones.
The comment in the media is that the Government are uncomfortable
about solutions that are more universal in nature.
This energy crisis—this energy cost—comes on top of a huge
increase in the cost of living. We know from figures out today
that people’s wages are not going up to meet those costs, and
therefore it is not just the usual smaller percentage of the
population that is suffering; it is actually a much larger
percentage of the population. People at all levels make
commitments, and they are struggling to meet them. They have to
meet their mortgages; that is not negotiable. They have to pay
their rent; that is not negotiable. Businesses have to pay
business rates; that is not negotiable. To be reluctant to
reduce, and to resist reducing, VAT from 5% to 0%—the most
obvious, quickest and easiest universal solution—is perhaps a
little disingenuous. It seems to me that at least 60% of the
people who would benefit from that actually deserve it.
The other universal approach is what we do about universal
levies. That is something that we will have to review, and we
will have to look at how the burden can be moved to general
taxation. We need to recognise that those levies are subject to a
number of contracts, which means that they cannot be the first
thing that the Government fix. None the less, they need to be in
the bag of solutions.
The obvious targeted solution—I think that it is an “as well as”
rather than an “instead of”—is expanding the warm home discount,
changing the eligibility, taking it beyond winter and looking at
how we might make it generally taxpayer funded rather than funded
by those that contribute to it.
How are we going to pay for this? Of course, it is right that the
Government consider that. A number of things have been looked at,
including a windfall tax on the oil and energy industry. Only
this morning, there have been suggestions that fraudulent covid
payments claims, which the Government have committed to claw back
and at the moment are estimated at £4.3 billion, would go a long
way to covering the most urgent and easiest solution, which is to
reduce VAT from 5% to 0%. The VAT bill that the Treasury would
have to cover would be somewhere between £1.7 billion and £2
billion. Affordable is the wrong word, but it is the right thing
to do, and it is entirely affordable given the likely income that
the Government can expect as the economic forecast improves
across the country—although, sadly, not in my constituency—and
what they might get back from the covid claims.
Of course, the people who are most impacted are the ones who are
most vulnerable: the over 65s on fixed incomes and those in
poorly insulated houses, which is definitely the case in my
constituency. Those people are the most important, but they are
not the only ones. I ask the Government not just to look at this
as a matter of money, but to ask what is the right thing to do.
What is the timeframe in which they must act? It is now—it is
cold now. I ask the Government not only to acknowledge that there
is a problem but to put forward steps now, before the new cap is
introduced—and certainly long before April.
(in the Chair)
Will Members now keep to about five minutes, so that everybody
can speak?
2.54pm
(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 () 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—
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?
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.
3.00pm
(Makerfield) (Lab)
It is a pleasure to serve under your chairmanship, Sir Edward. I
congratulate the hon. Member for Caithness, Sutherland and Easter
Ross () on securing the debate.
People will die. Those are not my words; they are not the words
of an Opposition politician. They are the words of , who was voted the most
trusted man in Britain. Heating bills are going up by more than
£700 a year in April and they are likely to go up more in
October. According to the Joseph Rowntree Foundation, 54% of
single adults and 25% of single parents spend more than half
their income on heating. That is simply not sustainable,
especially when they are facing other increased costs. We are in
one of the world’s richest economies, yet people are looking at
the stark choice of eating or heating.
Wages are not keeping up with inflation, which in particular
penalises low-income people, who spend much more of their income
on essentials. The solution cannot be an increase in personal
debt. Christians Against Poverty has reported a 41% increase in
people requesting help from it in January, while searches for
fuel help on the Citizens Advice website have gone up
phenomenally. We have to find a way to deal with the debt crisis,
but the first step is to deal with the fuel price increase. That
is urgent. It has been caused by not only the higher wholesale
prices, but the explosion and lack of regulation in new energy
companies entering the market and offering low and unsustainable
prices to switchers. That is supposed to increase competition,
but it has always failed the most vulnerable and it penalises
many who cannot or do not want to switch. We have to look at
that.
What can we do? An immediate cut to VAT on fuel would be a quick
fix to start. I agree that it is a blunt instrument, but it is
easy, quick and would help a number of people. However, it cannot
be the only measure. We need to increase the warm home discount
and widen the eligibility for that scheme, and we need to fund it
from a different source. It cannot be funded from a levy on all
electricity bills, because that will penalise everybody
again.
I agree that we have to look at greener and more sustainable
means of producing electricity.
The hon. Lady is making an interesting speech. I want to pick up
on an interesting point made by the hon. Member for Bath (). At the moment, the UK
consumes about 41.8 GWe. People can check that on their telephone
apps quite easily. Some 16.9% of that electricity is from wind,
but that figure could be greater. Wind has been supported by the
Government’s contracts for difference. Is there not a question as
to why wind is being bundled into those energy prices? Why, as
the hon. Member for Bath suggested, are companies profiting by
bundling it into energy prices, when it is actually supported by
the Government? We all know that the marginal cost of producing
wind energy is zero. Our wind energy output could be greater, had
things been built on the Scottish islands with a minor bit of
Government planning over the years.
We need to look at all the ways in which energy is produced and
we need a mix of energy. We have to look at the green levy as
well. At the moment it is a levy on all bills, so the poorest are
paying the most.
We need to look at a social or below-cost tariff funded by the
energy industry: each gas or electricity supplier should pay a
sum into a central pot, based on the number of customers, which
could then be redistributed to people in fuel poverty. We should
not forget the people on prepayment meters; often, they are the
poorest and have been in difficulty with their bills before.
There is no way that people on prepayment meters should be paying
the amounts they are paying for gas and electricity even now.
There should be help and adequate protection for those
people.
We have to accept that people should spend only a certain
proportion of their income on energy. I am not saying where we
should draw the line, but more than 10% is far too much—without
even getting into the eye-watering figures we have heard from the
Joseph Rowntree Foundation.
People on low incomes budget very carefully, but it is a bit like
spinning plates—they pay one bill, they pay another bill, they
look at the next bill. With the cost of electricity and gas
forecast to increase so much, those plates will come crashing to
the ground. That is why we need to act now to make sure that
people are not, as one of my constituents said, out of their
minds with worry. People need real help to keep the heating on,
pay all their other bills and eat properly. If we are not
careful, it will not only be free socks that energy companies
offer; they will have to offer food parcels as well—ones that do
not need heating up.
3.05pm
(Strangford) (DUP)
It is a pleasure to serve under your chairmanship, Sir Edward.
You caught me off guard there; the hon. Member for Na h-Eileanan
an Iar () just asked if I was
next and I said, “No, I will be at the end.” However, I am
pleased to participate at any stage.
I commend the hon. Member for Caithness, Sutherland and Easter
Ross () on setting the scene so well.
It was a superb introduction, which I think we all endorse and
support, because we understand the issues. I am pleased to be
here to discuss this important matter. To say I have been
contacted by a few constituents about gas and electricity prices
would be an understatement. The emails to my office on this are
legion, so it is great to be here to air the concerns that are
important to the livelihoods of so many. I commend the hon.
Member for Newton Abbot (). We all know her
position and what happened to her in the last week. In the debate
in the Chamber on VAT, the hon. Lady felt constrained and
supported a cut. We should put that on the record.
Soaring global gas prices are fuelling a domestic living crisis
in the UK and could potentially have economy-wide implications.
Energy bills are set to rise by up to £2,000 per year from April,
which will be detrimental to those who are already in fuel
poverty—people who need help and on whom I will focus. Recent
statistic from National Energy Action reveal that an estimated
1.2 million to 1.5 million households across the UK will struggle
to pay their electricity or gas bills. Those figures equate to
almost the whole population of Northern Ireland, but are spread
across the United Kingdom, which is just astonishing. The most
vulnerable and those in poverty will be hit.
Back home in Northern Ireland in the past year, gas providers and
all six electricity providers have increased their prices. In
September, Firmus Energy announced that 50,000 people in its
Greater Belfast network would see their gas price rise by a
third. SSE Airtricity, which others have referred to, has
increased its gas prices by 21.8%, which adds about £112 to the
average household bill. Power NI announced that it will increase
its electricity price for domestic customers by 21.4% from the
start of this month. As we have seen in the press, prices for
commercial businesses will also rise by as much as 30% to 40%.
Some of the figures quoted by the hon. Member for Na h-Eileanan
an Iar tell us just how important this matter is. The figures are
truly astronomical and will have a significant impact on those
who already struggle to make ends meet.
An emergency fuel payment has been introduced in Northern Ireland
by the Minister for Communities, Deirdre Hargey, which I welcome.
It is a £200 payment made through the Bryson Charitable Group for
those who are vulnerable or in special circumstances and need
help. We have taken some steps in Northern Ireland to make that
happen. However, the Communities Minister and her respective
counterpart in this House must take more of a lead, instead of
leaving this responsibility solely to charities, which are doing
their very best but need help from our Government to deal with
the sheer volume of applications.
We must stand up for those who are directly affected. I stated in
the debate on VAT on household bills that I support the green
energy push as the only sustainable way forward, but at a time
when there is a fuel crisis and pressure on those in financial
distress, the £750 that has been referred to should be put on
hold for a short term to help our constituents find a way
forward. Viable ways to bring down prices must be considered. A
plan needs to be put in place to assist those who need help. E3G
suggests an extension and increase in winter fuel payments to
support those on pension credit and low incomes.
The Minister knows I respect him, and he is always very capable
and able to answer questions, but we need an indication of what
we can do to help. No doubt all Members are hearing concerns
about this issue. It is not about politics; it is about helping
those who need it most. I look to the Minister and the Government
for reassurance that more financial help will be considered.
It is the most vulnerable who will be most susceptible to gas,
electricity and oil prices rising more than in other countries.
Therefore, more needs to be done—this is an easy point to make,
but it is a fact—to help those who need it most amid the rising
electricity, gas and oil prices that we face now, and more so in
the future. The hon. Member for Caithness, Sutherland and Easter
Ross referred to new technology. Perhaps the Minister will say
something about that. It is not his direct responsibility, but
perhaps he could say how we might use new technology to reduce
prices.
3.10pm
(Rutherglen and Hamilton
West) (Ind)
It is a pleasure to serve under your chairmanship, Sir Edward. I
congratulate the hon. Member for Caithness, Sutherland and Easter
Ross () on securing today’s timely and
critical debate.
We should soon, hopefully, begin to see some economic recovery at
the end of a very long couple of years. Unfortunately, there are
too many people across the UK who cannot wait indefinitely for
things to improve. The cost of living crisis is here, and it is
not avoidable. When the price cap was reviewed and bills
subsequently rose, I was contacted by many constituents who were
worried about the impact it would have on their living costs. It
came just at the time when the universal credit uplift was
removed and furlough ended.
At the same time, the Government were struggling to keep on top
of state pension claims, and vulnerable pensioners were waiting
months for their first payment. There was nothing to address that
in the Chancellor’s autumn Budget, and the national insurance
hike was also missing from the announcement. It was not missing
from the minds of taxpayers, though, particularly those on lower
incomes, where every penny counts.
Next month we will hear from Ofgem, and its announcement that the
price cap will rise once more come April will be no surprise.
Recent projections estimate that household bills could rise by
over £700 a year. In my constituency, that is almost the
equivalent of the average monthly rent. It is almost an extra £59
added to bills each month. Some people might be privileged enough
not to miss £59 a month, but they are few and far between. The
average weekly family food shop is around £63. The average cost
of sending one child to five after-school club sessions is £62.
Are those the kinds of sacrifices the Government expect our
constituents to make to keep the heating on?
A coalition of 25 charities, including Age UK and Save the
Children, have warned that the rise could push the number of
families living in fuel poverty from 4 million to a massive 6
million. That is 6 million households, not individuals, although
if it were 6 million individuals it would not be acceptable
either. Industry has warned that it might take from 18 months to
three years for the energy crisis to resolve.
Has the hon. Lady experienced in her constituency an increase in
the number of people who are referred to food banks, as the hon.
Member for Newton Abbot described? I know I have in my
constituency, where the figure is up by almost two thirds on this
time last year. That indicates that there are real pressures on
those who did not apply in the past, but are applying now.
The hon. Gentleman is absolutely right. I think we all find the
rise in the use of food banks in our constituencies shocking. As
the hon. Member for Newton Abbot () said earlier, people who
would not normally have to attend a food bank who are having to
do so now, so there definitely is a squeeze on people’s
incomes.
These households cannot and should not have to wait up to three
years for the energy crisis to resolve, so what is the solution?
What can the Government realistically do? The answer does not lie
in defunding the BBC, or in small changes to the universal credit
taper rate. The only way to ease the burden on families up and
down the UK is to tackle the energy price crisis in a pragmatic,
meaningful way. Many options have been put forward to the
Government, and I urge them in the strongest terms to please
consider those options as a matter of urgency.
A reduction to the VAT rate on energy would provide some much
needed breathing space for those who need it most. The Government
are keen to keep repeating that, as an importer, we are held to
the whims of the current market’s rapid and substantial levels of
demand. To a great extent, that is true, but a VAT reduction is
within the Treasury’s gift and should be given. A windfall tax on
North sea oil and gas companies would also mean that it is not
the most vulnerable paying the price for this unusually and
regrettably high cost. After all, those companies are expected to
report almost record-breaking profit levels for this financial
year. They have unarguably benefitted considerably, whereas our
constituents have suffered and will continue to do so. Suspending
or reducing green levies on energy bills could help too, as could
expanding the warm home discount, which many hon. Members have
mentioned, or increasing universal credit.
Whatever route the Government decide to take, they must do
something; it would be heartbreaking to hear the same stories
from my constituents for another 18 months or three years when
there are solutions, should the Government choose to implement
them—I hope that they do.
3.15pm
(North Ayrshire and Arran)
(SNP)
I begin by thanking the hon. Member for Caithness, Sutherland and
Easter Ross () for securing this debate, and
for his excellent introduction to the issues involved. Our
constituents are genuinely worried about their gas and
electricity bills. In Scotland, 640,000 people —one in seven—find
that their energy bills are unaffordable at the moment, and those
bills are only going to rise. The energy crisis and the cost of
energy have once again thrown into sharp relief the glaring
inequalities in our society. Inflation is expected to rise to 6%,
energy costs are doubling and the national insurance hike is
about to kick in, so there is huge concern. Alongside and because
of that, we face a debt time bomb as credit card lending jumped
by 41% in recent months. Much of that borrowing was to pay for
household essentials.
As things stand, 6 million people will slide into fuel poverty
because of the rising cost of energy. That will impact on the
wider economy, driving up the cost of food, goods and other
services. As petrol prices increase, consumer prices will
continue to rise, and at a faster rate. Alongside that, we can
expect the cost of mortgage repayments to rise as well. We need
Government action to tackle this. It is real, and it is crushing
my constituents in North Ayrshire and Arran.
We have heard today about the need to cut VAT on energy bills and
on the warm home discount, to offer some respite to those who are
struggling right now. In 2016, the now Secretary of State for
Levelling Up, Housing and Communities, the right hon. Member for
Surrey Heath (), said:
“If we vote to leave the European Union, we can cut VAT on
domestic fuel to zero and that would save households about £60 a
year… that would help the poorest families most of all.”
Let us ask the Minister to do what his Government promised they
could and would do. We need action on that.
It is time for the Government to listen to the calls to provide
loans to energy companies, which are teetering on the brink, rule
out a future rise in the energy price cap and reintroduce the £20
universal credit uplift. Households need help right now. The
Scottish child payment could be replicated across the UK, and we
could deliver a low-income energy payment, introduce a real
living wage and raise the level of sick pay. There are a number
of things that the Government could do to help families who are
struggling right now.
We heard earlier that there are real, genuine and well-founded
worries about cold-related morbidity this winter. In this day and
age, in a state as rich as the UK, that is a cause for
embarrassment and shame. Even the Secretary of State for
Business, Energy and Industrial Strategy, the right hon. Member
for Spelthorne (), has admitted that it was a
“mistake” to close off the storage sites, which the Government
withdrew support from. Although these issues are global and there
are many global factors at play, not having sufficient storage
for energy leaves the UK much more exposed to price shocks than
it needs to be. We have the lowest storage capacity in all of
Europe—1% of all of Europe’s capacity. Any kind of protection we
might have had from dramatic price shocks has been given away by
this Government. That is really not acceptable.
The UK is going through this whole situation while suffering from
the worst levels of poverty and inequality in north-west Europe;
in-work poverty is at record levels this century. We really need
to get a grip here and listen to our constituents’ problems. We
need fundamental and radical measures to protect our
constituents. Some have no idea how they are going to cope with
the price rises hitting their doorsteps. We have heard about the
differentials in energy transmission costs. Those need to be
tackled, but when will they be? We need an equitable energy
policy that works for all consumers, and I am really looking
forward to hearing the Minister’s response.
3.20pm
(Oxford West and Abingdon)
(LD)
It is a pleasure to serve under your chairmanship, Sir Edward. I
start by congratulating my dear hon. Friend the Member for
Caithness, Sutherland and Easter Ross () on bringing forward this
important debate. I also commend the hon. Member for Newton Abbot
(), who this week has had
the backbone to stand up for her constituents on the cost of
living crisis, while the Prime Minister seems to have
inadvertently misled himself as to whether or not he attended a
party. That does rather stick in the throat and perhaps shows the
priorities of this Government.
This issue really matters because it matters to millions. Like
many, I have received emails from concerned constituents. One,
Margaret, is desperately concerned. Some 3,000 people in Oxford
West and Abingdon are already classed as being in fuel poverty,
and she is concerned about how many more are going to succumb.
She is right to be. Jessica, who lives literally 10 minutes down
the road from Margaret, emailed me on the same day. She is
already classed as being in fuel poverty. She is considered
vulnerable by her energy supplier. She currently pays £85 a month
for her energy and has been told that that is going to increase
to £200 a month—she says that there is no way she can afford
those kinds of prices. Dave, who is on £10 an hour, contacted me
with a similar story and Jane, who is a pensioner, told me that
when she looks at what she will have to pay, she knows that she
simply does not have the money. I ask the Minister: what are
these people meant to do?
(Manchester, Gorton) (Lab)
I also welcome this debate and thank the hon. Member for
Caithness, Sutherland and Easter Ross () for securing it. My
constituency of Manchester, Gorton has long faced a fuel poverty
crisis. In 2019, almost a quarter of families there were in fuel
poverty; given current concerns about sky-rocketing fuel bills,
the number will now undoubtedly be substantially higher. Does the
hon. Member agree that this issue predates today’s cost of living
crisis and that this Government have overseen a dramatic rise in
fuel poverty without taking any of the action necessary to
mitigate it?
I thank the hon. Gentleman for his intervention, and I absolutely
agree. I am also deeply concerned that the problem will get worse
over the next few weeks. We have only to read the emails or
listen to the stories to be moved by them. , who was mentioned earlier,
dedicated an entire episode of his “Martin Lewis Money Show Live”
to energy prices the other day. Afterwards, he tweeted that he
was “near tears” after being unable to help a single mother, who
had recently lost her partner, to afford her energy bills. He
called on the Government to do more, and I agree with Martin.
The Minister will have heard many good suggestions today. My hon.
Friend the Member for Caithness, Sutherland and Easter Ross
mentioned cutting VAT on bills, a social tariff and an increase
in the winter fuel allowance. Age UK has suggested a £50 one-off
payment to those eligible for the cold weather payment and a
doubling of household support. All those could work, and we have
to ask the question: when are they going to come in? People are
already hurting now.
There is also a secondary question, and a correct one: who is
going to pay for it? Even more galling than all I have discussed
is that after hearing all these stories of hardship and
heartache, Gazprom announced a dividend of £179 million. Energy
giants such as Gazprom are profiteering from the misfortunes of
others. Frankly, the Government are complicit because they are
letting them.
The hon. Lady mentions Gazprom and how the UK is in hock to such
gas producers from outside the UK. If we cast our minds back, do
we not see that a mistake of George Osborne’s penny-pinching,
bean-counting style of five, six or seven years ago was his
reluctance to use the climate change levy to invest in renewables
to make us less dependent on energy from overseas and give us
more renewable capacity, which could have been built here? For
the sake of a few pennies, it was his argument—I disputed it at
the time, when I was the Chair of the Energy and Climate Change
Committee—that we should not do so. Now the customers of the UK
are on the hook for hundreds and hundreds of pounds each and
every year.
I could not agree more with the hon. Gentleman. It is for exactly
that strategic reason that the Liberal Democrats are calling for
a Robin Hood tax on the super-profits of oil and gas companies.
This one-off levy would raise over £5 billion to support
households in need of help. Surely that is the fairest way to
help the worst off.
However, there is a wider geopolitical point. Gazprom, as we
know, is owned by the Russian state, and Gazprom, at the behest
of Putin, sent 25% less gas than before to Europe in the last
year. We all know that Putin is playing politics with our energy
prices, and that is making all of us and our constituents suffer.
On one hand, the Government say they will not reward Russia for
aggression; on the other hand, by doing nothing about the
situation, they are allowing Putin to manipulate the energy
market and he is being rewarded for it. We believe that
instituting a Robin Hood tax would have many advantages, but one
would be to send a powerful message to Putin in Moscow: “You
cannot interfere with our energy market”.
Fundamentally—this comes to the point that the hon. Member for Na
h-Eileanan an Iar () made—in the long
term we need to wean this country, and indeed the entire world,
off gas and oil altogether as soon as possible. That is why the
answer to this problem is not to cut investment in green energy,
as some have suggested. Whether it comes into general taxation or
there is another way to fund it—that is the conversation that
needs to be had—we need to increase investment in renewable
energy, because to protect people now we need to think
strategically in the medium and long term. The answer is to end
our dependency on rogue states and protect the poorest in our
communities.
I just wonder how a Robin Hood tax on oil companies operating in
the North sea would affect reliance on Putin or Gazprom, or how
it would affect Gazprom’s share price or dividend. Those things
seem to me to be almost diametrically opposite.
We need to ensure that there is fairness in the system, and we
know that all oil and gas companies have made enormous profits.
My right hon. Friend the Member for Orkney and Shetland (Mr
Carmichael) made the point earlier about customers who had been
loyal to oil and gas companies but who now face high bills, when
the companies themselves are profiteering. There are many reasons
why a Robin Hood tax would work, but one is the geopolitical
point that I am making today.
3.28pm
(Kilmarnock and Loudoun)
(SNP)
It is a pleasure, Sir Edward, to serve under your
chairmanship.
As others have done, I congratulate the hon. Member for
Caithness, Sutherland and Easter Ross () on securing this debate. He
highlighted that the gas and electricity issue is a UK-wide one,
but he also made relevant and pertinent points about just how
much it affects rural Scotland, and in particular his own
constituency. His illustration of the effect that it will have on
his constituent who is sitting in the Public Gallery, and on an
already struggling hospitality industry, was really stark. I hope
that the Minister thought the same and pays heed to what was
said.
I thank all other right hon. and hon. Members for their
contributions. A clear theme seemed to come from all the
contributions: basically, we have this cost-of-living crisis and
the UK Government are doing nothing about it. The UK Government
really need to start taking action.
The UK Government have sat back as household incomes have dropped
in real terms by up to £1,200 and energy bills are sky-rocketing.
We have had the broken promises about lower energy bills post
Brexit, and yet when Labour proposed a 5% cut in VAT in last
week’s Opposition day debate, we had the absurd situation of all
the Tory Brexiter MPs questioning the validity of such a VAT cut
and voting it down. That makes no sense to me, given the broken
promises. As a couple of other Members have done, I pay tribute
to the hon. Member for Newton Abbot (), who followed the
courage of her convictions and voted for something that her Prime
Minister had promised us.
To return to the theme, without further action, a real crisis is
looming—if it is not already upon us, if truth be told. As others
have said, it is not credible for the cap to rise to
approximately £2,000 per year in April. Previously, National
Energy Action estimated there were 4.5 million fuel-poor
households in the UK. When the October cap increased, that added
a further 500,000. If the cap goes ahead in April as predicted,
we will end up with 6 million fuel-poor households in the UK.
That is a 33% increase in the number of fuel-poor households in
two overnight increments. It is disgraceful, and something needs
to be done to prevent it getting worse.
Worse, National Energy Action previously estimated that there are
roughly 10,000 premature deaths a year arising from fuel poverty.
How many more premature deaths are likely to occur, given the
number of households that will be plunged further into fuel
poverty? One cohort who have not been mentioned so far today are
the terminally ill, who suffer badly from fuel poverty. I cannot
think of anything more distressing than someone who wanted to
spend the end of their life in a dignified way in their own home
being forced, because of fuel poverty, to spend their final days
in a hospice. It is distressing for them and for their family,
and that is the real impact of fuel poverty.
A common theme has been the impact of a VAT holiday on fuel
Bills, which it is estimated would save £80 a year, so on its own
it is insufficient—it is hardly even a sticking plaster—but it
could provide a small amount of help.
It is critical that the UK Government take proactive action to
ensure that this cap rise is not passed on to consumers in April,
so direct intervention is required. Some of that intervention
could be in the form of loans, to smooth out the £2 billion of
additional costs that are estimated to have arisen from the 28
energy companies that went bust in 2021—money that will otherwise
be lumped on to consumers’ bills. Again, that is due to the
failure of the Government and the regulator.
As others have said, a proper debate is required about the merits
of different levies currently on our electricity bills, which
contribute 23% of our bills, according to Ofgem. The reality is
that these levies are a regressive tax and general taxation is
much fairer. At the moment, the Government are putting out to
tender the Contracts for Difference fourth allocation round,
which commit £265 million per year for renewable energy projects.
I am all in favour of that financial commitment, because we need
more renewable energy, but again that money will be lumped
directly on to our electricity bills, where it disproportionately
affects lower income households and does not form part of a wider
just transition.
Last week, the Nuclear Energy (Financing) Bill was considered on
Report. The impact assessment for the Bill estimates the capital
and financing costs to be as high as £63 billion for a new
nuclear power station. Again, it is proposed that that will be
added to our energy bills.
Does my hon. Friend agree that this Government, going back to
2015, have taken their eye off the ball? They have scrapped the
Department of Energy and have lost focus on energy. Then they
have had 10 years trying to do a smart meter roll-out, which has
been bungled, depriving consumers of information about when they
could get the best tariffs, which adds to the present problems.
The Government have to own the responsibility of the trouble that
UK consumers find themselves in at the moment.
I agree wholeheartedly that the Government have taken their eye
off the ball. The previous Prime Minister, , talked about cutting out all
the “green crap”. That set back the renewable industry badly. Not
only did they scrap the Department of Energy but, given that we
now have a legally binding target of net zero by 2050, it beggars
belief that there is not a stand-alone Department for energy and
climate change, or for energy and net zero. The Government need
to take responsibility on that.
I have a question on nuclear for the hon. Member for Caithness,
Sutherland and Easter Ross on small modular reactors. Rolls-Royce
is looking for something like £30 billion in capital costs to
deliver 15 or 16 small modular reactors. Again, that is money
that will be lumped on to our bills. With the financing on top,
the costs are eye-watering. Nuclear is not a solution; renewable
energy is the solution.
In terms of direct spending, the Treasury allocated £1.7 billion
in the Budget for the development of Sizewell C. That is
something like £60 from every household in Great Britain going
towards a new nuclear station, instead of helping them pay their
bills. That £1.7 billion could offset the cap for the estimated 3
million households that are eligible for the warm home discount
this year, or completely fund a VAT holiday for one year for
everybody. Under present policies, not only are the UK Government
not doing anything; they are making things worse with their
long-term planning. At the moment, costs will be added to energy
bills, making things more difficult.
As the hon. Member for Caithness, Sutherland and Easter Ross
said, people in the Scottish highlands not only have more
challenging weather to deal with and risk being off the gas grid,
which makes fuel immediately more expensive, but pay up to £400
more to heat their homes because they are on restricted
meters—paying up to 4p more per unit of electricity. Why does the
Minister think that it is fair that this surcharge is added to an
area that is actually supplying energy to the rest of the UK?
Direct intervention could be paid for through a windfall tax on
the Treasury. As our energy bills have increased, so have the VAT
returns to the Treasury. As fuel prices have increased, the
Treasury has raked in more money in fuel duty and VAT. The
November Budget’s Red Book showed that, over the lifetime of this
Parliament, North sea oil and gas revenues will contribute an
extra £6 billion compared to what was predicted just in March
2021. The Treasury should unlock the extra money that it is
getting from the North sea.
It is a subsidy from Scotland.
Yes. It is the broad shoulders of the UK working in the opposite
way from the way in which we are always told it is supposed to
work.
By contrast, the Scottish Government are doing their best while
operating on a fixed budget. The hon. Member for Caithness,
Sutherland and Easter Ross can at least tell his constituents in
Scotland that they can benefit as follows. The Scottish
Government’s child winter heating assistance, introduced in 2020,
supports the families of around 14,000 of the most seriously
disabled children and young people with automatic payments of
£200 a year. Low income winter heating assistance, which will
replace the UK Government’s cold weather payment, will give
400,000 low-income households a guaranteed £50 payment, instead
of that “maybe” £25 payment.
There is an economic point here. The money that the hon.
Gentleman is talking about, whichever level of Government is
giving it to individuals or businesses to see them through all of
this, is money that, as well as giving assurance and comfort,
ultimately will be spent in shops and other businesses, and will
boost local economies. I might suggest that the Government can
then recoup that through corporation tax and other means.
I agree. People on lower incomes are the ones who spend all of
their disposable income, and they spend it in local businesses
and support local businesses. For families in Scotland, there is
also the game-changing £20 a week Scottish child payment. As my
hon. Friend the Member for North Ayrshire and Arran () said, that compares with
the heartless £20 a week cut to universal credit by the UK
Government. Again, that universal credit uplift was spent in
local businesses. It was direct support.
It is absurd that Scotland has paid £375 billion of oil and gas
revenues to the Exchequer and that it has been squandered over
the years. There should have been an oil and gas fund, which
would have provided an additional buffer that could have been
used in this time of need. It is time that the UK Government take
short-term action to deal with the cost of living crisis and
energy crisis, but there needs to be a change in long-term
planning, for a fair and equitable energy policy. Perhaps that is
why Scotland needs independence, so that we can do things
differently.
3.39pm
(Southampton, Test)
(Lab)
I congratulate the hon. Member for Caithness, Sutherland and
Easter Ross () 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 () 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 () 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.
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.
Dr Whitehead
The hon. Lady has anticipated exactly what I will say in a
moment. One of the wider issues about the energy crisis is how,
regardless of where someone gets their energy from, what sources
they get it from and who makes the energy, it is all delineated
in gas prices eventually, so they pay what they would have done
had they been a gas-to-electricity customer, even if they are
not. Essentially, the whole market is now delineated—the
wholesale market and the balancing market—around gas prices being
the price-maker.
Hon. Members mentioned that the long-term issue is that we need
to get off gas and go further on renewables, but—I put this
straight at the Government’s door—we need urgently to reform the
wholesale energy market and balancing market so that the market
is not delineated in gas and it works in a way that properly
reflects the increasingly dominant form of energy production that
is renewables. Had we done that, although the gas price issue
would have been considerable, it would not have been as damaging
and as universal as it has been under the present
circumstances.
I call on the Government to undertake measures that will take
that terrible burden off the back of customers in the short term,
ensuring that they are not subject, as they look to be at
present, to the £600 or so increase that is likely to come their
way in April, and indeed further increases that are likely to
come their way as the price cap reflects the current price dome
in gas.
I ask the Government to look seriously in the longer term at how
the market has become so dependent on gas, how we have become so
vulnerable to it, and how we can take measures to protect our
industry and country from such volatility in the future by
reorganising our market so that customers are substantially
protected from it. This is an issue not just for domestic
customers; it is a substantial issue for industry as well, which
is groaning under the current price increases and, among other
things, needs protection. I personally think that we need a price
cap measure on volatile prices from outside the UK coming into
the UK for industrial purposes, so that industry can have some
certainty ahead of it regarding what prices it will pay for
gas.
I hope that the Minister will have answers on all those issues. I
know that the Government have been holding discussions with the
industry about measures that might be taken, but the concern
mentioned by hon. Members this afternoon is that nothing
whatsoever has come out of that so far, and time is running out.
The longer we do not know what we are going to do, the worse the
crisis becomes. I hope the Minister can tell us what is to be
done about this energy crisis.
3.50pm
The Minister for Energy, Clean Growth and Climate Change ()
I congratulate the hon. Member for Caithness, Sutherland and
Easter Ross () on securing this important
debate. We have heard from across the United Kingdom, from all
nations, of constituents’ concerns about this issue, and rightly
so, because this is of huge concern to all our constituents.
The recent rise in energy prices has been driven by the global
increase in the price of wholesale gas, and the demand for gas
that has grown as we and other nations recover from the covid-19
pandemic. Consequently, higher wholesale gas prices have been
observed internationally throughout 2021 and into this year. In
addition, greater liquified natural gas demand in Asia, upstream
gas production, maintenance affecting supply and capacity during
last summer, increased demand for gas in electricity generation,
as we phase out coal, particularly in Europe, have also
contributed to rising prices.
The first point I want to make is that that has not had an impact
on our energy security, a point raised by my hon. Friend the
Member for South Thanet () and others. The
Government continue to work closely with Ofgem, the National Grid
and other key industry organisations to monitor energy supply and
demand. We remain confident that Great Britain’s energy security
will be maintained. National Grid’s gas and electricity winter
outlooks, published in October, indicate that there will be
sufficient gas and electricity supply in all of its modelled
supply and demand scenarios.
The first part is all about delivering renewables—
On the point about domestic security, the Minister will be aware
that 5.6 % of the UK’s energy need, according to the GridCarbon
app, comes from overseas. Does the Minister not think that, in
the next round of CfDs, it should be paramount that the projects
that could have happened over the past number of years,
particularly in the Scottish islands, actually get under way, so
that there is less reliance on the continent and Scandinavia for
some of that energy?
That is exactly what we are doing. The new contract for
difference auction that was launched in September is as big as
the previous three auctions, when it comes to renewables. Our
dependence on foreign gas is less than 20%. Our dependence on gas
from Russia within that is less than 3% or 4%. That is action
that we have already taken.
Our long-term strategy is about finding effective replacements
for fossil fuels, which are reliable and do not expose us to the
volatility of international commodity markets. We already have
the world’s largest capacity in offshore wind, but we are not
resting on our laurels, because we are going to quadruple that
over the course of the next decade. That is all a major step
towards delivering the Government’s increased ambition on
renewables.
In answer to the hon. Member for Strangford () on new technology, it is both renewables and
nuclear, to which I will turn briefly, which is a key plank in
the Prime Minister’s 10-point plan in the energy White Paper and
the legislation that is passing through the House of Commons. I
will return in a moment to the comments from the hon. Member for
Kilmarnock and Loudoun ().
In the brief time of six minutes available to me, I will answer
some of the points raised. The hon. Member for Caithness,
Sutherland and Easter Ross referred to his constituent, the
businessman Andrew Mackay. I am happy to engage with the hon.
Member on behalf of his constituent. Business bills tend to be
set on long-term contracts, which give a certain insulation from
volatile prices, at least until the point where the contract
comes up for renewal.
On rural support, 15% of the energy company obligation—ECO3—must
be delivered to households in rural areas. We consulted in the
summer of last year on its successor scheme—ECO4—for delivering
energy efficiency heating measures in off-grid homes in Scotland
and Wales. We are already extending the warm home discount from
about 2 million to 3 million households, from £140 to £150. It is
worth pointing out, as the hon. Member for Kilmarnock and Loudoun
knows well, that the warm home discount is not a zero-cost
option. There are people who have to pay additional money on
their bills to support recipients of the warm home discount, so
it is not something that we can just take action on with the
stroke of a pen, like the Labour motion last week—the
trebling—without considering the consequences.
The hon. Member for Newton Abbot () is absolutely right on
cost-of-living issues, but let us look at a lot of what is
happening in this country. We have record figures for those in
employment. We have the national living wage increase. We have
beneficial changes in the universal credit taper rate and so on.
All these things are providing support for people facing
cost-of-living issues. I totally appreciate and am totally with
the hon. Lady on the impact that energy bills may be having and
will be having later this year. On levies and on the heat and
buildings strategy, we said that we would publish a fairness and
affordability call for evidence, which will set out the options
to help rebalance electricity and gas prices and to support green
choices, with a view to taking decisions in this year—2022.
The hon. Member for Bath () said that we are scrapping
the ECO scheme. No—as I have already pointed out, we are moving
from the ECO3 scheme to the ECO4 scheme. I guess, Sir Edward,
technically you may describe that as scrapping it, but we see it
as improving it and building on it. The hon. Lady called for a
windfall tax. She praised German energy company E.ON for doing a
great job, and it does do a great job, but she and other Members
have to be careful when they call for a windfall tax while also
praising those investing in the energy sector. She has to be
mindful of what impact any windfall tax would have on those
investment rates.
The hon. Member for Makerfield () made a very moving speech
about the situation for low-income households and prepayment
customers. There are 4 million prepayment customers. Ofgem
obviously put in place licensing conditions to protect prepayment
customers at risk—particularly of self-disconnection—including
dedicated helplines for prepayment meter customers. There is a
lot of support in place, but the issue of PPM customers is
something that we keep a very, very close eye on in the
Department for Business, Energy and Industrial Strategy, and I
know Ofgem does as well.
The hon. Member for Strangford () wanted an indication of what the Government are
doing to help. We are doing a lot. We have in place winter fuel
payments of between £100 and £300. I have already discussed the
warm home discount. There are the cold weather payments. There is
the £421 million household support fund. There is a lot of
support. I say that while recognising Northern Ireland’s
particular status as regards electricity. Obviously, a lot of
that is devolved to the Northern Ireland Executive.
The hon. Member for Rutherglen and Hamilton West () called for a VAT
reduction. That is obviously, as she rightly pointed out, a
matter for Her Majesty’s Treasury. It is not a very targeted way
of supporting vulnerable customers. We heard from the hon. Member
for North Ayrshire and Arran (). I do not think this is
really the right place for a Brexit debate, but she said that
leaving the EU allows us to cut VAT on domestic fuel. Her policy
of rejoining the EU would surely negate that policy.
Will the Minister give way?
No. I have only two minutes left. The hon. Lady asked a question
about storage, and I repeat that the current issue is not a
question of supply. Storage helps if there are supply issues, but
we have an issue relating to price. Storage does not protect,
generally, from price shocks if the supply is secure, and I have
already said that our supply is secure.
The hon. Member for Oxford West and Abingdon () made an extraordinary speech,
in which she said, I think, a windfall tax would be a powerful
message to Moscow. I thought the intervention by the hon. Member
for Kilmarnock and Loudoun slightly exposed that. If the hon.
Member for Oxford West and Abingdon can show me how to design a
windfall tax that would clobber Gazprom, I am all ears. Bearing
in mind that our imports of gas from Russia are almost entirely
liquefied natural gas and only less than a handful of percentage
points, if the hon. Lady can show me how her Robin Hood tax would
have an impact on Gazprom, I am all ears. We are not dependent
on—she said “rogue states”. More than half of our gas imports
come from Norway. I do not think anything she is proposing is
going to protect us from rogue states.
The hon. Member for Kilmarnock and Loudoun made a number of
familiar points on supplier of last resort costs. SoLR is there
to protect customers when their energy supplier ceases to trade,
so that they can transfer their account.
(in the Chair)
Order. Minister, do you want to give Jamie a few seconds?
Okay, I will give him a few seconds, Sir Edward. On oil and gas
and nuclear, I am constantly baffled by the SNP’s policy. It is
anti-oil and gas. It is anti-nuclear. It is hard to know what it
is actually in favour of in Scotland when it comes to supporting
Scotland’s energy customers and energy suppliers. Finally, I note
that we have not heard anything about Labour energy policy in the
week since the party’s disastrous four-page, convoluted student
union motion in the main Chamber last Tuesday. I thank everyone
for participating in the debate, and I look forward to further
engagement.
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