I have been lucky in recent weeks with Mr. Speaker’s roulette wheel—this is the second major debate that I have secured since the new year. It is topical, and the matter has been discussed in the House. Debate on the Energy Bill has been concerned primarily with the mix of suppliers and particularly the role of nuclear energy, but it has touched on fuel poverty. There was a debate here in Westminster Hall on fuel poverty on 8 January, secured by the hon. Member for Edinburgh, North and Leith (Mark Lazarowicz). Many of the right points were made, and since then the fuel poverty advisory group has delivered its report and there have been important discussions about the matter. I hope to add value by advancing some of the arguments made.
I wish to raise three matters. The first, and biggest, is whether energy prices are overwhelmingly driven by increased costs or whether there is an element of a breakdown in competition, unfair competition or monopoly profit. That is an important point that we have not properly pursued, although the Chancellor intervened with Ofgem. The debate presents an opportunity to pursue it in detail. I notice that the hon. Member for Selby (Mr. Grogan) is here. He will probably speak for himself, but he has tabled a motion in the past few days recommending a move towards the Competition Commission. I shall argue that he is right that that needs to happen, and I shall make the argument for that step by step.
The second matter that I wish to touch on is whether the Government could do something about costs and prices directly or indirectly through the European Union. I shall briefly mention gas storage, liquefied natural gas terminals and access to the European Union market. Thirdly, and finally, I shall return to something that has been discussed here often—fuel poverty and the role of the social tariff.
The context of the debate is substantial increases in domestic energy prices—I shall be talking about domestic energy, not transport. Four of the big six producers have increased their prices in January, and E.ON is thought to be following fairly soon. There has been a 17 per cent. increase in the price of gas and a 12 per cent. increase in the price of electricity. In a five-year period, there has been an 85 per cent. increase in the price of gas and a 63 per cent. increase in the price of electricity. Combined bills have gone up by 76 per cent. over that five-year period, and in the past few days we have crossed the psychological threshold of an average household energy bill being more than £1,000.
Associated with that are various symptoms of hardship. There were an estimated 420,000 additional cases of fuel poverty in January alone, based on the conventional definition of spending more than 10 per cent. of income on fuel. Worryingly, there has also been a rise in disconnections. Many of us thought that that problem had been solved by Government intervention some years ago, but disconnections have almost doubled in the past two years as a result of stress on prices.
The conventional explanation for the rise in prices is that it is linked to cost. That is clearly a major factor—it would be unreasonable to suggest otherwise. There have been big increases in international prices of oil, gas and coal. Gas is particularly important in the UK electricity sector, and prices are determined in a peculiar way at the end of the interconnector, linked with oil prices in Europe after a time lag of three to six months. External factors such as rising world prices are clearly a major influence. As the Minister has recently reminded us, there are additional factors such as the fact that we are opting for strong environmental policies, which impose on producers costs that are inevitably passed on. We must understand that. As he has pointed out, the annual cost of the renewable energy obligation is about £1 billion a year, and in addition there are the costs of energy efficiency undertakings. That all adds to costs.
The big question I want to pose is whether that is a satisfactory explanation. Is that all there is, or is there more to it? Some 80 per cent. of the public believe that they are being ripped off by the energy companies, according to a YouGov survey in the past few weeks. Is that right, and a fair assessment? Clearly the Chancellor of the Exchequer is worried that there is something else involved, otherwise he would not have approached Ofgem. I want to go through the argument about whether there has been a failure of competition policy that needs action.
The first point in the argument is that there is good research. A body called Cornwall Energy Associates carried out a meticulous, detailed study commissioned by Unison, the trade union, on the period 2003 to 2006. It tried to explain the increase in electricity and gas prices in that period and concluded that gas prices were pretty well determined by cost increases and were not a particular problem. On household budgets as a whole, it found that only 72 per cent. of the increase could be explained by cost increases and that there was a big unexplained differential.
The study meticulously went through all the contributory factors and concluded that the only plausible explanation was an increase in margins by the integrated energy companies that supply electricity. The study did not take a dogmatic, ideological view about that and stated that it was partly understandable, because profit margins had been very low in 2003 and it was understandable to try to rebuild them. However, the key conclusion was that as a result of their dominance in the market, the energy producers were able to push up their prices faster than their costs. There did not seem to be any other obvious explanation.
The hon. Gentleman will know that so far, Ofgem has rebutted and brushed away the concerns that people have raised. He is a distinguished economist of some standing. Does he agree that a market that is served by just six main suppliers is rather more likely to be oligopolistic than one served by the 20 suppliers that we had immediately just after so-called energy liberalisation?
The hon. Gentleman is right, and anticipates what I am going on to say. There has been a fundamental change in the market in the 20 years since privatisation. Initially there were two electricity generators, one integrated gas producer and a lot of regional monopolies. We then had a proliferation of competitors, but the industry has since consolidated and in the past 10 years has moved from 20 competitors to six vertically integrated companies.
The question is whether that matters and why. It matters because it has a major impact on new companies trying to enter the industry. I have had correspondence from a company called BizzEnergy, which is a specialist producer trying to sell wholesale energy supplies to small-scale business. In its letter to me and the attached note—the Minister probably has it, because the company has campaigned actively—it states:
“One of the biggest concerns facing companies like BizzEnergy is that with the ‘Big 6’ having their own power stations, with direct access to energy sources…this leads to market inconsistencies and aids the anti-competitive structure of the market…The liquidity of the wholesale market is currently very poor and sporadic due, in part, to this level of vertical integration.”
“This has a direct impact on independent energy suppliers such as BizzEnergy and its potential new customers.”
BizzEnergy is not the only company that is making that point. British Energy, which is the big nuclear energy company, has made a similar point about the dominating influence of the six integrated companies and their distorting effect. I do not wish to open the argument about nuclear power, but that is clearly testimony to the working of the market.
I congratulate the hon. Gentleman on securing the debate. Does he agree that it is a remarkable coincidence that the six major companies have managed to increase their costs relatively similarly? The increases have all been about eight, nine or 10 times the rate of inflation. At a time when we are capping public sector worker pay, should we not consider capping those increases?
I agree with the spirit of the hon. Gentleman’s intervention, although it is not strictly true: it is interesting that one of the six, Scottish and Southern, has not yet increased its prices. It argues that profits have accrued in the industry through the issue of emissions trading licences, and it is using them to hold down its prices. However, the spirit of the hon. Gentleman’s question is right.
The next element in the argument is that the industry, supported by Ofgem, argues that we do not need to worry about any of that or those six producers, because consumers switch suppliers, which eats away at any profit margins that arise. They argue that 50 per cent. of households have switched suppliers and that households can make mark-ups of up to £100. They say, “It is a good market, so why should we worry about it?” However, when we probe a little further, it is clear that the supposedly competitive retail market does not work as it is supposed to. Half of households have never switched—mine is one of them—perhaps because of conservatism or age. For the 6 million households with pre-payment meters, it is often, indeed invariably, impossible to switch because they are locked into a debt repayment arrangement with their supplier, so they cannot exercise that choice.
The most damaging evidence on this issue came out of recent research by the university of East Anglia, which found that a third of people who had switched ended up worse off than they were before. They had made the wrong choice. It is easy to understand why. Many people change as a result of a calculated, thoughtful exercise, but many change under pressure. I have had endless correspondence with Scottish and Southern about old ladies in my constituency being browbeaten into changing their contracts and making bad choices. For all those reasons, one has to be sceptical of the Ofgem argument that there is a functioning market. It functions in part, but it does not function brilliantly.
The final part of the argument is the industry’s claims that, because of the competition, British producers supply cheap power and gas. That is certainly true of British gas, which has historically been relatively cheap. The tables coming from the Minister’s Department suggest that British electricity prices are roughly in the middle of the European range, but that is misleading, because those prices are after tax, and the British VAT rate is one of the lowest in Europe; it is 20 per cent. in many countries. Using the pre-tax cost, Britain has the fifth-highest electricity prices in the Union, so something is not working.
I congratulate the hon. Gentleman on securing this important debate. Does he agree that one problem with the current energy market is that Britain has so little influence over it? We depend increasingly on foreign-owned companies that clearly have interests other than serving the British people to whom they supply energy.
I am not sure that I agree. There is a problem with energy suppliers—I shall come to my conclusion on that point in a moment, which is similar to that of the hon. Member for Selby. However, I do not think there is an economic, nationalist argument. I am not sure that having Union flags flying in the board rooms of energy companies would necessarily alter their prices. It is not a question of the nationality of owners, but there is a problem. That has been recognised by many in the competition business.
Stephen Davies, a leading adviser to the Office of Fair Trading, has described the Ofgem approach as misguided and misinformed, and argues that there is a serious problem. Surprisingly, the issue has been taken up by the Competition Commission. The problems are complex. We are not talking about price fixing and crude cartels, but there is a competition issue. The head of the commission has argued that the purpose of its market investigations is
“to enable the competition authorities to take an in-depth look at markets where competition is thought to be not working well, but where the problem does not at first sight appear to emanate from the dominant position of a single firm or the existence of hard core cartels.”
That describes the energy sector pretty well. He then makes a slightly odd remark:
“Despite the CC’s powerful armoury of regulatory and competition enforcement powers, its involvement in regulated sectors…has been minimal. Whatever the justification…the fact is that regulators are not making references to the CC for market investigations.”
I want to know why the commission is not being involved. It clearly has the competence and powers, and is willing to look into the issue. It feels that Ofgem is not making a reference that it should make, and many questions need to be answered, so why not have an investigation?
One aspect of Ofgem’s conclusions is right: it accepts that there is monopoly profit in the market. That arises from the gains that producers make from being gifted trading certificates under the European emissions trading system. In response to the Chancellor’s intervention a few days ago, Ofgem estimated that the energy industry will benefit from a windfall worth £9 billion of trade permits under the scheme over a five-year period. Effectively, there is a gift to the industry of £9 billion over five years because companies are being given the permits free of charge. That is a pure windfall and has nothing to do with efficiency.
A series of questions emerge from that situation. First, what are the Government doing about it? Does the Minister intend to implement Ofgem’s recommendation that the windfall should be channelled—it did not suggest a mechanism—to those who are hardest hit by the energy price rises? Should companies try to ensure that it is passed on to all consumers? I know that he is trying to introduce an auction system; I think that 7 per cent. will be auctioned in the next few years, but why only 7 per cent.? Why not 17, 70 or 100 per cent.? It is a free gift to producers, after all. Why is it not being auctioned as one would expect in a market? I expect that he will say that if it were auctioned, companies might try to pass the cost on to consumers, thus pushing up costs even more, but that is why the problem has to be dealt with in conjunction with a reference to the Competition Commission. Different aspects need to be considered together.
The Chancellor will be familiar with the concept of windfall gains because the Treasury will have received about £500 million extra in VAT receipts in the past five years because of the increases in electricity and gas prices. Why cannot some of that be recycled into Warm Front, which is losing about 25 per cent. of current expenditure levels and Government support?
That is a good point that I intend to discuss later. There are windfall taxes, although we do not call them that any more, such as the petroleum revenue tax. Other countries are doing that. Spain is trying to retrieve some of the windfall from the European trading certificates, although I do not know what mechanism it is using. It may be similar to that which the hon. Gentleman describes.
My next set of questions is about what the Government could or should be doing regarding other aspects of energy costs, starting with gas storage. An odd feature of Britain is that we have low levels of gas storage in comparison with other EU countries. I think that the figure is still five days, as opposed to more than 50, but it might have changed. We have one major storage at the Rough field, going back to the 1980s. In a world in which prices are volatile and a lot of imports are increasingly required, storage becomes important to even out booms and busts in prices, so why is ours so low? Could anything be done about it? As someone who came out of the oil industry, it puzzles me that we have a mandated strategic reserve for oil—under an international agreement, companies have to provide a strategic reserve—but none for gas. Gas affects households and industry as opposed to just transport, so it is just as strategic as oil—why do we take a different approach to it? Is there anything stopping the Government having such a policy? Does it have to be done internationally? Could it be done domestically? What are the practicalities of it? Surely, if we are interested in having greater stability of gas prices, that is one way of achieving it.
My second question relates specifically to diversity of supplies. A recent and, indeed, welcome development is that instead of being dependent on the end of the pipe from the interconnector, Britain now has alternative liquefied natural gas supplies coming in by boat. There have been delays—the Milford Haven problems are well known—but there is a question that I find difficult to answer. Perhaps the Minister knows the answer. Why is the existing Isle of Grain port so underutilised? Apparently, it is only about 50 per cent. utilised, yet if there were a big burst in domestic prices, one would expect, in a market, that liquid gas would come into the country.
A possible explanation is that the Isle of Grain is a BP project and is therefore run in the wider interests of BP. There is nothing wrong with that, but the Government chose not to require third-party access, which would have brought in more competition, enabled more suppliers to make use of the port, and helped to stabilise the market. Why has that not happened, and is it possible to rectify the situation?
Another question under this heading relates to the European Union. We know the well-rehearsed arguments about the malfunctioning of the European gas market in particular, and the link to oil prices, which is a linkage that should not occur, but the practical question is whether anything can be done about it. We all know about EU lack of liberalisation, but where are we on rectifying it? I understand that legislation has been promised by the end of next year that will, in effect, change the market for the better. Can the Minister update us on his assessment of the realism of that time horizon, and whether the legislation will make a difference?
In essence, I agree with the vast majority of the hon. Gentleman’s points, but I suggest that we need to look closely at the EU treaty that is before us at present, as it fails to usher in a truly competitive EU market. The term “free competition” was apparently removed from the draft treaty at the behest of the French, and we are seeing now, for example, the amalgamation of two giant energy companies, Gaz de France and Suez, to create one enormous one. Economic nationalism seems to be on the march on the continent. What does the hon. Gentleman have to say about a treaty that does not seem to be tackling this issue?
The hon. Gentleman is anticipating not what I am about to say but what I shall say tomorrow in the debate in the main Chamber on competition policy and the protocol attached to the treaty. In passing, the simple answer is that the protocol will, in effect, make the Sarkozy amendments symbolic and not real. However, the hon. Gentleman has touched on a real problem, and I do not want to minimise it.
My third question is about fuel poverty and the Government’s response to it. The broad problem has often been debated here. We have the problem that a large number of people—currently 4 million, as opposed to 2 million in 2003—are classified as fuel poor on the standard definition of greater than 10 per cent. of income spent on domestic fuel. The problem has been caused by a combination of income, energy prices and housing conditions, and the estimate is that some 420,000 fell into fuel poverty in the past month. Last year, 24,000 excess deaths were attributed to fuel poverty, so it is a major social problem.
It is fair to say that when this Government came to power, they initially made considerable strides to deal with the problem—the figure for fuel poor was 4.5 million in 1999—but we have had a recent reversal of fortune. I simply quote what the chairman of the Minister’s own quango, the Fuel Poverty Advisory Group, said about the policy on fuel poverty. He gives a rather harsh judgment that it is “incomprehensible, unjustifiable and shocking”. That is what he told the press over the weekend in discussing the report that his organisation has just published.
I want to focus on the practical ways in which the problem might be alleviated, in particular the debate around the social tariff.
Before the hon. Gentleman comes on to solutions, does he accept that part of the problem that we face in respect of fuel price rises is that they are unevenly distributed? Indeed, they are often concentrated in the most disadvantaged communities. Only today, figures came out that show that in Wales electricity prices are, on average, 20 per cent. higher than in England, and of course Wales has some of the most disadvantaged communities in the United Kingdom.
Indeed, the pattern of energy prices is regressive, both regionally and between social classes. What happens under the pricing system is that we have a negative social tariff, or, as somebody put it, reverse cross-subsidisation. In effect, the poor subsidise the rich through the pricing system. According to Energywatch, low-income households on prepaid meters pay 20 per cent. more, which amounts to some £140 a year on average, and something closer to £200 a year in the worst cases.
Clearly, the energy companies have addressed the problem, at least in theory, with their own social tariffs. Of course, some companies do not do anything; I believe that npower is one. Some companies—for example, British Gas—do rather more, but then British Gas has the biggest price differential between prepaid meters and online ordering, so the tariff is only partial compensation.
Can the Minister bring us up to date on the arguments on the social tariff? As he knows, a formidable coalition of charities—Help the Aged, Energywatch, the National Consumer Council, Unison, Save the Children, Barnardo’s, the National Housing Federation and Age Concern—is arguing that a Government power to require the companies to introduce a minimum standard of social tariff needs to be written into the Energy Bill. It is not a very ambitious demand, but it appears that the Government are balking even at that, and that they do not want reserve powers to be written into the legislation. I hope that the Minister will explain his position on the issue and say whether he is willing to listen to the powerful representations that have been made. A minimum standard is not too much to ask for in this context.
To conclude, this issue is relevant not just to the past few weeks. I fear that the sudden surge in energy prices may well intensify. In fact, the Minister himself has said that we have moved away from the world of cheap energy. I do not know whether that is true, but certainly in the short term oil prices will be very high, and they normally feed through into gas prices after three to six months. There may be further pressures for utility price increases. Many industrial users are seriously worried about the forward markets, and what will happen this summer.
Many of the issues that I raised will continue to be relevant. I hope that through debate and discussion we can make some progress, particularly on a Competition Commission reference and on a more progressive policy on fuel poverty and the social tariff.
I congratulate the hon. Member for Twickenham (Dr. Cable) on introducing the debate and on his careful analysis of the problems that we are facing. I welcome what he had to say, not least because he anticipated some of the things that I wanted to say myself, and because he repeated some of the points that I made not just in the debate in this Chamber in January this year, but on 23 January last year, when I warned about some of the things that happened in the course of the year and the winter.
The policies of the energy companies and the role of Ofgem, which we will want to consider and which were touched on by the hon. Gentleman, have not avoided what seems to be a crass undermining of the Government’s policy on inflation. The fact is that millions of people in Britain, many thousands of them in my constituency, are finding that their quality of life has diminished. My hon. Friends who are present this morning have raised those matters again and again.
We welcome the fact that today’s Daily Record dealt in some detail with the issues that we are debating; we welcome that transparency. I am also pleased that the paper’s leader, although its coverage was largely encouraged by Alistair Buchanan, who does a very good public relations job for Ofgem, made clear the position that we are in:
“Fuel prices are too high, simple as that. Companies making multi-million profits have raised prices again and again over the last couple of years.”
The leader went on to mention that Alistair Buchanan
“says there is a ‘bonanza’ out there.”
To be fair to Mr. Buchanan, he was promoting the idea, which I want to deal with shortly, and which the hon. Member for Twickenham addressed, that switching is the answer for many people. If there is a bonanza out there, it seems to me that it is not for the most vulnerable people, who have to pay the additional prices, or for those who have been the subject of so many studies, including the one by Save the Children, to which I shall return if I have time. More and more of the poorest people must deal with problems caused by price increases. If there is a bonanza, I can see evidence only of the one that the energy companies are enjoying to the hilt.
My right hon. Friend has raised an important point. Does he agree that the Government are adopting a contrary position when they cap the pay of public sector workers in the fight against inflation—saving merely £30 million in the case of the police—while at the same time they allow companies to rip off the people of Britain?
My hon. Friend makes a good point, which has been raised again and again by my constituents—and, no doubt, his.
The Daily Record leader concluded by referring to people power. In fairness, it was encouraging people to switch where that would be appropriate. However, it said:
“What’s more, people power is the only way to keep prices down.”
I welcome what the Record is doing, but, as to people power, Members of this House have tried again and again to exercise exactly that. One of my reasons for calling for a debate last January was that my Lanarkshire colleagues got together and, trying to speak for 500,000 potential consumers, we wrote to all the energy companies and said, “If you can reach agreement with companies on a discount, we offer you the prospect, as Members of Parliament, with nothing to gain, of a forum to enable the big companies to speak to the people. There would be competition in action and our constituents would have the opportunity to choose the company best suiting their needs.” What we got from many of the companies was absolute abuse. There was no suggestion that our constituents could enjoy the same access as companies. I spoke to a gentleman from a big company yesterday who told me that it had an agreement under which it paid for bulk purchase five years in advance. I do not know of any of my constituents who are being urged to switch who would get that benefit.
I want now to discuss switching, and what it means in reality. I use the word “reality” because I am a realist. The hon. Member for Twickenham accepted, and I agree, that of course wholesale prices have risen and that oil and energy reforms cost more. Inevitably that has an impact on the prices that must be considered. My question is why the consumer should bear most of the burden. I think that that is the question asked by most of us. In a truly competitive market, if only two, not one—we heard from the hon. Member for Twickenham that one of the energy companies has acted pretty well in this context—offered their consumers reasonable prices, they would undercut the rest, and bring about an exercise in real competition and choice.
Yesterday we received information about the publication of a poll by Save the Children. Its findings were very disturbing. It showed that nearly one in five families with kids cannot afford to heat their homes. It also showed that 19 per cent. of families could not keep their homes warm because of the cost. It indicated that 15 per cent. of households cut back on food, and the same number on clothes. If we are to be led to believe that the answer to all that is switching—I do not want to discourage anyone who is free to do it from doing just that—my response is that there are very few facts to support that view. For example, npower announced an increase this January. Even if people wanted to switch that would take six to eight weeks, by which time it will be almost spring, and those people will have had no help with the severe winter conditions that many parts of the United Kingdom have had.
Does the right hon. Gentleman accept that switching is more likely to be attractive to the young than the old, and to those with internet access, because that is where most switching information is? Indeed, Ofgem’s figures show that two thirds of pensioners have never switched. For the people who most need help, switching is not the solution. Given the negative experiences that pensioners often have when they switch, as pointed out by the hon. Member for Twickenham, it is hardly surprising that so many of them are reluctant to go down that route.
I repeat that I do not want to discourage those who are free to switch from doing so. None of us would. But the hon. Gentleman has a point. The suggestion, in the midst of all the problems that people are dealing with, that switching is the whole answer, and Ofgem’s devotion of so many resources to that answer alone, is not something I find convincing. Many people have switched more than once, only to find that prices have gone up again. All the evidence is that no sooner do people move, but the energy company they have joined raises its prices, too. The hon. Member for Twickenham mentioned evidence from the university of East Anglia showing that about a third—1.3 million people—switched to a tariff that was worse than their previous one.
The right hon. Gentleman is making valuable points about switching. I thought at one time that I was the only person who had not switched, until I heard that my hon. Friend the Member for Twickenham had not either. It is difficult to compare different companies on the internet, because they use different tariffs, and people do not know whether the tariff that they are on is equivalent to the one being offered by another company.
The hon. Gentleman makes another solid point. It is very difficult to switch. The plain simple fact is that many people are prevented from switching by debt, prepayment meters that make switching harder, or outdated radio meters that simply will not allow it. Ofgem should have a second look at the view that switching alone should be the highest priority.
I promise to wind up my contribution because I know that many hon. Members want to speak. The Minister knows that I have the highest regard for him and I know that, given the challenges he faces, he will do the best job he can. However, it is extremely worrying that yesterday Peter Lehman, the Government’s own adviser on fuel poverty, said in a press release that the big six energy companies
“have raised their prices, especially electricity prices, by more than their cost increases (with variations between companies) and Ofgem has done far too little even to investigate this”.
I think that that is the case. We know that there is a problem and we expect more from the regulators. If the powers do not exist, there is huge anxiety among all hon. Members that we should consider creating those powers. That is one reason why I shall conclude by saying to my hon. Friend the Member for Selby (Mr. Grogan) that he was right to table his early-day motion, which I have signed. If the companies and Ofgem think that their case is so good, why are they worried about going to the competition commissioner? Let them do so and undergo an examination, and let us go back to the people and explain what we have sought to do on their behalf to remove such a serious problem.
It is a pleasure to make a brief contribution to this debate. I think that there is a television show called “Before They Were Famous” and those of us who are regulars in Westminster Hall debates listened to the hon. Member for Twickenham (Dr. Cable) before he was famous. We are used to his analysis and sharpness and were not at all surprised that in many people’s opinion he was judged to be the parliamentarian of recent months and the past year. I am pleased that he has initiated this debate. It is also a great pleasure to follow my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr. Clarke).
As I said, I shall make a brief contribution in support of the hon. Member for Twickenham and the three essential points that he made. The Government should at least consider three regulatory interventions in the energy market: first, a reference to the Competition Commission of the big six; secondly, consideration of whether the Energy Bill should contain a provision on a minimum social tariff for the energy companies; and thirdly, examination of whether the Government have done enough in relation to the boast of the former Chancellor, now the Prime Minister, that on the issue of gas storage and pipelines the companies will have to use it or lose it. I think that the former Chancellor used that phrase in a Budget a couple of years ago. I want to examine those issues briefly and I will try not to go over the ground that has already been covered.
In referring to the European energy market a few years ago, one commentator talked about the seven brothers—the seven big energy companies—that dominate the energy market. We have six, not seven, brothers who dominate our energy market. It is worth listing them for the record: RWE npower, EDF Energy, British Gas, Scottish and Southern Energy, E.ON UK, and Scottish Power—which is being taken over by Iberdrola, a Spanish company. In recent weeks there has been confusion about the precise allegations that are being made about those six companies. For example, The Sunday Times ran a story about the Energy Retail Association and suggested that there had been meetings between energy companies, and that collusion and price fixing might be happening. I have seen no evidence of that. If there is evidence, it is a serious matter for the Office of Fair Trading. However, the fact that there is no proof has been used by some to say that there is no problem. The hon. Member for Twickenham referred to the Chancellor summoning the Ofgem regulator, who assured him that the market was competitive, in response to which the Chancellor said, “That’s all right then.”
Those developments have occurred over recent weeks, but the essential point is the structure of the market and vertical integration, to which the hon. Gentleman referred. No one has mentioned Energywatch so far in this debate. It has done an in-depth analysis to support some of the studies that have already been mentioned. Those studies discuss vertical integration—a market where a large number of the players are not just producing electricity and gas but retailing it, and are involved in every part of the process. In a short paper, which I recommend to the Minister, Energywatch mentions various anti-competitive practices that a vertical structure introduces.
I thank my right hon. Friend for his intervention. We will miss Energywatch because it has led the debate. In a moment, I shall reflect on why Ofgem might not be keen on a reference, but Energywatch has played an exemplary role in dealing with the issues of fuel poverty and competition in the market.
It has also played a key role in terms of the social responsibility of the companies. I will not mention all the different criticisms that Energywatch makes of the energy markets. There are well over 20 criticisms, and they break down into different themes. One feature of any market that is competitive is the flow of information and ensuring that people know what is happening. Energywatch criticises upstream long-term gas sales agreements, which account for more than 85 per cent. of source gas supplies to the UK. It states:
“These have the effect of withdrawing from the open market, information on prices and volumes which is necessary to make open markets work”.
There are many criticisms of price transparency and Energywatch goes into great detail about what it calls market foreclosure, which I understand relates to the great difficulty that any company has in breaking into the big six. From 20 down to six has already been referred to as the number of effective entrants in the market. That situation is quite remarkable. The hon. Member for Twickenham referred to British Energy, which is by no means a small player. It has complained to Ofgem that
“the access of the ‘big six’ to their own power stations and gas supplies undermines competition by restricting energy sales on the open market.”
And that energy trading
“increasingly forecloses the market to new entrants”.
Average UK consumer gas prices between 2004 and 2006 rose by 64 per cent. as opposed to 19.5 per cent. across six peer nations in Europe, in which there are apparently much less competitive and deregulated markets.
So, what are we asking for? We are asking for a reference, which is quite a simple request. Why is Ofgem not making a reference and why do regulators generally not make references about the markets that they are in charge of to the Competition Commission? I suggest that it is because of pride. Ofgem got rid of price controls some years ago and it is reluctant to admit that it is not capable of giving both the business and the residential consumer the best possible deal because of the structure of the market. That is why Ministers were given the power to make a reference in the legislation. I understand that doing so is difficult because many of the businesses concerned are the same ones that are building new power stations, upon which the nation relies. However, overall in business terms, I think that the Government would be incredibly popular if they made such a reference to the Competition Commission. For example, manufacturing industry is very critical of energy prices and the influence of the big six. I realise that it would take political courage to make such a reference, but I would like to think that the Chancellor was serious when he summoned Ofgem the other week and that when he studies the documents from Energywatch and others, he will realise that an examination of the issues is essential so that the energy companies and the critics can both make their case as we move forward.
The issue of social tariffs has been well covered. We last spoke about the subject in a debate on fuel poverty in the House a couple of weeks ago, and I was particularly critical of npower and the chief executive of npower retail, David Threlfall. It is interesting that in recent weeks even Ofgem has picked out npower as having the most to do to improve its social responsibility and tariffs.
The debate pack that the Library has helpfully supplied lists my question to the Minister on 22 November 2007, column 1315 of Hansard. In relation to social tariffs, I urged the Minister to give Ofgem reserved powers to insert a minimum floor to the tariffs. The Minister said then that some companies are doing well, and others are now moving in the right direction. Will my hon. Friend indicate which companies he thinks the Minister had in mind, and what the right direction is, because that is not immediately obvious to the outside observer?
I shall let the Minister speak for himself on how he would rank the various companies. It is interesting that when npower was criticised by the regulator a few weeks ago, rather than putting its hand up and saying that it needed to do better, it rebutted the regulator’s claims and said that it had a range of practical solutions. Incidentally, it was found that it had disconnected seven in 1,000 gas users last year, which was twice as many as its nearest rival, EDF Energy, which disconnected three and a half in 1,000.
It is futile to try to rank the companies, because they are all woefully inadequate by any measure, so legislation to force action on a minimum floor is the right way forward. Does my hon. Friend agree that the existing arrangements are largely a sham, and a pretext for corporate responsibility that is not real?
I agree that the time has come to have a minimum floor for social tariffs. I have great hopes of the Minister, and he gave a thoughtful interview on the “Today” programme this morning. If he looks back at the White Paper, he will see the comment:
“If no further action is undertaken by the companies”
“will consider whether to take the opportunity for legislation to enable the Secretary of State to require companies to have an adequate programme of support for their most vulnerable customers. In this context, we may consider the role of mandated minimum standards for social tariffs”.
The Energy Bill provides the opportunity to do more than just consider; it provides the opportunity to put that into effect.
I was almost moved during the Minister’s interview this morning when he replied to the claim that we have 22,000 more deaths among the elderly population in winter than in summer. The reason for that can only be energy prices. In Scandinavia, there is no significant difference between the number of winter and summer deaths. We have a chance to make a difference on our own watch as MPs and as a Government. We have a target of eliminating fuel poverty by 2016, so I hope that the Minister will take further steps in the Energy Bill.
I said that I would say a few words about gas storage and pipelines. The matter was dominant in the news 12 or 18 months ago when wholesale gas prices were high, but went off the political agenda during a short period when there was rather less pressure on wholesale gas prices. I understand that about a year ago, Ofgem consulted on the operation of the gas storage market, gas pipelines and so on. I would be interested if the Minister briefed us on the conclusions of the Ofgem inquiry, his response to it, and whether there is a case for instituting in law third-party access to gas storage and gas pipelines, which the hon. Member for Twickenham mentioned.
It is always a great pleasure to speak in debates under your chairmanship, Mr. Amess.
I congratulate my hon. Friend the Member for Twickenham (Dr. Cable) on securing this debate. He has great expertise as an economist, particularly of energy and oil companies, and has been able to relate complicated Competition Commission issues to the fate and experience of vulnerable people who are finding it more and more difficult to keep their houses warm, and to survive the winter. However, he represents Twickenham, so he was remiss in not mentioning the great energy surge there during the second half of the Wales and England game last Saturday. That was one of the last great class battles and for once we had the result that we often deserve, but rarely achieve.
Fuel, food, water and air are essential commodities for life, and we must pay for three of them at the moment. The hon. Member for Selby (Mr. Grogan) mentioned that there are 22,000 more deaths during the winter, which could be avoided if we had properly insulated houses and fuel that people could afford. That is a testament to our inability to address the fuel poverty issue, and brings into question whether we are such a civilised country as we claim and hope to be.
My hon. Friend focused on competition issues, and it is important to reflect on them again. Fossil fuels, which are the mainstay of heating and lighting our homes, are a finite resource. Many of us are aware of the concept of peak oil and peak gas, and there is competition in that also, because that finite resource is coming to an end, and exploration and exploitation to produce that resource are becoming more difficult and expensive. It is sometimes said that the best cure for high prices is high prices, because higher prices encourage investment in exploration, exploitation and so on. However, we are approaching the stage at which wherever we look for such resources, they will cost more, and some of those issues will be reflected in the price.
Another competition issue to which a number of hon. Members referred is consolidation. The number of energy companies has fallen from 20 to six, and that has been mentioned often during the debate. There has been a similar experience with supermarkets. Morrisons recently bought Safeway, which reduced competition. When there is consolidation, even if the remaining companies try to remain within the spirit of competition law, it is sometimes difficult. Indeed, an inquiry by the Competition Commission into supermarkets has established that there was uncompetitive practice in the grocery trade, particularly the dairy trade. A number of supermarkets have admitted to that breach of competition law and been fined, while others refuse to accept that and are contesting the issue.
When a small number of companies are vertically integrated, it is more difficult for them not to be uncompetitive than in the supermarket trade where at least vertical competition has not reached the same scale as in the energy sector. Ofgem must look at that, and consider whether there should be a referral. The market is huge and domestic energy accounts for 27 per cent. of total UK consumption, of which gas makes up 69 per cent., electricity 22 per cent., petrol products 7 per cent., and coal 1 per cent. The problem is not restricted to domestic supplies; small businesses also find it difficult.
When I was having a pre-match drink on Saturday in the Old Cognac, which is an excellent pub and provides excellent food, the landlady told me that her fuel bill is now £3,000 a quarter for that very small but high-quality establishment. The problem affects domestic consumers, but also small businesses. I remind the Minister that it would not be new for the Competition Commission to investigate the fuel industry. At the instigation of my predecessor, the noble Lord Livsey, and following continued pressure from me, there has been an inquiry into liquid petroleum gas, on which a number of people who are not on mains gas have to rely. That fuel is much more expensive per unit of energy than mains gas or electricity.
In the inquiry, the Competition Commission uncovered some uncompetitive practices, and we are still waiting for it to make its recommendations on how to deal with the problem. I understand that the park home owners have put in an objection to the recommendations. I ask the Minister to accelerate the outcome of that inquiry because vulnerable people such as park home owners and pensioners, who are not on mains gas, suffer from the very high prices of liquid petroleum gas.
Clearly, problems exist for consumers. Energy prices are quick to rise when gas and oil prices go up, but they do not seem to drop when prices come down. May I refer to the point that was made by the hon. Member for Carmarthen, East and Dinefwr (Adam Price)? The Western Mail today reported that energy prices in Wales were between 15 and 20 per cent. higher than from the same supplier in England. By referring the matter to the Competition Commission, I want to ensure that the issue of regional pricing disparities is addressed. In my constituency, some of the ex-mining villages do not have mains gas and have to rely on oil and electricity, which is an expensive form of heating. Therefore, this disparity in pricing really must be tackled.
Ofgem claims that the level of competition can be calculated by the number of people who switch energy suppliers during a given year. We have heard that about 4 million domestic users out of a total of 36 million have switched. As the right hon. Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) said, many of those switched because they were encouraged to do so, and did not necessarily secure a good deal.
In conclusion, a number of issues relating to competition need to be addressed. Fuel poverty is a scourge from which this country suffers. I thought that the Minister was very measured in his response to the interview on Radio 4 this morning. He clearly understood the problems. The Government’s energy policy is that prices should be reduced through competition. We can see that that is not happening for a number of reasons, including limited supplies and the consolidation of the industry itself. The Minister will know that although some of the Warm Front schemes have been very successful, the Government are now reducing their investment in them.
To sum up, are the major companies being really competitive? I am not alleging that an overt cartel exists. So, are there any ways in which companies are co-ordinating prices by means other than overt cartel making? We must look at the social tariff, which was raised by the hon. Member for Selby, whose early-day motion will probably be signed by many of us. We need to look at meter payment, the associated high tariffs, and the difficulty of those on meters to switch supplier. We also want to look at regional differences in supplies. The liquid natural gas pipeline has come through my constituency, but not a single constituent will be able to tap into it. Despite all that disruption, prices are still higher in Wales. Will the Minister address the liquid petroleum gas issue and tell us when people in isolated villages and homes can benefit from true competition?
I congratulate the hon. Member for Twickenham (Dr. Cable) on securing this debate, and other hon. Members on their excellent contributions. A great deal of consensus exists on this issue. Rising energy prices and fuel poverty are a concern for all our constituents. It is essential that we have the right regulatory framework in place to deliver a competitive market and to try to secure the best possible prices for all our citizens. In fairness, we should recognise that Ofgem has provided the UK with one of Europe’s most competitive markets. Arguably, we have the fifth cheapest market for electricity and the cheapest for gas. Energy prices for consumers remain lower than before market deregulation. However, we must recognise that international and economic forces and global trends are driving up prices. The question is whether the Government are doing all that they can to help people with those price increases. Serious questions have been asked by hon. Members, and I want to focus on two or three other issues as well. I hope that the Minister will have plenty of time to answer my specific questions.
Since 2003, the price of gas has risen by 82 per cent., and the price of electricity by more than 60 per cent. Cost increases are taking their toll on all households, especially those of the elderly and the vulnerable. I make no apology for repeating that point. We have all had letters from constituents raising those issues. I recently received correspondence from a local gentleman in his 60s explaining how, with council tax increases and rising food bills, increases in energy prices are causing a real difficulty. I hope you will forgive me, Miss Begg, if I read out a couple of sentences from his e-mail. He states:
“I myself cannot pay the gas and electric increases, petrol or council tax increases. I have informed the utility companies that I cannot pay the 27 per cent. increase.”
He goes on:
“So, my food has to suffer and I eat less. I only have one good meal a week. I live on toast and biscuits and chips and the odd cup of tea daily to keep my weekly costs down…The Government are aware, but don’t care.”
I fear that there are many others in the same situation.
According to some estimates, the number of fuel-poor households has doubled since 2005 alone despite a Government target to eradicate fuel poverty from vulnerable households by 2010. Picking up on an earlier point, will the Minister explain why there has been a cut in the budget for the Warm Front scheme, which is the main mechanism for assisting households in fuel poverty?
We have also heard figures relating to fuel poverty deaths. Apparently, in the winter of 2006-07, about 25,000 people over the age of 65 died as a result of cold-related illnesses. Those figures are far in excess of countries on the continent with even more severe weather conditions. The disparity in the figures between those who die in the winter and those who die in the summer is far greater in this country than on the continent. Will the Minister address that issue because it suggests that the Government’s strategy and policies are not having the desired effect?
Fuel poverty, as we have heard, impedes competition. As many as 2 million customers cannot switch suppliers because they are already in debt to their existing suppliers. In light of that worrying trend, I hope that the Minister will use his winding-up speech to explain how he proposes to meet his target to eradicate fuel poverty and say whether he believes that the time has come for Ofgem to have a specific mandate to ensure that fuel poverty is driven down, which has been touched on by a number of hon. Members.
We have also touched on social tariffs. I do not wish to re-explore the debate about social tariffs, but they could be part of the solution. Some suppliers are keen to develop them. Indeed, there have already been calls for the Secretary of State to take powers to direct suppliers to provide social tariffs. I would welcome the Minister’s response and opinion on that.
We have heard about Ofgem’s future role. It could have an important role to play in promoting sustainable development and reducing our national carbon footprint. As the Minister will be aware, the Sustainable Development Commission has made five key recommendations about Ofgem’s responsibilities, including changing the market arrangements to make it easier for small and low-carbon generators and suppliers to compete—a point touched on by the hon. Member for Twickenham. It would be useful to know whether the Minister has considered the options proposed by the commission and what views he has been able to form.
One of the commission’s recommendations was for consumers to have better information through smart metering and billing to help them to make decisions about energy consumption. The Government have been slow off the mark in that area. I suggest that they have committed themselves to the technologically inferior electricity display device over the smart meter, despite industry consensus that EDDs may be a waste of time and money and will not help to deliver favourable reductions in fuel poverty. The beauty of smart meters, as I understand them, is that they offer the opportunity for varied and innovative tariffs that will encourage those on tight budgets to use electrical appliances such as washing machines in off-peak hours. EDDs, however, simply tell people how much electricity they are using and perhaps dissuade them from using their appliances at all. In addition, EDDs work only for electricity, not gas, despite gas being the main heat source for most UK households—the figure that we heard was 69 or 70 per cent. of all households.
The use of smart meters in all homes would lead to the removal from use of often expensive pre-payment meters, which statistics suggest are a much more expensive way of using energy. Many of the customers who use pre-payment meters are fuel poor and in debt to energy companies. Smart meters would also allow many people who are prevented from moving supplier to take advantage of market liberalisation. Will the Minister explain why he decided to opt for EDDs over smart meters? What beneficial effects are they likely to have on fuel poverty?
Finally, I want to touch on how to ensure true competitiveness in the UK market—the point that I raised with the hon. Member for Twickenham. In assessing competitiveness, we must consider not only the UK market, but the wider European context. I have already posed the question in this debate about the EU treaty, which fails to usher in a truly competitive EU market. Liberal Democrat Members and Government Back-Benchers must ask why the treaty is not ushering in a more competitive market. For example, the phrase “free competition” was apparently removed from the draft treaty at the behest of the French. Some of our continental allies appear to take a far less liberal approach to these matters than we do, and the consequence not only for British business but for British consumers is very serious. Whereas 20 million British consumers use French or German gas suppliers, none in France or Germany uses UK ones, so we have to consider the issue in a European context.
For evidence of the different attitude taken by our neighbours, we need look no further than France’s €70 billion merger of energy giants Gaz de France—already Europe’s largest natural gas operator—and Suez to create what will become the world’s fourth-largest energy company, with the French Government keeping a one-third share of the new company. That is, as I have suggested, economic nationalism on the march. The French Prime Minister has gone on the radio and said, “We have control. We control strategy.” That is creating national champions and that cannot be good for competition. The merger was approved by the European Commission in 2006, subject to conditions, but how different that approach is from our national experience of breaking up monopolies and not consolidating national champions.
Meanwhile, European watchdogs have been busy probing continental energy firms over claims of anti-competitive practices, but many of the results have proved inconclusive. There does not seem to be the political will to sort that problem out. I suggest to all hon. Members that if we are truly serious about trying to help our citizens in achieving or gaining the best possible prices, we have to grasp that nettle and try to ensure greater competition across Europe as a whole. I ask every hon. Member to examine the EU treaty carefully, because it falls well short of trying to introduce a more competitive market across Europe as a whole. One is not looking for favours or anything like that, but one does want far greater competition and this EU treaty is not delivering it. The treaty shies away from bringing in a more truly competitive market. Will the Minister say what the Government will do to try to put that right? What pressure will the Government bring to bear with their European counterparts in bringing into effect a much more liberalised energy market on the continent? We are failing to do that at the moment.
I do not intend to say much more because I want to leave the Minister plenty of time to respond to the points that we have all made, but I ask him in all earnestness and honesty to address the concerns that we have raised, particularly with regard to smart meters, Ofgem’s future remit and how we can best create a truly competitive European market.
I congratulate the hon. Member for Twickenham (Dr. Cable) on the measured and thoughtful way in which he introduced the debate. I hope that I shall have time to respond to some of his key points. We heard a very fine speech from my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr. Clarke), who has been a long-term advocate of doing more for the fuel-poor. My hon. Friend the Member for Selby (Mr. Grogan) made an important speech.
We also heard some important Front-Bench contributions. I was impressed that the hon. Member for Brecon and Radnorshire (Mr. Williams) is so diligent that he even continues his research when in an establishment that he called “The Old Cognac”. The price of an old cognac would be more than a new cognac, so I hope that that helps with some of the energy costs involved. I congratulate his nation on a remarkable comeback in the rugby over the weekend.
I hope that the hon. Member for Billericay (Mr. Baron) will forgive me if I do not go too far down the European treaty road, because I vaguely recall that in the main Chamber we have spent a few hours debating that issue; indeed, we debated the energy aspects only the other day. However, I will say something about market liberalisation. I do not think that he is a supporter of the European treaty, but at one stage he almost seemed to be calling for more European powers to override national policies when it comes to energy nationalism. I am not sure whether that is a new Conservative party policy.
We are all concerned about rising energy costs, particularly as they affect vulnerable people such as the frail elderly and poorer families with children. It is important that we are as clear as we can be about the evidence base, and the hon. Member for Twickenham was very measured in his introduction. Wholesale price rises in the past year have hit hard. Wholesale gas forward prices—the prices that our supply companies have themselves to pay—have increased by 50 per cent. for gas and 85 per cent. for coal since January 2007, so in just a year there has been a dramatic increase in wholesale prices. I am advised that wholesale prices tend to make up about 50 and 45 per cent. of retail prices for domestic gas and electricity customers respectively. Wholesale prices make up roughly 70 and 90 per cent. of prices for average-sized industrial gas and electricity consumers. UK gas prices are of course linked to continental prices because of interconnectors—increasingly so, because of the importance of liquefied natural gas, the price of which is strongly influenced by the price of oil. Fossil fuel prices have been on an upward trend in the past 12 months, pushed by global supply and demand pressures, which we all understand.
The European Commission’s third package of legislation on the internal market and action by the EU competition authorities aim to develop transparent, better- functioning EU gas markets. In response in particular to the hon. Member for Billericay, but also to the hon. Member for Twickenham, we can proudly say that the UK has been in the lead of the charge for greater market liberalisation in Europe. That is central to the concept of the single market. We are working hard on the matter and I am pleased that Commissioners are now taking it very seriously.
I shall not say too much about the emissions trading scheme but, in response to the hon. Member for Billericay, we will see far higher rates in phase 3 of the scheme—very high rates—of auctioning of the allowances. We back that as a policy.
I accept that the Government have tried to make the case in Europe for a more liberal market. The problem is that they are not having much effect. When we look at the merger in which the French Government will keep a 35 to 40 per cent. stake, we will see that economic nationalism seems to be on the march on the continent. What more will the Minister do to try to get the French Government to change their mind?
We continue to push for that in the Energy Council of Ministers, of which I am a member, and we work closely with the Commission. The Commission’s action on competition was significant—it launched dawn raids some while ago on the offices of major European energy companies. We are very much engaged in that process.
We are not alone in having to pay more for our energy, but our domestic gas prices are still significantly lower than domestic prices in France or Germany. For more than a decade, our market has consistently delivered lower prices to UK domestic customers than the vast majority of other EU countries. I am conscious that that will bring no comfort to some of the vulnerable people in this country who are having to pay higher bills, but European comparisons are important. Even following the latest price increases, there will be opportunities for customers to save by switching suppliers. I shall say more about that because I am not far from the analysis of the hon. Member for Twickenham on switching.
Alongside the great increase in wholesale prices, which is down to global factors such as the great demand for energy in China and India and so on, our environmental policies—we all support tackling climate change and global warming—are pushing up prices quite considerably. We need to understand that we will not save the planet on the cheap—such things are expensive. Our policies to protect the environment, be that through the EU’s emissions trading scheme, the new carbon emissions reduction target, which is the successor to the energy efficiency commitment, and our renewables obligation which, as the hon. Member for Twickenham reminded us, will be worth £1 billion in investment by 2010, inevitably have an impact on price. The cost of CERT, which funds installation of energy efficiency measures in households to save energy and to reduce carbon emissions, particularly lower-income households, has doubled on both gas and electricity. We estimate that the combined impact of the renewables obligation, CERT and the EU ETS counts for about 16 per cent. of annual electricity bills, which is a significant amount. In an estimated average bill, those costs will be a total of £60 for electricity and £19 for gas, and they will rise as we pursue our climate change policies.
Contrary to what the hon. Member for Billericay said, we are committed to smart meters. There is a debate about whether the clip-on devices are helpful for energy inefficiency—they probably are—but we are committed to driving forward the development of smart meters. That is not inexpensive, but we think that it is important for a variety of reasons, about which we will say more in the weeks to come.
Ofgem’s primary role is to promote competition in the interests of gas and electricity customers. I have no doubt that if Ofgem was to see evidence of anti-competitive behaviour, it would not hesitate to investigate formally—it has a record of doing so. Ofgem states that ongoing market surveillance shows that the market remains competitive, and its June 2007 domestic retail market report showed vigorous price competition between the six major suppliers. I always urge Energywatch and other critics to put the evidence to Ofgem so that it can remain ever vigilant. The hon. Member for Twickenham cited an interesting study that I shall look at further.
Is the market competitive? According to independent research—the latest figures from Oxera—the UK’s energy market remains the most competitive in the EU and G7. We need our commitment to open and transparent markets to be replicated throughout the rest of Europe. Suppliers face similar costs when procuring energy wholesale. When those costs change, they face similar pressures on their margins. Despite the popular rhetoric, there is much evidence to show that we have a competitive market.
I listened carefully to the opening of the debate by the hon. Member for Twickenham and found myself agreeing with him on two issues, so much so that I realised that I had said similar things to the Business, Enterprise and Regulatory Reform Committee when I appeared before it last week. First, it is important not simply to say that we have competition, but to look critically at that. In particular, we need to ensure that the conditions in our market do not prevent new entrants or new approaches that may emerge as we progress to a lower-carbon future. I am thinking particularly about the growing interest in local energy systems, combined heat and power, and the often small-scale development of renewables. We must ensure that smaller companies do not find unnecessary barriers to market entry. I do not know whether that happens, but it has been suggested, and I shall discuss it further with Ofgem. If we believe in markets and competition, we must ensure that they look like markets, rather than like oligopolies, as my hon. Friend the Member for Selby said. I am sensitive to that.
The second matter on which I agree with the hon. Member for Twickenham is switching. We must ensure that switching works for all customers, but particularly for the vulnerable. If switching becomes the preserve of an IT generation and is not relevant to many of our vulnerable constituents, it will be worthless. I have raised that matter with Ofgem and the companies and I shall pursue it further.
The Government have made progress through the years and decades on fuel poverty. The figures for excess winter mortality rates are shocking, and they continue to be so, but, when we look at the long-term trend, thankfully, as a result of rising affluence, more jobs, improved housing, energy efficiency schemes, pension credits and winter fuel payments, we see that the Government have been moving in the right direction on the fuel poverty indicator—spending 10 per cent. of income on energy is our definition of fuel poverty. We have made progress for all those reasons. I am proud of that progress. The Government have spent some £20 billion on energy-related measures, including the winter fuel payment, but I recognise that we are being knocked off course by rising energy costs.
The hon. Gentleman needs to look at the funding of Warm Front, which is the public spending programme administered by the Department for Environment, Food and Rural Affairs, alongside the successor to the energy efficiency commitment—CERT. When he does so, he will see that more money will be spent in the next three years on vulnerable people and energy efficiency than has been spent in the past. Social tariffs can play a role, and I have met the energy companies to urge them to do more on those. They have increased the amount that they spend on social tariffs, but I met the bosses of the energy supply companies only last week to urge them to do more.
I am not complacent. I am proud of what we have done as a society. I am worried about the current situation, and we need to redouble our efforts. The debate obtained by the hon. Member for Twickenham has helped us to focus on some of the critical questions.