Motion made, and Question proposed, That the sitting be now adjourned.—(Miss Chloe Smith.)
I am grateful to you, Mr Gray, for the opportunity to speak in my first debate in Westminster Hall—this is, I suppose, almost like my second maiden speech.
The topic of the debate has been brought into sharp focus by the fact that the recent cold weather has left many constituents struggling to pay household energy bills. Last December was the coldest on record for 100 years. As a result, every home owner used more energy to heat their homes, resulting in more households falling into fuel poverty.
Fuel poverty is a serious and complicated issue. It is defined as affecting those who spend more than 10% of their income on energy bills. It is caused by unaffordable fuel prices, combined with poor housing stock, which is often characterised by inadequate insulation and inefficient heating systems.
Fuel poverty has more than doubled in the UK since 2003. The “Annual Report on Fuel Poverty Statistics 2010” estimated that fuel poverty affected 2 million households in 2003, and the figure rose to 4.5 million in 2008. Official predictions say that that is only the tip of the iceberg and that the worst is yet to come.
On 16 December 2009, an Ofgem presentation forecast that 6 million households would be in fuel poverty. On 24 February 2010, Ofgem warned the Select Committee on Energy and Climate Change:
“there is a real chance that as we go towards the middle of this decade prices will not only go up but will become fantastically volatile. That is not good news for the consumer”—
quite. Age UK says that, between 2003 and 2009, average household gas bills doubled and average electricity bills rose by 60%. The latest estimate of fuel poverty in the UK shows that more than 3.5 million older people are in fuel poverty. Surely that must be a worry for us all.
Fuel poverty is not spread evenly throughout the UK. Nearly a fifth of households in England, more than a quarter in Wales, nearly a third in Scotland and more than a third in Northern Ireland are in fuel poverty. In Wales, the November 2010 fuel poverty figures showed that 332,000 households were fuel-poor in 2008, and that the figure had risen by 198,000 since 2004, representing a 15% rise. In 2008, 26% of Welsh households were estimated to be in fuel poverty. That is despite measures undertaken by the previous Government to address fuel poverty and to improve the energy efficiency of homes.
One lesson that we all have to take on board is that the previous Government put too much reliance, especially in the early stages, on cutting energy prices and on the market delivering lower prices, so when the market put prices up, many people went back into fuel poverty. The hon. Gentleman is therefore right to say that it is important that we permanently deal with the energy efficiency of the housing stock.
Yes, I agree, and I will develop that argument further.
The measures introduced by the previous Government included the winter fuel payment, central heating programmes, which the hon. Gentleman alluded to, and the energy efficiency commitment. All those have played a role in tackling fuel poverty, but their impact has been eroded by the financial crisis and what seem to be annual energy price rises. With rising fuel prices and lower disposable incomes, householders must make a tough decision between heating their homes and paying for other essential household expenses.
I congratulate the hon. Gentleman on obtaining this important debate. He said that 6 million were in fuel poverty, and he mentioned Northern Ireland and that a third of households there are in fuel poverty. Does he agree with organisations such as Action Cancer and Macmillan Cancer, which are concerned that those with cancer-related diseases are more susceptible to the cold weather and that extra focus needs to be put on people with serious disabilities and illnesses?
I am always happy to take interventions, but the hon. Gentleman has just raised one of the major points I am going to make. I will come to that, thank you very much.
In quite a cynical move, when people were about to celebrate Christmas, British Gas, Southern Electric, ScottishPower, and Scottish and Southern Energy, introduced a price rise. In fact, five of the big six suppliers have now announced increases, which have taken effect, although EDF has announced that it will hold its prices until March 2011. Those increases mean that average annual electricity and gas bills are now £1,239.
In November, the regulator, Ofgem, announced that it was reviewing whether the profits made by the industry were too high, but I have to admit that I am quite sceptical about that review. Since 2001, 18 reviews have been conducted by Ofgem, Members of this House, the European Commission, the Competition Commission and the Government, all of which have had little or no impact on prices.
I congratulate the hon. Gentleman on securing the debate. He is right to be sceptical about those reviews, but will he spend some time talking about those who rely on fuel from sources that are not regulated? In many rural areas, including my constituency, for example, about a tenth or a fifteenth of constituents are on off-mains liquefied petroleum gas or oil supplies. Over the past 18 months, their fuel bills have gone up by more than 100%—they are not regulated at all. Should the Government take steps to ensure that such fuel providers are regulated, just as mains providers are?
Yes, I agree. I will come to off-mains gas later, but let me just say that fuel poverty is really bad in rural areas, and the hon. Gentleman is right to raise the issue.
The impact of price rises on fuel-poor consumers, many of whom are in low-income households, will be devastating. It is likely to push thousands more people, including many pensioners, into fuel poverty.
As a Welsh Member of Parliament, I am deeply concerned that Wales is one of the parts of the UK that is most badly affected by fuel poverty. Many pensioners in Wales have illnesses such as heart disease and diabetes, and many living in constituencies such as mine are former miners with lung diseases. They often have high fuel bills because of their health problems and need to keep their homes at a much higher temperature than other people. That problem is made even worse in older and poorly insulated houses.
Older people in Wales bear the brunt of increases in fuel prices. In my constituency, there were an average of 41 excess winter deaths between 2003 and 2008. Across Wales, more than 1,700 people die in winter every year as a result of fuel poverty, and that figure is certain to rise.
National Energy Action estimates that about 28% of households in Caerphilly county borough, where my constituency is situated, are in fuel poverty and have to spend at least 10% of their income on energy to keep warm. Some 20% of the population does not have access to mains gas. About 40% of fuel-poor households in Wales are pensioner households, and 28% contain single pensioners—often widows and widowers—who are desperately trying to make ends meet. Those pensioners face a double whammy, because electricity prices in Wales are up to £25 a year higher than in England.
A recent report on fuel poverty among vulnerable groups produced by Consumer Focus Wales found that 75% of those with a long-term illness or disability suffer fuel poverty. Some 62% of those aged 65 and over were concerned about paying their winter energy bills and were also more likely to cut back on their energy use at home to save costs. Across the population, the figure was 54%. What is more, more than 50,000 households in Wales are in debt to electrical suppliers and more than 46,000 are in debt to gas suppliers. It should be pointed out that the report was compiled before the recent energy price announcements.
The hon. Member for Upper Bann (David Simpson) mentioned cancer sufferers, and Macmillan got in touch with me to say that cancer patients, in particular, are struggling to pay their energy bills. According to its research, seven out of 10 working-age cancer patients suffer reduced household income, losing 50% on average. It is estimated that about four in 10 cancer patients of working age do not return to work after treatment.
Higher utility bills are one of the major additional costs that cancer patients face. One in five people with cancer turn off their heating in the winter, even though they still need it on. One in four wears outdoor clothing indoors to stay warm and reduce energy bills. Cancer patients have higher heating bills. In a survey for Macmillan, 59% of respondents said they had used more fuel since being diagnosed with cancer. Three quarters of those said that that was because they felt the cold more, and a similar number said that it was because they spent more time at home after being diagnosed.
A statement by the Secretary of State for Energy and Climate Change on 15 December muddied the waters further. He informed the House that the budget for the Warm Front scheme in England is fully allocated for this financial year. We are told that the scheme is fully subscribed and will be unable to take new applications for the remainder of the current year. The reason is that the scheme has a substantial order book of work, which will take until at least March 2011 to complete.
Essentially, the major problem with fuel poverty is that people who are victims of it do not necessarily know that they are. That may seem a strange statement, but many accept the difficulties they live with. When I worked for the previous MP for Islwyn, Lord Touhig, we prepared for a debate on this topic, and spoke to the secretary of the National Old Age Pensioners Association of Wales to ask what effects fuel poverty had on his members. We were both surprised to discover that members simply accepted that rising fuel prices are a fact of life. Whey they get cold they simply have to slip on an extra pullover, or heat just one room. Therein lies the great problem with fuel poverty. It can be difficult even for energy companies to identify customers who are fuel-poor.
My hon. Friend is making an important point about vulnerable groups such as pensioners. Indeed, prior to coming to the House, I worked with several agencies, including Age Concern, as it then was, to identify them. That is why a universal benefit such as the winter fuel payment is important. For all its flaws, it gets to those people, who are often very proud and do not make claims. They are difficult to get to. All hon. Members should work with agencies to maximise benefit take-up so that people can get the benefits they deserve to help them with fuel poverty.
My hon. Friend makes an important point. The dignity of pensioners is astounding, but in many respects they do not help themselves, because sometimes they are too proud to claim the benefits they are entitled to. I have said to every pensioner I have spoken to: “If you are entitled to it, claim it.” Those people have served this country. Many are veterans. Some people have devoted their lives to industry. If there is a benefit and they deserve it, they should claim it.
Further to the previous intervention, I am sure that the hon. Gentleman knows of similar cases to what happened in my constituency, where, in the area where I live, the temperature dropped to minus 7° C: it went down as far as minus 19° C in other parts of the Province. The cold weather payment helps, but there was also a severe weather payment of £25. We had fluctuations of temperature in my area but there were places where the temperature was below 0° for a period. It seems that the system does not always work to the advantage of elderly people. Does he agree that perhaps the Government should be thinking about clarifying the system and improving it for people who need the payment most, at the time they need it, so that they do not miss out?
I shall be making a point about the specific targeting of benefits. The severe weather payment is a difficult one, because it is supposed to relate to the temperature dropping at the local weather centre. It may be difficult to work out who is experiencing low temperatures.
To return to the point I was making, when energy companies target support to customers there should be additional support from the Government. That could be through the sharing of data; alternatively, local authorities and other community groups, which often have a better understanding of where support is needed, could be encouraged to work in partnership with energy companies to deliver energy efficiency programmes to vulnerable groups. Of course, as my hon. Friend the Member for Ynys Môn (Albert Owen) said, putting schemes in place is all very well, but if people do not know about them, the opportunity to assist them is lost. Members of Parliament should be doing much more to publicise the availability of existing schemes and to encourage people to take them up. The complexity of fuel poverty means that there cannot be a one-size-fits-all solution to tackling it. It is important that we look for long-term, sustainable solutions for families in fuel poverty.
One way to combat fuel poverty is to increase the income of many of those who are at risk of falling into the fuel poverty trap. There should be a review of the winter fuel payment and it should be better targeted, to reach those in need. Perhaps the payment should be targeted at the fuel-poor of all ages, including children and young people, those living in hard-to-treat homes and those with long-term health conditions, as well as older people. Another effective and sustainable way to tackle fuel poverty is through improved energy efficiency. The provision of energy efficiency measures and advice must be at the heart of all Government programmes, whatever the colour of the Government, to help vulnerable people to heat their homes adequately.
I congratulate the hon. Gentleman on a timely debate. He touches on the question of ensuring that every person who is eligible and vulnerable should try to get help from whatever form of warm homes scheme they have in the part of the UK where they live. Does he agree that perhaps we should consider upgrading the scheme, to target the older properties that he referred to earlier, which are particularly hard to heat, so that elderly and young people can have a warm home, rather than an additional couple of inches of roof space insulation, which some schemes offer?
The point that I am trying to make is that one way to solve fuel poverty is to make sure people do not use so much energy; it brings the price of their energy bills down and they will have a warmer home. They will come out of fuel poverty and will not be in so much danger.
The welfare and public sector cuts that have been announced by the Government together represent a threat to the lives of millions of people. I worry that the number of people in fuel poverty will soar over the coming months as a result.
It is all very well quoting figures, and my telling the House how wicked I think the Government are, but what does it mean to live in fuel poverty? It means that families will have to cut back on essential items to allocate money for rising fuel bills, or will have to turn down their heating, risking their health by increasing the chances of contracting common ailments such as colds, flu or bronchitis. Fuel poverty causes stress in children and adults as well as long-term depression and anxiety. To many individuals and families it can be the main cause of social exclusion, and deteriorating life chances and educational achievement.
I welcome the independent review of fuel poverty targets that the Government have said they will initiate before the end of the year. Making the nation’s housing stock more energy efficient should be at the heart of the Government’s energy strategy in the Energy Bill. The Government have set out plans for their green deal, whereby loan-funded insulation costs pay for themselves through efficiency savings. However, at the same time, as I have said, the coalition have announced that they are cutting Warm Front funding to a third of its current level. That threatens to leave many fuel-poor households even worse off, because they are likely currently to be under-heating their home, so any savings from improved energy efficiency will be taken in additional warmth, and their energy bill savings will not be enough to cover the green deal finance repayments.
Furthermore, some vulnerable customers may be nervous about taking on a fixed charge on their energy bill, despite promises of lower final bills, as that will reduce their option to budget. I fear the green deal is unlikely to be sufficient to help the fuel-poor. That has been confirmed by Age UK, which states that while the Government’s plan to have loan-funded insulation costs pay for themselves through efficiency savings
“is likely to benefit mid and high income households, there remains a big question mark over whether it will work for those in fuel poverty.”
It is therefore vital that the energy company obligation should meet the needs of the fuel-poor. That is particularly important for the fuel-poor, as in some cases existing heating systems may be inefficient, but the existing carbon-focused schemes mean that it is not possible to install a new more efficient system.
In conclusion, given the pain that is being inflicted on people by energy companies, it should be remembered that, unlike consumer prices, wholesale energy prices are half of what they were in 2008. It is a matter of some urgency that the Government should intervene to curb excessive fuel price increases.
I certainly agree that the regulator, and everyone, should try to ensure that we have the lowest possible prices, but in tackling fuel poverty we must confront the fact that the underlying pressures of carbon reduction and world energy scarcity mean that we shall have to have a fuel poverty strategy that will cope with higher prices. We cannot just rely on low prices to get us out of the problem.
As I said earlier, fuel poverty is a complex matter, and there is no magic bullet to solve the problem. We have to consider it in a holistic manner.
If the regulator does not have sufficient power to intervene to prevent huge price increases, the solution is clear. It is time for energy companies to be made to serve society again, rather than the other way round. In February 2010, Ofgem published the findings of its Project Discovery. One of the most radical proposals was to have a central energy buyer, on similar lines to the old Central Electricity Generating Board. At present, the big six energy companies own most of the UK power plants, which supply the majority of the country’s consumers, but a central Government-controlled body could require power plants to sell electricity at fixed rates that would then be sold on to customers, thus bringing an end to the dominance of the big six once and for all.
It is important to remember that fuel poverty is not simply about schemes and programmes. It is a matter of life and death for the many people who are forced to live in cold and damp conditions. We need a new, far-sighted fuel poverty strategy to ensure that fuel-poor households have a decent income and that sustainable energy-saving measures are prioritised.
I am grateful for the opportunity to speak in this debate, which is timely and well-intentioned.
Given the harsh weather conditions leading up to Christmas last year, fuel poverty has never been of such concern to the people of Hexham. I represent well over 1,000 square miles of rural Northumberland, and the subject is most important to my constituents. It is no exaggeration to say that many people have to make a straight choice between heating and eating. They are in a difficult situation. If that does not sound primitive enough, NFU Mutual, the rural insurer in my part of the world, found in its annual rural crime survey last year that domestic fuel was sixth on the list of the top 10 items most commonly stolen from homes. The “Crimewatch” scene in Northumberland is astonishing for the number of people who are suffering rural crime with the loss of their fuel.
Although there are ongoing recommendations on how to discourage thieves, this crime wave is something that the country cannot tolerate. Is it something that we can deal with or, in reality, do we need assistance in the March Budget? I certainly hope that we shall get such assistance; I believe that it would be right, because the problem is putting an unacceptable strain on people’s incomes.
I have extensively gone through the approximately 20-plus providers of heating oil in rural Northumberland. In excess of a dozen of them are owned by one company. Hon. Members will be amazed to hear that they are all using their old names, and that they are all operating and selling as if they were perfectly independent. Some people have been buying from these companies for 30 or more years. It is only when one starts digging that one realises that there is a significant problem, which affects well over half the population. It is well known that the company behind this is DCC Energy, a Dublin-based provider. The company’s fuel oil customers are less able to negotiate a good price, as the cost of oil continues to rocket.
A more serious problem in the working of the market is that, at times of stress, quite a few of these supply companies say when asked for a price, “We can’t give you a price now; it’ll be the price on the day that we make the delivery.” How can the market work efficiently if people cannot shop around when placing an order? Would the hon. Gentleman like to comment on that aspect?
I would: the simple truth is that customers, wherever they are and whatever problems they face, need to shop around. If they do not, they will face the problem that the hon. Gentleman describes, which I and others in Hexham have come across. They will be deprived of the ability to buy fuel on an ongoing basis.
The hon. Gentleman raises an important point that affects rural users of heating oil. He will not be surprised to hear that all the companies on a price comparator website were owned by one company—DCC. It is hardly surprising that there is no differential in the prices that they offer, and that customers are unable to make an informed decision.
A number of independent organisations in Hexham provide fuel—WCF, Wallace, Par Petroleum and Johnson Oil. Those four are the last independents that supply the area. It is amazing to chart how such companies have been bought up over the years.
What worries me most is that, without a strong local and competitive market, it is a lot easier for companies to hike up prices, delay things and move people on, explaining that they will produce a fair price at some stage or the right price only when they turn up. I am in negotiations with the Office of Fair Trading to ensure that it does investigate these matters. However, the reality is that it needs information from those whom we represent. I therefore urge individual constituents to write to the OFT, bringing such information to its attention, and I am doing so for people in my area that have complained.
I accept that. Like the hon. Member for Westmorland and Lonsdale (Tim Farron), roughly 10% of my population is being provided by particular companies, with the market narrowing whether or not they like it. We need to help them in whatever way is possible. I hope that the Minister will address that point.
Costs are clearly getting out of control for the residents of Hexham. Fuel is a necessity in a constituency of 1,000 square miles, not a luxury. People do not spend their money on it because they think it would be jolly to go for a drive. Last week, when I filled my petrol tank, I was stopped by the garage owner, who unluckily recognised me and said, “What are you going to do about this?” [Interruption.] Yes, I did pay him—a lot of money. I pointed out that we are trying to address the problem. There is much that I hope that the Minister will do.
The trade body has made a statement justifying the price increase. It is long on generalities and short on specifics. I would have liked it long on specifics and short on generalities. I accept that DCC and other companies are perfectly entitled to a fair return, but the market has gone up and people—it matters not where—are at their mercy. That is not right.
Although wholesale costs have increased, the situation has been made worse by the extremely cold weather. Temperatures have been as low as minus 19° in my area. I am worried about the market in my constituency, which gives residents too little choice when trying to find the best price. The price hike is unacceptable, and the Government can do more about that. I hope that the status quo does not continue.
It is a pleasure to follow the hon. Member for Hexham (Guy Opperman), who made an important point about off-grid supply. Before I touch on that matter, I congratulate my hon. Friend the Member for Islwyn (Chris Evans) on proposing and sponsoring this debate. Given the time that he has been in this House, tribute should be paid to him for the way in which he has battled with this matter on behalf of vulnerable people—Lord Kinnock and Lord Touhig in the other place also have a strong record on standing up for the vulnerable. I welcome my hon. Friend’s contribution.
I pay tribute to the Energy and Climate Change Committee, the report of which many hon. Members must have read. I am a current member of the Committee and cannot take any credit for the 2009-10 Session. It conducted an excellent inquiry into fuel poverty, and two members of that Committee are here today—the Minister himself and the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith). I pay tribute to them for their work and to the organisations and agencies that have worked long and hard to alleviate fuel poverty in our country.
In his opening remarks, my hon. Friend the Member for Islwyn mentioned Macmillan Cancer Support, which is carrying out pioneering work on identifying the hardships that are suffered by people with terminal cancer, and Consumer Focus. I will not make many political points today, but I will enhance some of the points that have already been made.
I am sure that the Minister agrees that the previous Government were right to give such a high priority to fuel poverty. Although the target for 2010 was not met, it was a bold one—to reduce the fuel poverty in England of vulnerable households—and the Government were right to set it. The Committee’s 2009-10 report said that average domestic fuel prices pushed the Government off their target. According to the Fuel Poverty Advisory Group, some joint electricity and gas bills went up by as much as 125% during the period from 2003 to 2008. The hon. Member for West Aberdeenshire and Kincardine has said that we cannot rely on just keeping prices down, but we cannot turn a blind eye to such rises either. We need to keep our foot on the pedal and keep the pressure on the energy companies that have been making excessive profits, which is why this Ofgem inquiry is so important. We must continue to work with the Minister, the Government and the devolved Administrations on the matter.
Is the hon. Gentleman aware of the appalling statistics on fuel poverty in Northern Ireland? For example, National Energy Action has found that in Craigavon borough some 44% of households are unable adequately to heat their homes. In Magherafelt and Ballymoney, there is 40% fuel poverty. We must not forget that behind every one of those statistics is real human hurt.
The hon. Gentleman is absolutely right. I was not aware of those specific statistics. The hon. Member for Hexham was right to say that this matter affects not just parts of the country but all the country. We all have semi-rural and rural areas in our constituencies. Indeed, I represent a periphery area, which is something that I shall discuss in more detail later. Such areas face a double whammy in that they also have to get in fuel supplies. Cumbria faces such a situation, so I agree with the hon. Member for South Antrim. What connects us all across the political divide is that we are talking about not only statistics but real people. We are talking about how we can alleviate hardship for people. Indeed it is a common endeavour of all political parties to do that, although we disagree on the mechanisms by which to achieve it.
Earlier, I referred to how it is essential that we work with the devolved Administrations. I have been working with the Welsh Assembly Government on delivering energy efficiency, and they have a good record in that regard. Although provision is patchy across many parts of Wales, there is, as my hon. Friend the Member for Islwyn has highlighted, some good work being done by organisations in the areas of energy efficiency and loft insulation. None the less, we need a mechanism to deal with hard-to-treat properties. Some older rural properties do not even have proper insulation in the foundations, let alone in the walls, windows and roofs.
When we discuss rural areas, it is right to consider how to deal with hard-to-treat housing. It is also important to consider the fact that average wage levels in rural areas are significantly lower—that is certainly the case in north Wales. As a result, fuel poverty is a larger issue, because a larger percentage of income is spent on heating and housing. Fuel is also more expensive in rural areas. Therefore people in such areas suffer from both low income and high fuel prices, so there is an issue relating to economic development in rural areas and a need to create economic opportunities for people, so that they can enjoy an income level that is sufficient to allow them to meet fuel costs.
Of course household income is an issue. In areas in which GDP is low, household incomes are not necessarily low; such indicators do not necessarily go together. There are joint incomes in rural areas. Many people feel that they have to have a supplementary income to pay the bills. None the less, the hon. Gentleman is right; in some of the more deprived areas of the United Kingdom, fuel poverty is worse. There are also other factors such as rurality and the problems faced by areas on the periphery of the United Kingdom, which is something that I will discuss later.
I welcome the Ofgem inquiry into the big six, which looked at their price mechanism and their excessive profits, and we must keep up the pressure on the companies. Indeed the Select Committee, of which I am a member, met Ofgem yesterday. A few weeks ago, we spoke to the big six. I make no bones about it; excessive profits are being made and they should be curtailed. We must give the regulator teeth to bring that about. We have peaks and troughs, and the inquiries always seem to come when the prices are subdued for a period of time and then there are the excessive profits. We have not been able to prove that through the Competition Commission and various other mechanisms, but it does happen and real people are paying the price.
One example can be found in Northern Ireland. The oil comes in through Belfast. We have variations in price across the Province. The price for 800 litres of fuel can vary by as much as £20 to £25. The hon. Gentleman has rightly said that it is an obscenity that companies are making excessive profits while people are experiencing difficulties. We need an extensive inquiry and some rules and regulations from the regulator.
Yes. I will come on to the off-grid as well to provide some balance. I stress that Ofgem is doing a good job, but it needs more teeth. I know that we will have the opportunity to discuss both that matter and how we can beef up the regulator’s powers in forthcoming energy Bills.
I am a big supporter of winter fuel payments. The previous Select Committee included that matter in its report, to which this Government provided a response. Some people think that such payments should be modified, targeted or means-tested, but the benefit is a huge success. It is a substantial payment that is easy to claim and easily understood. I believe in universal benefits. As a nation, people contribute to the national pot, so that benefits can be given to people in need. I understand that we need a mixed package of targeted benefits in addition to the universal benefit. This particular benefit has been a huge success, and I am sure that the Minister will confirm that the Government have no intention of changing it. I know that there is a cost element to it, but the benefits far outweigh any negatives in this area.
I realise that there are other Members who want to speak, but it is important to highlight some of the points made by the hon. Member for Hexham about off-grid gas supply—indeed, a number of interventions have been about that matter. Households that are not connected to the gas mains experience a double whammy; many of them are in periphery areas and pay extra money for petrol and diesel, as well as having to pay more for domestic heating fuel. We need to consider that issue. For instance, liquefied petroleum gas is far more expensive than on-mains gas, and we have heard much anecdotal evidence in many debates about the huge rise in price for domestic oil and domestic LPG.
I do not believe that the Office of Fair Trading has been sufficiently proactive on this issue. I heard what the hon. Member for Hexham said about the importance of giving the OFT anecdotal evidence, which is one way forward although it is a cumbersome process. There should be a single regulator to look at gas and electricity prices, and it should consider both the grid and off-grid supply. We should have a single regulatory body, and I ask the Minister to consider that proposal for the future. There should be a single regulator looking at all domestic fuels with a view to regulating the off-grid supply as well as the grid supply, and that regulator should have real teeth and real responsibility to look after the most vulnerable people in our society, which is what the existing regulator was set up to do. In many areas, a huge number of people are not on the grid—in some areas, a majority of people are not on the grid—and they are suffering disproportionately as a result.
As the Minister may know, I have been campaigning on this issue for a long time. However, I have been frustrated by the responses that I have received from the regulator, from this Government and previous Governments, and from the gas distribution networks, agencies and energy retailers. There is no joined-up thinking on this issue—there is a blockage and things just do not happen. People who live within a short distance of gas mains are not connected to them. I am not talking about isolated properties. I am talking about villages of considerable size and hamlets that are close to the gas mains, but there is no incentive for them to be joined up, although to be fair to the Department of Energy and Climate Change the Government have had some schemes, agencies and partnerships over a number of years that have worked on that issue.
The differential between those who pay off the grid and those who pay on the grid is so great that there should be some real investment and a mechanism to provide connection to the grid, so that those people who are not on the grid can have additional choice. Choice is what I am talking about. If people wish to remain off the gas mains, it is a matter for them, but at the moment those people do not have any choice in the matter and are being hammered by domestic oil and LPG prices.
I hope that the Minister will act on this issue. I understand that new developments will need renewable sources of energy built into them when they are constructed, which I fully support—ground source pumps and other measures may be the future. However, we are talking about hamlets and villages that have been off the gas mains for an awfully long time. When coal was cheap, for historical reasons, it was okay for those communities; there was not the disparity that there is now between the price that they paid and the price that those on the mains supply paid. Today, however, because of the lack of regulation and the inability to connect people to the gas mains, there is a huge disparity between those who are on the mains supply and those who are not, and there is a huge amount of extra fuel poverty in those areas that are not on the mains supply. So it is something that we need to work on collectively. I am sure that the Minister will respond to that issue.
I want to make an overtly political point about fuel prices, which concerns the price of petrol at the pump in periphery areas. The extra fuel poverty that I have just referred to was made worse in January, because of the additional 2.5% hike in VAT, which is really hurting people. I am not talking about people who use their cars just for pleasure. I am talking about people who use their cars because there is a lack of adequate public transport in their areas and because they have to take their children to school or to leisure activities on a daily basis and the only means of transport is a larger car. Also, those people work in a communal fashion, as it were, by giving lifts to other people. Those people are paying—
I will certainly bring the debate back to fuel poverty, because petrol is a fuel, people are in poverty and the VAT hike is compounding the problem of the increase in their daily household bills, because they have to pay extra fuel duty on top of paying extra money for the off-mains supply of gas. It is a big issue in my area; people who are already paying additional money for their fuel also have to pay extra for their travelling costs, and as a result their household budgets have been squeezed considerably. That is the point that I am making. It is a serious point about fuel poverty and not just a political point about the VAT rise, although in my opinion that rise could have been avoided. It was a political decision and on top of the duty escalator it has hurt periphery areas the hardest.
I support the Government in looking for a stabiliser mechanism, because the peaks and troughs in prices are too great. I want to see some stability in prices, so that we can hold household bills down. I also welcome the proposals for a freeze on duty when there is hardship. I lobbied for that for a long time, and we achieved limited success under the previous Government. However, we need some stability because of the volatility of the prices. I want to see some sort of stabiliser mechanism, and I also want to see periphery areas receiving some benefit from that mechanism, which is an issue that the Government propose to re-examine. The pilot schemes that the Government are talking about for diesel and petrol are limited to the Western Isles and to St Ives and other parts of Cornwall. I want to see a Welsh and Northern Irish dimension to that programme, to include periphery areas in those regions.
And west Wales. I am calling for that extension, because those of us in those periphery areas are paying so much extra for fuel. The argument that we hear about petrol and diesel delivery is the same one that off-grid providers use; they say that they pay an extra amount to deliver fuel to those periphery areas. I do not think that we should be paying that extra amount for fuel in periphery areas.
I hope that the Minister will take that point on board. I am supportive in principle of a stabilising mechanism, although I would like to see how it works in practice. I also want to see area rebates extended to Wales and Northern Ireland in addition to England and Scotland, because they will help to alleviate poverty.
The differences between us on this subject are small, although I do not agree with scrapping the Warm Front programme, which was a success. I am not sure about the details of the green deal, but I will support those measures that help to alleviate poverty. As I have said, it was wrong to raise the VAT on petrol and diesel, just as it was wrong of a previous Government to try to introduce VAT on domestic fuel. Governments can disinherit some of these measures. I hear the Government saying now that they have to go ahead with the fuel duty price rise because they inherited it. However, the previous Labour Government disinherited the plans to put additional VAT on domestic fuel, and we are all comfortable with that move now. It was wrong to propose such a rise, which is why we should re-examine VAT and fuel costings.
We need to have a proper regulatory system, and we need to bring Ofgem and the OFT together in a single body when it comes to off-grid supply. That point is important, and I hope that the Minister will take it seriously. I believe in the retention of the winter fuel payment, which is a universal benefit that helps to alleviate fuel poverty. I also want to see an extension to the gas mains, whereby we have a proper, clear way of moving forward and a mechanism that allows people to choose whether to connect to the gas mains.
I am conscious of the time, so I will leave it at that. We have a common endeavour here to alleviate poverty. I know that the Minister, as a member of the previous Energy and Climate Change Committee, is at one with me on that issue, and I look forward to hearing his responses to my points. Finally, I again thank my hon. Friend the Member for Islwyn for securing this important debate.
It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate the hon. Member for Islwyn (Chris Evans) on securing this important debate. He has said that this is his first time in Westminster Hall. I have spoken a few times in Westminster Hall, where I always find the level of debate enlightening. The first time that I stood up to speak in Westminster Hall was in a debate that I secured on fuel poverty, with a focus on rural Britain. It is nice to see some of the same faces again for today’s debate, adding new issues for us to consider and re-emphasising the issues that make fuel poverty a constant topic for debate in our constituencies, as my hon. Friend the Member for Hexham (Guy Opperman) has said.
In the debate that I secured, I focused on people off the mains gas grid, concentrating on oil and LPG. I am pleased to say that, as a result of that debate, electricity companies were falling over themselves to let me know what they were doing for my constituents. If this message has not got out I will repeat it now: anyone who does not have access to mains gas is allowed to claim for a dual fuel discount from all their suppliers. The electricity companies made their position on that scheme clear, and if any constituent of mine, or indeed of anybody else, is not taking advantage of that scheme at the moment, they should alert their electricity company to that fact.
Since then, we have also had the oil price spike, and both the Minister and I have homes that are heated by oil. He was already taking action on the matter when it was raised in December, and I commend him for some of the work that he has done, but there is no question in my mind but that the spike has plunged more people into fuel poverty. We are talking about a significant differential of hundreds of pounds between the cost of heating our homes with gas and the cost of heating them with oil or LPG, and I encourage the Minister to think more creatively. I do not want to sound like a socialist, but when the market is not operating efficiently, regulation is at times necessary—or just the threat of regulation might help.
We have already heard stories about prices rocketing; they have now fallen back a bit, but not to where they were in October and November. Some of that is due to the oil price rising. The spikes were of 70 or 80%, although some people say that they were higher. Rises of 50 to 70% were typical in my constituency.
The price has now dropped back to about 62p per litre, from an average, at its peak, of about 72p. Considering, however, that in October the price was about 40p, that is still a significant increase. In my view, if the price of mains gas or electricity leapt by 50% in a matter of weeks, there would be more action than we saw over student tuition fees.
I do want to pay some tribute to the previous Government’s Warm Front programme. It would be wrong to dismiss it entirely as it did quite a lot of good but, as I have said previously, I encourage the Minister not to repeat some of its mistakes, because it was inflexible and took no real account of the housing stock. Several of my constituents took advantage of the programme, seizing the opportunity to get more efficient boilers and similar equipment, but they were in properties that were already connected to the gas grid. Most of my constituents who fall under the fuel poverty definition missed out on an opportunity to do something about their heating situation.
The hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) mentioned that housing stock does not seem to be a factor in deciding how fuel poverty measures are applied. It absolutely needs to be, and the green deal is a great opportunity to do that. The green deal has been flagged up as being about efficiency, and I think that initially it over-focused on the insulation of existing houses. Energy companies and the Energy Saving Trust and similar bodies say that a lot of what is planned will be almost irrelevant if we do not all have thermostats in our homes. We can turn down our radiators manually and do other things, but if we do not have thermostatic control the boiler will still generate and consume the same amount of fuel. Prioritising thermostatic control is, therefore, one thing that we need to focus the green deal on.
There is also the issue of the funds available to households. I understand the simplicity of the green deal, and that it will mean about £6,500 for householders, but the plan is that the amount will be the same across the country. Frankly, with urban stock, householders could do a lot of what they wanted—insulation and draught excluding—for less than £1,000, as I did in my house in Hampshire, when I was living there. For about £12, I dramatically reduced my fuel bills, simply because I plugged the gaps that the old walls and doors did not—the change was significant. I am concerned that for my constituents who rely on LPG and oil, it will cost far more than £6,000 to rip out inefficient carbon-based fuel systems and replace them with more energy-efficient heating systems. I hope that the Government take that into consideration when doing their individualised, but hopefully targeted, programme. It would add complexity, but it would make a difference, rather than the programme just being about getting a bit more energy efficiency for the same money.
My hon. Friend the Member for Hexham talked about efficient markets—perhaps oligopolies—developing. I am not suggesting that suppliers in my constituency operate as such, but I am concerned about the efficiencies of the market because they have an impact on pricing. I have written to the Office of Fair Trading and, to my knowledge, it has not acknowledged my letters from over a month ago, which is disappointing. I hope that the Minister thinks about some of the suggestions that the hon. Member for Ynys Môn (Albert Owen) made about the importance to people of energy and of its pricing, and about whether the Office of Fair Trading is the best body to look at this energy sector, given that LPG and oil do not currently fall under the Ofgem banner. Despite my attempts to talk with that body about some innovative social tariff ideas, it keeps saying, “It’s not our issue.”
The hon. Lady makes an important point. When Ofgem is dealing with the other energy suppliers, those of electricity and mains gas, it looks at vulnerable customers and the way in which customers are treated, as well as the price of the product. The OFT, however, is far more limited in its powers and, it would appear, in its interests.
I agree strongly, and that is why I am keen to see an expanded role for Ofgem. I do not say that lightly, nor do I insist upon it, but I would like the Minister to consider the issue, because it is not going away. It is a fact of life that energy—certainly oil—is becoming more and more scarce.
It has been mentioned that quite a lot of people in this country live less than a mile from grid gas, so should we be considering introducing incentives to use some of the green deal money to get more homes on to the grid? Should we think about encouraging communities? Several communities already come together to do co-operative buying, so is there a way of rolling out best practice in that area? Again, I do not think that the OFT is the body to do that, and aspects of Ofgem could be involved.
I pay tribute to a collection of men who belong to a Rotary group, not in my constituency, but where I used to live in the North West Hampshire constituency. Every week they get together to chop wood and make it into kindling, which they supply to pensioners in the village—my mother is a beneficiary. It is a nice thing that these good people do, and spending £4 a week on a bag of kindling is welcomed by the pensioners. I am sure that the activity provides the men with exercise but, more importantly, it provides them with a sense of well-being and of knowing that they are doing a service. We should encourage good examples of communities working together to ensure that vulnerable people in those communities are well served.
In summary, I want the Minister to think more widely about the oil and LPG market, about its efficiency and how it operates, about how we can get social tariffs into oil and LPG provision, and about Ofgem’s role. Most importantly, the flexibility of the green deal is critical in making a difference to the fuel poverty of, and energy efficiency for, those not connected to the mains gas grid. I look forward to the Minister’s comments.
I apologise, Mr Gray, for not being here at the beginning of the debate because of other duties in the House. I shall take two minutes to mark up some other unfair practices that I believe take place among domestic heating oil suppliers, and which I have tried, unsuccessfully, to address in my constituency.
The Christmas before last, a couple who were moving into a new house and had never used heating oil, found the tank empty. They rang up a supplier and were given a price, which, because they had no understanding or no experience of oil, they accepted. It turned out to be exactly twice the going rate. I tried to take the matter up with trading standards officials, but they felt that they could not intervene. That is an example of unfair trading practices, and I have another from this Christmas when a couple in a very isolated house were asked to pay a £200 delivery charge on top of a very high price for the oil.
To give an example of my own—although I am not suffering—I ordered 2,300 litres of heating oil in October, but when I looked at the delivery note, I saw that only 1,600 litres had been delivered, at a price of about 40p a litre. To my surprise, in December, the company delivered another 1,000 litres of heating oil of its own volition, but this time at a price of about 65p a litre. My area still has the independent suppliers Calor and Watson, but the other four main suppliers are now owned by DCC. The Office of Fair Trading needs to look into that. I have written to the OFT before, and it has said that it cannot take on the issue, but I have now written again, as it appears that DCC has a substantial share of the market and might be in danger of abusing that position.
I thank my hon. Friend the Member for Islwyn (Chris Evans) for securing this important debate. He made a heartfelt presentation and raised some serious points.
None of us underestimates the increasing challenge of fuel poverty. It is worth reinforcing the figures that many hon. Members have mentioned. National Energy Action estimates that 5.5 million households, or one in five homes, will live in fuel poverty this year, which is the highest number in 15 years. The previous Labour Government made fuel poverty a priority and legislated to end that tragedy by 2016, introducing measures such as winter fuel payments and the Warm Front scheme. For a time, that investment ensured progress—between 1996 and 2004, the number of fuel-poor households fell by 70%, from 6.5 million to 2 million—but the steep energy price rises to which many hon. Members have alluded mean that despite the previous Government’s best efforts, the targets for eliminating fuel poverty among the most vulnerable have not been met.
My hon. Friend the Member for Ynys Môn (Albert Owen) has referred to the Fuel Poverty Advisory Group. FPAG’s annual report, which was published in July last year, stressed that a typical gas and electricity bill has increased by 125% over the past six years, and uSwitch, the energy consumer group, estimates that homeowners are paying £338 a year, or 37%, more for their gas and electricity than in 2008.
The past few months have squeezed families’ budgets to breaking point. We have just had the coldest winter for decades, with further sharp increases in energy prices. The domestic fuel shortage last month showed the difficulty of heating homes adequately in hard-to-reach rural areas. Many hon. Members have also spoken about the additional challenge of unregulated domestic oil supplies and a lack of transparency in pricing systems. Furthermore, the 2.5% increase in VAT and rising inflation will reduce families’ spending power even further. This will be an even tougher year for households on fixed incomes, so we must redouble our efforts to tackle fuel poverty.
I welcome the fact that the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle (Gregory Barker) recognised in the House on 11 November that
“We have to really attack fuel poverty”.—[Official Report, 11 November 2010; Vol. 518, c. 404.]
I agree. It cannot be right that in Britain, one of the world’s most prosperous countries, families must choose between buying food or keeping warm. As the hon. Member for Hexham (Guy Opperman) has put it, they must choose between heating and eating. It is vital that the Government match their actions to the scale of their rhetoric.
Before exploring the Government’s approach to tackling fuel poverty, I will consider their upcoming consultation and what it might mean for the future. How we define fuel poverty and its causes is key to ensuring that we focus our efforts to tackle it effectively. If the newspapers are to be believed, the Government are still having difficulty identifying someone to chair the review, but we have been told that it will report in the summer. Will the Minister confirm that that is still the case?
One of FPAG’s key recommendations in its latest report was that the Government should lay out a clear strategy for eliminating fuel poverty by 2016. Will the Minister confirm that the Government plan to include that in their review? The outcome of the review will shape what action is taken in the future, so it is important that it is fully independent and has full stakeholder engagement.
The Government currently define a fuel-poor household as one that must spend more than 10% of its income to heat the home to an adequate standard. Many of the stakeholders to whom I have spoken are deeply worried that the review’s aim is to narrow that definition to such an extent that fuel poverty is virtually defined out of existence. I sincerely hope that that is not the case. Will the Minister give us some clarity and assurance about the consultation’s terms of reference? I reiterate that the scale of the challenge must be faced.
It is also important that we examine who is affected by fuel poverty. I am sure that when most people hear the term “fuel poverty”, an image of pensioners comes to mind, but Save the Children highlighted in a report last week that many types of family face a poverty premium, which forces them to pay more for basic goods, services and bills because they do not have access to a bank account or cheaper payment methods such as direct debit and lower social tariffs. Save the Children’s research showed that one fifth of the poverty premium comes from fuel bills. If low-income families who pay the highest tariffs for gas and electricity were charged the same amount as families who pay by direct debit, they would save an average of more than £250 a year. The Government must adopt a range of measures to tackle the underlying causes of fuel poverty among disadvantaged groups. Fuel poverty extends beyond pensioners.
The Opposition’s concern is that the Government are adopting a sticking-plaster approach rather than tackling fuel poverty directly. Hon. Members have said that funding for the Warm Front scheme will be cut by two thirds over the next two years. Given that the Warm Front budget for this financial year has already run out, there is clearly need as well as demand for the scheme, and the reduced budget will not cover all those homes that still need new boilers to bring their heating systems into the 21st century.
The Government plan to introduce their warm homes discount later this year as a more targeted way of tackling fuel poverty. However, according to Consumer Focus, only about 25% of fuel-poor households in England will be eligible for the scheme, based on the most recent data. Two hon. Members have mentioned Macmillan Cancer Support’s campaign. Will the Minister confirm whether the warm homes discount will extend beyond low-income pensioners to other low-income, fuel-poor households, such as those with children or those where someone has a terminal illness?
FPAG advises that the only long-term and sustainable solution to fuel poverty is radically to improve the energy efficiency of every dwelling occupied by fuel-poor households, as many hon. Members have said. The Government have adopted that approach in their proposals in the Energy Bill for the green deal. The Opposition welcome the proposals in principle and will seek to work with the Government to ensure that their plans are workable and centre around fairness for the consumer. However, FPAG has also noted that the green deal’s financial model of measures paid for from bill savings may not be suitable for fuel-poor households, because many in fuel poverty currently under-heat their homes. If the Government are determined to base their approach on replacing Government-funded schemes to tackle fuel poverty directly with market-led schemes, they must ensure that they do not simply withdraw funding, leaving an abyss in its place.
The Energy Bill is starting its legislative journey in the other place, and in a few months’ time we will have the chance to scrutinise it in the Commons. However, will the Minister give us some details of how the Government foresee the green deal and the energy company obligation will work specifically to eliminate fuel poverty? I have heard from many stakeholders worried about low levels of green deal take-up among fuel-poor households and hard-to-treat homes, to which the hon. Member for Suffolk Coastal (Dr Coffey) has referred. It is vital that the Government get it right and ensure that the green deal works to tackle fuel poverty. The Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle has said that the green deal will be “the game changer” for fuel poverty. I hope that the Minister will be able to give us those assurances and a bit more detail.
On the Government’s proposals for electricity market reform, the Opposition acknowledge the need for reform. As the shadow Secretary of State, my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier), said in the House on 16 December, we will support fair and sensible mechanisms for reform. On 10 January, however, in a written answer to my hon. Friend the Member for Glasgow North East (Mr Bain), the Government indicated that the impact of their preferred reform options will hit the lowest-income families with the largest increases, stretching families’ budgets even further. I hope that the Government will review that problem as they work through their proposals and ensure that a fair outcome is reached, so that those in fuel-poor homes are not disadvantaged further.
It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate the hon. Member for Islwyn (Chris Evans) on securing this debate and thank him for the interest that he has shown in this incredibly important issue. It is vital for his constituents, for Wales in general and for the country as a whole. I also congratulate him on the comprehensive way in which he outlined his thinking and his assessment of the challenges that we face. I reassure him from the outset that we share the same objectives. We both recognise where things have not been working, and we are both determined to do better. I look forward to working with him, as we try to make progress on the issues over the coming years.
I have also been encouraged by the contributions of my hon. Friends the Members for Hexham (Guy Opperman) and for Suffolk Coastal (Dr Coffey), and the hon. Members for Ynys Môn (Albert Owen) and for Brecon and Radnorshire (Roger Williams), as well as the extremely constructive contributions of many other hon. Members who have intervened in the debate, during which the full range of issues that affect fuel poverty have been considered. That breadth has made it extremely constructive.
Reference has been made to the Fuel Poverty Advisory Group, and I would like to put on record my respect and admiration for that group’s work, particularly the incredibly assiduous work of its chairman, Derek Lickorish, in drawing attention to the issues and how we should seek to address them.
The figures for fuel poverty, which have been set out by the hon. Member for Islwyn, make it clear that the situation in Wales is worse than in much of the UK as a whole. From 2005 to 2008, the number of households in fuel poverty rose from 2.5 million to 4.5 million, and it is estimated by many organisations that today’s figure is probably 5 million, so it has doubled over the past five years. In Wales, 26% of households—332,000 of them—are estimated to be in fuel poverty. That figure has more than doubled over the past six years. It is, therefore, absolutely clear that more needs to be done to address the problem. As the hon. Member for Liverpool, Wavertree (Luciana Berger) has said, this is not about rhetoric, but action.
The hon. Member for Ynys Môn talked about the importance of targets. They are important, but every bit as important as a target is a road map—a strategy for how one intends to meet the target. What we have lacked lately is a strategy on how to meet ambitious targets. The hon. Member for Liverpool, Wavertree said that we need action, not rhetoric, and that is exactly what we are determined to put in place. However, given what we inherited on the issue, we cannot continue to pretend that the previous policy was working. We need a different approach and there needs to be much greater urgency in how we address the issue.
Historically, Warm Front has been one of the main vehicles for trying to achieve that. I have no doubt that Warm Front has done much good work, but it has simply not been up to the scale of the challenge. Between 2008-11, Warm Front spent more than £1.1 billion helping 580,000 homes. In 2009-10 alone, it assisted 210,000 households by introducing 112,000 heating measures and 82,000 insulation measures. That will help to improve the standard assessment procedure rating of those properties from 33 to 66 points on average, which is the equivalent of an energy efficiency rating increase from band F to band D. The scheme has, therefore, been doing a good job on energy efficiency, which has led to average savings of £650 and more in the running costs of those households.
Those are real benefits, but, as other hon. Members have said, particularly my hon. Friend the Member for Suffolk Coastal, they have been dwarfed by the scale of the problem. The Association for the Conservation of Energy estimates that a quarter of the homes supported by Warm Front are in fuel poverty. Therefore, even at the peak of its work, when Warm Front was helping 200,000 households a year, only 50,000 of those were in fuel poverty. Some 5 million homes are estimated to be in fuel poverty, so it would take 100 years, using Warm Front, to deal with the problem. That is simply not adequate.
The vast demand for the Warm Front service has highlighted the problems, which is why we had to announce in December that the budget for this year had been allocated and was fully subscribed and that we could take no new applications in this financial year. We will still help 130,000 households in this financial year, and we expect the 55,000 jobs that are still in the queue to be completed by March. The measure is, undoubtedly, temporary and the scheme will open for new applications from next year. However, Warm Front has clearly not been able to deal with the scale of the problem, and we need a better approach.
Warm Front will continue for the next two years with a budget of £110 million in the first year and £100 million thereafter, as we get new measures that we think are more fit for purpose up to speed. We are consulting on the eligibility criteria, so that we can ensure that, for its remaining period, Warm Front is more targeted on the most vulnerable people, who are likely to be those on income-related benefits. Warm Front will be more targeted on the least energy efficient homes in particular, so that it can be more effective. Alongside that, we are committed to maintaining winter fuel payments, which were planned by the previous Administration, at a higher rate of support this winter.
There were some questions about how the cold weather payment would work, and I am keen to receive more information from the hon. Member for Strangford (Jim Shannon) about his concerns. It strikes me as a particularly well-targeted benefit. It is automatic and based on a postcode approach. When the temperatures in a postcode trigger a payment for those who qualify because of the benefits that they receive, they should receive it automatically. If the hon. Gentleman would like to write to the Department with his concerns, we would be keen to respond to them in more detail to ensure that the scheme is working as effectively as possible.
We are also committed to doing more to work with the energy companies to identify vulnerable customers. The energy rebate scheme has been an extremely effective mechanism. It has matched information from the Department for Work and Pensions about those who are on pension credits with the consumers of each energy company. That has enabled the companies to target those people with an £80 discount on their electricity bills, which has enabled 200,000 households to benefit to the tune of £16.5 million in total, with additional running costs paid by the energy companies themselves. That shows the benefits of the Government and industry working together.
We are determined to build on the success of that scheme through the warm home discount, which will also help to address the issue—this was mentioned by the hon. Member for Islwyn earlier—of hidden fuel poverty for people who do not necessarily come forward. It will require the energy companies to give a greater discount and to target it on the most vulnerable customers, sharing more information about other people who are in receipt of benefits. We expect it to be £140 a year, which almost doubles the discount on electricity bills. We are also looking at how we can spread the breadth of that for low-income families, those with long-term illnesses and those with disabilities, which are issues that have been raised in this debate. We are in touch with Macmillan to try to make this scheme work for those homes with someone suffering from cancer, for whom we all have tremendous sympathy and wish to help as much as possible. The scheme will be mandatory and worth £1.1 billion over four years. We expect it to help 2 million households a year.
Against that background, we also believe that the time is right for a fuel poverty review, and I am grateful for the recognition and support that it has received from hon. Members who have spoken this morning. It will ensure that the available resources are focused most effectively on tackling the problems underlying fuel poverty. It will be an independent review of the target and the definition of fuel poverty. We believe that that is the right place to start. Given the failure so far to meet the targets that have been set, it is right that the target and the definition should be the starting point. Additionally, if we are to have someone truly independent to chair the review, we are keen that they should also help to frame its terms of reference and its priorities. It will be fundamental in helping us to assess what will be the right measures to deal with the challenges.
We have heard a significant amount—understandably so—from hon. Members on both sides of the House about their concerns about the domestic oil market and the liquefied petroleum gas market. I want to make it absolutely clear that we understand those concerns. As a Member of Parliament, this is the largest issue raised in letters in my constituency postbag. As a Minister, it is the largest element of the letters in my ministerial postbag that express concerns to me in the Department. I have no doubt whatsoever that many hon. Members and members of the public do not believe that the market has been working as effectively as it should.
We recognise that many issues can affect prices—refinery capacity, stock levels, distribution costs, retail margins and exchange rates all have a role to play—and we are liaising with the Office of Fair Trading, which has the responsibility to consider any example of market failure. What has struck me in many of the letters that I have received and in the contribution of the hon. Member for Brecon and Radnorshire is the specific—not anecdotal—examples of where things have not worked as we would expect them to. I hope that the Office of Fair Trading will consider those matters very carefully. It is currently consulting on its annual plan and on proposals to prioritise markets impacted by high, rising and volatile commodity prices. The Department of Energy and Climate Change supports such an independent assessment of the off-gas grid supply issues for consumers and competition in the relevant markets.
Many issues need to be addressed in this context. However, we also need to consider how we address these matters more fundamentally. There are plans to extend the gas grid, but it is a slow process and we recognise the challenges that exist. That is also why we have attached so much importance to taking forward the work on the renewable heat incentive. We want to encourage those people who are off-gas grid to look at other renewable ways of heating their homes and providing hot water. The renewable heat incentive, on which details will be announced shortly, will be a crucial way to try to deliver on that.
The Minister is very skilful in his reply. He mentioned the apparent failings of the Office of Fair Trading. Will he consider—I am asking for a consideration—whether DECC will look at the work done by Ofgem on the on-grid and by the OFT on the off-grid? Will he consider the comparisons and think about whether there should be a single body dealing with the matter, because the complexity of making reports to the OFT, which must then do so to the Competition Commission, does not benefit vulnerable people in those areas? I ask him as a DECC Minister to go back to his officials, look at those comparisons and come up with a possible regulator for the off-grid in the future.
If the hon. Gentleman looks at some of the speeches that I made when I was the Opposition spokesman, he will see that I raised those exact issues. It has been argued that there are many competitive companies in this area. We have heard about some of the challenges to the market in this morning’s contributions. The matter is so important—it is such an enormous part of so many people’s household budgets—that we are determined to ensure that we get the policy right. We will consider how the market is working and the role that the OFT can take, which is primarily independent in its ability to assess these matters. We will also look at the role of Ofgem, as we reform its role as a regulator. It is critical that we learn a great deal from the lessons of this winter.
I am encouraged by the Minister’s commitment to engage with the Office of Fair Trading in these issues. The OFT did eventually relent and conduct an inquiry into liquefied petroleum gas supplies. Customers now have greater power to shop around for better supplies of LPG, but they often do not understand what they can achieve by doing so. A publicity campaign could result in real savings for those customers.
There is a great deal in what the hon. Gentleman says not just about the benefits of shopping around, but about people understanding the benefits of buying early. The price increase happened extremely quickly. It rose from 40p at the beginning of December to 70p within two or three weeks. More people should be ordering in October and November. I hope that they will not have the experience that the hon. Gentleman had of only getting a partial delivery. We need to ensure that people understand that issue more fully.
The most important change that we need to consider is whether to take a fundamentally different approach to energy efficiency. In this country, we have some of the least energy efficient housing in Europe. From 2012, the green deal, which is part of Energy Bill, will provide the opportunity for householders to take action to improve the energy efficiency of their homes and to protect themselves against energy price rises through greater energy efficiency. We are also introducing a new energy company obligation to replace both the carbon emissions reduction target and the community energy saving programme. That will do more to help the poorest and the most vulnerable consumers and it will offer basic heating alongside insulation.
The key to the green deal is that the consumer should receive the benefit before they have to pay for it. We also hope that it will be of benefit to people who are in private rented accommodation, which is often the most difficult area to deal with. The landlord will no longer have to pay up front to cover the costs because they will be recovered over time from the people living in that property, as a result of a small addition to the Energy Bill. We hope that the landlords will decide to do that work voluntarily, but the Energy Bill will provide powers to require that work to be done, including a new power for local authorities from 2015 to require action to improve the worst performing homes. As the Energy Bill goes through the other place and, ultimately, the House of Commons, we are keen to discuss much of the detail and to ensure that we deal with the matter in the most effective way possible.
The hon. Member for Suffolk Coastal (Dr Coffey) raised the fact that a lot of the early talk about the green deal related to measures such as the physical insulation of the home. Has there been any discussion with suppliers about expanding the green deal or working with installers to put more efficient equipment into the home? Is there any way that that can be integrated into the green deal?
The golden rule with the green deal is that the saving has to be greater than the long-term cost. Accordingly, measures can be considered—for example, more efficient boilers and thermostat controls—that will help to meet that energy efficiency goal and to fit within the total golden rule that I have mentioned.
The root of the problem of fuel poverty is that price rises and changes are reflected in the cost of energy. I am very disappointed that most energy suppliers announced price increases before the winter. I join the hon. Member for Islwyn in paying tribute to EDF, which deferred a price increase until after the winter. We should recognise good practice where it occurs, and EDF’s customers will recognise and appreciate such action. In addition, we want a complete end to retrospective increases, where customers are only told after an increase has come in that it is going to happen. We want to do more to help consumers switch by requiring more helpful information to be provided on bills, and we are pleased that Ofgem has announced a market review to consider the large increase that it has seen in the profit margins of such companies.
As the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) mentioned, rising commodity prices have been reflected in consumer prices. The increase has been on a rising trajectory, and I think that most hon. Members would assume that the price of oil—currently, $90-plus a barrel—will continue to increase. We are looking to the same companies to rebuild our energy infrastructure. Some £200 billion needs to be found to upgrade our energy infrastructure, because of the lack of investment over recent decades. Accordingly, an enormous amount needs to be done by the companies and we need to recognise that. I am pleased by Ofgem’s work and by the evidence that Alistair Buchanan gave to the Select Committee on Energy and Climate Change yesterday. I am in absolutely no doubt whatsoever about the robustness and thoroughness of the Select Committee’s investigation and the real powers that it has to address these issues.
Once again, I congratulate the hon. Member for Islwyn not only on securing the debate, but on giving hon. Members the chance to address these issues at an important time of year, when they are very much on people’s minds. I also congratulate him on the constructive and thoughtful way in which he introduced the debate.