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Fuel Poverty

Volume 532: debated on Wednesday 14 September 2011

Motion made, and Question proposed, That this House do now adjourn.—(Mr Syms.)

I am delighted to have secured this debate. I look forward to hearing the Minister’s comments on the wider issues that I shall raise.

First, let me set out the current state of fuel poverty in Scotland. Fuel poverty afflicts a cross-section of society. It is determined by the percentage of one’s income that is spent on energy bills: to be exact, when a household spends more than 10% per cent of its income on gas and electricity, it is deemed to be in fuel poverty. One third of Scottish households live in fuel poverty. The Scottish Government believe that, after recent energy price rises more than 900,000 Scottish households will be living in fuel poverty. I fear that we are on the edge of a fuel poverty crisis and that in the coming years that figure will reach the 1 million mark in Scotland alone.

Colder winters in the rest of the UK have not stopped the Scottish National party Administration in Edinburgh cutting the fuel poverty budget by a third, and aided by what the Tory-led Government are doing, the poor and needy are set to suffer even more in the years to come. In constituencies such as mine, as well as others, fuel poverty relates predominantly, although not exclusively, to pensioner poverty; however, many who are not pensioners —people with severe disabilities, single parents and the unemployed, to name but a few—are also in fuel poverty.

My home city of Glasgow is fairly youthful compared with other cities in Scotland, but there is a large elderly population. Among those of pensionable age, there are large pockets of severe pensioner poverty, to which my constituency is sadly not an exception and from which it suffers more than most. When I was elected to Parliament in November 2000, 80% of single pensioner households in Scotland lived on an annual income of £15,000 or less. Today that figure is 60%—admittedly less than in 2000, but still unacceptable. With 13,500 pensioner households in my constituency alone—one of the highest concentrations of pensioners in Europe—hon. Members will understand why this issue is of grave importance to me as a local MP and why I am raising it today. About 6,500 people are claiming pension credit in my constituency, which is consistently ranked 7th out of all Scottish parliamentary constituencies in that respect. My constituency has the highest proportion of single women pensioners in the entire country, and according to official figures their number will continue to rise, with over two thirds of women over 85 in Scotland projected to live alone by 2033. Glasgow North West is fast becoming—sadly for me—like the name of a recent film, “No Country for Old Men”.

Because 65% of single pensioner households and about half of smaller pensioner households in Scotland were classified as fuel poor in 2009, according to official figures, making them more likely than any other type of household to be experiencing fuel poverty, my constituency casework, as hon. Members can imagine, is dominated by the issue—and rightly so. According to Scottish Government figures, almost a quarter of single pensioner households and a fifth of smaller pensioner households in Scotland are deemed to be in extreme fuel poverty, whereby they spend more than 20% of their disposable income on heating their home. In addition, 8% of pensioners in Scotland live in absolute poverty and one in 10 over-65s are classed as “materially deprived”. Although Scotland is one of the worst affected areas in the UK, many inner-city and rural areas elsewhere have the same severe fuel poverty status. Hon. Members will understand why I believe we are on the verge of a fuel poverty crisis.

What causes fuel poverty? To put it simply, it has three root causes: low incomes, poor housing and high energy prices. Eradicating fuel poverty will involve tackling these three problems. Improving the quality of housing stock is of paramount importance. Although big strides were taken under the previous Government through the decent homes standard, the Warm Front programme and the energy efficiency commitment to improve energy efficiency and install cost-effective heating systems in homes, more has to be done. In Scotland between 2008 and 2010, new housing supply decreased by 16%, house building decreased by 17% and public sector housing provision fell by 1%. I would like to blame the current Government for those things, but unfortunately they were not in power. In 2009, according to Scottish Government figures, new-build housing completions were at their lowest level since 1982, meaning that fewer modern, properly insulated homes are being built. In addition, people living in private sector housing in Scotland are twice as likely as those in social housing to experience extreme fuel poverty. More than a third of pensioners live in housing that is poorly insulated or reliant on expensive heating.

Housing is a devolved matter, however. In this speech, I will focus mainly on areas where the Government potentially have a direct influence. Although I will use Scotland and my constituency as examples, colleagues tell me that the situation is just as bad in many other areas of the UK. I have had to apologise to a number of Members who asked to intervene, because I would have needed hours of extra time to have a proper debate and allow them the time that they so richly deserve.

I hope that the Chancellor and the Government will focus more on the vital role of the tax and benefit system in raising the incomes of the needy. I am sure that the Minister knows that benefit entitlement checks can help to ensure that vulnerable customers are getting their fair share of the millions of pounds of unclaimed benefits. Sadly, the many inches of newsprint about the £1.5 billion-worth of benefit fraud outweigh the coverage given to unclaimed benefits. Do not get me wrong, fraud of any kind should be sought out and punished as it is the poorest who always suffer as a result, but little recognition has been given to the fact that up to £5 billion of means-tested benefits that should go to older people in the United Kingdom are unclaimed each year. I wish that the Government would apply the same gusto to chasing up the pensioners who need that money as they give to those who defraud the welfare system.

I could not discuss fuel poverty without mentioning winter fuel payments. I know that the Conservatives were latecomers to supporting winter fuel payments. I remember the Foreign Secretary, when he was leader of his party, saying that such payments were a gimmick, and I am glad that the Conservatives have now publicly declared their support for them. However, the Chancellor’s decision to cut winter fuel payments to the poorest pensioners by £100 seems a cynical and short-sighted decision in the current economic climate, with incomes falling and energy prices rising.

I congratulate my hon. Friend on securing this important debate. I am sure that he was in the Chamber for Scotland questions earlier today, where the figures for Glasgow were given: 100,000 pensioners face cuts to their winter fuel allowance this year, totalling £4 million, at the same time as their energy bills are rising by up to 20%. Does he share my concern that, sadly, too many pensioners in the UK will have to choose between heating their home and putting food on the table?

My hon. Friend and neighbour makes a very good point. I know that the Minister will say that the Government are not cutting winter fuel payments, but maintaining the level that the Labour party set in government. The fact is that each time the Labour party increased the payments because of the weather, it consolidated them the next year. Had Labour won the election, we would have expected the Government to consolidate the money given last time. That is why I feel that this Government should consolidate that money, particularly at a time when energy prices are rising and when poor people—particularly the elderly—who need the money the most will suffer the most. It is a fact that those who receive the winter fuel allowance will receive less this year than last year. The Labour Government did not do that; the Conservative Government did. They had their opportunity to consolidate the payments, but instead used them as another attack on the poor.

Energy is a major cost to everybody, but especially to people who fall into the trap of fuel poverty. Energy companies constantly remind us of increases in the wholesale costs of oil and gas and increased demand, and add that they are required to invest in modernising their industry to keep climate change commitments; they remind us less often of the Government subsidies that they get to invest in renewables, and still less often of the huge profits that they make, and of the huge profits that they made in the days of cheap oil and gas, none of which have ever been repaid to customers. After all, the profits of the big six energy companies have gone up almost a third since 2008, and payouts to shareholders increased across the board, up an incredible sixfold since 1999 in the case of Centrica, which owns British Gas.

I support renewable energy, but the delivery of clean energy has not matched the price paid by the Government. It is time that we saw a return for our taxpayers’ money. The production—or lack of it—of clean energy is being used to rip off the British people, thus adding to the costs of those who can least afford them. I can compare the scale on which private energy companies have managed to privatise profits but nationalise losses only with the recent bank crisis. The energy customer in the UK—if we were totally honest, we could just call them the British taxpayer, because they are one and the same—is picking up the tab for the excesses, irresponsibility, recklessness and lack of long-term vision of the big six energy companies. Those companies—the energy barons—have managed to turn us into their 21st century serfs. The cheek of some of them knows no bounds. As I pointed out in June, ScottishPower is milking the British consumer: having recently increased energy bills in this country to record levels, it lent £800 million to its foreign sister company, which is based in the US, to keep US energy prices down. That money could have been invested in the UK, or it could have helped to keep UK prices down.

That was not even the first time that that happened. Back in 2008, ScottishPower lent £750 million directly to its Spanish parent, Iberdrola. One can assume only that that was to the benefit of Spanish energy customers. That is not the truly sickening aspect of this problem. This is the first year since 1990 when Iberdrola’s US gas and electricity supply companies have raised their customers’ bills. They have seen increases of 2% and 8%, but the British customer is getting hit by near-20% increases this year, and has been hit by 40% increases since 2007. That same supplier is lending money to the American company.

I believe that that is why the energy companies do not want to be fully transparent. Although extra wholesale market costs increase prices, with full transparency we might discover that market costs are not increasing prices to the extent that the price hikes would suggest. According to Bloomberg, the wholesale price for gas in autumn 2008 went above 70p per therm, compared with 59p per therm today. That shows that wholesale gas prices have actually dropped 15%. Similarly, prices in the wholesale electricity market reached £120 per MWh in autumn 2008; today, they are £51.20 per MWh—less than half the price back then.

This is not a case of energy companies being backed into a corner by market forces; it is an act of collective incompetence and ineptitude, leading to a cartel of companies backing consumers into a corner by raising prices in tandem. I therefore suggest that we break up the big six’s monopoly and allow other providers to enter the energy market. I would like to see a major co-operative energy supplier and/or a big supermarket chain, such as Tesco, giving the big six some competition.

Does my hon. Friend agree not only that it would be useful if other players entered the market, but that it is important that people can understand the various tariffs? Many people on the lowest incomes find it extremely difficult to work out what is best for them. The energy companies could do more. I hope that new players would operate differently.

My hon. Friend makes a good point, and believe me, if I had more time I would go into it. I certainly did so in the Energy and Climate Change Committee, when we talked about tariffs and the fact that there are more than 400 of them. It is a disgrace. How is anyone supposed to understand them all?

It is odd that in 2011, I, a Labour MP, am calling upon a Tory Government to create greater competition in the marketplace, but with more companies and greater competition, I believe that costs would fall, employment would be maintained or increased and the same profits would lead to greater efficiency in the old and new companies. If we do nothing, however, just like the big banks, which were too big to fail, so too, owing to the cartel-like nature of our energy market, will these huge companies feel that there is no sanction for reckless price rises, and only disaster and a big bill will await the taxpayer. I strongly suspect that the true reason for the price rises is the gross failure of the companies to stockpile their energy reserves to hedge adequately against future price rises. Their error is our loss. There might be numerous reasons for the current situation, including ineptitude, but although that is likely, I feel that the answer lies more in the fact that neither the Government nor Ofgem have given them any incentive.

I realise that it is not all the energy companies’ fault. I believe that the regulator, Ofgem, has not helped matters by being idle. I recently publicised the £200,000-a-year salary of Lord Mogg, its chairman. I hope that the Government, who claim to want to crack down on quangos, will have an urgent word with that gentleman, who is paid more than the Prime Minister for a three-day week. He is on footballer-like wages and needs to be reminded to justify his salary. His organisation should be acting to protect hard-pressed British consumers, who on his watch are not getting a fair deal.

I know that I have quoted many facts and figures—I hope that I have not bored too many people, including the Minister—but they are not nameless and faceless to me; they represent individuals whom I have known for many years, not just as their MP, but as their neighbour and friend. That is why I have such passion for this issue. In the nature of cross-party good will, I have a few questions that I would be grateful if the Minister answered.

What does the Minister believe can be done to encourage uptake of means-tested benefits among those in our elderly population who can rightly claim them? Will he consider enforcing transparency upon the big six energy companies or asking the Competition Commission to hold an inquiry into the energy market? What does the Minister think of my suggestion of breaking up the energy companies to stop them acting like a cartel and to allow other providers into the market? What does he believe can be done to tackle fuel poverty, and what measures does he propose to alleviate its harshness this winter? What plans are in place to increase awareness among pensioners and others of the help provided this winter? Would he be interested in a cross-party energy summit, held in Westminster, bringing together energy companies and politicians? Will he ask the Chancellor to revisit the winter fuel allowance and consolidate the £100 reduction?

I thank the many groups, non-governmental organisations and colleagues who have contacted me with help and advice. To mention them all would have taken hours. Let us have the debate we need. I look forward to the Minister’s reply.

I congratulate the hon. Member for Glasgow North West (John Robertson) on his success in securing an Adjournment debate, particularly on the important subject of fuel poverty. He spoke at length and with great passion. Unfortunately, he has left me about nine minutes to respond to the many important points that he raised. I shall have to make a slightly shorter speech than I had intended, but if I do not cover all the salient points, I will write to the hon. Gentleman after the debate.

At a time when fuel bills are rising and we are approaching the cold months of the year, it is right to start by reaffirming the coalition’s absolute commitment to helping those households in or at risk of fuel poverty. We recognise the need to help more of the most vulnerable keep their homes warm at an affordable cost. However, the state of fuel poverty in this country, which is totally unacceptable, has not occurred overnight. Fuel poverty has been rising year on year for much of the past decade, during which the hon. Gentleman’s party was in government. Despite legislation designed to reverse the trend, between 2005 and 2009 the number of fuel-poor households across the UK more than doubled from 2.5 million to 5.5 million.

In England, we have seen the number rise from 1.2 million in 2004 to 4 million in 2009 and, of these, 3.2 million were vulnerable, so the elderly, families with young children and the long-term sick and disabled are among those most affected by fuel poverty. Of Scotland’s 2.3 million households, in 2009 there were 770,000 households in fuel poverty, compared to 543,000 in 2005. This means that, as the hon. Gentleman said, a third of households in Scotland were in fuel poverty in 2009. In Glasgow city, which encompasses his constituency, there were 69,000 households in fuel poverty in 2009.

If we are to reverse this trend and the iniquitous and ever-increasing number of those in fuel poverty, it is clear that something big has to change. I do not doubt that the previous Government were well intentioned and had hoped to be more effective than they were, but the numbers speak for themselves. The attempts of the previous Administration were singularly unsuccessful for a number of reasons, some of which were within their control and some not. We need completely to rethink, redesign and re-engineer our policies to meet the challenge of turning around this juggernaut.

Before leaping forward with new answers, we must first make sure that we are asking ourselves the right questions. That is why we invited Professor John Hills to undertake an independent review of the fuel poverty target and definition. He has been asked to look at fuel poverty from first principles—what causes it, its effects and how best to measure it. The review is looking to ensure that in these difficult times available resources are focused where they will be most effective in tackling fuel poverty, targeting support to those who need it the most. As I said, this is an independent review so I cannot predict what will be said, but I am aware that Professor Hills is engaging with a broad range of stakeholders and we look forward to receiving his interim findings this autumn.

In the meantime, the coalition Government need to act. We have introduced the warm home discount, a scheme that spans Great Britain. This is the first year of the scheme and we will assist around 2 million households. The majority of these will be low-income pensioner households in receipt of pension credit guarantee credit only. We expect to find more than 600,000 of them and provide them with a £120 rebate on their bill. Most of these will receive a rebate without having to claim, as a result of the Department for Work and Pensions and the energy suppliers sharing their data to help to find these customers. The rebate will be a major benefit to these vulnerable people who may struggle to claim. This is part of the answer to the hon. Gentleman’s question about how we start identifying such people and encouraging them to take up the benefits to which they are entitled. The discount will increase across the four years of the scheme, rising to £140 by the fourth year. To ensure that those off the gas grid can also benefit from the scheme, the discount will be applied to household electricity bills. Other groups, such as low-income families and those with long-term illnesses or disabilities, may also receive the discount.

Tackling fuel poverty will be a huge challenge. A key part of the solution is undoubtedly to address the thermal efficiency of our housing stock. Britain has some of the oldest building stock in Europe. As consumers, we pay a high price for inefficient, leaky buildings. It is widely known that it costs more on average to heat a home in southern England than it does to heat a home in Norway. That is obviously not because it is colder here, but because our buildings are significantly leakier and draughtier. Both the carbon emissions reduction target and Warm Front continue, installing measures in the homes of some of those most at risk from cold. However, the coalition has extended the CERT programme to 2012, which will bridge the gap before the introduction of the real game changer in autumn 2012, the green deal.

Warm Front has helped more than 2.2 million households in England with a range of heating measures. However, we recognised early on that Warm Front was a totally inadequate response to the scale of fuel poverty. It has helped hundreds of thousands of people when the challenge is to help millions. If we had to rely on Warm Front alone, at the previous high rate of spending under the last Labour Government it would take more than 80 years to get close to achieving our aim. The Government’s green deal, which we debated this afternoon, will be the flagship programme for addressing energy efficiency. We hope that it will be the game changer that finally deploys resources from the private sector to achieve the ambitious scale of change and investment that we need.

The domestic green deal is an opportunity for householders to improve the energy efficiency of their homes and will come at no up-front cost. It will help to protect people against price rises through greater energy efficiency, saving them money now, but also protecting them against future rises. In developing the green deal and the energy company obligation—the subsidy that will target hard-to-heat homes and the fuel-poor—we are removing the barriers to take-up, raising awareness and showcasing the benefits to make energy efficiency a no-brainer. We are also working closely with the devolved Administrations, particularly in Scotland, to ensure that the green deal can be rolled out right across the country.

The hon. Gentleman spoke at length about the big six. Let me remind him that after privatisation in the early 1990s there were dozens of energy companies. I agree with him that the market was surely much healthier then. I have great sympathy for his wish to see far greater competition in the energy sector, although the consolidation of the energy companies into the mighty big six occurred primarily at the end of the ’90s, under the last Labour Government. However, we will not overcome the problem by simply squeezing or over-regulating them evermore. Regulation is important, but we must be careful not to create new barriers to entry. Like him, I want to see new players entering the market and more disruptive technologies. We want to see a more decentralised energy system challenging the monopoly of the old-style, old-fashioned provider. We want to see more energy service companies that make their money not from selling energy, but from helping people to save energy by using less to keep their houses warm.

The Government are taking a range of measures, including our exciting proposals for electricity market reform, to create new incentives to bring new players into the market, because ultimately it is competition—new entrants, new players, new investment—that will create the choice and best value for consumers that the hon. Gentleman and I both want. Indeed, he is absolutely right about that and I am glad that we have found that point of agreement. I am also glad that we have had this opportunity to debate the issue. He is absolutely right—

House adjourned without Question put (Standing Order No. 9(7)).