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Energy Tariffs

Volume 551: debated on Thursday 18 October 2012

Order. At this stage, all that the right hon. Lady needs to do is to ask the Secretary of State to make a statement on the matter.

Rising energy prices are a cause for concern in these difficult times, particularly for those vulnerable consumers who struggle to meet their bills. I am profoundly concerned and disappointed to hear of the recent energy price rises, and I will be seeking to discuss them with the relevant suppliers as a matter of urgency.

My Department has already taken a number of different actions to assist consumers with their bills. Programmes such as the carbon emissions reduction target, Warm Front, the green deal and the energy company obligation will make homes more energy efficient. In addition, the warm home discount will provide no less than £1.1 billion of support up to 2015 to help 2 million low-income and vulnerable households annually.

Following the Prime Minister’s announcement yesterday, I am pleased to confirm that we will be bringing forward legislation to help energy consumers to get the best deal. We have already regulated, we have plans to improve competition and simplify tariffs in the retail market process, and we will improve liquidity and competition in the wholesale market, through the Energy Bill, in weeks rather than months. A number of options are being considered. For example, the voluntary agreement with energy suppliers announced in April secured a number of measures which will be evaluated to see whether we should make the legislation binding. This is a complicated area, and we will have discussions with the industry, consumer groups and the regulator in order to work through the detail.

As I was saying, the Prime Minister threw energy policy into confusion yesterday, causing chaos in the energy industry and leaving his own Ministers at a loss over what Government energy policy actually is. It is no wonder that the Secretary of State has avoided coming to the House today to explain a policy that he knew nothing about until yesterday.

As energy bills have gone up by over £200 in the last two years, the public deserve an answer. Switching has fallen to its lowest level ever, and in recent days three of the big energy companies have announced another round of price hikes this winter, so it was not surprising that there was a great deal of interest when the Prime Minister told the House yesterday that

“we will be legislating so that energy companies have to give the lowest tariff to their customers”.—[Official Report, 17 October 2012; Vol. 551, c. 316.]

But now it appears that energy companies will not be forced to put all customers on cheaper tariffs after all.

Let me ask the Minister three straightforward questions. First, did he know about the announcement before it was made yesterday, or was the Prime Minister making it up as he went along? Secondly, can he confirm today whether the Government will be legislating to force the energy companies to put all their customers on the cheapest tariff—not through a voluntary agreement or through sending a letter once a year, but, as the Prime Minister said, legislating to make the energy companies put all their customers on the lowest tariff? Is that their policy or not? Thirdly, if that is their policy, will the Minister explain how it will work and when it will be implemented? If not, will he explain what the Prime Minister meant and tell us when he will return to the House to put the record straight?

We all mis-speak from time to time, and the Prime Minister was under a lot of pressure yesterday, but for the Government to spend a day pretending to have a policy that they have no intention of implementing is no way to run the country. It is like something out of “The Thick Of It”. In the past year, I have made the case for a radical reform of Britain’s energy market. The millions of families and pensioners who are worried about how they will heat their homes deserve better than policy made on the hoof, and the House needs answers.

You know, Mr Speaker, that it is not my habit to be excessively partisan in this House, and the British people will judge how to define “excessive” in the light of the fact that in 13 years the Labour party did so little to plan for our energy future. The right hon. Lady, who was a Minister when that party was in government, dithered and delayed and deferred key decisions about energy policy and investment, which has left us in the situation we face today. It is not so with this Government, who will bring forward the Energy Bill to reform markets, increase competition and secure investment, which should have been done years ago.

Let me answer the right hon. Lady’s questions very directly. She asked whether I knew what the Prime Minister was considering. Of course we understand what the Prime Minister was considering, as we have been debating and discussing the provisions of the Energy Bill for months. The draft Bill has been carefully scrutinised by the Select Committee—the excellent Select Committee on Energy and Climate Change, if I may say so—while the Opposition have made their views known, the industry is in constant dialogue with the Government on these matters and consumer groups are regularly consulted, so of course all these matters have been discussed and considered over the months.

With an alarming misunderstanding—or, at least a supposed misunderstanding—of parliamentary process, the right hon. Lady then asked how this policy would work and how would it be implemented. She will know that this Government take the Energy Bill so seriously that we are determined that it should have proper scrutiny in this House. During that scrutiny, we will of course discuss how these things will work and how they will be implemented. That is a fundamental part of the process by which legislation passes through this Parliament.

The right hon. Lady asked for an affirmation of our determination to tackle the issue of tariffs. Had she had the good fortune to be at the Conservative party conference, she would have heard me on a number of occasions articulating, with some style, the case for lower tariffs as a means of reducing demand and placing an emphasis on demand- side measures that the previous Government failed to do for almost their entire stewardship of the energy brief.

The answer is yes, we will use the Energy Bill to get people lower tariffs. There are, of course, different options to be considered in that process, but those options will be discussed with the industry and with consumer groups. More than that, they will be effective in a way for which only this Government—and I am bound to say, this Minister—are renowned. If I may say so, I have brought fresh energy to this brief, and I am determined that this Bill will be a landmark piece of legislation in the interests of the British people, delivering lower energy prices for businesses and households across the country.

Order. A sizeable number of hon. and right hon. Members are seeking to catch my eye, and I am keen to accommodate that interest. I remind the House, however, that business questions are to follow and that thereafter there are to be two relatively well subscribed debates to take place under the auspices of the Backbench Business Committee. Brevity is therefore of the essence from Back-Bench and Front-Bench Members alike. I trust that the Minister of State, who has just addressed the House with the eloquence of Demosthenes, will tailor the length of his responses accordingly.

Does this not turn on a very short compass? Will my hon. Friend confirm that the difference is that he intends within 13 weeks to bring forward legislation to ensure that consumers have the lowest possible electricity prices, whereas the Opposition had 13 years in government in which they did absolutely nothing to help consumers with electricity prices?

If you were to wander through the corridors of the big six energy companies today, Mr. Speaker, you would hear the sound of low tariffs being ripped up and thrown in the bin. How, through legislation, can the Minister seriously make it an option for the lowest tariff offered to be low and affordable, rather than being set by the energy companies to suit their profit margins?

The hon. Lady is right—as she so often is, by the way—to suggest that we need a robust relationship with the energy companies. Of course they are partners in this process, but none the less we will take the necessary steps to ensure that the people get the best possible deal, for we are the people’s party and the people’s Government.

Having just experienced the horrors of trying to switch tariffs myself, I know that a lot more work still needs to be done to make it much easier. I commend North Lincolnshire council, which is looking at having its front-line staff in the Link centres trained to advise people on how to switch, but what we really need is for the energy companies to take that on board and offer the training that is necessary.

That is an excellent point. I will happily engage with my hon. Friend and his local district council. He is right: clarity and explicability are important, and I do not think that they have always been as good as they might have been in the past.

These proposals did not feature anywhere in the draft Energy Bill, the White Paper, the technical updates or the impact assessments, so I assume that DECC staff have been working hard on the new idea this morning. Can the Minister guarantee that when he has worked out how to do this, it will not impede the progress of the Energy Bill and its delivery to the House?

The hon. Gentleman is a great expert on these matters, and he is a member of the Select Committee that scrutinised the Bill so carefully. One of the first things that I did when I became the Energy Minister was to meet the Chairman of that Committee to consider the suggestions that it had made about the Bill. I do not think that that will slow things down, but it will certainly ensure that we get things right. I am grateful for the hon. Gentleman’s continuing diligence in these matters.

I regret the fact that my hon. Friend has had this pit dug for him. Do I understand from his reply to the urgent question that this is not a firm policy proposal, but merely an item that is currently under consideration—if I may use his own language?

I think that the Prime Minister was crystal clear yesterday. [Laughter.] The Opposition are often behind the curve. We believed in one nation when they had not heard of Disraeli. The truth is that the Prime Minister was very clear. This is a policy intent, which will be delivered through the necessary mechanisms. Luckily, the Energy Bill is to be presented to the House, and that will allow proper scrutiny and consideration by Opposition Members and others.

Will the Minister arrange for the impact assessment of the Prime Minister’s announcement to be placed in the Library, so that we can all have a look at it?

The hon. Gentleman is an experienced Member of the House. When the proposals are presented, of course there will be an impact assessment.

This morning my constituent Anthony Noel contacted me to say that his energy bills had risen by more than 11% in the last year, so I welcome the remarks made by the Prime Minister yesterday. I understand that the Government will be inviting the six main energy companies to engage in a round-table discussion of the policy. Can the Minister confirm that?

At a time when families are struggling to pay their fuel bills and fuel companies are making billions of pounds of profit, why does the Minister not stop coming forward with gimmicks, and introduce effective regulation that will control those companies?

Regulation is important. I do not want to be ungenerous—still less unkind—but it must be said that the last Government had 13 years in which to do something about this. I have been in the job for a matter of days, and we are getting on with it.

Does the Minister agree that although the shadow Minister speaks of an energy policy, the previous Government simply did not have one? They took none of the big decisions, such as on new nuclear build, which is why we are over-reliant on expensive imports today.

Let me be even more generous. There is always a tension involved in taking big strategic decisions in a democratic polity, because of the imperatives that we face day to day, week to week. However, that cannot legitimise a failure to take decisions that were in the national interest and for the common good. Those strategic decisions, given their scale and time scale, need to be framed around meaningful legislation that establishes a robust relationship between those with commercial interests and those missioned, as we are, to defend the national interest. That is precisely what we will do, in weeks not months, and at its heart will be a landmark piece of legislation which I will guide through this House.

We all know that the Minister is eloquent in the art of obfuscation, but will he set aside the flim-flam just for the moment and answer a straightforward question: was he aware that the Prime Minister was going to make this announcement—yes or no?

The Prime Minister, as the hon. Gentleman knows, comes to this House weekly to be scrutinised by this House. Does he give me notice of every answer and does he get notice of every question? Of course the answer is no. If the hon. Gentleman is asking me whether we were considering these matters—whether I was considering them and whether the Secretary of State was considering them—and whether they were being debated as part of the consideration of the Energy Bill following the scrutiny by the Select Committee and others, the answer is a definitive yes.

In meetings I have had this week, major green investors were already complaining about perceived political noise around green investment. Does the Minister agree that if uncertainty is the enemy of investment, surprises such as yesterday’s are even more unhelpful?

The fundamental objective of the strategy I outlined is to bring clarity. Clarity is the prerequisite of certainty, certainty is the prerequisite of confidence and confidence is the prerequisite of investment. That, in a nutshell, is where the failure of the previous Administration lies.

As this moment in time, 80% of people are paying too much for their energy because of confusion and unfair tariffs. Last year alone, 70 more tariffs were introduced, making a total of more than 400. What are the Government actually doing to make things more transparent for consumers?

As I mentioned, transparency and what I described as accessibility or explicability are crucial—the hon. Gentleman is right about that. People need to know how they can get the best deals. We have done a lot of work on that, but we need to do a lot more. We need a simplification of the process, and that has been debated in this House for a considerable time. He makes a good point, which was also made earlier, and we will be drawing it to the close attention of the energy companies and considering it as we develop our own thinking.

While many households in Pendle are worried about being able to afford their energy bills this winter, millions of pounds available through the Government’s Warm Front scheme go unclaimed. The same applies for the warm home discount, which, as the Minister said, alone represents more than £1.1 billion of support for the poorest households. If these proposals to give people the lowest energy tariff are going to be done through people’s energy bills, may I ask that we take the opportunity also to improve the information contained in those bills about those two important schemes?

My hon. Friend will know that one of the features of the energy marketplace in recent years has been a concentration of the number of companies involved. That was not predicted at the time of privatisation; people expected a more plural market, and the competition and downward price pressure that that brings. While the number of companies has shrunk, the number of tariffs has simultaneously grown, by, I understand, something like four-hundredfold. That is not sensible. Whatever the intention, it is leading to a degree of confusion which I think is unhelpful. Better information on bills and a simplification of tariffs, targeted in a way that allows people to get the best possible arrangement, are an absolute priority.

Many of my constituents have no access to broadband, particularly those who are elderly, and many pay by pre-payment cards. Will the Minister be the people’s champion today by guaranteeing that those people will have the lowest tariff?

Yes, the answer to that question is that we need to do that in a range of ways. Sometimes the mechanisms used do not reach the very people whom one wants to help most. I do believe in the redistribution of advantage; perhaps in that sense I take a rather more forward position than the Labour party.

In the real world, does the Minister realise that millions of people on modest incomes fear the coming winter because of the huge increases in energy prices that have occurred and will continue to occur? When are the Government going to take a hold of these privatised energy companies, which pay their leading personnel very high salaries, make huge profits and act as a cartel?

As someone who comes from as modest a background as anyone in this House and is committed to social mobility, I could hardly not be aware of that.

Could the Minister confirm whether he or any other Minister in his Department discussed the Prime Minister’s announcement with any energy company, specifically Scottish Power in my constituency, prior to the announcement yesterday?

I have said that we have an ongoing dialogue with all the energy companies. In the short time that I have been the Minister, I have clearly been involved in that dialogue. I have met representatives of some of the companies several times already. That is part of the business of being in government, as the right hon. Gentleman knows—I recall that he was a very distinguished Minister in the Home Office. The discussion about tariffs is, of course, a core part of that dialogue. I have, even in the short time that I have been the Minister, come to the conclusion that demand management has not been given sufficient attention in the past and now needs to be a crucial part of our strategy, and tariffs are central to that.

The Minister has shown some chutzpah, if not modesty, today, but is it true that the Department of Energy and Climate Change advised the Prime Minister against this policy?

DECC has a wonderful relationship with our other partners in government—of course that includes the Treasury and No. 10. I say, with appropriate modesty, that that relationship has improved still further since my arrival.

The Prime Minister was very explicit in response to my question yesterday. If the Government do not follow through on his announcement, will the Minister ask the Prime Minister to come back to the House to apologise for raising people’s expectations only for them to be dashed at the last minute?

Let me repeat what I said earlier, because amplification is necessary, given the hon. Gentleman’s question—I note that he was the person who raised this matter with the Prime Minister yesterday. We want to use the Energy Bill to get people the lowest tariffs—it is as plain as that.

It is right to say that the strategy of having no strategy cannot go on, but are pop-up policies either workable or worthy as an answer?

The development of the strategy is challenging. Putting aside what can sometimes be excessively political partisan banter, the Government and the Opposition know that it is essential to put in place a strategy that works. We are planning for a period of between 20 and 60 years, depending on how we measure the lifetime of the types of different generating resource in which we are looking to encourage investment. The issue requires a large degree of consensus across this House, and I hope that I will be able to work to deliver that, in order to ensure that the strategy that the hon. Gentleman describes is meaningful. That is a challenge, but it is one that we must meet, in the national interest.

I think that the Minister is on record as saying that he was not informed about this. He said earlier that he will seek to have a meeting with the energy companies to talk about the price rises—will he explain that? Does it mean that he has not had a meeting previously? Was he not informed by the energy companies about the price rises? If he was not, that would be astounding.

Again, the hon. Gentleman will know, because of his experience in the House, that when British Gas announced a price rise, as the first company to do so, we of course had a discussion with the company. I had discussions with British Gas at the weekend, and I spoke to other energy companies as well. Of course that dialogue takes place, because I want to be clear about the reasons for these rises. International gas prices comprise a significant reason for them, but I think it is absolutely right that we are robust in our dealings with energy companies; this needs to be a mature and professional relationship. That dialogue will never be better than it has been since I got here, but I tell hon. Members that it will take place on terms defined by the people’s interests and not the interests of any particular commercial organisation.

While the Government’s policy descends into farce and shambles, 5 million people are being ripped off daily by the big six companies. Can the Minister tell us finally how many people will be on the lowest possible tariff as a result of his Energy Bill?

The hon. Gentleman knows that the proposals I have described today will form part of a Bill. That Bill will be debated and scrutinised by this House, and it would be impertinent of me to anticipate how that Bill will end its passage through this House, because the party of which he is a member will of course table amendments and make its case, and the details of that are at this stage unknown. I will say, however, that our policy intent, articulated by the Prime Minister with, to be frank, a determination not seen when the Labour party was in government, is that people should pay less for their energy through the reform of tariffs. I cannot be plainer than that.

Analysis on “Newsnight” last night suggested that the policy as announced by the Prime Minister could well reduce competition and increase prices. Was the programme right to raise those concerns?

I do not believe so. I think we can square the circle of increasing competition, which I hope will encourage downward pressure on prices, but at the same time getting the investment we need in energy infrastructure. I described that as a significant challenge—the whole House knows that it is—but I think it can be achieved if we get energy market reform right.

I wonder, in view of the Minister’s linguistic acrobatics today, whether he can give us a little hint about how he will square that circle?

I add acrobatic skills to the many qualities that have been ascribed to me by this House. I do not think it is a question of linguistic acrobatics; I think it is a question of getting a set of policies in place that work for Britain. I am sorry to have to say this again, but the previous Government palpably, singularly, failed to plan for our energy future. This Government will not make the same mistake. Tariffs are a part of that and prices are critical, and we will act in weeks rather than months.

Is it the Government’s intention to stop energy companies offering predatory deals, usually only over the internet, to just some customers at the expense of the majority of others, who do not switch as often?

The hon. Gentleman will have heard what I said earlier about the number of companies declining but the number of tariffs increasing. That has caused confusion, at the very least, and part of the process needs to be about greater clarity and explicability, very much in the terms he describes.

To make things as clear as possible, is it the Government’s intention to bring forward legislation specifically to put all customers on the lowest tariff? A yes or no answer will be sufficient.

A yes or no answer would be insufficient to deal with the hon. Gentleman’s question—indeed, it would be almost an insult to him to reduce my answer to that level. Let me be plain, though: the Energy Bill will be used, as the Prime Minister said, as a vehicle to get people the lowest tariffs. We will look closely at the best means of doing that over the coming days and weeks, and the hon. Gentleman will be as excited as the rest of the House when those proposals are published.

I think it is a fair summary to say that the House has enjoyed the scrutiny process over the past half hour.