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Household Energy Bills

Volume 592: debated on Thursday 5 February 2015

Energy bills remain a worry for many, so we have three main ways of helping households: giving direct financial help, promoting competition and enabling energy efficiency. Our financial help includes the £2.15 billion winter fuel allowance for pensioners, and more than £31 million will be spent this winter on providing assistance to more than 2 million low-income and vulnerable households. Although there remains room for improvement, energy markets are more competitive than they were in 2010, enabling many people to save around £300 a year by switching supplier. Our energy efficiency policies, which provide permanent cuts to bills, have improved the energy efficiency of more than 1 million homes, enabling us to meet our target earlier than expected.

There is indeed room for improvement. The Children’s Society tells me that there are 2,200 children in families that are trapped in energy debt in my constituency of Wythenshawe and Sale East, yet Which? says that given the global changes in commodity prices, energy companies could be driving down household bills by £164; does the Minister agree with it?

I certainly agree with Which?, which has welcomed the referral of the energy market to the Competition and Markets Authority—something that we have backed. The Leader of the Opposition, when he was doing my job, failed to back such a referral on three occasions. It is vital that the cuts in wholesale costs are passed to consumers, and we are on it.

The Children’s Society tells me that there are 3,300 children in families that are in energy debt in my constituency, yet only last week, Ofgem estimated that household bills could be cut by £114 because of the cost of energy. Why will the Secretary of State not give Ofgem the power to cut bills when they are that high?

The problem with the Opposition’s policy is that if we had listened to them and frozen bills, people would now have even higher bills and would be in even more debt. We are not going to listen to the Opposition’s failed energy policy. Our policy has seen bills come down, not just frozen. People can get some of the best deals by switching to the independents that we have encouraged into the market.

With the news this week that price comparison sites do not always show customers the cheapest offers because they would not get their share, and given that switching is so crucial to the Government, is it not time that we had a non-commercial Government comparison site?

The hon. Lady raises an important question, because it is vital that consumers can switch with confidence. That is why I am pleased that Ofgem has decided to toughen up the confidence code for the accreditation of switching sites. That will be a big step forward.

The report to which my hon. Friend the Member for Wythenshawe and Sale East (Mike Kane) and my right hon. Friend the Member for Delyn (Mr Hanson) referred shows that 2,300 children in my constituency live in families that have energy debt. Equally, at the other end of the spectrum, many of the high-energy businesses that sustain some of the most valuable jobs in my constituency are struggling because of this policy. What sort of policy is it that creates failure at both ends of the market?

I disagree that the policy is creating failure, but I agree with the hon. Gentleman and other Opposition Members that high energy bills need to be dealt with. The question is what is the best way of dealing with them. We have been dealing with them every single day since I took office by using competition, energy efficiency and direct financial support, and by helping energy-intensive industries. Our policies are working. Frankly, if we had listened to the Opposition, people would be paying higher energy bills.

Does the Secretary of State agree that transmission and distribution charges account for more than a fifth of many household bills? Will he press Ofgem to bear down more toughly on the charges made by the monopoly transmission company, National Grid, and by near-monopoly distribution companies all over the country?

My hon. Friend is right that network costs account for about a fifth of the average household bill. Of course, the Energy and Climate Change Committee, which he chairs, is looking into this issue and has taken evidence on it. We look forward to receiving his report. If one looks at an historical analysis of network costs as a proportion of energy bills, they have been coming down steeply since privatisation. We obviously want Ofgem to continue to bear down on them, and our regulatory regime is one of the strongest in the world.

My right hon. Friend the Secretary of State has already explained the incompetence of a price freeze. Does he agree that the best way to help families is to use the traditional liberal approach of competition to drive down prices?

My hon. Friend is right: a liberal approach is definitely the best. In the spirit of the coalition, we have together managed to bring down energy bills by reducing policy costs by £50, something opposed by Labour. It is often forgotten that because we have liberal markets in Britain, the UK enjoys the lowest domestic gas prices in the EU15.

New research shows an 80% fall in insulation measures for fuel-poor homes under the coalition. While the Secretary of State desperately spins about having helped 1 million households, the facts show that had the Government not weakened their policies, nearly 3 million homes would have been helped by now. When will he make energy efficiency a top infrastructure priority with the funds to match?

I am grateful for the hon. Lady’s question, although I do not recognise her figures. Energy efficiency is a top priority for the Government, and I hope that she will welcome the fact that yesterday I laid before Parliament new regulations to require landlords in the private sector to meet minimum energy efficiency standards by 1 April 2018. That will help 1 million tenants in the most energy-inefficient houses in the country.

Is not the last thing that will help household energy bills a policy that freezes prices at a level above the market, the mere announcement of which—even while the proposers are in opposition—has had a detrimental effect, distorting the markets before the policy is even implemented?

My right hon. Friend is right. The evidence is clear, not just to everyone in this House, but to every voter: if we had implemented Labour’s proposal, people would be paying higher energy bills now.

This week, the consumer body Which? added to the growing body of evidence that energy companies do not pass on reductions in wholesale costs to their consumers. Which? confirmed that cuts to consumer bills should have been larger and made far sooner. Does the Secretary of State regret that he voted as recently as last month not to back Labour’s plan to give the energy regulator the power to cut energy prices when wholesale costs fall?

This is a very important issue, and when I considered it last year, I looked at the record of a predecessor of mine as Secretary of State—now the Leader of the Opposition—when wholesale prices fell far faster and further. He did nothing. We have acted all the way. I agree with much of the analysis by Which?, especially on the need to work even harder to make our markets more competitive. The markets we inherited in 2010, with Labour’s big six, needed reform. We have undertaken that reform, and that is why the big six’s market share has fallen so significantly, and why we have backed, unlike Labour, a reference to the independent competition authority, so it can look at the energy market.

As usual, the Secretary of State did not answer the question. Will he explain why Ofgem estimated only last week that profit margins for the big energy companies are set to soar to £114 per household, citing expected future falls in wholesale costs as the reason for the increase? Is that what a functioning, competitive market looks like?

Of course we all want to see falling prices, not increased profits, and that is one of the reasons why we are increasing competition. It is ironic that Labour is now quoting Ofgem—the regulator it introduced, tried to improve and now wants to abolish. The hon. Lady and her party must come behind our policy of increased competition, must start backing the Competition and Markets Authority reference, and should change their policy in the face of the evidence. They should say that they will abide by the recommendations of the CMA and will stop playing party politics with a very serious issue.

Order. It is always a pleasure to hear the right hon. Gentleman, but his question is in a later group. We are saving him for the delectation of the House at a later stage in our proceedings.

I am grateful to you for that guidance, Mr Speaker. I received a letter from the Department yesterday saying that my question, which was then question 22, was linked with question 5, tabled by my hon. Friend the Member for Coventry North West (Mr Robinson). The Department has created great confusion which you, Mr Speaker, with your usual efficiency and consideration, are clearing up.