---

Energy Regulations (Consumer Prices)

I agree with the spirit of the hon. Gentleman's intervention, although it is not strictly true: it is interesting that one of the six, Scottish and Southern, has not yet increased its prices. It argues that profits have accrued in the industry through the issue of emissions trading licences, and it is using them to hold down its prices. However, the spirit of the hon. Gentleman's question is right. The next element in the argument is that the industry, supported by Ofgem, argues that we do not need to worry about any of that or those six producers, because consumers switch suppliers, which eats away at any profit margins that arise. They argue that 50 per cent. of households have switched suppliers and that households can make mark-ups of up to £100. They say, ““It is a good market, so why should we worry about it?”” However, when we probe a little further, it is clear that the supposedly competitive retail market does not work as it is supposed to work. Half of households have never switched—mine is one of them—perhaps because of conservatism or age. For the 6 million households with pre-payment meters, it is often, indeed invariably, impossible to switch because they are locked into a debt repayment arrangement with their supplier, so they cannot exercise that choice. The most damaging evidence on this issue came out of recent research by the university of East Anglia, which found that a third of people who had switched ended up worse off than they were before. They had made the wrong choice. It is easy to understand why. Many people change as a result of a calculated, thoughtful exercise, but many change under pressure. I have had endless correspondence with Scottish and Southern about old ladies in my constituency being browbeaten into changing their contracts and making bad choices. For all those reasons, one has to be sceptical of the Ofgem argument that there is a functioning market. It functions in part, but it does not function brilliantly. The final part of the argument is the industry's claims that, because of the competition, British producers supply cheap power and gas. That is certainly true of British gas, which has historically been relatively cheap. The tables coming from the Minister's Department suggest that British electricity prices are roughly in the middle of the European range, but that is misleading, because those prices are after tax, and the British VAT rate is one of the lowest in Europe; it is 20 per cent. in many countries. Using the pre-tax cost, Britain has the fifth-highest electricity prices in the Union, so something is not working.