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Fuel Poverty Bill

In the spirit of cross-party support and encouragement, I am more than happy to recognise the work of my hon. Friend the Member for Southend, West (Mr. Amess) in that regard and as a sponsor of the Bill. My hon. Friend the Member for Rochford and Southend, East (James Duddridge) from the other side of the town shakes his head, just in case we confuse him with my hon. Friend, although he has made equally important contributions on other aspects of tackling these issues. The Government's figures on fuel poverty only go as far as 2006, and they show that 3.5 million households were in fuel poverty then, compared to 1.8 million in 2005. The estimate is that 5.5 million households, or 9 million people, are now in fuel poverty. There are some 23,000 excess winter deaths, as they are unattractively called, each year as a result of fuel poverty, and the situation is becoming ever more challenging. The annual dual fuel bill is now £1,100, up from £572 in 2003. Every 1 per cent. increase in fuel bills pushes another 40,000 people into fuel poverty. We are all genuinely concerned that the reductions in people's domestic energy bills have not happened anything like as quickly as the increases that we saw a while ago. As the hon. Member for Somerton and Frome said, fuel poverty occurs across the country, in urban areas as well as rural, and affects the young, the old, single people and families. The issue is not easy to categorise in terms of one particular group, but affects people of all backgrounds in all parts of the country. We must also address the situation of people who are off grid and do not have access to the same support mechanisms and regulation as we see elsewhere. It is because of the price increases that we need a swift investigation by the Competition Commission into the relationship between the wholesale price of fuel and what the energy companies charge their customers. We must also recognise that the value of the winter fuel payment has decreased in real terms, while energy prices have risen. The hon. Member for Chorley (Mr. Hoyle), in his impassioned contribution, put much of the blame on the energy companies. I do not agree that this is an opportunity to press the case for a windfall tax. One of the challenges that we face is the real risk that the lights in this country will go out within the decade, and we need to secure massive new investment in our energy plant. A third of the coal-fired stock will be out of commission by 2016 at the latest, and all bar one—Sizewell B —of our nuclear fleet by the early 2020s. If we have a windfall profit tax, the energy companies that we expect to invest in the new stock will simply look elsewhere in the world. The chief executive of E.ON has already made it clear that it does not see the UK as the most attractive place to invest. Homes in this country are very poor in terms of energy efficiency. Only 40 per cent. of our homes are properly insulated. The average British home leaks twice as much heat and power as homes in Nordic countries. As the hon. Member for Somerton and Frome said, there are great opportunities to provide a badly needed economic stimulus at the same time as we make our homes more energy efficient. Figures that have been provided to us show that, when adjusted for climate, we have the second most inefficient homes in Europe. Even when the figures are not adjusted for climate, we are still worse than countries such as Sweden and Germany, which we would not expect. We have heard about the role of Warm Front, which has been the Government's chosen vehicle for addressing some of these issues. There is general agreement that it is not delivering as much as it should. To some extent, we can see why. We know in early 2008 the Government cut Warm Front's grant by 25 per cent. That cut was partially reinstated, and £100 million was put back into the budget, but that still results in an overall deficit of £76 million in Warm Front's spending for 2010-11, compared with 2007-08. The Government say that the £100 million that they have put back in will mean that an additional 60,000 homes will be brought more up to date in terms of energy efficiency and the installation of modern boilers. Using the same calculation, however, the £76 million still missing from the budget means that the Government are condemning a further 45,000-plus households to fuel poverty. Warm Front grants are, as we know, often not sufficient to cover the total cost of insulation. Many of our constituents cannot afford to pay the top-up element that is required and so have to forgo the grant. Concerns have been expressed, too, about the contractors used. Too often, the contractor used is not the cheapest available and national contractors do not give the best possible price. Clear improvements are needed and the Bill represents a genuine effort to achieve them, although I point out that, a few weeks ago, the Conservatives set out some of our thoughts on how to achieve a low-carbon economy, and I believe that our approach is more comprehensive. The Bill sets out the need for targets and a delivery plan. All too often, targets are set without a road map—without a delivery plan or solid methods of measuring progress towards the targets. One has to question the value of targets set in that way, so I welcome the fact that the Bill includes a delivery plan. I have a practical concern, however: how can the Secretary of State identify accurately all the houses involved? The challenge is to tackle poor insulation, so that houses have adequate energy conservation, but we have to recognise that residents come and go. Rented accommodation is a particular problem. There is often a significant turnover of tenants, some of whom are fuel poor, some not; none the less, at one moment in time the property will be categorised to determine whether it needs to be upgraded. There is an important debate to be had on whose responsibility it is to tackle these issues. There is a clear link between the energy companies and energy efficiency. In a time of a developing energy gap, they have a clear interest and a clear responsibility to help their customers to use less electricity and gas, but the link between the energy companies and fuel poverty is less clear. Those who are fuel poor are often more generally poor. It is the Government who know best who those people are and where they live because the Government have all the relevant information—on income and benefit entitlements, for example—to identify them. There is a case for dealing with the two issues—energy efficiency and fuel poverty—separately. Furthermore, although some people are locked into fuel poverty for the longer term, others come into and out of fuel poverty over shorter periods. Take, for example, a pensioner couple whose income from savings has declined dramatically in the past year, while energy prices generally have risen. Although they might not have been in fuel poverty a year ago, they may well be now or in a year's time. Or take a family with two incomes, perhaps not well-paid but not currently in fuel poverty. If one or both partners lose their job, that family could easily fall into fuel poverty by next winter. Or take the situation of someone who has a long-term but not chronic illness. They may be in fuel poverty for a substantial period, but there is every likelihood that it will not be permanent, and that must be our hope. The difficulty is that the Bill is aimed a moving target. Our approach is better, I think, because it focuses on poorly insulated houses generally. We would offer every household, whether in fuel poverty or not, an entitlement of up to £6,500-worth of approved energy efficiency improvements. Our figures have been developed in consultation with the best brains in the industry to make sure that they are comprehensive. We think that that is the right way forward because it would enable gas and electricity costs to be reduced immediately, and the costs to be recovered over time by the energy companies, which would have the duty to put the energy conservation measures in place. That is the approach taken in the United States, where National Grid is a supplier as well as a distributor of electricity and is legally required to work with consumers to reduce their energy demand. We think that that is a model worth following. I believe that the Minister has been misinformed about our policy and how many homes would be included, but I emphasise that we want it to be rolled out across the entire country. The Bill also includes energy assistance packages, which provide that, until their homes have been fuel poverty-proofed, the fuel poor must be offered the lowest tariff available—lower than any other tariff. However, that is hard to define because of the huge range of tariffs offered. One energy provider says it has 700 tariffs because it operates in four parts of the country supplying both gas and electricity and has single and dual tariffs and so on. As the hon. Member for Somerton and Frome said in introducing his Bill, this can therefore be an extremely complicated issue. Tariffs that might sound cheaper when first offered may end up not being cheaper when one looks at the consumer's actual consumption pattern. They may be using more electricity at peak times simply because they are elderly and are at home when other people are at work. There could be a potential conflict of objectives here. One of the reasons why we have supported smart metering so enthusiastically is that it would change people's consumption patterns. They would use less electricity at peak times, which, in turn, would reduce the need for building new generating capacity. They would, for example, be encouraged to put their washing machines and dishwashers on overnight, and would find that a better way of using their electricity. However, the Bill would make it illegal for energy companies to offer to someone who commits to using their washing machine overnight a lower rate than to somebody in fuel poverty who chooses to run theirs during the day. The longer-term goal of smart meters is to allow better demand management. People would be offered a better tariff if they allow their electricity supplier to switch off or reduce their power supply to their fridge or lighting at different times of the day when there is peak demand. However, the Bill potentially makes that illegal, because it says that the energy supplier must, at a minimum, offer a customer in fuel poverty a tariff lower than any other tariff available to its other customers. In its current form, the Bill also says that the supplier must not just offer that tariff, but supply it. So in the event that it was offered to somebody but they did not take it up, according to the way in which the Bill is phrased —I hope that we can work out such issues in Committee —it could be illegal if it was not actually supplied at that rate. Therefore, what we need is an adaptable system. Tariffs need to adapt to changing circumstances. Somebody on a low wage who happens to lose their job and is therefore at home much more needs to be on a different tariff from the one they were on before. The danger, however, is that the company will have broken the law by not offering a revised tariff, even though it could not reasonably have expected to know that that person's circumstances had changed. Nor do we yet know from the Bill what the penalties will be, although it does give an indication of the level of penalties and what would happen in such a case. Again, I believe that our proposed solution is better, because we would require every energy company to offer social tariffs to vulnerable households. That would help to achieve the same objective, but it would not potentially criminalise companies for offering price incentives to customers to use their electricity in an environmentally sound way. We would require energy companies to provide information on their energy bills that clearly showed customers whether they are on the cheapest tariff offered by their company. If they are not, it would show exactly how much they would save if they switched to the cheapest tariff and how they could do so. This approach would be constantly up to date and would reflect consumption patterns. We would also ensure that people's bills show how their household use compares to a similar household in their neighbourhood, so they could make comparisons and informed choices. On top of that, we would reform the Post Office card account to enable people to pay their utility bills through direct debit-style payments, cutting the energy bills of up to 4 million people who currently do not have access to a bank account. We would certainly look to introduce smart meters, which in the longer term offer the potential to eliminate completely the charges for prepayment meters. In conclusion, we are seeking to improve the Bill as it moves forward. Its aims are good, but it could lead to some less desirable unintended consequences. The thinking behind it has been very positive, and I again pay tribute to those who have encouraged the hon. Member for Somerton and Frome to introduce it. Our approach is I think significantly better, so although we cannot give a ringing endorsement to everything in the Bill at this stage, I hope that we will have the chance to explore these issues further in Committee.