This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Fuel Poverty and Energy Efficiency debate with Edward Davey, Secretary of State for Energy and Climate Change
The Secretary of State for Energy and Climate Change (Mr Edward Davey): I am grateful to the Opposition for this opportunity to set out the many things the Government are doing this winter, and in the winters to come, to help people to keep their energy bills as low as possible and to keep their houses warm. I am under no illusion about how hard it is out there this winter. Times are tough, many people’s incomes are not going up, and the cost of necessities such as food is rising. I understand that higher energy prices are hitting some people hard, so let me make it very clear that rising energy bills are one of my greatest concerns.
We need to set the story straight on why energy bills have been rising. They have been driven remorselessly up by wholesale fossil fuel prices, as the right hon. Member for Don Valley (Caroline Flint) admitted. Global gas prices were 50% higher in the five years to 2011 than in the previous five years, and they have continued to rise. Sustained higher world oil and gas prices have taken some by surprise because, in the past, prices have fallen when the developed world has experienced recession and low growth. But today, probably for the first time in modern history, the fast-growing economies of China, India, Brazil and other parts of the emerging world are all demanding oil and gas. So world oil and gas prices have remained stubbornly high, and are likely to remain high.
Mark Reckless (Rochester and Strood) (Con): My right hon. Friend referred initially not to rising oil and gas prices but to rising fossil fuel prices. Is it not the case that, although coal prices have fallen significantly, we are seeing no benefit from that because we are closing coal-fired power stations, including Kingsnorth in my constituency on 17 December, because of an EU directive?
Mr Davey: My hon. Friend is not quite explaining the situation fully. There is an awful lot of coal being burnt in this country and elsewhere, because of its low price, but that has not changed the picture because of the high price of gas.
Britain cannot control the global market. We cannot drive down international wholesale prices, but we must still do everything we can to help the people and businesses facing those rising global prices, especially the most vulnerable and those in fuel poverty—and, despite what the right hon. Member for Don Valley said, we are doing that. Government policy is designed specifically to drive a wedge between global energy prices and energy bills, now and in the future. It is designed to enable us to cushion and insulate people from the hikes in global fossil fuel prices as best we can. The coalition has a plan to tackle ever-rising energy bills. When the Labour Government were in power, they talked big but did very little. They did not effectively target help on those who needed it most, they did not establish a new market in home energy efficiency and they did not reform the electricity market. We are doing those things. We are acting, whereas they just talked.
Caroline Lucas: Will the Secretary of State explain how promoting a major new nuclear power programme, which will require a subsidy of about £4 billion a year and which will inevitably push up prices, is compatible with trying to reduce the impacts on people in fuel poverty? It is going to make energy far more expensive.
Mr Davey: Two things surprise me about the hon. Lady’s question. First, she seems to know the details of the ongoing negotiations between EDF and the Government. I pay tribute to her if she knows them, but I have to tell her that her figures are completely wrong. Secondly, I would have thought that, given the real threat of catastrophic climate change, low-carbon energy would have changed a number of people’s views on nuclear power, if we can make it cost effective without public subsidy, in line with the Government’s policy.
David T. C. Davies (Monmouth) (Con): Does my right hon. Friend agree that it is deliciously ironic that the Green party should be attacking the coalition Government for pursuing a form of energy generation that requires some kind of subsidy when it is determined to festoon the country with wind farms that require enormous subsidies to generate anything at all?
Mr Davey: My hon. Friend tempts me down a particular road, but it does not relate to the motion, so for reasons of time I am happy to get back to what I want to say.
Charles Hendry: I was delighted to go to the constituency of my hon. Friend the Member for Monmouth (David T. C. Davies) to help open a wind-turbine manufacturing plant, which is keen to take advantage of this technology. That was not, however, the point I wanted to make in this intervention. Does the Secretary of State agree that the Labour did not just talk, but blocked progress? When the Minister of State, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), and I proposed a green deal as an amendment to the Energy Bill under the last Labour Government, Labour vetoed it. We could have seen progress two years earlier than it has happened.
Mr Davey: My hon. Friend is absolutely right, and he is an authority in the House on this issue. It was not just the green deal or nuclear or other things that Labour failed to do when in government; they failed to get investment into the energy system in the UK, and we are having to make up the backlog. We are helping people now, in the short term, by intervening directly—getting extra money into the pockets of those who need it to pay their bills and looking after those who are struggling most—through the warm home discount. We are helping people now and in the medium term by helping everyone to be able to help themselves to cut their bills by saving energy through the green deal. We are ensuring through the Energy Bill that our country and future generations are not hit by future volatile fossil fuel prices, as we are being hit by major reforms for a more competitive, more diverse market of suppliers and energy sources. Let me deal with each of those areas in turn Richard Fuller rose—
Mr Davey: Before I do, I shall give way to my hon. Friend.
Richard Fuller: We all recognise the differences between this Government and the last Government. This time money is short, whereas the last Government spent like drunken sailors money that they did not have. When we deal with fuel poverty, we thus want to ensure that the funding is focused on those who really need it. Will the Secretary of State address the issue that under the last Government schemes were not targeted on those who really needed them, and tell us what this Government are doing about it?
Mr Davey: My hon. Friend is absolutely right, and I am coming on to talk about that right now. Looking at the actions we are taking, it is clear that we are helping the poorest and most vulnerable with targeted extra money to help with winter bills. We need to make sure that those who feel the cold most sharply and those who can least afford to pay can put on the heating in the knowledge they will receive extra help to pay for it. For many pensioners, winter fuel payments make a valuable contribution to paying their energy bills. That is why we have protected winter fuel payments in line with the budget set out by Labour. Last year, we made over 12 million payments to over 9 million households at a cost of around £2.6 billion.
We are doing more for the poorest pensioners and for many other vulnerable households through cold weather payments. When the coalition came to office, cold weather payments were at £8.50 a week and had only temporarily been raised to £25. As cold weather payments target the most vulnerable when they need it the most, the coalition decided, despite the tough financial situation, to keep cold weather payments at £25 a week and to make that permanent, investing an extra £50 million a year. About 4.2 million people are currently eligible—older people on pension credit, disabled adults, families with children under five on an income-related benefit. They can now be sure that—year in, year out—if the temperature drops dramatically, they will get help with energy bills. We should be proud of that.
Mrs Main: The Secretary of State is making an enormously persuasive argument, far more persuasive than simply continuing with Warm Front, which was not targeted and certainly did not reach the people it should have reached. This is a much better use of public money.
Mr Davey: I will come on to the energy efficiency part of our measures; at the moment, I am showing how we are using money very effectively to help people with their bills. Several hon. Members rose—
Mr Davey: I want to make a bit more progress. In addition to the winter fuel allowance and cold weather payments, the coalition brought in the warm home discount—a legal obligation on the energy companies that we introduced for direct cuts to the energy bills of the most vulnerable. The Opposition rarely mention this, although to be fair to the right hon. Member for Don Valley) she mentioned it today. She will know that so far this winter, more than 1 million low-income pensioners have already received the warm home discount to help keep them warm—and, with them, almost a million other vulnerable households with mandatory rebates worth £288 million this year alone, automatically cutting the bills of the most vulnerable by £130 a year.
The Opposition do not normally mention that because it is clear evidence that we are doing everything we can to tackle fuel poverty, despite the financial situation we inherited. Even before cold weather payments can be claimed, a poor pensioner over 80 is guaranteed to receive £430 of help with their energy bill. Under Labour, a vulnerable household was not guaranteed anything, but with the coalition’s warm home discount, they can get £130 off for sure. That is real help.
Nia Griffith (Llanelli) (Lab): How can the Secretary of State say that a pensioner over the age of 80 was not entitled to £400 under Labour, when they were entitled to £400 under Labour’s winter fuel scheme? Will he come clean and tell the House that his Government have cut that to £300, at the same time as cutting the £250 to £200? Can he tell us one week in this winter in which the cold weather payment has been paid to people in the UK?
Mr Davey: First, cold weather payments are related to the weather, which the coalition Government do not control, as the right hon. Member for Don Valley was at least good enough to acknowledge. I am afraid that the hon. Lady’s figures are wrong. Under Labour, £300 of winter fuel payments went to all pensioners, but through the warm home discount we guarantee £130 off their bills from the energy companies, so that amounts to £430 off for elderly pensioners. That did not happen under Labour.
Hywel Williams (Arfon) (PC): One thing the Government could do is make winter fuel payments earlier so that people who are off grid and buy large amounts of oil, gas, coal or wood got more value from the money the Government are giving them. Will he consider that? Such a proposal was made by my hon. Friend the Member for Angus (Mr Weir) in a Bill that was blocked by Government Members.
Mr Davey: As the hon. Gentleman will know, the Department for Work and Pensions administers that benefit, and I am sure that he has made that request to the Secretary of State for that Department. My Department has been encouraging people in many parts of the country who are off grid to buy early, because they can get much better deals than if they leave it until later.
Although the extra payments are welcome to those who get them, they are not received by everybody. They do not address the fundamental problem of homes and appliances that waste energy and money. Britain’s draughty homes account for a quarter of the UK’s greenhouse gas emissions. Millions of homes do not have full double glazing. More than half do not have enough insulation or an efficient condensing boiler.
Most do not even have proper heating controls. The single most effective means of bringing bills down for people, including for the most vulnerable, is to help people waste less energy. Energy efficiency is about using less energy to provide the same warmth, or more. That means lower bills and lower carbon emissions.
Caroline Flint: I quote the written ministerial statement from today: “The Warm Front scheme has been an important policy in tackling fuel poverty among private sector households in England though the installation of a range of heating, insulation and other energy efficiency measures”— and since 2000 it “has helped around 2.3 million households vulnerable to fuel poverty.”
Given that this budget has a £50 million underspend, will the Secretary of State explain why he is not urging his colleagues in Government to extend the Warm Front deadline so that the budget can be spent to help the very people he has just been talking about?
Mr Davey: I am coming to the Warm Front scheme, because the right hon. Member for Don Valley made much of the fact that we are closing it down. Under the previous Government, the Warm Front scheme was the vehicle by which some vulnerable households were helped, but we consider the scale of the fuel poverty challenge to be much greater, and, as she has admitted, there were problems with the scheme. We are far more ambitious, because fuel poverty must be tackled and Britain has some of the oldest and, therefore, draughtiest, housing stock in Europe. If we are serious about climate change and tackling high energy bills, we should not help just those who are at risk of fuel poverty, although they should of course be a priority. We believe that everyone should have the opportunity to green-proof their house and achieve lower energy bills in the process.
Warm Front will be closing, as announced more than two years ago, but applications will continue to be accepted up to 19 January, and the work will be followed through, for all who apply up to 19 January. I have set out to the House today in a written statement how that transition will work. Even before 19 January, we brought in Warm Front’s successor—the affordable warmth scheme, which the right hon. Lady did not mention, and which is part of our new energy company obligation. Affordable warmth is up and operating, and low-income households who previously could get Warm Front can now get affordable warmth. It and the energy company obligation, which are both now in operation, will support our most ambitious policy of all—the green deal.
This is a transformative moment. We shall see the full launch of the green deal this month. From 28 January, all households will be eligible for it. They will be able to make energy-saving improvements that will be paid for, over time, through their energy bills and the savings that they make. This is an affordable way of retrofitting millions of homes, making them cheaper to heat and lowering carbon emissions at the same time.
The right hon. Member for Don Valley rightly wanted to talk about Warm Front and the details of its budget. I shall deal with that now, although she herself admitted that there will problems with Warm Front. As she said, we have spent £38.4 million of the £100 million budget, and £15.5 is committed. We expect to spend about £70 million by the end of the year. We will not return the remaining £30 million to the Treasury, as the right hon. Lady implied, because we want to do all that we can to address fuel poverty, and we have worked hard to ensure that the money is spent on tackling it, organising a local authority competition for cash from a special fuel poverty fund. I told the House yesterday that about £30 million was being provided for local authorities across the country to spend on local energy efficiency projects for low-income and vulnerable households. There will be no waste. As it comes to the end of its life, Warm Front is being recycled, and what is replacing it is infinitely better.
Opposition Members seem to think that Warm Front was a fantastic scheme, but people had to apply for it, whereas under affordable warmth the energy companies will have to go out and find people in order to help them. I should have expected Opposition Members to support that.
Joan Walley (Stoke-on-Trent North) (Lab): The Government announced yesterday that extra money would be available under the affordable warmth scheme. In Stoke-on-Trent, it will amount to £290,000, which could help 200 homes. However, when a quarter of the population are in fuel poverty, that is a drop in the ocean.
Mr Davey: Opposition Front Benchers criticised me for not spending the money. I have just told the House that we are spending the money, and now I am being criticised again. I am afraid that sometimes one cannot win.
Richard Fuller: Will my right hon. Friend give way?
Mr Davey: I want to make a bit more progress.
Caroline Flint: Will the Secretary of State give way?
Mr Davey: I will give way to the right hon. Lady.
Caroline Flint: When—in, I believe, October 2012—the Secretary of State announced the competition for local authorities seeking to win money to help energy efficiency locally, did he make clear that it would be Warm Front money? He has said that £30 million will go towards the scheme. What is happening to the other £20 million of Warm Front underspend?
Mr Davey: The right hon. Lady was clearly not listening when I said that we expected that amount to be spent by the end of the year. [Interruption.] It would help if the right hon. Lady listened now. She will know that uncertainties are involved in schemes such as this—even Labour could not macro-manage everything—but we expect to spend about £70 million.
The right hon. Lady asked whether we had announced that the money would come from the Warm Front scheme. We did not do so, because we were not absolutely sure what we would be spending on Warm Front by the end of the year. I wanted to ensure that we were making fuel poverty a priority, and that any underspend from Warm Front or anywhere else was targeted at it. Now the right hon. Lady is criticising me—
Caroline Flint: The Secretary of State has misled Parliament. [Hon. Members: “Withdraw!”]
Mr Davey: I certainly think that the right hon. Lady should withdraw that. Being accused of misleading Parliament, even from a sedentary position, is serious, and I think that she will wish to withdraw that accusation.
Caroline Flint: I am happy to withdraw it, but I will look into the facts to establish whether it was made clear in that announcement that the money would come from Warm Front.
Mr Davey: We did not need to. Through targeted intervention to help the most vulnerable and by helping people to insulate their homes, we can help them to keep their bills down, but if we are to keep bills as low as possible in the long term, we shall need to ensure that there is a competitive market of diverse suppliers and diverse energy sources in which consumers can obtain the best possible deal. The Energy Bill, which is now before Parliament, is designed to do just that. We had a full debate on Second Reading just before Christmas, so I shall not go into the details of the Bill now, but I will say something about tariff switching, because I think that that has already been raised in the debate. Switching has been the principal way to ensure suppliers compete for customers and to enable more suppliers into the market, but some statistics suggest the system is not working as well as it might and the majority of consumers do not seek out the best deals. Some 75% of consumers are on their supplier’s standard variable rate tariff, which tends to be more expensive. We therefore need to shake up the market.
We shall do so in two ways. First, we must help the vast majority of consumers who do not shop around to get the cheapest tariff their supplier offers that is in line with their current preferences. Secondly, we need to help and encourage people to shop around for even better deals, with better and more helpful and simple information on bills. Many Members will by now know about my personal focus—some might say obsession—on collective switching, as it can help cut bills, promote competition and address fuel poverty. That is a collective solution to fuel poverty that the Labour party never thought of in 13 years. It is about encouraging people no longer to be passive consumers of energy, but to be active consumers, clubbing together to strike a better deal than they can get alone, and using the weight of thousands of voices—or whole local authority areas—to drive a harder bargain. It was not the Labour party that first pushed this idea into the political debate; it was this coalition Government and, if I dare say so, myself and the Liberal Democrats in particular. This is about rekindling the spirit of co-operatives.
I have spoken many times about the many examples of this policy working, including examples in Belgium, the Consumers Association’s “Big Switch”, and examples involving South Lakeland district council and Cornwall Together. Yesterday, I announced the winners of “cheaper energy together”, a £5-million competition I set up last year to stimulate collective switching across the UK. I was thrilled so many councils and community groups applied. There were 114 bids, and the 31 successful bids cover 94 different local councils, so this year millions of people will have the opportunity to take part in collective switching schemes.
New ideas such as collective switching are part of the answer to high energy bills and fuel poverty, but no single measure will bring bills down, keep bills down and end fuel poverty. Today I have outlined a series of measures that will help people, both this winter and in winters to come, to keep warm at an affordable price, to save energy and to change the dynamic in the markets. While no Government can control global energy prices, we will do everything we can to limit the impact on people. Taking all our policies together, by 2020 the average household energy bill will be 7%, or £94, lower than if this Government were not pursuing our energy and climate change policies. Last year, our independent review of fuel poverty suggested that our policies are reducing fuel poverty: we are doing the right things. That is good news, but there is no room for complacency.
No party in this House has a monopoly on compassion. When there are reports of people having to choose between heating and eating, we are rightly determined to make sure that we help the most vulnerable. I will do everything I can with my colleagues across Government, as well as working across the House and with business and consumer groups alike, to make sure that the choice between heating and eating becomes a thing of the past.