Energy Policy and Living Standards

Debate between Jim Cunningham and Douglas Carswell

Wednesday 10th December 2014 Westminster Hall

[Douglas Carswell]

The hon. Gentleman argues in favour, I think, of Government price-fixing and making it illegal for suppliers to charge different prices in different parts of the country. I think there are a number of flaws in that approach. For a start, it could quite possibly mean that some areas would have to go without supply at all. Generally speaking, if we try to fix prices, we interfere with the allocation of resources and we have to be prepared for black-outs. That is not something that I would want, but he is absolutely right to say that a fifth to a quarter of the bills that we pay cover the cost of the companies distributing and supplying energy. The hon. Gentleman then makes the leap that many have made, which is that if only we could force energy companies to lower their prices, we could have cheaper energy for all. That, at least, seems to be the level of logic from the right hon. Member for Doncaster North (Edward Miliband). However, a prices and incomes policy for energy in 2015 will no more work than a prices and incomes policy has worked for anything in the past. Prices and incomes policies do not work.

Energy prices are not going up because of a shortage of energy or because of beastly energy companies; public policy is driving up the cost of household energy bills. The renewable obligation requires energy companies to increase the proportion of energy they generate from supposedly renewable sources. That basically means that we have to pay more in order to subsidise the construction of wind turbines. The Government’s own estimate suggests that fuel bills have gone up by 7% to refund those renewable obligations. However, the Renewable Energy Foundation, for example, has pointed out that the methodology of the Department means that the figure of 7% is, by many ways of analysing it, an extraordinary understatement. If we measure the increase in terms of price per kilowatt-hour, the increase in prices is likely to be far greater.

According to data that the Department recently put out following a freedom of information request, in the central fossil fuel price scenario for 2020, low-carbon policies will result in a 50% increase in energy costs for small business. In the low fossil fuel price scenario for 2020, low-carbon policies will cause a 77% increase for medium-sized companies, which would rise to 114% by 2030. Whitehall officials have gambled on the price and cost of fossil fuel and they have got it spectacularly wrong. I wonder whether the Minister, with an ambitious eye on the world beyond May next year, is willing to defend those policies.

The Minister’s colleague, the Secretary of State for Energy and Climate Change, has pledged to treble the amount of electricity derived from renewables. Will the Minister defend that, too? Energy prices are increasing because we are switching off perfectly good gas and coal power stations while pouring billions of pounds into windmills. It does not make sense.

[Mr Jim Cunningham (Coventry South) (Lab)]

I am intrigued by what the hon. Gentleman has had to say, but his analysis has missed out the fact that the price of oil has been dropping. That can have an impact on the cost of living and on energy costs, particularly for poorer families in this country. How does he think we could get the oil producers to pass on that decrease to the consumer?

[Douglas Carswell]

The hon. Gentleman is absolutely right and makes a very valid point. For a number of reasons—not least because of technology and innovation in the United States and the shale gas revolution—the cost of fossil fuel is being driven down. Unfortunately, we have a Government whose officials banked on the cost of fossil fuels being relatively high, so we are now locked into a position where people will have to pay higher costs for years, despite the potential for a great reduction. It is extraordinary that a Government who once pretended to believe in the free market are presiding over that. It is quite remarkable. We should be benefiting from the lower oil costs, but we are unable to because we have a Department that is committed to price-fixing.