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Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
I beg to move,
That this House has considered the introduction of energy rebates for Highlands and Islands.
It is a pleasure to serve under your chairmanship, Mr Paisley. Before I start the debate, may I thank the Minister for taking time out to see me prior to this debate? Engaging beforehand is a refreshing departure from how many of her Government colleagues work, so I thank her for the way in which she goes about her business. We will see, of course, whether she can agree to the change that is so desperately needed.
Let us get something straight from the beginning. Energy policy is 100% reserved to the UK Government. I will come later to the actions of the Scottish Government on the cost of living and our attempts to mitigate UK Government harms, but let us be clear that the issue we are discussing today lies squarely at the feet of the UK Government and the regulator Ofgem.
The energy market in its current form is completely broken. Along with colleagues, I have called for urgent changes to the whole system and urgent support for those in need, the reintroduction of a £400 energy bill rebate, for regressive standing charges to be abolished, and for the Chancellor to honour his pledge to open a consultation on the social tariff. Today’s debate, however, is about a specific action for the people of the highlands and islands, who are uniquely disadvantaged, and a workable solution for them. I will underline how the people of the highlands and islands have been neglected by both the regulator and the UK Government, how energy injustice has not levelled up but rapidly increased, why now is the time to fix it and, of course, how the Government can do that.
Part of the problem in preparing for a debate such as this is that the message is so straightforward and the injustice so clear and unarguable that it feels almost surreal. How has the problem been allowed to get to where it is and why has it not already been fixed? Of course, the highlands and islands are largely rural, almost entirely off the gas grid and so rely on higher electricity use, fuel oil and liquefied petroleum gas. It is much more expensive than for the majority across the nations of the UK who are on the gas grid. We have a colder climate, sometimes spectacularly so. As a result, we use more units of electricity and pay more than the UK average, with higher electricity bills just to get through the days. More of our people—around a third—are in fuel poverty and a fifth are in extreme fuel poverty, by far the highest across the nations of the UK. We might think that those facts alone would have spurred any Government with a spare ounce of conscience to look at meaningful interventions to help, but that has not happened.
Fuel poverty is a major driver of actual poverty. When the time comes when you cannot switch the heating on—a lived experience for many—other problems click in. Some people are already barely eating due to the punishing cost of living and simply try to endure the cold. Some go to more extreme measures, as we know, such as self-disconnection. That has depressingly obvious consequences.
As the medical journal The Lancet pointed out, when people can no longer heat their homes their mental health deteriorates significantly. The odds of their reporting depression, anxiety or hypertension increases by around 50%, as does the risk of suicide. Children in cold homes are at increased risk of asthma attacks and respiratory infections. As the temperature drops and the circulation of viruses increases, immunity is impaired. Absolutely avoidable public health dereliction continues while that remains unaddressed. We might think that any Government with the power to do so and any shred of decency would act in those circumstances, but instead things have been allowed to get worse.
We have long been arguing these points, but the kick in the teeth for the people in the highlands and islands is the standing charge for electricity, which is a pernicious beast for those suffering fuel poverty because it applies every single day, warm or cold, whether the heating is on or off. The consumer cannot control it; there are no measures they can take. What have the UK Government allowed Ofgem, the regulator, to do across the highlands and islands? People were already paying 40% more for their standing charge than those living here in London, yet the Government have let Ofgem increase it to 50% more. According to Yourweather.co.uk, the mean daily temperature in London—the warmest city in the UK—is 16°C; in Skye, it is 9°C. How can that be fair? Surely any Government with the power to do something about that and with a shred of decency would do so.
If that were not unfair enough, think about this: the families across the highlands and islands who suffer these unfair charges, which lead to fuel poverty and even extreme fuel poverty—those who are terrified of the envelope containing the bill when they turn their heating on and try to feed and warm their kids—are sitting in the middle of energy wealth that is much, much greater than their needs, and they get none of it paid back to them. They can see the infrastructure all around them. Renewable energy generates at least six times more than the electricity they use—the figure is higher than that, but let us go on the low side. The rest is exported to the grid, only to be sold back to them at the cost I have described. It is immoral.
The UK Government have the power to do something about it and must make amends for that grossly unfair situation. The Minister will say that her hands are tied because Ofgem makes these decisions, and Ofgem will say that its hands are tied because it needs instruction from the Government. I do not believe anybody suffering those conditions in the highlands and islands will take that argument from the Minister when we hear it. Perhaps she will adjust her notes before we get to that point—we will see.
The Scottish Government have been doing what they can to mitigate Westminster policies that increase poverty in the highlands and islands, although they should not have to. They have been paying the bedroom tax, for example, so our people do not have to. They have supported children through the Scottish child payment and put money in place to fund a council tax freeze, but they do not have power over energy: the UK Government do. That is the same UK Government who introduced the two-child limit and the rape clause, cut universal credit by £20 a week, and reduced funding for public services in the last autumn statement by £19 billion, severely restricting devolved government and local authority support.
I started by praising the Minister for her engagement with me prior to the debate, and she told me that she would like some figures, so I have some for her. Northern Scotland, as it is called under Ofgem, pays more for both standing charges and unit rates than the UK average —60.1p and 24.5p respectively. Currently, northern Scotland’s standing charge cost is 59.38p, roughly 50% higher than London. Energy usage in the highlands and islands averages over 4,400 kW per household, compared with about 3,000 kW in London. Some 62% of the properties in the highlands and islands are not connected to the gas grid, resulting in higher heating costs per household. On current rates, April to June 2024, the daily standing charge direct debit single rate for electricity is 61.1p in northern Scotland and 40.79p in London and the daily standing charge’s direct debit multi-rate is 62.25p for northern Scotland and 40.75p for London.
The 2021 rates of fuel poverty are thought to be underestimates because of covid restrictions, and the Commons Library uses 2017 to 2019 aggregates. The highlands and islands region has the highest levels of fuel poverty and extreme fuel poverty in the UK. It is 39.8%—some 5,000 households—in Na h-Eileanan Siar, with 24.3% in extreme poverty; 32.9% of households in the highlands, with 21.5% in extreme poverty; 32.2% of households in Argyll and Bute, with 19% in extreme poverty; 31.6% of households in Moray, with 18.5% in extreme poverty; 30.9% of households in the Shetland Islands, with 22% in extreme poverty; and 30.5% of households in the Orkney Islands, with 22% in extreme poverty.
I expect the Minister will point to the hydro benefit replacement scheme as helping to balance the situation. Knowing that she will have done her research, I think she knows that that is a poor substitute, and an excuse for years of inactivity. A Department for Business, Energy and Industrial Strategy report of 2022 notes that the HBRS
“does not (and never could) provide an efficient or effective way of providing targeted support to specific groups of vulnerable consumers within a region.”
However, in its own unique and inadequate way, it points to a solution, along with another precedent that has come up recently and could be adopted, which I will come to shortly.
The HBRS was established in the 1940s to compensate for the small hydro dams, and it took current form in 2005 under the Energy Act 2004. As it stands, it falls woefully short of the meaningful intervention required. In 2022, the Highlands and Islands Housing Associations affordable warmth group highlighted the £60 per annum discount is only “adding insult to injury” to regional energy costs.
When someone is paying much more than the rest, that does not really make a difference, in an area that is producing much more electricity that it could ever use. In 2022, Scotland was already producing the equivalent of 113% of Scotland’s overall electricity consumption from renewable technologies, a 26 percentage point increase on 2021. As I said earlier, I am certain that figure is on the low side.
The highlands produces enough energy through electricity to power six times more homes than there are in the highlands. The highlands produced a total of 7.2 million MW of energy, with 4 million MW from onshore wind and almost 3 million MW from hydro power. Argyll and Bute produced 1.3 million MW of energy from renewable sources. The Highland Council area comprises only 0.36% of the UK total population, yet the area produces 5.5% of the 49.7 GW UK-installed capacity for renewables, 43% of the UK’s installed hydro capacity and 13% of the UK’s installed onshore wind capacity.
With those regions playing a crucial role in providing the rest of the UK with cheap energy, it is surely only right that they should start to get some benefit from cheaper energy prices, yet they are not. The HBRS could and should be converted into something more meaningful. In his autumn statement, the Chancellor offered the solution. Why not introduce a meaningful rate based on compensating the highlands and islands contributions? He said he would introduce a rebate of up to £1,000 a year for up to 10 years for people living next to planned new energy generation infrastructure. That is very laudable. If it works for those living next to new generation equipment, how about those living among existing generation equipment?
That rebate would redistribute the wealth being generated in the highlands and islands among the communities, enabling them to reap benefits from what is produced there. That would offer several benefits, such as reduced energy costs for those facing higher than average per unit costs, alleviating the financial pressure that that places on households. It would empower communities by allowing them to reap the benefits of what their communities produce, and it would boost economic growth by alleviating the pressure on households from energy costs.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
The hon. Member is making an excellent speech, which strikes a chord with anyone who knows and works for the highlands. There is another benefit, I think. During the pandemic, the recovery of anyone suffering from covid was assisted by being kept warm. I believe that a warm household goes a very long way towards disease prevention. It is arguable that one of the benefits of getting this right would be the health of people in the highlands, which would lead to fewer days off work and greater economic productivity, and that can only be good for the economy of the highlands.
Drew Hendry
I thank the hon. Member for his intervention. He will not be surprised to hear that I agree; indeed, I mentioned earlier in my speech that The Lancet has reported on the health outcomes of having a house that is too cold. One of them is the fact that immunity drops, and people’s resistance to picking up infections actually decreases due to those circumstances. There are particular effects on children and their ability to develop. The hon. Member makes the good point that this is an issue of not only lost work days, but lost ability for people to operate in their communities and have a general sense of wellbeing. He was absolutely right to highlight that point, and I thank him for that.
The hon. Member talked about economic growth. As I said, a highland energy rebate would boost economic growth by alleviating the pressure on households from energy costs, allowing them some money to try to get through the cost of living and to spend elsewhere. Let us see some justice for, and amends made to, those suffering in fuel poverty who are generating and exporting power for others across the nations of the UK. The highlands and islands produce almost 6% of UK energy while having about 0.4% of the population. Why do we not benefit further from that? We pay higher than average bills, face higher costs due to the climate and have higher rates of fuel poverty and extreme fuel poverty, yet we live in an energy-rich region.
Even the UK Government’s own report, the BEIS review scheme of 2022, describes how the hydro benefit replacement scheme does not provide efficient or effective support for vulnerable consumers in specific regions. The scheme introduced by the Chancellor that will give rebates to those living near new energy infrastructure up to the tune of £10,000 over 10 years is laudable, so why can a scheme not be put in place for those living near to existing renewable infrastructure? It is time for the people of the highlands and islands to be treated fairly, for fuel poverty to end, and for the contribution of those people to the billions that is generated for the Treasury on their doorsteps to be recognised. It is time for a highland energy rebate.
Several hon. Members rose—
Ian Paisley (in the Chair)
I thank Members for bobbing. That helps me considerably.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
It is a pleasure to serve with you in the Chair, Mr Paisley. I warmly congratulate the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) on acquiring this time for a debate on a subject that matters to his constituents, my constituents and the constituents of my hon. Friend the Member for Caithness, Sutherland and Easter Ross (Jamie Stone) and the right hon. Member for Ross, Skye and Lochaber (Ian Blackford).
As the hon. Member for Inverness, Nairn, Badenoch and Strathspey said, this issue goes right across the highlands and islands, where we have longer, darker and colder winters. We have more houses that are older and therefore more difficult to insulate and heat, and we have virtually no access to the gas grid. Those things all contribute to the perfect storm that he rightly outlined, which is the exceptionally high incidence of fuel poverty. I know that because one of the less laudable claims to fame that the northern isles have, along with the Western Isles—Na h-Eileanan an Iar—is higher rates of fuel poverty than anywhere else in the country.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
Much is often said about the colder temperatures and dark winters that we have in the highlands. However, we also need to give consideration to the fact that it is about not just temperature, but about the driving wind and rain that make it feel colder. There are times when the rain is horizontal, certainly in places such as the Isle of Skye and others. Let us remember that these communities are often very isolated. We are talking about single homes. Little protection is provided, so the impact of bad, cold, windy or wet weather on these communities is enormous, which just increases the need to have the heating on to give some protection from the climate.
Mr Carmichael
The right hon. Gentleman is absolutely right. We have to be a little careful about how we describe that to people in other parts of the world: doubtless, in a week or two, we will all be back here telling everybody they should come and have their holidays in the highlands and islands. However, we are by no means unfamiliar with the phenomenon of the rain that comes straight at you. Certainly, it is always the surest sign of somebody who has just recently moved to Orkney or Shetland, or who is visiting, that on a rainy day they go out with an umbrella, which is a spectacularly useless piece of equipment in the communities that we are blessed to call home.
The hon. Member for Inverness, Nairn, Badenoch and Strathspey brings us the interesting and constructive proposal of a standing charge rebate. When it comes to the question of energy costs, I have long taken the view that every little helps. Frankly, it does not really matter whether it is a silver bullet: when families are facing the choice not of heating or eating but of starving or freezing, which might be a better characterisation of the situation in the highlands and islands, if there is some benefit to be had, we should take it. That was the view I took on the alternative fuel payment brought forward by the Government last year: it helped a bit, and a bit of help is better than nothing.
The hon. Member for Inverness, Nairn, Badenoch and Strathspey would probably agree that standing charges are a small part of the equation when it comes to the question of energy costs and the actual cost involved in heating people’s homes. The unit price is where the real action is to be found, and it is there that I would like to focus some attention, not least because I understand that Ofgem is carrying out a consultation on a social tariff. That is an interesting idea, and one that I think would command a fair degree of support across the whole House. I therefore hope Ofgem gets on with it—and quickly. Within that social tariff, there surely has to be some mechanism for geographical variation, because social is not just on the basis of income. It has to bring in other factors as well, such as the fact that we live in places that have longer, darker and colder winters.
Drew Hendry
The right hon. Gentleman is right to talk about this as being part of a wider package. I secured the debate today to be specific about the need for a highland energy rebate, but that does not negate the sense of what he says about the collective impact. With the social tariff, the highland energy rebate scheme might give an opportunity to put that geographical difference into the mix, in order to achieve the right hon. Gentleman’s aim.
Mr Carmichael
The Shetland Islands Council has promoted the idea of a Shetland tariff for years. I understand what the hon. Member says about seeing the energy development; that is something we have lived with in Shetland and Orkney for the past 50 years, as we have kept the rest of the country supplied with hydrocarbons. We have had some significant benefit, but nothing compared with what we could have had. Yes, there are opportunities here. The real fight comes with the energy unit cost, but in the meantime, if we can do something with standing charges, we should.
I am a wee bit disappointed that we do not have a better turnout for this debate. It seems to me that the hon. Member for Inverness, Nairn, Badenoch and Strathspey has drawn our attention to something that is really severe for the highlands and islands, but not only there. The hon. Gentleman referred to the disparities between a standing charge in London and in the highlands and islands, or in northern Scotland, which is probably the same thing. For somebody in London paying their bill by direct debit, the current standing charge is 38.5p per day, against the northern Scotland figure, which is 59.38p per day, and the southern Scotland figure, which is 62.08p per day. That is utterly random. I am sure that very clever and complicated sums were done to get those figures, but they have produced what we in the highlands and islands, and elsewhere in Scotland, would probably call mince. If ever there was an illustration that the regulation of the energy market has gone fundamentally wrong and requires root-and-branch reform, that is surely it. In north Wales and Mersey, the rate per day is 62.21p, which is even higher than in the highlands and islands and southern Scotland. People in north Wales and Mersey pay 29.57p per unit, compared with 28.48p in the north of Scotland and 28.16p in southern Scotland.
When we drill down into the figures and the regulation of the market, the other injustice is the rate charged to people on prepayment meters, who by definition are under the greatest financial pressure in relation to energy. The rate charged in the highlands and islands is 62.3p per day in standing charges and 27.19p per kilowatt-hour. If people in the north of Scotland pay by direct debit— I do, and I suspect everybody else in the room does—they pay 59.38p per day, whereas somebody who has to rely on a prepayment meter pays 66.23p per day. In what universe is that a sensible and fair system?
Jamie Stone
My right hon. Friend is making an excellent speech. He talks about an injustice. When the national health service was set up, people who lived in Lerwick, Tain, Paisley or Bristol had the same right to see a doctor and to get an antibiotic or treatment to make them well; the situation that he describes flies in the face of the notion of fairness, which is important to our democracy.
Mr Carmichael
My hon. Friend makes an important point. Like the hon. Member for Inverness, Nairn, Badenoch and Strathspey, my hon. Friend touched earlier on the health aspects of energy costs, which not only impact the family budget for heating the house but have a much wider application. As the hon. Member for Inverness, Nairn, Badenoch and Strathspey said, they impact mental health, and have serious impacts on those who are elderly and so more vulnerable to the cold and on those who have physical health conditions. For those people, the choice between heating and eating actually becomes less difficult, but only in a bad way: they have no choice. Their medical condition means that they have to give priority to heating.
The fact that we are now so far from the idea of a universal, standard price for energy across the whole country shows just how badly wrong the regulation of the market has gone. As the hon. Member for Inverness, Nairn, Badenoch and Strathspey said, responsibility lies at Ofgem’s door. I wish we could see more proactivity from Ofgem, which had to be taken kicking and screaming to get to the point of consulting on a social tariff. If the Minister could instruct it to look at the issue and achieve meaningful change, she would be doing some genuinely good work.
In conclusion, I congratulate the hon. Member on focusing our attention on the question of standing charges. The situation is bad for the highlands and islands, and it seems even worse for other parts of the country, although they might not be as heavily dependent on heat in the winter as we are.
Of course, I could not sit down without making brief reference to the fact that, for many in our constituencies, the real cost of heating their houses comes from the cost of using heating oil, as that is the only way that they can. There are no standing charges for that, and it is much more difficult to get money into the pockets of people who rely on it. That is baked into the system, and it will not be fixed easily.
Drew Hendry
I realise that the right hon. Gentleman is concluding his speech, but it is important to point out that this is an issue that I and others, and possibly even himself, have raised in the past. Ofgem has been delinquent in not regulating for those off the gas grid as well. We need to appreciate those who are reliant on LPG and fuel oil because they need protection as well. Again, when they are using fuel oil and LPG, they also tend to use more electricity, which brings us back to the main thrust of the debate. I thank the right hon. Gentleman for his patience.
Mr Carmichael
I am grateful to the hon. Gentleman; as one would expect, there is not a great deal of difference. The one thing I would start with, if I were in Ofgem, would be multi-rate meters, such as Economy 7 and “Total Heating with Total Control”, which many of our constituents use. The standing charges on those are 69.32p per day in northern Scotland and 69.17p in southern Scotland. Again, we see the disparity. That is one standing charge where direct action could have a direct impact on the highlands and islands.
I await with interest what the Minister has to say. I share the experience of the hon. Member for Inverness, Nairn, Badenoch and Strathspey; the Minister is thoughtful and prepared to engage. I hope that, having had this brought to her attention, she will use her offices to ensure that, going ahead, the highlands and islands, as well as those who are fuel poor in England, Wales, Northern Ireland and indeed southern Scotland, will not be given this rather shoddy treatment.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
It is a pleasure to serve under your chairmanship, Mr Paisley. I thank my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) for securing this important debate and for his contribution on the absolutely urgent need to get recompense for those who live in the highlands and islands. I also thank the right hon. Member for Orkney and Shetland (Mr Carmichael) for his remarks.
If I may, let me put this is in a slightly broader context. We stand on the cusp of an energy production revolution. David Skilling, in his 2022 report, “The Economic Opportunity for Scotland from Renewable Energy & Green Technology”, talks of a potentially fivefold increase in green energy production from the current 12 GW to 80 GW by 2050, transforming the landscape in Scotland, and of course the economic opportunity there for investment and jobs as well. Scotland is therefore playing its part through green energy production, and we must also play our part to deliver on climate change and net zero. An energy-rich Scotland could be the powerhouse of green energy production, with the highlands and islands a key driver in increased onshore and offshore production, and a green energy bonanza driving investment and financial returns for investors, who will benefit from what are, after all, our natural resources.
However, there has to be fairness, and there has to be equity for those who live in the highlands and islands. There is an expression, spoken originally in Gaelic for many generations of Gaels: you do not own the land; you belong to the land. There is sense of responsibility that comes from that to look after the land, to protect it, and to use opportunities wisely. That the highlands and islands is a source of green energy production is something we can take pride in. But what does that mean for those who live there? As has been outlined, the harsh reality is that so many in the highlands and islands are living in fuel poverty. People who live in the region can see the energy production and the transmission lines exporting energy while too many are facing fuel poverty. That is a disgrace.
Let us examine the facts. Even before the cost of energy spiralled over the last two years, too many households in the highlands and islands were already living in fuel poverty. In 2022, it was estimated that 31% of Scottish households were in fuel poverty, with an extraordinary 18.5% already in extreme fuel poverty. That was before the energy price increases we have seen over the last couple of years. The fuel poverty rate of rural households was 35%, and for remote rural areas it was a staggering 47%—nearly half of all households in the rural parts of the highlands and islands living in fuel poverty. We are supposed to be a civilised society. Compassion is supposed to be at our core. How can that be right? How can we tolerate so many of our citizens living in fuel poverty?
My constituency is largely a remote rural constituency. We have talked about the impact of weather—not just temperature, but the wind and the rain. Think about that. Yes, of course we can enjoy, and we encourage people to come and visit, our beautiful areas in the summer, but think about having to endure a highland winter—that driving wind and rain. Many people simply cannot afford to turn the heating on, given the costs that they face.
Let us not forget that much of this is a political choice. Much has been said about the standing charge, and since 2022 it has increased by 138% in Scotland. How on earth can the Government—how could anyone—justify such an increase at a time when so many people are suffering from the cost of living? How can anyone look my constituents in the eye and tell them it is right that we should be increasing the standing charge by 138%?
Today, we have the Budget, and the Tories are fixating on tax cuts. Tax cuts—my goodness. I’ll tell you what people in the highlands and islands want: they want help with their energy bills. They want the ability to turn the heating on. They want the ability to put food on the table. What a distraction this Tory fixation on tax cuts is. Let us deal with the fundamentals.
Going back to what has happened with the standing charge, let us be clear that consumers are being ripped off in the middle of a cost of living crisis by a policy decision that heaps costs on those who face difficult choices, such as whether they can turn their heating on. Of course, whether people can turn their heating on or not, they still have to pay the standing charge. They still have to pay that daily bill. Where is the fairness? Where is the equity? Not only that, but we get penalised in the highlands and islands by higher transmission and distribution charges. That is, after all, a financial penalty imposed on people who live in the highlands and islands by this Government. That is what it is—no ifs, no buts. It is a charge for living in the area in which many people were brought up. Yet, when those living in houses there are having to consider whether to put the heating on, they can look out their windows and see the wind turbines and transmission lines. What kind of country do we live in that we allow that to happen?
As my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey mentioned, the vast Highland Council area has 0.36% of the UK’s population, yet we produce 5.5% of the UK’s installed capacity for renewable energy. Where is the direct benefit for communities producing energy that the rest of us, in other parts of the United Kingdom, benefit from? Why is it not mandatory in legislation for compensation to be paid by producers to local communities, from whom they need consent to produce that energy? It comes back to that point: you do not own the land; you belong to the land. There ought to be a commitment written into legislation that the communities affected by that should benefit from it. Why is it not mandatory for the transmission companies to recognise the rights of communities to compensation for transmission rights? I want companies to invest in the highlands and islands and for those companies that come and invest to prosper and be a part of our future. I want the highlands and islands to be at the forefront of green energy production. I want investment in green energy to lead to a green industrial renaissance for the highlands, but I want fairness for our communities.
The Chancellor has talked about those living near transmission lines benefiting from up to £1,000 off their energy bills for a decade. Why has that not yet happened? That much-needed investment in the national grid to meet the increase in energy production is with us now. It is very much a live issue in the constituency that I represent. To a greater extent, Scottish and Southern Energy is at the forefront of much of that investment. I stress that we should all work with companies such as SSE, which I know shares a vision of a just energy transition for the highlands and islands. I want to see that economic renaissance in the highlands, and I recognise the scale of investment that SSE will be making over the coming years in transmission and production, not least in the Coire Glas pump storage scheme. There is, in essence, a £20 billion investment programme for the north of Scotland, and it is important that we ensure the legacy for jobs and wider infrastructural improvements. That is £20 billion just from SSE. We should think about that and about what should be a modest—because that is all we are asking for—community benefit.
To expand on Coire Glas, there will likely be 500 full- time jobs in its construction. That will require housing for the workforce. It is vital that such projects have a lasting legacy and investment in housing, which is critical for the future of the highlands, linking what happens in energy policy to our industrial development and the need for homes. We also need that offer of financial compensation right now for our communities. If we can greenlight that much-needed investment, where is the benefit for those affected and, as my hon. Friend said, the recompense for those who have existing transmission lines?
Drew Hendry
My right hon. Friend is making a clear point about the fact that, as generation is happening, the people of the highlands and islands are losing out. As I underlined in my speech, it is a direct slap in the face when we look at what they have to endure. There is also the matter of the electricity generator levy, which is deducted from those generating electricity in the highlands and goes straight to the Treasury. That is another fund that could be used to pay some of that money back to the people generating it.
Ian Blackford
My hon. Friend makes an important and fair point. In my constituency and home island of the Isle of Skye, a number of planning applications are coming forward. Of course, there is always a range of views on these things across all our communities, but if I look back over the past few years and, indeed, at the debate taking place today, on balance, people are generally favourably disposed towards those developments. They understand the importance of getting to net zero. My goodness, the communities that we all represent feel the impact of climate change—we can see it. There has to be that fairness, and the fact is that so many people are living in fuel poverty—the 47% of households that I referred to that live in rural areas. I see it when I am out and about.
If we think about us here in London going about our jobs, many people are dressed, as we are, in their working garb—suits or whatever it might be—but when we see people in remote rural areas, they often work outdoors, in the fishing industry or as crofters or farmers. It is largely an outdoor life, so people wear layers of clothes. They need those layers because of the climate they face outside, but—here is the “but”—in too many cases, they are still wearing those layers when they come back inside because they simply cannot afford the heating. That is the reality. When we give our consent—because it is about our consent—to that increase in energy production, where is the benefit?
I mentioned the increase in energy production that we will see in Scotland between now and 2050. We welcome it, but how can we have our people living in fuel poverty? How can we accept that? Where is the fairness? We are being charged higher transmission costs to transmit that energy into the grid, and being charged again to get the energy back. That energy is produced in our communities. Can somebody explain where the fairness is in that? How does that look for those living in these communities?
Jamie Stone
None of us should be under any illusion; the fact that so few of us are here today does not reflect or minimise the nature of the problem. It is fundamentally unfair that many other aspects of government would command a higher attendance of Members. There is something basically wrong here. Part of the UK is being ripped off when it comes to energy.
When the Chancellor and his civil servants were drawing up the Budget, I am sure they took into account what was fair, what was right and what was not, but has this issue been factored in? We await today with interest. It is apposite that the debate is precisely at this hour, because shortly we will know whether the Chancellor cares about a fundamental unfairness or not.
Ian Blackford
I thank the hon. Member, my constituency neighbour, for that contribution. I agree with the sentiment; it is a pity that more Members are not present. Having said that, the Members who represent the four most northerly constituencies are here. We four represent the communities most exposed to this issue. We have four of the most rural constituencies in the whole United Kingdom, although we could add Na h-Eileanan an Iar or Argyll and Bute to that. It is our constituents who are feeling this. It is our constituents in the main who are facing fuel poverty to such an extent. I wonder whether those in government actually recognise what it is like to live in those communities and face the kind of pressures that we face.
I have talked about the community benefiting from transmission, but it is important that the community should benefit from production as well. Again, those on the production side are encouraged to engage in community benefit, but we simply cannot leave it to the developers to determine community benefit at a whim. It must be mandatory. It must be in legislation. The highlands and islands produce enough energy to power nearly six times as many homes as there are in the highlands, even before the scale investment that we are talking about. Of course, being a windy and wet region makes us an attractive option for developers, but there must be payback for communities.
In the highlands and islands, we are exposed to the effects of climate change. In general, it is an outdoor lifestyle. Crofting and fishing still provide the backbone to economic activity, and those exposed to such activities are exposed to what climate change is bringing. Anyone who has engaged in crofting can say how difficult it is over the winter months with, from personal experience, crofters increasingly sinking into the mud because it is just so relentlessly wet. That is the effect that climate change is having on us.
It is therefore unsurprising that, in general, those who live in such places as Ross, Skye and Lochaber support green energy initiatives, but there is an increasing concern that rising production produces little direct benefit for communities for that right to produce. That is why we have a broken UK energy market. Let us not forget that the increase in pricing over the last two years is largely because electricity prices are tied to gas prices. However, we have talked about the fact that in the main, people who live in the highlands and islands are off grid. We do not consume gas as part of our energy mix, yet highlanders are paying the price for others’ dependence on gas.
It is simply unfair that Scotland, which produces enough affordable renewable energy for all domestic consumption, must pay higher prices because other parts of the United Kingdom are more reliant on more expensive gas. In energy-rich Scotland, consumers are in fuel poverty because of the broken UK energy market. Those in Scotland are paying a price for being in the United Kingdom—so much for the broad shoulders of the United kingdom; so much for the “Union dividend”. There is no Union dividend; it is a financial penalty, and we in Scotland all pay the price. To put that in a wider context, the value in today’s prices of tax from North sea oil to the UK Exchequer is more than £400 billion. Our legacy from the bounty of North sea oil has been squandered, and we have now been locked out of the benefit of Scotland’s green energy production.
The phrase “Scotland has the energy, but we don’t have the power” is often used. It is an absolute scandal that we produce the energy and yet so many of our people are living in fuel poverty. That is the price of Westminster’s control of Scotland’s natural resources: highlanders and islanders suffering fuel poverty from a broken energy market. The blame lies fairly and squarely in this place, and its inability to act in the appropriate manner to defend the interests of our constituents.
Kerry McCarthy (Bristol East) (Lab)
It is a pleasure, as always, to see you in the Chair, Mr Paisley. I thank the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) for bringing forward this debate, as well as all four Members who have taken part and highlighted the specific circumstances that mean fuel poverty is even more of an issue in their constituencies than in the rest of the UK.
We know that overall the average fuel poverty gap increased by 66% between 2020 and 2023. We know that 3 million people are in debt to their energy providers. We know that the Government are struggling to roll out their home insulation scheme; we saw figures the other day showing that in the first eight months of the Great British insulation scheme, only 2,900 houses had benefited from measures meant to benefit 300,000.
Obviously, in areas such as the ones represented by the Members present, home insulation is even more of a challenge. That is partly because of the nature of the homes—they are older buildings that are difficult to retrofit—but also because there is a much smaller retrofit-skills market. The scattered nature of the housing and its isolation means that the economies of scale from rolling out an insulation scheme would be far more difficult to implement. Unless local skills and finance can be mobilised, the areas are unlikely to be first in the queue to benefit from national schemes.
All Members in this debate have spoken eloquently, partly about the conditions that mean that fuel poverty is more of an issue: the longer darker nights, the cold, and the rain that “comes straight at you”, as the right hon. Member for Orkney and Shetland (Mr Carmichael) described. The hon. Member for Inverness, Nairn, Badenoch and Strathspey said that a third of people are living in fuel poverty, and a fifth of people are living in extreme poverty.
One of the things that I am grappling with is the debate about prepayment meters. We know about forced disconnection, when people simply cannot afford to carry on paying for their electricity. What is more difficult to ascertain is the extent to which people, while not going to those extremes, are living in very cold conditions because they have cut back on paying bills. We know that when there is energy bill support, and when prices come down, their energy use will go up, which implies that they were using less energy than they needed to keep themselves warm. A point was made about the impact on the health of children, older people and people with disabilities. People with disabilities have higher energy costs.
Drew Hendry
I am grateful to the hon. Member for underlining that there are big impacts on health, as well as the point that where there is a rebate and some funding to help people, it has a measurable impact. The whole point of the proposal on the highland energy rebate is to put that in place. It is an excellent point to underline and I am grateful that she has brought it to the table.
Kerry McCarthy
I would say that we do need to look at this in the round. Hopefully, the Minister will enlighten us a bit more, but Ofgem did a call for input on standing charges, which I think closed at the end of January. As far as I know, the outcome has not yet been published, but I think that it is for the Minister to give us some more details about the balance between standing charges, unit prices, and indeed the discussions about the social tariff. We are certainly looking at all those things.
As the hon. Member for Inverness, Nairn, Badenoch and Strathspey has said, the fact that the highlands and islands lack access to the gas grid means that they are in a particularly difficult situation. It was mentioned that 62% of properties in mainland Scotland were off the gas grid; I think I have that figure too. However, some places are almost entirely off grid, as I think the hon. Member said. That obviously leads to significantly higher costs because oil is often then used as a fuel, or heating is entirely electric.
Again, we have very much taken on board the point about decoupling from gas prices, but this all means that those people do not benefit immediately when wholesale prices do come down. I have figures here from Lochalsh & Skye Housing Association, which says that households in the area pay an additional £1,000 a year on energy bills compared with an average-sized home in the rest of Scotland, amounting to a 76% premium. That is just one figure illustrating the problem.
The point was very well made that Scotland is home to a huge amount of old and new generation energy generation. As the right hon. Member for Ross, Skye and Lochaber (Ian Blackford) asked, where is the benefit for Scotland from that? I was reading through a report from Changeworks on fuel poverty in the region in advance of this debate, and there was a quote from an energy adviser that really stood out:
“The annoyance of being a 321% net generator of green electricity to the rest of the UK, all from renewables, yet we have no access to the polluting fuel which is mains gas and the price of energy is four times the cost.”
Again, we know that renewable energy is going to be way cheaper than fossil fuels, and that is one of the reasons why Labour is committed to the “clean power by 2030” mission—because we know that that will help bring down energy prices. However, I can appreciate how absolutely galling it is to be somewhere where so much energy is generated—I think the right hon. Member for Ross, Skye and Lochaber talked about an economic renaissance for the highlands and islands linked to renewable energy—yet to be last in the queue to actually benefit from that. We absolutely need to tackle that unfairness.
I do not know whether anyone wants to intervene on this, but my understanding is still that the SNP is opposed to a windfall tax within our proposal. It is telling that we have this debate today, with the upcoming Budget; I hope that we see firm action from the Chancellor on tackling fuel poverty and recognising many of the unfairnesses that have been raised. There is some talk— I think we have actually heard most of the Budget already, which is not normally the case—about movement on a windfall tax on oil and gas. Labour is calling for an increase in the rate on the energy profits levy to 78%—
Kerry McCarthy
Sorry, I will just finish what I was saying. And we are calling for an extension of the sunset clause to 2029, which would raise billions of pounds for the green transition, cutting household energy bills in the process.
Drew Hendry
I apologise if I got it wrong, but I thought that the hon. Member was inviting an intervention on that subject.
Kerry McCarthy
I was, but I just wanted to get my bit in first, otherwise I would have lost track.
Drew Hendry
Yes, of course. The point—I think I have to underline it again and again in this debate, and I think that the hon. Lady understands this—is that there is already a windfall tax, and other taxes coming from the highlands and islands through renewable energy, and we are getting nothing back. We are already seeing the effect of money being taken out, and it is not going back into the pockets of the consumers who are being punished in this way.
Kerry McCarthy
To do justice to the issues that hon. Members are raising, I will not go down the path of having an argument about the windfall tax, because we want to focus specifically on fuel poverty in constituencies.
Drew Hendry
The hon. Lady did actually raise the issue of windfall tax, so to say that she does not want to debate it is rather perverse. Let me try to help her a bit: over the past two years, oil prices rose to extraordinary levels and, as a result, many oil production companies made excess profits and have engaged in large-scale share buybacks. It is pretty simple and straightforward: in effect, it is a return of capital to shareholders, but it is untaxed. The Labour Opposition and the Government missed the opportunity to recognise the one-off nature of the situation. A one-off tax on share buy-backs could have alleviated the impact of higher energy prices, but both the Government and the Opposition missed the chance.
Kerry McCarthy
We have been calling for a windfall tax for quite some time. We have also been challenging the generosity of the investment allowance that goes to oil and gas companies, which I think is 91p in the pound. Not least because my voice seems to be slightly failing me, let us keep to the topic—[Interruption.] I will draw my remarks to a close.
Scotland’s huge potential for renewable energy generation shows the need for a place-based approach that allows people to feel that they are part of the transition and are directly benefiting. It is particularly galling that Scotland is responsible for so much of the new renewable energy generation, but is not benefiting. In some ways, it should be benefiting more than other parts of the country because it is doing the generation.
What Joe Biden has done with the Inflation Reduction Act in the States very much demonstrates a place-based approach to the green transition. I think that about 70% of the investment has gone into Texas, which is traditionally an oil-producing state but has been keen to embrace the benefits of the green transition not just for jobs, but for the community. Labour’s local power plan is partly about community energy generation and how communities can directly benefit from renewables and use them to serve their needs, but an element of it is about lifting places up because they have made a contribution to the rest of the country.
I suspect that the Minister will tell us she cannot say anything about what is being announced in the Budget today, but I would like some reassurance that she recognises the geographical disparities whereby some parts of the country are being hit harder by fuel poverty. There is an overarching need to tackle the fuel poverty that affects millions across the UK. Could the Minister say something about the geographical disparities? Could she also give some indication of where the Government are on the fairness of pricing, on the impact of standing charges versus unit prices, and on prepayment meters? I look forward to hearing from her.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Amanda Solloway)
It is a great pleasure to serve under your chairmanship, Mr Paisley. I thank the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) for securing this incredibly important debate, and I thank other hon. Members for attending. Although we are a small group, they have made their cases very powerfully.
I will go through the main issues one by one. Standing charges have been the thread running through the debate. The hon. Member made a powerful point about how standing charges for residents of the highlands and islands are too high. As hon. Members will probably know, the setting of standing charges associated with each tariff is a commercial matter for suppliers, which have flexibility to structure tariffs. However, Ofgem has launched a call for input on standing charges, which closed in January and has so far received more than 40,000 responses. We are looking at how standing charges are applied to energy bills and at what alternatives should be considered. Ofgem is currently analysing the responses and will publish in due course.
It should be noted that suppliers can offer low or no standing charges. As wholesale energy prices are coming down, competition is coming back to the market and consumers are able to access different tariffs.
Once the findings have all been put together, I am very happy to get together to further discuss how we can use them. I recognise that the price of standing charges for highland and island households is an important issue for all hon. Members, and it would be useful to discuss that in more depth on an ongoing basis. The importance of discussing these matters with Ofgem was mentioned earlier; I assure all hon. Members that I have been putting pressure on Ofgem to address all these important issues.
Drew Hendry
The Minister is always very thoughtful and considerate about these issues, and she wants feedback, but people in the highlands and islands need action. I think I am hearing from her that she agrees with the principle that it is fundamentally wrong that people in the highlands and islands are paying more in this way. Is that indeed what she is saying? Is she determined to address that injustice and to get something done about it with Ofgem?
Amanda Solloway
The point I am making is that we are looking at the standing charges, which are the one thread that has run through everybody’s speeches and comments today. We need to ensure that the standing charges are fair. We do not know what the findings will be, but I suspect that among the 40,000 responses— I think it is probably nearer to 44,000—there will be a lot to take into account, including looking at how we adjust the standing charges.
Ian Blackford
I say respectfully to the Minister that this is about fairness, and it is about what should be a universal market. We cannot have people being penalised to this extent. It is simply a matter of the Government saying to Ofgem that this is not right. There should be a universal market; people should not be penalised on the basis of where they live. It is a simple question, and the Government ought to provide leadership.
Amanda Solloway
To give assurance again, that is exactly what I am saying: I have been tasking Ofgem with looking at the issue. We are waiting for the consultation results to come through.
Amanda Solloway
Once we have all the responses and have looked at them, I will be very happy to welcome views on the findings.
I turn to transmission and distribution charges. Electricity network charges are the costs that users pay to connect to and use the electricity network. These are charged to suppliers and generators, so eventually the costs are passed on to consumers in their energy bills, some of which is reflected in their standing charges.
As an independent regulator, Ofgem is responsible for setting the electricity network charging methodology. Government officials are working closely with the regulator to understand these charges. Electricity network charges must be cost-reflective, so that those who pay them are charged in a way that reflects the cost that they are placing on the network.
Transmission charges are based on the costs that different users impose on transmission by connecting in different locations. That means that there are higher charges for those whose use of the network results in longer distances of electricity transmission. As hon. Members will know, Scotland is a net exporter of electricity, so transmission costs for Scottish consumers are lower than those for their counterparts in England and Wales.
Mr Carmichael
The Minister describes locational charging. That made a degree of sense in the days of generating electricity from hydrocarbons, because there was an element of transmission loss, so we wanted to encourage transmission closer to the point of consumption. As we move to renewables, that argument simply no longer stands, because we are not wasting a non-renewable resource in order to generate and then transmit electricity. Why has the approach not been changed?
Amanda Solloway
I thank the right hon. Member for his intervention. These are the kinds of things that we are working through as we respond to the net zero challenge.
Hon. Members have quite rightly talked about the geographical challenges of electricity supply in northern Scotland, such as the area’s size, poor weather conditions, sparse population, mountainous terrain and the need to supply multiple islands. Inevitably, these challenges mean that the costs of distribution are much higher than for other regions in Great Britain. Hon. Members have made that point very clearly.
I also acknowledge that the highlands and islands produce high levels of renewable electricity, although that does not remove the challenges of distribution. We will be looking at that issue.
The hydro benefit replacement scheme provides annual assistance of about £112 million to reduce distribution charges for domestic and non-domestic consumers in the region. That equates to a reduction of about £60 annually per household.
Drew Hendry
The Minister knows what I am going to say: with the bills that we are talking about, the £60 that she is talking about does not touch the sides for the people affected. I know she knows that, because I have said it to her before. What we need is an overhaul. We need a rebate that actually makes sense to people and has an impact on their bills. That is exactly what this debate is about: getting a highland energy rebate. If the Government want to use the scheme as a basis for doing so, that may be workable. I hope that the Minister will take that point away. Every little helps in a way, but the scheme really does not touch the sides for the people who are suffering this injustice.
Amanda Solloway
The hon. Gentleman is right. He has made that point clearly on several occasions, and I am prepared to discuss more fully the highland energy rebate paper that I have been sent.
I turn to energy prices and support. Despite the rise in standing charges, energy prices have fallen significantly since the winter of 2022-23. The 2024 quarter 2 price cap of £1,690 is 60% lower than the 2023 quarter 1 price cap peak. It is important to note that the Government reacted quickly to support households last winter. About £40 billion was delivered to support households and businesses, an average of £1,500 per household between October 2022 and June 2023. We delivered £40 billion to support households and businesses last winter, with a typical household receiving £1,500 in support between October 2022 and June 2023. Many highlands and islands households off the gas grid also benefited from the £200 alternative fuel payment schemes.
Despite the fall in energy prices since the winter of 2022-23, the Government have continued to support households. We are delivering a package of support worth £104 billion—an average of £3,700 per household—between 2022 and 2025.
Debt is an incredibly important challenge at the moment. Although we are doing a lot to help households, we know that some have fallen into energy debt. We want to support them to ensure that consumers do not fall into further debt. Last year, Energy UK announced a voluntary debt commitment: 14 energy suppliers announced their collective commitment to go above and beyond the current licensing conditions to help households with their energy bill debt. Those energy suppliers will aim to provide immediate assistance to those in debt and will arm people with knowledge and resources to empower them to manage their bills more effectively. For assurance, I regularly meet stakeholders such as Citizens Advice to discuss what can be done to address consumer debt. I welcome further input from hon. Members on the issue.
Kerry McCarthy
This week, I met some academics who are doing some research into debt levels. As I understand it, the average is about £1,000 per household, but I do not know the extent to which some people are in only £100 or £200 of debt and others are in five-figure debt. Do the Government have analysis of that? Does the Minister have figures she could share with me or put in the House of Commons Library?
Amanda Solloway
It is important that we consider the different levels of debt. It is quite complicated to get those figures because the suppliers have them, but I have pushed to see whether we can get a flavour of them. One of the things that I would advise households struggling with their bills to do is to speak to their supplier before going into debt, to receive help and support as soon as possible.
We have talked about prepayment metres, which can be a useful tool for consumers to manage their budgets and for energy suppliers to manage debt. However, it is important that the rules around their use are sufficient to protect consumers and are properly enforced. Involuntary installations should be used only as a last resort. Ofgem has strengthened its licence conditions for suppliers to conduct involuntary prepayment metre installations with exemptions in place for households with vulnerable individuals, such as those with people over 75 or children under the age of two.
The Government have already committed to supporting households past April 2024. Though I obviously cannot comment on today’s Budget, in the autumn statement we announced the biggest increase to the living wage and an increase to benefits of 6.7%. Earlier this year, we also cut national insurance for 27 million people, worth £450 for the average worker. As hon. Members have noted, in the autumn statement we also committed to giving communities living nearest to electricity transmission infrastructure up to £1,000 off their electricity bills for the next 10 years. That will apply across England, Wales and Scotland, including the highlands and islands, and they may be able to benefit from the scheme. We will also publish guidance this year on the wider benefits for local projects and provide an update on the electricity bill discount scheme.
As hon. Members have mentioned, many households in the highlands and islands are off the gas grid, which means they rely more on electricity. I also understand that many highlands and islands residents will use more energy and subsequently pay more for their energy bills due to the inclement weather, colder temperatures and poor insulation, but also due to having older and larger properties, which are harder to heat. To address that, the Government have already introduced several domestic energy efficiency schemes for all households in Great Britain to help lower bills and reach net zero targets. As an example, the Great British insulation scheme is delivering low-cost and free insulation to the least efficient homes in lower council tax bands, including many vulnerable households. The scheme will run until March 2026 with a value of £1 billion.
Since it was launched in January 2013, the energy company obligation has delivered around 3.8 million measures in approximately 2.5 million homes. Across ECO schemes, around 31,600 measures have been delivered to 23,100 households in local authority areas in the Scottish highlands and islands since 2013. As hon. Members will know, fuel poverty is devolved, with the Scottish Government responsible for the matter in Scotland. However, the ECO and the Great British insulation scheme are delivering energy-efficient measures to the least efficient low-income homes in Scotland. We are currently reviewing the fuel poverty strategy for England and will engage with the devolved Administrations as part of the process.
I understand this is a complex matter and one that is important to all hon. Members here. I thank them for bringing it to the debate. I would be happy to meet people further to today’s discussion. Finally, I want to touch on lived experiences and the impact on health. Having been brought up in a household that was fuel-poor, I know what it is like. I know the impact that that can have on someone’s health, especially as my mum suffered with chronic obstructive pulmonary disease and we found it incredibly difficult to manage all those challenges. My commitment is therefore to do the very best I can to support all those energy-poor households.
Drew Hendry
I thank Members who have taken part in the debate. We have had a clear exposition of the issue this morning. I thank the hon. Member for Bristol East (Kerry McCarthy) on the Labour Front Bench and the Minister for being so open to looking at discussions and understanding the issue. Nobody in this room has disagreed that an injustice is happening to the people of the highlands and islands or that they are suffering unduly in the circumstances from the prices that they pay for their electricity.
I more than anyone welcome the idea of further discussions with the Minister, but along with the empathy that she obviously displayed there is a need for action. The issues of electricity pricing for the highlands and islands and unregulated off-gas grid customers have been going on for years and years—decades, in fact. They need action now, because this is a severe and urgent problem. I urge that those discussions be quick and meaningful, and I urge the Minister to use her best offices to give the most serious shove to Ofgem to tackle the issue.
As we said during the debate, the highlands and islands produce 6% of electricity but have only 0.4% of the population across the nations of the UK. They have higher than average bills, yet they get the highest levels of fuel poverty and extreme fuel poverty. The hydro benefit replacement scheme does not do the job that it was supposed to do. It needs to be updated, and there is an opportunity to do that by combining it with the Chancellor’s scheme to get a rebate that goes back directly to those people affected in the highlands and islands. I hope that the Minister will take that away, as she said she would, for further discussions, but I stress again the need for urgent action to solve the issue. I would be happy to meet her in future to see what we can do to get some real action.
Question put and agreed to.
Resolved,
That this House has considered the introduction of energy rebates for Highlands and Islands.