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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Martin McCluskey)
I thought we were about to end up in an “I am Spartacus” moment. [Laughter.] It is a pleasure to serve under your chairmanship, Dr Allin-Khan. I thank the hon. Member for North Norfolk (Steff Aquarone) for raising this vital issue and giving us the opportunity to discuss it at length, since it is an important area that is dominating much thinking among Members and in my Department.
It is important at the outset to put this in the wider context of what is happening in the middle east. It is clear from what we have heard over the past few weeks that the conflict in the middle east is not Britain’s war. The Prime Minister made the right judgment in not taking the country into offensive action, but how we emerge from this crisis will define us for a generation in how we respond. It is clear that we need to de-escalate the situation in the middle east. We need a negotiated settlement that allows the free passage of traffic through the strait of Hormuz. That will ultimately determine the fate of energy prices and our constituents’ cost of living.
Let me do three things. First, I want to respond to issues raised around the immediate support the Government have offered. Secondly, I will talk a little more about market reform and regulation, and the process going on with the CMA. Finally, I will talk about some of the wider structural issues discussed this morning.
As hon. Members have mentioned, 1.5 million households in the UK use heating oil to keep their homes warm. We know from what has been said this morning, and also from looking at what has been happening in the market, that the price of a litre of heating oil has increased significantly—doubled, in fact—since the war in the middle east began. Even before the situation in the middle east developed, the cost of living crisis was a priority for the Government. Hon. Members know that we have till the end of June. This does not apply to those on heating oil, as we will discuss, but energy prices have been reduced under the price cap by 7% until the end of June, and the Government were taking other measures to alleviate the cost of living even before the middle east situation started.
I want to be candid with people about the choices that we had to make. Under the last Government, it took around 200 days for support to come to heating oil customers. We have rolled out support within two and a half weeks, but there is a trade-off when we make such decisions, and the decision that we made was to prioritise speed at this point, which meant deploying funding through local authorities in England and through devolved Governments elsewhere in the UK. That does, however, limit our ability to stipulate what the criteria are, but that is the trade-off we had to make. Listening to hon. Members this morning, I think we have made the right choice in prioritising speed because the need is clearly great right now. Had we been sitting here saying that the Government were coming up with a far more extensive scheme that might take months to deliver, I think we would have had a very different sort of debate this morning.
Martin McCluskey
No one has said that this is the extent of all the support that will be on offer: I have been very clear about that, both in the Chamber and whenever I have been asked the question. The point of immediate support now was to provide people with relief from an immediate crisis. We have been very clear—the Chancellor was and the Secretary of State was—that it was never intended to provide discretionary support for every single heating oil user to fill up their tank. It was to provide immediate relief quickly from a pressing crisis that we were facing across the country. We are keeping everything under review. Were we in a situation later in the year where we need to look at providing further support, we will make decisions then, but right now that support is on offer to people.
Different local authorities are taking different approaches. That is in the nature of the trade-off that we had to make. North Norfolk is taking an approach that looks at means-tested benefits, but North Northamptonshire is not taking an approach that relies on means-tested benefits. It is asking for evidence that people are not able to afford a payment, which involves, for example, giving over bank statements to enable people to make an assessment based on income rather than on means-testing. So different authorities are taking different approaches. That is what we have to accept if we are deploying this through the crisis and resilience fund and not having a centralised scheme as we did before. But as I said, this is about doing things at speed to make sure that people have the support they need.
On the situation in Northern Ireland, the hon. Member for Strangford (Jim Shannon) highlighted that almost two thirds of homes rely on heating oil. We have allocated £17 million to support them. Again, we will keep that under review. We have heard complaints from the Northern Ireland Executive, as we have heard from others this morning, that it is not enough. But as I understand it—the hon. Member might want to correct me—there is not currently a scheme through the Northern Ireland Executive to deploy that money, so we do not yet know what the demand actually is in Northern Ireland for the take-up of that funding.
Jim Shannon
I do not want to be churlish—when we get something that is helpful, we accept it—but our indications are that those moneys will be disbursed across Northern Ireland shortly and that it will be £35 per household. As I asked in my contribution about pensioners, who are really feeling the pinch, what can be done for them specifically?
Martin McCluskey
As I said, once the funds are disbursed in Northern Ireland, just as across the whole of the United Kingdom, we will make an assessment as to what further work might need to take place. I will have further discussions with the Northern Ireland Executive. We are obviously keeping every option under review, especially as we start to think about later in the year and into the winter. In Northern Ireland, we are still to see what happens when the funds are disbursed.
In Scotland, we have heard from my hon. Friend the Member for Na h-Eileanan an Iar (Torcuil Crichton) about how Advice Direct Scotland is disbursing those funds. However, we cannot know at the moment how much is being given out, because the Scottish Government will not let Advice Direct Scotland provide us with that data, so there is no way for us to know what the situation in Scotland looks like.
In England, we are having weekly stocktakes with the DWP, which is the Department responsible for the crisis and resilience fund. It is providing us with assurance on the disbursal of those funds, and we hope to have a dataset available in May that looks at how many applications and payments have been made, and what those payments look like across the country.
Torcuil Crichton
If officials from Advice Direct Scotland can tell me, as a constituency MP, the number of applicants they have, and the estimated number they will have—16,000, with 5,000 applications already last week—surely they can provide that information to the UK Government as well.
Martin McCluskey
Unfortunately, the Scottish Government are not allowing the data to be shared because of the pre-election period. I would argue that that is not what the pre-election period is meant for, and I will continue to have those discussions with the Scottish Government. I know that other hon. Members in Scottish constituencies have faced a similar problem in getting any data about their constituencies from Advice Direct Scotland because of this prohibition from the Scottish Government.
I am conscious of time, so I turn to the issue of wider market reform. There is obviously evidence that the market as it exists at the moment is not working. I find it difficult to listen to the hon. Member for Mid Buckinghamshire (Greg Smith), who was a Minister in the Department for Business and Trade under the last Government—
Martin McCluskey
Well, the hon. Member was a Member of the party that was last in government, let me say that, and I find it difficult to listen to him tell us about the lessons that we should have learned. We should never have been in this position, and we should not be in a position again where we are facing higher energy prices because of an international situation, and where we are having to deal with an unregulated market in heating oil. I argue that the then Government should have looked at this in 2022 and determined what action needed to be taken.
I will explain what we have done so far. The CMA is conducting an investigation at speed. These investigations normally take around a year, but it is going to conduct this one within 12 weeks. It has already completed the evidence-gathering stage, and it is now in the process of examining that evidence. I hope that it will come forward with the report in June. The Prime Minister has been clear that we will look at what comes forward from the CMA and examine the case for regulation.
Hon. Members across the Chamber have spoken about a price cap, but I do not want to prejudge the work of the CMA. There have also been suggestions about minimum orders and price guarantees—there a number of different proposals on the table—but we have to ensure that we make the right decision, and do not end up with unintended consequences that could make the situation worse. In a market with a large number of players, many of which are quite small rural businesses, it is especially important that we do not make the situation any worse. We are looking at a range of options.
The Chancellor has written to the CMA to ask that it remains vigilant across heating oil prices and tackles any unjustified increases that it might find. The Government are also in daily contact with industry to understand the drivers of recent price movements. We have reminded heating oil distributors of their commitments under the trade association code of practice.
Pippa Heylings
Does the Minister have a timescale for when he expects the review of the market and any recommendations to come back from the CMA? When will the Government enact them? Will they be part of the energy independence Bill, or is there another way in which they could come into effect quite quickly?
Martin McCluskey
I hope the report will come back to us some time in June, and then we will examine it to determine what may be required in terms of further action. I want us to move as quickly as possible. I have another meeting with the chief executive of the CMA tomorrow to discuss progress on the market investigation and ensure that work is carrying on at the pace that we want. We are not moving slowly. We have already accelerated this process—it was a year, and it is now 12 weeks. That is significant, but we obviously want it to move as quickly as possible.
Let me turn to the wider structural issues that we face in the energy sector. We recognise that the heating oil sector is under-regulated. Unlike gas and electricity, heating oil is not regulated by Ofgem, and we will put that right by exploring what regulations are needed to protect consumers and get them a better deal.
Taking a step back, ongoing events provide us with yet another clear reminder that we must get off the rollercoaster of global fossil fuel markets and on to the path of clean, home-grown energy that we control. We will learn the correct lessons from the crisis, unlike the previous Government, who went through the situation in 2022 and did not. In our mission to make the UK a clean energy superpower, we have already brought in £90 billion of investment in clean British energy. In the light of spiking oil and gas prices, we intend to go further and faster in the pursuit of national energy security.
We are bringing forward the next renewables auction, just months after the most successful auction that we have ever had, which secured enough power for the equivalent of 16 million homes. We are making plug-in solar available for the first time in Britain so that families can buy a low-cost panel straight from a supermarket and set it up on their balcony or in their garden.
We are speeding up delivery of the £15 billion warm homes plan. I heard what many Members said about the fabric of housing. There is obviously support within the £5 billion that we have set aside for low-income schemes, but there is also work going on about low interest and no interest consumer loans. I am trying to accelerate that work so that we can get that to people as soon as possible.
Pippa Heylings
We welcome the publication of the warm homes plan, but we have not received details of what will replace the energy company obligation 4 programme, which was run through local authorities. Can the Minister tell us when he expects that detail to be available? Will it be published ahead of the winter so that it can be applied and homes can be upgraded?
Martin McCluskey
As the hon. Lady knows, the Department runs a range of programmes. We took the decision to abolish ECO4 because it was not working effectively. In some cases, it was costing more to find people who needed the measures than it was to deploy the measures. The Department has been provided with an additional £1.5 billion, which took the total up to £15 billion for this financial year. That money is being deployed through the local government schemes—the warm homes social housing fund and the warm homes local grant. That is enhancing what has already been provided to low-income households through the Department.
As I say, £2.7 billion of capital is being deployed to provide low interest or no interest consumer loans. We need to accelerate that. At the moment, we are probably looking at early next year, but I would like to see that come forward so that we can use those consumer loans as a response to the current situation. We know that there is significant demand for home upgrades, including solar, battery and heat pumps, but we have to give people the support they need to take up those options.
We will speed up the delivery of the £15 billion warm homes plan—the largest home upgrade programme in British history—and we are reforming nuclear regulations following the Fingleton review so that we can fast-track new nuclear power stations.
Greg Smith
The Minister seems to have pivoted towards electricity and away from heating oil, which this debate is about. On the wind auctions, I am not sure consumers will thank him for the price that has just been paid. However, we are talking predominantly about the many rural homes that are off the gas grid. Many are built out of stone—I declare an interest, as mine is built out of witchert, which is a form of cob—and heat pumps do not touch the sides. Will he at least acknowledge that for those rural homes, we need to look at things such as alternative fuels? Boilers can be converted to run on hydrotreated vegetable oil and, in the future, synthetic fuels. We must not just keep talking about electricity.
Martin McCluskey
Fifty per cent of grants provided through the boiler upgrade scheme, which is our primary vehicle for providing people with grants for heat pumps to replace—
Martin McCluskey
If the hon. Gentleman will let me finish the point, I was going to say that 50% of those are to rural homes. I am not trying to dismiss the fact that there are some properties where it would not be appropriate to fit a heat pump because of the fabric, although adaptations can be made. However, we are seeing from consumer behaviour that most boiler upgrade scheme grants are going to rural homes, so there is clearly demand within rural areas for heat pumps, whether the traditional air-to-air or air-to-water heat pumps or ground source heat pumps, which are increasingly popular in rural homes.
I go back to the point about learning the lessons. We are in a situation where this country is significantly exposed to fossil fuels, whether through gas or oil. The long-term solution—to remove that risk and exposure—is to move to electrification, because we would not be having this debate if homes were electrified. We need to find solutions for rural homes, and we need to move to technology that means people have more control over their energy and the system.
Behind every decision this Government take is a simple principle: whatever the challenges, we will support working people. We will always fight their corner through this crisis. That is why we are directly helping those affected by the spike in heating oil costs, cracking down on energy suppliers who are cancelling orders or jacking up prices, and working at pace to ensure the sector is properly regulated. That is why we are doing everything we can to end our reliance on unstable fossil fuel markets and take back control of our energy.
That will mean an era of economic growth, good new jobs and unprecedented investment—an era of real energy security. That is how we will ensure that ordinary working British people, including those in rural areas, never again pay the price for foreign conflicts and our overdependence on fossil fuels.