Domestic Gas and Electricity (Tariff Cap) Bill

Debate between Lord Henley and Lord Stoneham of Droxford

Wednesday 18th July 2018 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, I spoke against Amendment 1 on Report, so I will not repeat my detailed arguments. However, I remind the House that the amendment would insert provisions for an indefinite relative price cap. The Government cannot accept a permanent price control being put in place. Members in another place have returned the Bill, having removed this House’s amendment, but with an amendment in lieu, which was agreed without a Division. I will now speak to that amendment in lieu, and I hope that the House will agree with me that it is a sound and sensible amendment.

Amendment 1A will ensure that Ofgem must conduct a review before the removal of the price cap into the pricing practices of suppliers and where there are categories of consumers who are currently paying, or may in future pay, excessive charges for SVT and default tariffs. In reviewing the practices of suppliers, and where the consumers are paying excessive charges, the regulator must consider whether there are consumers who will be excessively negatively affected when they move from fixed rates to SVTs and default rates, and whether vulnerable consumers require protection. If the regulator’s review concludes that protections are indeed required, they must take necessary steps to provide those protections, using their existing powers under the Gas Act 1986 and the Electricity Act 1989. The amendment rightly provides the regulator with the discretion to consider the form that any protections may take so that Parliament does not prescribe a solution today for what may well be a distinctly different concern in the future. The Government view Amendment 1A as striking the most appropriate response to the concerns that were articulated by noble Lords in this House during the Bill’s preceding stages.

I thank noble Lords across all Benches for their interest in the Bill and for their constructive engagement in its development, both in the Chamber and outside. I believe that the Bill is now in the best shape it could be, which is due in no small part to the work put in by this House. I hope that we may swiftly agree with the amendment made in another place so that the Bill may proceed and the price cap can be in place by the end of the year. I beg to move.

[Lord Stoneham of Droxford (LD)]

My Lords, I am speaking on behalf of our Front Bench spokeswoman, my noble friend Lady Featherstone, who unfortunately cannot be here tonight.

We too do not believe that the retail energy market currently operates to the advantage of customers. This Bill is a very blunt instrument, and one that is intentionally temporary—a sticking plaster while the Government desperately search out for a long-term solution. In coalition, we were proud to stimulate switching to a level way beyond what had happened before. But while successful, it is not sufficient. We still believe that a part of the solution lies in a relative price cap mechanism. That is why we supported the original Lords amendment, although we would have preferred it to have been stronger.

The fundamental issue is one of the “tease and squeeze” sales tactics used by energy suppliers, which would be far better tackled by a relative cap. However, we acknowledge the Government’s Commons amendment in lieu has recognised some of these concerns. We also recognise that, however imperfect this Bill might be, it is important to get it on to the statute book in good time before the winter weather and the escalation of consumer energy consumption. It is for these reasons that these Benches do not intend to call a Division this evening.

[Lord Grantchester (Lab)]

My Lords, I am grateful to the Minister and I very much welcome this amendment in lieu of the amendment passed in your Lordships’ House on Report.

This is necessarily a Labour-inspired amendment. It addresses our concerns over the domestic energy market at the termination of tariff-capped conditions. On Report, the House supported the contention that there should be ongoing monitoring through the implementation of a relative tariff differential. The incoming chairman of Ofgem, Martin Cave, whose appointment is very much welcomed, has expressed scepticism before the BEIS Select Committee that a fully competitive market will have returned by the end of 2023, when tariff-capped conditions will ultimately end. He has expressed doubt that vulnerable customers will be able to access competitive deals within this timeframe.

Furthermore, the amendment on Report was explicitly designed to deal with the exploitative behaviour of suppliers, known as “tease and squeeze”, whereby customers are moved over time from a competitive deal on to a much higher rate. This behaviour operates now and could continue even if the market be deemed later to be operating under competitive conditions. There is the twin effect that vulnerable customers could continue to be at risk post 2023 and that this particular behaviour of “tease and squeeze” across the market will not be dealt with.

I am very grateful to the noble Lord the Minister, and to the Minister for Energy and Clean Growth in the other place, Claire Perry, for considering this most carefully and engaging with our team so constructively. I thank them for considering that Ofgem must continue to monitor the market and to take appropriate action, should pricing practices of suppliers continue to put customers under disadvantage through excessive charges. Too often in the past, Ofgem has not used the powers it has in order to combat anti-competitive behaviour and excessive pricing.

The temporary nature of the Bill is to correct a clear existing fault in the present operation of the market. But the action to be taken through this Bill must take account of all anti-competitive behaviour, including “tease and squeeze”, and once concluded under the terms of the Bill on or before 2023, to continue to make sure all customers will be protected, including special measures for vulnerable customers.

Most people admit that they find the monitoring and switching of tariffs cumbersome and confusing. The debate over energy market intervention has run for several years, and certainly for too long. I am very pleased that, last year, the Conservative Government finally conceded that action is urgently needed to tackle unfair practices and excessive charges. Customers have been paying up to £300 per annum more than they might have done under a more competitive market.

Both the Conservative Government and the Labour Opposition are committed to have this legislation on the statute book to bring real benefits to consumers this winter. Ofgem must fulfil its functions and be seen to take appropriate action. The industry must realise that unfair behaviour will not be tolerated. Consumers will be protected.

I would like to pay tribute at this stage to all the staff who have worked so hard at both ends of Parliament, and especially the Bill team at the department. I would like to thank my Front Bench colleagues, my noble friends Lord Stevenson of Balmacara and Lord Lennie, for their support and attention, especially at the early stages of the Bill when I was absent due to ill-health. I am very grateful to my noble friend Lady Crawley, who spoke so passionately about the need to tackle the “tease and squeeze” tactics so prevalent in the energy market, and on the Liberal Democrat Benches to the noble Baroness, Lady Featherstone, and the noble Lord, Lord Teverson, for championing vulnerable customers, where we are very much aligned. I certainly do not want to forget or underplay the crucial legislative support of our opposition adviser, Rhian Jones.

I very much support the amendment and the Bill and look forward to the benefits it will bring.

National Minimum Wage (Amendment) Regulations 2018

Debate between Lord Henley and Lord Stoneham of Droxford

Thursday 15th March 2018 Grand Committee

[Lord Stoneham of Droxford (LD)]

My Lords, I have two or three points to make on these regulations. We welcome the move to increase the rates and we support that policy. Obviously, evidence over the past few months has shown that the economy is slowing. We have some quite serious problems in the retail sector and cutbacks in catering, with a lot of chains in financial difficulty. The other sector I would like to mention—here I must declare an interest as the chair of Housing & Care 21, a housing association with considerable care interests—is the whole care sector, which is under huge pressure. Obviously, this is a further burden in terms of costs—and not just for the operators because, given that the health service does not protect a lot of people in this sector, those costs are coming straight out of the pockets of consumers. I hope that the Government are paying some attention to these sectors and I should like to ask the Minister what they are doing.

A key issue is the degree to which productivity will increase in order to absorb some of the significant costs that are being imposed on these low-wage sectors. What are the Government doing? We have various estimates of productivity, but what initiatives are the Government taking to encourage productivity growth in these sectors? What case studies are they implementing to judge the impact of labour costs in these sectors? What policy initiatives are being speeded up—particularly, I hope, in the care sector—to address the fact that the sector is very labour-intensive and that inevitably the costs will impact directly on some very needy people who are not catered for by the National Health Service? The Government’s delay in producing their social care policies is a major consideration as this policy of increasing the living wage continues towards the Government’s targets.

Finally, as we seek to improve to improve rates of low pay, the best scenario in which to do it is one in which the economy is growing well, living standards are increasing and we have no undue pressures. We know, however, that we are now facing a period of low growth and that, because of the movement in the exchange rate and the rise in costs—particularly those imposed by these measures—living standards will be squeezed. On top of that, the Government will impose on the economy the huge costs of Brexit. The Prime Minister has admitted that Brexit will affect jobs and standards of living, regardless. I would therefore like to know what specific measures and initiatives the Government are taking to deal with these problems, which could undermine their low-pay strategy.

[Lord Henley]

My Lords, I thank both noble Lords for their helpful contributions to this debate and their broad welcome for these regulations. I will deal with the regulations and their attached documentation, and the concerns of the noble Lord, Lord Stevenson, that they were not set out exactly as they should be. I will ask the officials to send him a more readable version. More importantly, we take note of what he said. I will make sure that we do somewhat better at setting these documents out and making them clear to the noble Lord and other noble Lords taking part.

The noble Lord was also rather worried about why I used the expression “subject to economic growth”. The important point here is that the Low Pay Commission makes its recommendations in the light of an array of matters, and—as the noble Lord will know—it includes representatives of employers, employees and others. Ultimately, it makes recommendations and it is for the Government to make the decision. Those who are somewhat higher up in the Government—the Chancellor and others—have to take into account the effect on the economy of the Low Pay Commission’s recommendations, though we hope that it will also have considered the effect its recommendations might have on increasing unemployment by making it less affordable to employ people. The matter is, therefore, considered by the Low Pay Commission but, more importantly, my right honourable friend the Chancellor and others consider what lies ahead.

I join the noble Lord, Lord Stoneham, in wishing to see greater growth, but—as my right honourable friend the Chancellor set out recently—we are seeing steady growth over the coming years and I see no particular red lights in this area. We are still on track to achieve the target that we wanted to achieve—I think the noble Lord asked about this—which is 60% of median earnings by 2020. The Low Pay Commission will take all evidence into account in trying to get there.

The noble Lord also asked about the bigger change in the disregard for accommodation. Again, the Low Pay Commission took evidence to determine that off-set and its report summarises its view that the rate is a fair balance of the employer’s and the worker’s interests. Obviously I am happy to write to the noble Lord in greater detail on that if he so wishes.

I move on to the comment of the noble Lord, Lord Stoneham, that this imposes particular pressure on certain sectors. He singled out one that he knows particularly well, the care sector, for which we accept it can be difficult, and similarly for retail and other areas where wages tend to be on the lower side. That is why we are very grateful that there are representatives of employers on the Low Pay Commission to make sure that that point is made. There is no point raising rates too far if it will increase unemployment or create difficulties for certain businesses. Obviously it means that there will be extra costs for businesses but, as I think the noble Lord will accept, we want to make sure that workers are fairly rewarded.

There are certain things that Governments can do to recognise the increased costs for businesses. We give employers up to £3,000 off their employer NICs bill through the employment allowance. Last year more than 1 million employers benefited from that, saving some £2 billion. That will apply in all sectors. We cut corporation tax, as the noble Lord will be aware, from 28% to 19%, and that again benefits a large number of firms. As the noble Lord will remember, my right honourable friend announced reductions to business rates in the Budget.

I appreciate that things can still be difficult. The point behind having the Low Pay Commission, with representatives from both sides and others, is to make sure that we try to take all factors into account and, I hope, achieve greater balance. The noble Lord would like me to discuss the Government’s care policies more generally, but I do not think I am the right person or that this is the right place for me to do that at this stage, so I shall restrain myself from being tempted to take up his offer. No doubt he will find other opportunities to raise this matter with others in due course.

With what I take to be the support of both noble Lords, I commend these regulations to the Committee.