Energy Prices

Ben Gummer Excerpts

Wednesday 11th January 2012 Commons Chamber

[Ben Gummer (Ipswich) (Con)]

It is always a great pleasure and honour to follow the right hon. Member for Coatbridge, Chryston and Bellshill (Mr Clarke), whose defence of his constituents is always reasonable and valiant. I think he is right to this extent—that appealing to people to switch supplier will not be the entire cure for problems in the energy market. The reason for that is that the energy market is broken, so competition will not work entirely. It can work to a certain extent, but not entirely, if the market cannot deliver what the consumer wants.

To understand how to fix the market, we have to look at the history of the market and why it went wrong. If we look at energy prices, we find that they have moved since the privatisation of the late ’80s. They fell consistently beneath the retail prices index every year from the late ’80s and the early 2000s. They did so over a longer period than at any time since records of energy prices began. Then, from the mid-2000s they levelled out, and from 2005 to 2007 they increased further than RPI until 2010 when the last Government left office.

I am fully aware that this is often not a moment to talk about the previous Government’s record, but they had a fundamental hand to play in the reasons why we are in the position we are in now. It is also incumbent on us to point out that much of the responsibility lies with the man whose name stands at the head of the motion who seeks to lead the British public as Prime Minister after the next election. He is responsible for the complete lack of action taken to do anything about the broken energy market, which has caused the problems from which our constituents, including those of the right hon. Member for Coatbridge, Chryston and Bellshill, suffer today.

In a debate earlier in the Session, the right hon. Member for Don Valley (Caroline Flint)—who is now shouting from a sedentary position—said that reform of the electricity market was

“what my right hon. Friend the Member for Doncaster North (Edward Miliband) has been calling for ever since he was Energy Secretary, including now, as leader of the Labour party.”—[Official Report, 19 October 2011; Vol. 533, c. 931.]

A Secretary of State does not call for a reform of the energy market, or of the electricity market. The right hon. Gentleman’s purpose should have been to do something about the situation, but far from doing something about it—or even calling for something to be done about it—he issued the following warning to the then Opposition Front-Bench team during a 2009 debate on the Energy Bill:

“I have to say that the alarmism... is of no help at all.”—[Official Report, 7 December 2009; Vol. 502, c. 43.]

It was not alarmism, however. We understood that the market was broken, and we understood that fundamental changes were needed. That is why we are introducing the changes that need to be made now that we are in power.

My first problem with the proposals in the motion is that they do not have the agreement of even small energy providers, who say that the right hon. Lady’s pooling mechanism would not work.

[Caroline Flint]

How do you know?

[Ben Gummer]

I can tell the right hon. Lady, in answer to her sedentary question, that even the small providers have put that on record.

Secondly, the right hon. Lady alluded to a series of reforms that she believes would combat fuel poverty. That suggested that the last Government’s attempts had somehow been successful, or would be successful were they to be continued. In that earlier debate, the right hon. Lady also said:

“we had the most ambitious programme to help people in fuel poverty deal with their bills”. —[Official Report, 19 October 2011; Vol. 533, c. 932.]

Let me remind her of that policy. Between 2000 and 2008 the last Government spent £20 billion on abatement of fuel costs, and what happened to fuel poverty during that period? It increased by 333%. That was indeed ambitious. It was ambitious to the extent that for every household the Labour party put into fuel poverty, the taxpayer paid £5,700. The taxpayer paid £5,700 to reduce a household to fuel poverty, yet Labour Members have had the cynicism to come to the House and claim that their policies would work again, and that the brave and principled position of Her Majesty’s Government is somehow misguided. It is a hypocrisy which lays bare a party that has no ideas of its own, and is reduced to attacking its own record.

--- Later in debate ---

[David Mowat (Warrington South) (Con)]

I have been sitting here for a few moments trying to work out whether to talk quickly in the next few minutes or to curtail my remarks. I wish briefly to say something about the structure of the UK gas and electricity industries.

First, I shall discuss the gas industry. I heard the comments made by hon. Members from both sides of the House, but particularly by Labour Members, about the predatory nature of the industry, cartels, price fixing and so on. I return to my earlier intervention by saying that this country has the lowest gas prices in Europe, leaving aside three small countries. I am not defending these organisations and if the prices could be lower, they should be lower. However, if that situation is the result of predatory pricing and the operation of a cartel, the companies are not very good at it.

[Ben Gummer]

Is my hon. Friend aware that the probe initiated by the previous Secretary of State found that the energy companies were not acting as a cartel and that there was indeed price transparency between them?

[David Mowat]

I was aware of that, and I shall finish on this point by saying that if Labour Members have evidence of directors operating a cartel, which is a criminal offence, they should come forward with it. Alternatively, they should just stop making the accusation, which is becoming increasingly silly.

I was somewhat disappointed by the Secretary of State’s answer to the question about shale gas, because it has the potential to be a game-changer. In the United States gas prices have reduced by a factor of three and, in 2015, the US is going to start exporting shale gas, and if we do not have it here, that could well have a major impact on the structure of the industry and how it will work in the future. For the first time, we are seeing the decoupling of gas and oil prices, and once that has happened, all bets are off. The price of gas in Europe—in the European balancing hub—is three times what it is in the US. If a fraction of what happened in the US happens here, the results could be very radical and could create some issues to address in terms of the debt strategy.

Whereas we have nearly the lowest gas prices in Europe, the same cannot be said for electricity prices. We have structural issues to address in our electricity market. We do not have cheap nuclear power, as France does. We have missed the opportunity on that, although we are doing our best to catch up.

In the minute remaining, I want to suggest to the Minister one area that I believe we have got wrong in policy terms. The Climate Change Act 2008 sets a very ambitious target of 80% decarbonisation, and I accept that, but I believe we have confused the need to decarbonise with the need to go for renewables. The 20-20-20 directive from 2009, which imposes a renewables target over and above what we could have done to reduce carbon, has confused the issue. As a result, we have gone into nuclear more slowly than we should have done and, frankly, we have gone more slowly into carbon capture and storage, which is an alternative. Will the Minister assure us that the Green investment bank will be concerned with decarbonisation, not just renewables, and that the money available from it will therefore be available to the nuclear industry, which is in as much need of it as other parts of the decarbonisation chain, and the CCS industry?