Energy Price Freeze

Ian Lavery Excerpts

Wednesday 6th November 2013 Commons Chamber

[Mr Jim Hood (Lanark and Hamilton East) (Lab)]

The Secretary of State apologised to the House at the beginning of his speech, saying that he would not be here for the summing-up speeches, and the House accepted that. I was rather disappointed, however, that he did not comply with the long-held convention of the House by staying in his place to hear the following speaker from the Opposition Benches. That was disappointing, to say the least, and I feel obliged to comment on it.

I was once told that if someone stands by the side of a river and watches the logs go down, like the tide of mankind, they will see them float back again if they stand there long enough. I was reminded of that when I watched the energy company executives giving evidence to the Energy and Climate Change Committee last week. That exotic gathering of four had in its midst three representatives of the big six. Their evidence mimicked the three wise monkeys. They saw no evil in the hiking of energy prices, they did not hear the universal condemnation of their greed, and they spoke in glowing terms of their care and compassion while British consumers are suffering charges that have been fabricated by their rigging of the market.

I served on the Standing Committee of the Bill that privatised the electricity industry. I recall that the Secretary of State at the time was Mrs Thatcher’s favourite boy, Cecil Parkinson. He was followed by John Wakeham. I note that there is a private Member’s Bill relating to the legacy of Mrs Thatcher. Well, the things we are discussing today are her legacy. I remember another former Conservative Prime Minister, Harold Macmillan—by then the Earl of Stockton—accusing the Thatcher Government of selling the family silver. That is exactly what they did when they sold off the electricity, gas, coal and water industries, and we are in deep water today because of that legacy.

In my maiden speech, I recalled being a miner, and quoted Nye Bevan saying:

“This island is made mainly of coal and surrounded by fish. Only an organising genius could produce a shortage of coal and fish at the same time.”

The Tories, past and present, were and are such organising geniuses.

[Ian Lavery (Wansbeck) (Lab)]

Is my hon. Friend and fellow former miner aware that it was announced on Tuesday that 48% of the UK’s energy is generated by coal?

[Mr Hood]

Yes. Indeed, half the world’s energy is produced by coal.

We are an island people and, in my younger life when I was a miner, we were self-sufficient in energy. It is thanks to Government failures that we now have to go cap in hand to the Russians for gas, to the Chinese for coal—they are now buying up coal all over the world—and the French for nuclear-generated electricity.

--- Later in debate ---

[David Mowat]

No, I will not, because I have already given way twice.

I welcome the proposal for a competition review: it would clear the air. If there is indeed no cartel, surely everyone should welcome it. I also welcome the proposal for 24-hour switching, although, having reflected on why I might not switch as often as I should, I concluded that it was still too difficult. I have just moved house, and it took a long time for me to manage to speak to those guys on the phone. I suggest to Members on both Front Benches that we should introduce a fining system. If it takes more than 10 or 12 rings for any of the big six to answer the phone and transfer callers to someone who can deal with their query, that company should be fined. I bet that if we introduced such a system, we would find that the energy companies hired more people and dealt with calls more efficiently, and switching—whether in 24 hours or not—would be much easier.

Of course we need more new entrants to the market, but I have a further, serious criticism to make of the big six. They have described a margin of 4% or 5% as reasonable, which is an entirely spurious observation. I have no idea whether such a margin is reasonable, but the point is that we should evaluate them on the basis of their return on capital employed. A margin of 4% is a huge margin for a foreign exchange dealer and for a petrol retailer, but a very small margin for any other retailer. When someone asks if £7 million a day is too much profit or too little, that is a very hard question to answer. The big six are entitled to a reasonable return on their capital employed. We should focus on that, and they should focus on it too when they are telling us how reasonable they are.

[Ian Lavery]

Will the hon. Gentleman give way?

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[Albert Owen (Ynys Môn) (Lab)]

It is a pleasure to be speaking for the first time under your chairmanship, Madam Deputy Speaker, and I congratulate you on your election to the post.

I am very pleased that the former Energy Minister, the hon. Member for Wealden (Charles Hendry), is still in his place, because he is right that there was consensus between my good friend the late Malcolm Wicks and him, and they had a good working relationship. When he talks about political risk, however, he should not look across to this side of the Chamber. He should look within his own party and within the coalition, and see the debate within the coalition, which is causing divisions on energy policies today.

I am pleased this issue is high on the agenda. I have been banging on about energy prices for some time and I am glad it is now in the political mainstream. I am glad my party and party leader are leading on this issue, too, because I am afraid the Government are for ever in the wake on these issues. Only 18 months ago the Prime Minister had a summit in No. 10 Downing street. He was there for a few minutes—he was very busy—but he said he had sorted the energy companies out on prices. When I intervened on the then Energy Secretary, Chris Huhne, in a debate and asked him whether he had told the energy companies to hold their prices down, he replied, “No need, they’re already going to do it on their own,” but here we are today with rises in prices that people and business cannot afford.

[Ian Lavery]

My hon. Friend and I had the dubious pleasure of attending that Select Committee hearing last week, and comments about a modest return have been made here today, too. The Centrica boss said to the CBI yesterday that £2.7 billion was a modest return. That is £7.4 million per day, or £86 per second. Is that a modest return, or is it robbery?

[Albert Owen]

My hon. Friend will recall that I challenged the Centrica bosses. Indeed, I challenged the CEO of Centrica not to take his bonus this year, because his salary and bonus combined have gone up by 38% since 2008 while bills from his company have gone up by 36%. I am a customer of British Gas, although perhaps not for much longer. To be fair to the CEO, Sam Laidlaw, he has decided not to take his bonus this year. I hope that others will listen and follow suit, because it is immoral that these companies are saying, “We are making only a modest amount,” yet they are paying themselves more than a modest bonus out of their profit. They tell us that the internal market between generation and retail is working okay and that they are separate entities, but they pay their bonuses altogether as one company, and they take a huge amount in dividends for their shareholders.

--- Later in debate ---

[Ian Lavery (Wansbeck) (Lab)]

Thank you for calling me to speak in the debate, Mr Speaker. I have been in the Chamber most of the day, but I had to go to a debate on the draft deregulation Bill, which I see as a punishment. I apologise if I repeat points that have been made in my absence.

This debate is really worth having. This is the most important issue in the lives of ordinary people up and down the country. It is great to see so many people supporting Labour’s proposal for a price freeze, because it means so much to them. It could make a difference of between £120 or £130 a year to families who are struggling to put bread on the table. Since 2010, the average household’s energy bill has increased by more than £300 a year. Energy companies have increased their profits on the back of spiralling energy bills for hard-pressed households. Energy prices have rocketed, and they are set to increase again in the near future. Only this week, Ofgem’s latest electricity and gas supply market indicators have shown that the typical domestic dual fuel bill stands at £1,420 a year, in stark contrast to the £1,105 at the time of the general election in May 2010.

One of my great concerns in life is people living in poverty, including people who are in fuel poverty. Ministers have admitted that, despite a recalculation and reconfiguration of the how the fuel poverty figures are arrived at, the number of people in fuel poverty is expected to rise in the next two years. The recalculation was supposed to reduce the figures, but they will increase in any event. Figures from Ofgem this week show that the wholesale costs have increased by only 1.7% this year, while bills are up on average by more than 9%; and 60% of the levies, which the Government blame for putting up energy bills, were introduced by this Government.

Ordinary people are entitled to know why these bills have been increased. People are at a loss to see why their bills are escalating. For the first time I can remember—as I look around, I see that I am one of the youngest, of course—people in this country cannot afford to buy energy. They simply do not have enough money to buy energy to keep themselves warm. Is that what we politicians want—giving people the choice between heating their homes or eating with their families? I am not being dramatic; it is a fact of life. If anybody has any doubts about that, they should come to me and I will introduce them to people who are heavily in debt and cannot manage their everyday costs.

I am greatly concerned about the trading system and the cartels that have been described today. We met energy companies last week and tried to get some information from them, but it is very difficult to achieve that. The trading systems appear to be mysterious. How do these companies trade? People are not sure about that. How do these companies trade in the long term, and how do they trade in the short term? How do these big six companies trade at all? It is a real mystery. The Government need to find out more about it, and Ofgem needs to investigate it. Ofgem does not even ask the energy companies for their trading figures. That is illuminating, and there is no reason why that should not form part of the regulatory reform of energy companies’ responses to Ofgem. There is a real sense of financial jiggery-pokery. The mystery of the big six is seriously outflanking a Government who forget the misery of increasing numbers of people in fuel poverty yet support the monsters who create such despair. We really need to tackle this.

When I came back into the Chamber, my hon. Friend the Member for Blaydon (Mr Anderson) was mentioning the various options and said that it looks as if this energy market is broken. How can we fix it? The energy companies are crying crocodile tears, claiming that they cannot make ends meet, while at the same time they are making fortunes. The boss of Centrica said only yesterday that profits of £2.7 billion were modest. That is a profit of £7.4 million a day or £86 a second. These chief executives and secretaries and senior managers are receiving massive bonuses too—bigger bonuses than premiership footballers. These wages structures makes premiership footballers look as if they are on workfare. We need to look at that.

Let me end by saying something rather controversial. I really believe that the system is broken. If prices are being increased twice or thrice every year on a uniform basis by a cartel, and if all these people are saying that they cannot make ends meet while directors are making fortunes and shareholders billions, we need to look at that as well. Is it not time for us to break up the cartel? Is it not time for us to consider different options? Is it not time for us to do what was suggested by a member of the Energy and Climate Change Committee the other day—it was not a Labour Member—and consider adopting co-operatives such as those that operate in New York, and indeed elsewhere in America and in Canada, enabling the public to own part of the system?

[Mr Anderson]

My hon. Friend is, as always, making an excellent speech. I am pleased that he has mentioned America, because the American Government’s Energy Information Administration has said not just that the cost of natural gas to manufacturers fell by 36% between 2006 and 2010, but that at the same time the total cost of energy fell by 11%. Can my hon. Friend remember whether we in this country saw a 36% or even an 11% drop in bills during those four years?

[Ian Lavery]

That is the very point that I want to make.

I said that I was going to be slightly controversial. If the directors are creaming off billions, the shareholders are making millions, and the only people who are suffering are the consumers, who, for the first time in my lifetime, cannot afford to pay for electricity or gas, the system is broken. If we do not change that system, it will be in a really dangerous state.

I am going to say what some people are dreading hearing me say. There should be a serious investigation to establish whether the entire electricity system and the big six should be returned to some form of public ownership. That would enable us to control what we owned as a Government, and, most important, we would be able to ensure—because the Minister would ensure—that ordinary people, particularly the most vulnerable members of society, would not be cold in winter. We would prevent 24,000 or 25,000 deaths. It is a dodgy subject, and people are frightened of it, but we cannot control what we do not own, and we are not controlling the energy companies.