Energy Prices

Justin Tomlinson Excerpts

Wednesday 19th October 2011 Commons Chamber

[Damian Hinds]

The fact that the hon. Lady made those points does not make them bad points, and there will be further detail to come. Things do not necessarily have to be on the face of the legislation. As the green deal is introduced, I am sure that ensuring that the most vulnerable households share the benefits will be high on Ministers’ list of priorities.

The second point that I want to cover briefly is about complexity in the market. We know that there are hundreds of tariffs on the market—one of which, slightly inexplicably, involves getting a free football shirt. In some ways, complexity in the energy market is a reflection of increasing complexity in consumer markets in general. Those visiting the Sainsbury’s wine aisle now need to take a Hewlett Packard scientific calculator to work out the best deal, whereas those looking for a savings account or a credit card deal need to spend quite a long time working out the best deal in the first place and, more importantly, need to be sharp and ensure that they cancel it at the right time to get the savings. Things are becoming harder for consumers, but they are especially difficult with energy because it is that much less tangible and has that much more complexity to it.

[Justin Tomlinson (North Swindon) (Con)]

I congratulate my hon. Friend on making an excellent speech. On empowering consumers, one of the challenges is that most people are incentivised to switch accounts when their prices are hiked, only to find a few weeks later that their new supplier has also hiked its prices. Does he agree that one solution would be to block price rises for new customers for the first six months after signing up to a new tariff?

[Damian Hinds]

My understanding of the recent Ofgem announcement is that there is some provision for ensuring that what it calls innovative price tariffs must have a fixed element to them—funnily enough, I was just coming to more or less that very point. I welcome Ofgem’s new requirement for a single, simple tariff per payment type, but we need to ensure that that does not beguile us. I used to work in the hotel business, and anyone who has ever stayed in a hotel might be familiar with the rack rate. That is the price pinned on the back of the door, which is nominally a perfect reference price that people can use to compare hotels. The problem is that hardly anybody pays the rack rate; rather, all the competition centres on the other rates. That does not mean that such rates are a bad thing, but we would not necessarily be able to say that we had thereby solved the problem.

When it comes to solving the problem, we have to remember that the comparison websites—all the puns about meerkats and Go Compare were getting a bit much earlier—are commercial enterprises. Although they allow people to compare, the click-through payments that they receive mean that they have an incentive for screen biasing. The Consumer Focus code and accreditation are welcome, but that is not quite the same thing as ensuring that comparison sites operate absolutely perfectly in the public interest. I hope that it might be possible to consider a new model of comparison websites to sit alongside those that already exist, which would be broadly modelled on a website called Lenders Compared. I do not know how many hon. Members are familiar with Lenders Compared—probably not that many—but it was set up as a result of the Competition Commission investigation into high-cost lending and enables consumers to compare the cost of various home credit operators and others.