Margot James
Main Page: Margot James (Conservative - Stourbridge)
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
When we debated this same topic in November last year, I said that I would welcome every opportunity to debate the best way in which to help people and improve Britain’s energy markets, so I am grateful to the right hon. Member for Don Valley (Caroline Flint) for at last returning to the topic—not least because we took another huge step forward last week with the publication of the first annual competition assessment, an assessment that we had commissioned, and Ofgem’s proposal to refer the energy market to the Competition and Markets Authority for a full market investigation.
We are supporting a step forward for the consumer that the last Government ducked time and again. We now have an independent, impartial, evidence-based, fair and just process for ensuring that the markets are working properly for consumers. I am delighted that the official Opposition have changed their minds and backed us on that, but today I want to address directly the question at hand, which is whether there should be a Government-imposed energy price freeze in the meantime. Quite simply, my answer to that question is no, because it would not work, and, in fact, would hurt the consumer.
We do not need an investment-damaging, Government-imposed, heavy-handed, blanket price freeze anyway, because the markets are already responding to the Government’s actions, sometimes by cutting prices. Following our action at the end of last year to reduce bills by an annual average of £50—a move that the right hon. Lady seemed to oppose yet again today—the rises that were announced by the companies last year have been reduced, and, as a result, all the major energy companies have said that there should be no need to raise prices this year. Some companies have gone further: npower has pledged that there will be no further price rises for customers on standard variable tariffs until at least the spring of 2015, and SSE has said that, owing to the Government’s actions, it will not raise standard variable tariffs until 2016 at the earliest. By acting properly, this Government—unlike their predecessor—have made the energy companies start bearing down on the prices that people pay.
Margot James (Stourbridge) (Con)
My right hon. Friend mentioned the Scottish and Southern Energy price freeze, which will be greatly welcomed by my constituents. In her opening remarks, the right hon. Member for Don Valley (Caroline Flint) quoted the chief executive of that company. I wonder whether she, and my right hon. Friend, are aware that the company stated clearly last week:
“An externally-imposed 20-month price freeze would not reduce the costs of supplying energy.”
There are many reasons for that, which I hope my right hon. Friend will proceed to enunciate.
Mr Davey
My hon. Friend is quite right. SSE’s press release made it clear that its price freeze had come about because of this Government’s actions.
When the energy companies next consider price rises, they will do so in the face of an imminent report by the Competition and Markets Authority, to be published in 2015. We shall then be able to consider, on the basis of proper evidence and tough action and advice from the independent competition experts, how best to reform our energy markets further to help customers. Of course, if there were a huge shift in wholesale prices or network costs between now and that point, we would expect the energy companies to respond, so let us think about what would happen in that circumstance under the Opposition’s plans put forward today. For the sake of debate, let us do a thought experiment.
Mr Davey
The right hon. Lady is absolutely right in that, as the recession took place there was a period when wholesale gas prices plummeted, because the economy was in such a mess that the demand for energy was reduced. However, she ought to be careful about going too far on this issue.
Whatever the price rises are, there is a problem for consumers. We know that incomes have fallen as we have emerged from Labour’s great recession, and the fact that price rises have been slowing will be of little comfort. I can, therefore, understand why a promise of a blanket, Government-imposed energy price freeze might seem popular, but as I will demonstrate, it is not a price freeze but a con.
At no point have the Opposition explained how their proposal would actually work, so let us try to get to the bottom of their thinking with a few questions. Are they proposing to freeze all current tariffs in their existing state, in real cash terms? Would people be able to switch back from a higher but longer fixed-rate tariff to a lower, variable-rate tariff before that variable rate became fixed by law? If a cut-price deal was set to end during the freeze, would suppliers be forced to continue it until the freeze ends, penalising firms who try to help their customers?
We know the problem for smaller competitors if wholesale prices rise. They tell us that they would go bust under Labour’s energy price freeze. But what if wholesale prices fall during the freeze? Is Labour proposing to prevent firms from passing on that price fall? [Interruption.] I am delighted that the right hon. Lady said that, because it is clear that Labour will not prevent bills being cut. Instead, would Labour legislate to force companies to pass on each and every cut in wholesale prices, and how would that work? It is a reasonable question. Would Labour legislate to force price cuts during the freeze, or would companies be able to hold on? If a company has bought its gas 18 months ahead, paying a higher price on the wholesale markets, would Labour still force it to cut or freeze its prices, bankrupting it?
The Opposition want to intervene in the markets to control prices and second-guess global price changes, so they must have the answers to these questions. Would smaller suppliers be exempt from the price freeze? How would the price freeze be applied to new entrants? Alternatively, is Labour happy to see a return to the big six, with just a smaller number of suppliers?
This is a gimmick, not a policy. It is a shambles, and it is back to the 1970s. Given that it clearly will not work for consumers, might it work for businesses? Typically, large non-domestic customers have bespoke sophisticated fixed-term contracts which pass through each element of third-party costs. How would the price freeze work for them? What would happen to a contract whose term ended during the freeze? Alternatively, will comrades on the Opposition Benches decree that contracts need to be renegotiated ahead of a freeze? Will the comrades stop at energy price freezes? Are there plans to freeze rail fares or water charges? In the past six years butter and margarine prices have gone up faster than energy prices. What is the plan for butter and margarine prices?
The right hon. Lady tries very hard to paint her party out of the picture and to blame others for the problems we face, but after 13 years of Labour rule, it was not just a wrecked economy that the coalition inherited four years ago. We inherited an energy infrastructure future with a huge multibillion-pound black hole at its heart, the result of years of underinvestment, dithering and delay, and we inherited a retail energy market which, over 13 years of a Labour Government, had been stripped of proper competition and had become hugely complex and confusing for consumers, with prices rocketing and no avenue of escape from the clutches of the big six.
In both these areas—in investment in infrastructure and in reforming the markets—this coalition Government have had to clear up the mess that Labour left behind. Look at the investment figures. The Office for National Statistics figures show that from 2005 to 2009, average investment in the electricity sector was around £5 billion a year. That was far too low for the country’s needs. We had to work tirelessly to turn it around, and we have. Since 2010 investment has continued to rise. On average in this Parliament it has risen by almost £8 billion a year. In 2012 investment exceeded £10 billion—the highest figure on record—and we have a pipeline worth £187 billion, including the first nuclear power station in a generation.
There have been record levels of investment in renewables. Bloomberg estimates that average annual investment in renewables has more than doubled in this Parliament, compared with the previous one. Last year electricity generated by onshore wind rose by 36%. Offshore wind is up 45%. Solar is up by almost 70%. Low-carbon generation now makes up more than 35% of the electricity mix. Emissions are coming down, the share of clean power is going up and investment in new infrastructure is booming. Under this coalition the lights will stay on, and we will go green.
When it comes to their policy detail, we have learned nothing today about what the Opposition are proposing. It is a slogan, not a policy. This Government are getting on with the complex task of mending the markets to serve the best interests of consumers. We have transformed the retail market, increasing competition, challenging the power of the big six and putting customers more firmly in the driving seat. We have minimised the impact of Government policy on bills while protecting help to the poorest, protecting investment in low carbon and maintaining emissions reductions.
Margot James
Talking of the stimulus to competition under this Government, may I remind my right hon. Friend that, despite reducing the subsidy from 43p to the 13p tariff, this Government have seen the number of homes supplied by solar power increase from 15,000 to more than half a million? Is that not testimony to some of the excellent work of this Government?