Domestic Gas and Electricity (Tariff Cap) Bill

Simon Clarke Excerpts

2nd reading: House of Commons
Tuesday 6th March 2018 Commons Chamber

[Rebecca Long Bailey]

The hon. Lady makes an interesting point. I think that both sides of the House have reached something of a consensus on our energy market. People on the right and left—wherever they place themselves on the political spectrum—agree that our energy market is fundamentally broken and needs to be reviewed. It is interesting that the Government put their own commission in place, under Dieter Helm, but we have had no response from them so far about the proposals it made.

I have several issues with the Bill as drafted, but I start with the fact that it does not provide any direction from the Secretary of State on his preferred level of cap, which effectively passes the buck to Ofgem. The Bill merely states:

“The Authority must exercise its functions…with a view to protecting existing and future domestic customers who pay standard variable and default rates”.

In doing so, Ofgem must consider a number of factors, including creating incentives for suppliers to improve efficiency, enabling suppliers to compete effectively, maintaining incentives to switch between suppliers, and the need to ensure that holders of supply licences who operate efficiently are able to finance activities authorised by that licence.

[Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)]

With respect, I dispute the hon. Lady’s claim that we are in accord on energy policy. The Opposition’s stated policy is to proceed with wholesale nationalisation, which Government Members strongly disagree with. Does she not accept that renationalising National Grid and the energy sector would be antithetical to driving down prices, which is what we all want?

[Rebecca Long Bailey]

I refer the hon. Gentleman to the Labour party’s manifesto, which clearly states that we wish to increase competition in the energy market by creating regional suppliers. We want to promote fair and transparent competition within the energy market, but unfortunately the Government do not advocate a similar position. We hope to fine-tune aspects of the Bill as it goes through the House so that competition in the energy market will be effective, fair and transparent.

--- Later in debate ---

[Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)]

I am grateful for the opportunity to make a few brief remarks in a debate that has been perhaps the most consensual in which I have participated since my election last summer. I pay tribute to the Minister, and also to my hon. Friend the Member for Weston-super-Mare (John Penrose), who has done so much to ensure that the Bill is indeed a reality. It is certainly needed. In a winter in which we have been reminded of just how bad the British weather can be, and just how much we rely on our ability to heat and light our homes, too many of our constituents are being taken for a ride by their energy suppliers. Millions of so-called sticky customers, many of them elderly and on low incomes, are stuck on poor-value default tariffs and, as a result, pay more for their energy than they need to. In a deprived constituency such as mine, the case for change is clear. In June 2016, the Competition and Markets Authority found that consumers were being overcharged by about £1.4 billion a year. That is not fair. It is bad for consumers’ finances, and it is bad for trust in the energy market. I was therefore pleased to see this measure included in our election manifesto last year.

It is important to understand how the Bill will work, and it is also important to understand what it is not. As was pointed out by my right hon. Friend the Member for West Dorset (Sir Oliver Letwin), it is not the crude measure proposed by the right hon. Member for Doncaster North (Edward Miliband) in the good old days when he led the Labour party. He proposed a straight-up freeze on energy tariffs: a blunt proposal with insufficient scope to deal with natural price fluctuations. In contrast, the Bill will implement not a freeze but a cap: a cap set on standard variable and default energy tariffs.

Competition still lies at the heart of our vision for the energy market, and that must be the right way forward. However, those who are less able to switch will no longer be at the mercy of rip-off merchants. This is not a permanent solution, but it will buy time for the ambitious programme of reform that the Government are delivering to take effect. The provision of faster, cheaper and more reliable switching, backed by smart meters and simpler, clearer energy bills, is an essential step that was proposed by the Competition and Markets Authority and is now being introduced by Ofgem. In the meantime, a temporary cap must a good idea. It will promote choice while also ensuring that the energy market works for everyone.

That is an infinitely more progressive approach than the one proposed by Labour Members. The Centre for Policy Studies has shown that Labour’s plans to renationalise our energy network would cost up to £185 billion, exploding the deficit and leaving every household in our country facing a bill for thousands of pounds. Putting the cost aside, however, I challenge Labour Members to tell us where is the evidence that the state would suddenly develop the all-seeing wisdom that would enable it to know how best to price what is an immensely complex and fast-changing market. We know from the Government’s reforms of the way in which we produce our energy that it is far better for Governments to set an enabling framework, and then to let the market shape itself according to innovation and demand. If we relied on the state to direct how we generate our electricity, we would still be relying on dirty coal today, rather than enjoying subsidy-free solar and offshore wind. Of course, as we noted from their shameful early-day motion, tabled a few weeks ago, too many Labour Members would rather like that, but at best we would have a series of Hinkley Points. I will not take lessons from Labour Members about embracing the merits of outright state control and the direction of prices.

1s the Bill perfect? I must say that I wish it were not necessary. I did not come into politics to cap prices, and I do not believe that the state is generally particularly adept at doing so effectively. However, we are where we are. We have a market that is not working for some of the most vulnerable people whom we serve. I am a great believer in not making the best the enemy of the good. A price cap is what my constituents need and want, a price cap is what we promised to deliver, and a price cap is what I will vote for tonight.