Social Energy Tariff

Question

14:57:00

Tabled by

To ask His Majesty’s Government what consideration they have given to introducing a social energy tariff.

On behalf of my noble friend Lord Foulkes and with the permission of the House, I beg leave to ask the Question standing in his name on the Order Paper.

My Lords, the Government know that more needs to be done to support vulnerable households that are struggling with bills while we transition to clean power. Earlier this year, we published a consultation on the expansion of the warm home discount, giving more eligible households £150 off their energy bills. These proposals will bring about 2.7 million households into the scheme, pushing the total number of households that will receive the discount next winter up to around 6 million. The department has considered all responses, and a government response will be published in due course.

My Lords, I am grateful for the Minister’s response; I think all Members, on both sides of the House, agree that this is needed. Given the situation the Government found themselves in financially, I congratulate them on finding the resources within that difficult period to do something positive about it. When will this be introduced and when will this matter be resolved?

The consultation has just ended, and we expect to make an announcement in due course. The question is about a social tariff, but if you look at organisations such as National Energy Action, you will see that there is no one definition of a social tariff. We are doing everything we can in the circumstances to extend the warm home discount to as many families as possible.

My Lords, speaking as honorary president of National Energy Action, I ask the Minister: would it not be better to increase the warm home discount for those households already eligible—it has not been increased for about the last three to five years—rather than extending the same amount, a very small amount, to a larger number of households? Increasingly, those living in fuel poverty really need more than the £300 available.

I welcome that question; we have to balance increasing it for a certain number of people with widening it out to as many people in fuel poverty as possible. The Government are doing the right thing by extending it from about 2.7 million to 6 million people in fuel poverty—to people who would have received no payment whatever.

My Lords, one of the main reasons why electricity prices are so high is the bizarre way the wholesale market works. If I need to buy 10 pints of milk, so I go to my supermarket, where they are 95p each but it has only nine, and then buy the 10th pint from the corner shop for £2, I do not have to go back to the supermarket and pay the difference so that all 10 cost me £2 each. That would clearly be insane. But that is exactly how the electricity wholesale market works. Does the Minister agree that that is mad and that it is time we stopped setting the wholesale price at the highest cost generator in each half-hourly trading slot?

That is a good question, and the Government keep this under review at all times. We find ourselves in very difficult times; since the fuel crisis in 2022, we have been dealing with a very difficult situation, and this is under review all the time.

My Lords, some 16% of our energy bills are made up of levies, which the MCS Foundation has found could be costing bill payers some £300 per year. Does the Minister agree with the call of Make UK, Energy UK and the Climate Change Committee for policy actions to remove levies from electricity bills to better incentivise people to switch to low-carbon energy? What actions are the Government taking on this?

There is a levy for the warm home discount, but that works out at only £1.50 a month per household, which is not that high considering how many people it takes out of fuel poverty.

My Lords, does the Minister agree that spending more money on home insulation would be a more permanent solution to the energy problems that low-income families face?

The noble Baroness makes a valuable point. We will invest £13.2 billion in the warm homes plan over the spending review period, in line with our manifesto commitment. This builds on last year’s initial settlement of £3.4 billion, and we have taken a major step forward in our plans to upgrade up to 5 million homes over this Parliament, cutting energy bills for good and fulfilling our manifesto commitment to deliver the warm homes plan.

My Lords, as has been pointed out, we have a social tariff. We had one previously, before 2011, but it was abolished in favour of the warm home discount. I welcome any initiative by the Government to increase that to alleviate any suffering, but any talk of a social tariff would be a sticking plaster over the fundamental problem raised by the noble Lord, Lord Vaux: that the cost of our electricity is way too high. Our domestic electricity is three times more expensive than that of the US, and industrial electricity is four times more expensive than that of the US and seven times more than that of China. This is the real problem. Only one-third of electricity prices in domestic bills are wholesale prices; 46% of the total costs are the green levies and subsidies, which are being accentuated by the accelerated and self-inflicted rush to decarbonise the grid. Will the noble Lord go back to his department so that we can come up with a new plan for energy that is affordable for all?

We have plans on the go to make everybody’s energy bills cheaper. We need to move towards having energy that is essentially homegrown, as at the moment it is not. We need to move in that direction if we want to bring down bills, which is the target of this Government.

My Lords, I welcome the steps the Government have taken on this difficult issue, but will they consider the very simple approach of abolishing the standing charge on all public utilities, which is a punitive tax on those who can least afford it?

I thank the noble Lord for that question. We had a comprehensive review involving Ofgem in December to discuss this issue. We know that too much of the burden of the bill is placed on standing charges. We are committed to lowering the costs of standing charges and have worked constructively with the regulator, Ofgem, on this issue.

My Lords, I declare my interest as a director of Peers for the Planet. Does not the conversation that has just gone around the House illustrate clearly that there are a number of serious issues with the cost of electricity that need to be looked at in a comprehensive way? As has been said, we need to look at decoupling it from gas prices, the tariffs and the effect of zonal pricing—if it comes in, and many people have suggested it. When are the Government going to look at all those issues in the round? Is that something the REMA review will do, and when will we hear the results of it?

We will hear from the REMA review in due course. We take this issue very seriously and we will be looking at all the factors the noble Baroness has mentioned. When we have reached a conclusion, we will come back to the House.