I beg to move,
That leave be given to bring in a Bill to require energy companies to provide social tariffs for low income customers; and for connected purposes.
Last week, we saw people’s energy bills go up by another 6%, as Ofgem raised the energy price cap again, meaning that typical households now face bills of not far off £2,000 a year. My argument for a social tariff is born out of a career spent grappling with Britain’s energy market, including in my work with the current Secretary of State for Energy Security and Net Zero in the old Department of Energy and Climate Change, where we saw, through the global financial crisis, the need to better protect consumers from volatile energy prices. Watching him trying to convince energy companies to lower their prices as the country faced spiralling costs and economic chaos convinced me that a social tariff was the least a Labour Government could and should do to protect the most vulnerable.
Much has changed since then. There has been significant success in shifting to cleaner power, as a result of a political consensus—held across this House until recently—on the need to decarbonise our energy system to tackle climate change. This Labour Government’s mission to achieve clean power by 2030 is part of our long-term solution to bring energy bills down for good. People see increasingly that there are further benefits to such a shift: greater energy security from generating our own energy rather than being exposed to the whims of petrostates and dodgy regimes, as well as a reduction in the costs of generating that power. Some 96% of newly installed solar and wind capacity has a lower generation cost than natural gas. However, consumers are not feeling the benefits of cheaper costs as much as they could, partly because our energy prices are set by global oil and gas prices.
As an MP, the reality of fuel poverty is frequently rammed home to me on the doorstep, where concerns are raised about the rising costs of energy and the pressure that they put on household budgets, especially among those on low incomes. I remind the House that East Thanet is not a leafy, affluent community of the kind that many people associate with the south-east. It is a coastal community with high levels of deprivation, much low-paid and insecure work, many elderly residents, many families with a disabled member, and many cold, old and draughty homes. In Thanet, a quarter of all working-age adults claim universal credit, and over 40% of people claim at least one form of benefit from the Department for Work and Pensions. These are the people who suffer most from increasing energy bills, and who often have to choose between heating and eating.
A social tariff that supports the most vulnerable with their energy bills and prevents them from falling into fuel poverty would protect them from some of the failures of the current energy market, and shield them as that market is reformed to make the most of leaving fossil fuels behind. The energy market needs to change so that the efforts the Government are making to decarbonise our energy system truly deliver benefits for consumers. The reform of retail prices will need to be part of that.
As a member of the Energy Security and Net Zero Committee, I have heard witnesses’ growing calls for such change. The vast majority of homes are heated by gas, while electricity is much more expensive. The costs of shifting to cleaner power have been loaded on to electricity bills, creating a disincentive for many to choose to shift to electric heat. We artificially make electricity more expensive, which makes it impossible for some to move to clean power. It is those who cannot pay who are least prepared.
Rapid change has always been associated with upheaval and risk. A social tariff, working as part of the welfare state, can support people as we make these changes. This is the right thing to do from not only a fuel poverty perspective but a decarbonisation one. A modern welfare state has done this before, and it can do it again. The Labour party is the party that created the welfare state, and on these Benches, we understand why having a strong social safety net is vital, but energy is an area where the safety net has a gaping hole in it. That is why a targeted social tariff is needed—so that we can provide vital support for those in the greatest need.
There is also an increasingly chronic problem with consumer energy debt. People owe more than £2 billion in energy bill debt, and that figure has doubled in the past three years alone. Those in debt then become stuck in a cycle where they face an increase in energy bills while also trying to pay off the debt they have built up. That is not sustainable for those consumers or even the energy retailers, which have to deal with the fallout from fuel poverty debt.
The warm home discount is the most prominent current scheme to help with this issue, but it is simply not sufficient for the scale of the challenge. It has not scaled with retail prices—as energy bills have increased by hundreds of pounds, the warm home discount has increased by only £10 since its introduction. The discount is also limited to households receiving means-tested benefits, meaning that many families living in fuel poverty miss out on this vital support. A social tariff should build on the warm home discount but not replace it.
The purpose of the Bill is to enshrine in law the principle that a social tariff should be provided by all energy companies, to ensure there is no supplier lottery for those who need support. It should be additional to existing and planned support, it should be targeted, and it should be sufficient enough to reduce costs to an affordable level.
National Energy Action has argued that we need to aim a social tariff at people on low incomes, people with disabilities, carers, households with low energy efficiency, off-gas grid homes and households with prepayment meters. There are far too many complaints by energy companies that they cannot identify the people who need this support. These categories tackle that problem, because we already have the data: we know who is in receipt of universal credit, disability benefits and carer’s allowance; we know those on prepayment meters and the homes with poor energy ratings. These are people who face huge financial pressures and who are at the forefront of the cost of living crisis. These are the people who are most at risk of fuel poverty, and, crucially, we can find these people, so that those who need the support get it.
This Government have rightly established a child poverty taskforce to tackle the scar on our society of children growing up poor. A social tariff can be part of a wider approach to tackling this moral outrage by ensuring that the families who are most in need have to worry less about their energy bills. Children who grow up in households that struggle to pay their energy bills are more likely to struggle at school and more likely to end up struggling in life.
However, simply protecting people from a failing energy retail market is not sufficient. We should be developing a package of measures that prioritises shifting the most vulnerable on to the cleaner, cheaper and more secure energy that we are generating ourselves. There is always a risk that the case for such market interventions is made simply by talking about protecting people from the worst extremes of the market, but it is also important to say that such a measure increases economic security and is therefore good for economic growth. It puts money in people’s pockets. Money they are spending on excessive energy costs is money they are not spending in their local economies. With this relief, they can be part of the economic revival of the places in which they live. This is not a new idea; social tariffs are already working in many other countries. For example, Spain has a tariff that provides a 35% discount for vulnerable customers and a 50% discount for severely vulnerable customers.
I have spent a lot of my career working on how energy can be generated, supplied and consumed in a way that does not cost a packet or the planet. For far too long, energy companies have urged consumers to “engage” with the energy market. That, in my view, has always been based on a failure to understand that for most people, energy is a means to an end. It is not exciting, and it can be stressful, especially for those who are struggling. We should be in the business of reducing that stress, so that people can spend their time and energy doing things that are more interesting and fulfilling. The very least we can do for those who already struggle to do exactly that because of limited means is to protect them from the market. That is why a social tariff should be part of our plan for change and our national mission to transform this country for the better.
Question put and agreed to.
Ordered,
That Ms Polly Billington, Yuan Yang, Torcuil Crichton, Andrew Pakes, Pippa Heylings, Luke Murphy, Wera Hobhouse and Mike Reader present the Bill.
Ms Polly Billington accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 25 April, and to be printed (Bill 220).