Energy Update

The Government recognise that this is a deeply worrying time for households and businesses, as we see renewed highs in energy prices. These are of course largely a result of Vladimir Putin’s illegal and barbaric invasion of Ukraine, as we discussed at the G20 meeting of Energy Ministers on Friday. The surge in the global wholesale price of gas meant that Ofgem announced on 26 August that the default tariff cap level from 1 October will rise to £3,549 for a typical household paying by direct debit. This represents around a £1,600 per year increase on the current level, and around a £2,300 per year increase on last winter’s level. We see no reason to believe that gas prices will fall any time soon; prices will continue to be driven by geopolitical instability, with energy bills likely to remain high for some time to come.

The future outlook is uncertain, but we know that we need to support UK energy consumers to manage the impacts in both the short and longer term. That is why the Government have taken decisive action, including introducing a £37 billion package of support, which is targeted at those who are most in need of support. This includes a £11.7 billion energy bill support scheme, which is worth up to £400 for around 29 million households. In addition, targeted support includes more than 8 million households on means-tested benefits receiving a payment of £650. Over 8 million pensioner households that receive the winter fuel payment will also receive a £300 cost of living payment. Six million households that receive disability support will receive a £150 disability cost of living payment, and there is a £144 million discretionary fund for local authorities to distribute to those identified as being in need.

The Government are also focused on delivering a programme of work to tackle energy efficiency in order to target longer-term energy bill reductions. We are investing £6.6 billion in energy efficiency and heat decarbonisation over this Parliament. We will deliver upgrades to over half a million homes in the coming years through our social housing decarbonisation fund, home upgrade grant schemes and energy company obligation scheme, delivering additional average bill savings of £300.

We must continue to decarbonise, reducing our dependency on expensive, imported fossil fuels and bolstering our energy security through clean, home-grown energy. A net zero economy is not just critical to tackling climate change; it is also in our strategic interest as a means to reducing our reliance on global energy markets. That is why the Government’s British energy security strategy, published in April, set out a series of bold commitments, which put Great Britain at the leading edge of the global energy revolution.

The Government are delivering on this, for example, in our latest renewables auction, awarding contracts for difference to a record 93 new renewable energy projects, which will total almost 11 GW of new generating capacity for Great Britain—enough to generate sufficient electricity to power around 12 million homes. The UK is already a world leader in offshore wind, with the biggest installed capacity in Europe, generating 12.7 GW of electricity, enough to power around 10 million homes. We are continuing to increase this with another 6.8 GW in construction and a further 7 GW in preparation. We are increasing our nuclear ambition with the construction of Hinkley Point C and Government investment into Sizewell C, both of which could power 6 million homes. We are also launching Great British Nuclear, a body tasked with developing a resilient pipeline of new build nuclear projects. We have launched a major review into Britain’s electricity market design, to radically enhance energy security, and to help deliver our world-leading climate targets, while reducing exposure to international gas markets.

We have facilitated the uptake of new products and services such as time of use tariffs, which reward consumers financially for using energy when demand is low or when excess clean electricity is available—for example, on sunny or windy days and nights. The Government also recognise the impact that rising energy prices will have on businesses of all sizes. We are in regular contact with business groups and suppliers, to understand the challenges they face, and explore ways to protect consumers and businesses.

We are determined to secure a competitive future for our energy-intensive industries, which are, of course, most vulnerable to energy price rises. We have therefore extended the energy-intensive industries compensation scheme for three years, and are considering further measures to support businesses, including increasing the renewable obligation exemption to 100%.

However, this Government recognise that we need to go further still. These measures were brought forward when estimated annual energy costs were expected to rise to £2,800. It is now clear that we are looking at a challenge on a greater scale. The Government are working closely with Ofgem and other stakeholders to ensure that consumers and businesses are protected from the volatile energy prices this winter and beyond. I know that tackling this issue will be at the top of the incoming Prime Minister’s inbox, as we look to address both the short-term shocks and longer-terms needs of the UK energy system.

When it comes to energy security, this Government have an excellent record. When it comes to energy prices, we will once again be rising to the challenge of ensuring that British consumers and businesses are given the support that they need for this winter. I commend this statement to the House.

I thank the Minister for his statement and for the brief advance notice that we had.

I think that we can all agree that this is a statement of astonishing vagueness and complacency. I had, for example, anticipated that the Minister might have a bit more urgency on the consequences of Russia’s decision to cut off Nord Stream 1 today, and the effects that that will have on gas prices. I thought that he might have come to the House to tell us about that. We are closely tied to European markets. Does he accept that this announcement today puts an even greater sense of urgency on the need to protect the price of gas from outside the UK, both for businesses and for domestic customers, and what measures are the Government undertaking to make that happen?

For domestic customers, there is certainly an energy bill crisis in this country. We need urgent action now.

The Minister talked about funding for the last round of price cap increases, not the one we have now. I know that we have a new Government coming in, but we have heard nothing from the Minister or the Prime Minister about what the plans might be. In fact, all we have heard from the new Prime Minister is that there will be an announcement, but nothing about what the announcement might be. A clear and obvious announcement already exists, however: Labour’s fully funded plan to freeze energy bills this winter, paid for by a further windfall tax on the oil and gas giants making record profits on the back of the energy crisis.

The Minister has an opportunity today to put flesh on the bones of any announcement. He should tell us whether he thinks that the Government should freeze energy prices. Also, does he think that the Government should implement the further windfall tax on the oil and gas giants, and if not why not—and if not, does he want just to protect the profits of the oil and gas industry as a whole?

I thank the hon. Gentleman for his engagement, as ever. Let me try to deal with each of his points in turn.

First, on the Russian decision to cut off—or, as they put it, repair—Nord Stream 1, it is worth reminding ourselves that we are not dependent on gas from Russia, as the hon. Gentleman knows. Last year less than 4% of our gas came from Russia, and this year there have been no deliveries of gas from Russia since March—50% of our gas is domestic, and 30% is from Norway. He is right that this has an impact on prices, however, and that is being discussed at the moment and I would expect to hear more from the new Prime Minister and her team in the coming days, as he well knows.

The hon. Gentleman asked about any future windfall tax. Again, I do not want to speculate on what might happen, but I will say what happened when Labour last proposed a windfall tax. The measure that we introduced—the energy profits levy—is projected to raise twice what Labour’s proposal for a similar move would have raised at the time, and it has led to greater support for the most vulnerable customers. Labour’s proposals would have raised about £600, but the Government’s proposals raised twice that amount—about £1,200 for the most vulnerable households—and, as I said in the statement, there will be more to come on this.

The hon. Gentleman asked a very reasonable question about decoupling the electricity price from the gas price. Of course, this is one of the measures being looked at in REMA, as he rightly pointed out, and it will also be something of active interest for the Government. He asked about onshore wind, and he will know that the local partnerships scheme announced in the British energy security strategy in April has exactly mapped out how we see the changes in the onshore wind regime in England. There is no change as yet in Government policy on fracking, but that will obviously be a matter for the soon-to-be new Prime Minister.

The Minister said that the rise in price was a result of the attack on Ukraine. It is much more than that: it is a deliberate part of the attack on Ukraine. Is not the essential ingredient of any scheme that the Government bring forward that it encourages customers to reduce their consumption?

My right hon. Friend of course makes a very strong point about Russia’s deliberate weaponisation of energy in this conflict, which we wholly deplore and our international partners also very strongly deplore. On our energy use, my job is to make sure that we have the energy supply that this country needs, and I am confident in our energy supply and the energy security measures we already have in place.

I call the SNP spokesperson.

The only aspect of this rehashed statement to welcome is the acknowledgment from the Minister that the current proposals are insufficient to avoid a catastrophe. What we should be getting today is a proper updated statement on energy security and a net zero update that would reflect additional investment in renewables such as pumped storage hydro, Peterhead carbon capture and storage, what is happening with the Rough gas storage facility, the decoupling of renewables from gas, and grid upgrades.

The reality at the moment is that 6.5 million households are in fuel poverty, and if the energy cap increase goes ahead as planned, then 9 million households will be in fuel poverty. What is the Minister’s red line for the acceptable number of households that will be left in fuel poverty? What does he say to the businesses that have had no support to date? Does he agree with Make UK, which says that 60% of manufacturing businesses are now at risk? What assessment has he made of the impact on agriculture and the food and drink industry, and does he agree that the tax cuts proposed by the incoming Prime Minister will adversely help the rich and do nothing for the lowest-paid workers? The incoming Prime Minister has talked of scrapping the green levy. Has he explained to the incoming Prime Minister that there is no single green levy, and that doing so would not actually be a solution for reducing household bills?

On nuclear, will the Minister confirm that Hinkley Point C is now nearly 50% over budget and is years late, and that EDF now wants a delay to the payment start dates? For Sizewell C, will he confirm that the upper estimate for construction and finance is £63 billion? That is £63 billion to be added to bill payers’ bills, and it will not actually reduce energy bills in the future. In 2019, the Nuclear Decommissioning Authority’s estimate for the nuclear clean-up cost was £131 billion. When will we get an updated figure? Surely that in itself indicates that we need to end this nuclear folly and madness.

I commend the hon. Gentleman on his ability to squeeze in so many questions. On additional investment in renewables, the Government are moving to annual allocation rounds on our renewable options. That is a strong achievement. The Government have invested a huge amount in renewables, particularly through the contracts for difference system, which I would urge him to support. He will know that we made an announcement recently on where we are with Centrica and Rough gas storage, and that continues to proceed.

I remind the hon. Gentleman that fuel poverty is a devolved matter, so he may wish to have a word with the Scottish Government, which I have reason to believe he may be close to. He also mentioned businesses, and I remind him that the cost of energy for businesses is right at the top of the in-tray of our new Prime Minister. He mentioned the food and drink sector, and I am sure that is also the case for that sector. He asked about tax, and that will be a matter for the Treasury and for future announcements.

The hon. Gentleman mentioned nuclear budgets, and I am getting a bit fed up with the SNP’s obsessive anti-nuclear behaviour. It is exactly that kind of no-saying that got us into the problem of not having enough nuclear power in this country. Thankfully, earlier this year the Prime Minister rectified that with the British energy security strategy, making sure that we get to 24GW of nuclear power by 2050. As for the cost of Hinkley Point C, the hon. Gentleman will find that the strike price, which was negotiated by the then Chancellor of the Exchequer, George Osborne, and by me, as Chief Secretary to the Treasury, compares very favourably with energy prices today.

Finally, I think I heard a complaint from the hon. Gentleman about budget allocations to councils, which was extraordinary, coming from the SNP. It is the party that has been hammering council budgets in Scotland, and then expecting them to collect the rubbish with vastly decreased levels of budgetary contribution. I again urge him to have a word with his friends in Edinburgh who are running the Scottish Government, to see whether they might be able to do something to improve the budget allocations for Scottish councils.

I welcome the Minister’s statement and the support for individuals and businesses, but may I raise with him the issue of schools? Southend West is home to 30 excellent schools, and many heads have been in contact with me, concerned that they will not be able to pay the utility bills. One has even trailed in the local press the possibility of opening for only four days a week. Can he assure me that it is the Government’s priority to make sure that our children’s education does not suffer as a result of the energy crisis, as it did as a result of the coronavirus crisis?

I thank my hon. Friend for that contribution. Schools are certainly at the forefront of our thinking for the coming winter. She is right that we need to make sure that schools are properly supported, and there are lessons to be learned from the pandemic as to how that was done. I am sure that her words will be well heard by Ministers, HM Treasury and the Department for Education.

A year ago I asked the Government why they had closed the Rough gas storage facility off the Yorkshire coast, leaving the UK with just 1.7% of storage for annual demand. The Secretary of State for Business, Energy and Industrial Strategy, the right hon. Member for Spelthorne (Kwasi Kwarteng), told me that the question was irrelevant, and accused me of inducing panic and stoking alarm. Given the reports that the Government are to U-turn and reopen the facility, will the Minister now admit that the closure was a mistake?

The closure was a commercial decision, made by Centrica, not a decision made by the Government.

The Energy Minister has a well-deserved reputation for getting things done, and I thank him for the prompt responses he has given to inquiries that I have made to his office, especially in respect of businesses. I sense that he understands the challenges, such as for the small engineering business I visited last week whose energy bill is £13,000 a year currently, and which has had a range of quotes between £37,000 and £68,000 for the renewal of its contract. The staff tell me that means that in the coming year they may not be able to replace a machine or take on a couple of apprentices as they would like to do. He has told us about the details that will be coming on short-term support—I am sure businesses will welcome that when it arrives—but I wonder whether he would say a little more about the long-term proposals to decouple the electricity bills from the gas price.

I thank my hon. Friend for that question. He is truly a champion of businesses in his constituency and across the country; I know the important work he does on the Select Committee on Business, Energy and Industrial Strategy, for example. He is right, in that most of the energy of businesses in this country is dealt with through long-term contracts. That is an advantage in giving certainty, but when it is time for the long-term contract to be extended or renewed that can lead to a very concerning rise in the price of that contract. The Government are keenly aware of that and it is absolutely something that our new Prime Minister and the team overall will be looking at.

The Minister’s statement was nothing but full of hot air. In the midst of a cost of living crisis, the worst in living memory, many of my constituents are struggling to pay their energy bills, as are others across the country. The words of wisdom from the outgoing Prime Minister were for people to buy a kettle for £20 and save £10 a year. Does the Minister agree that the Government are out of touch with struggling families and that the suggestion of a new kettle is not only insulting, but derisory?

Look, that is not what the Prime Minister said; he did not say that the answer to the energy crisis was to buy a new kettle. He used the new kettle to provide an analogy as to how we have dealt with nuclear power in this country, further to the points I raised earlier, with the failure to have a long-term view as to how to save money on energy costs overall. The hon. Gentleman is wholly misrepresenting what the Prime Minister said—I suspect he is wilfully misrepresenting it—in his speech on Friday.

Pubs, grassroots sports clubs and an indoor play centre are examples from the local hospitality and leisure sector that have been in touch with me in the past few weeks to highlight the astronomical price rises they are expecting, putting their businesses in a perilous situation. These sectors are often an afterthought for Government support, yet their importance in our communities should not be underestimated. So will the Minister place on the record that this Government recognise the value of the hospitality, leisure and indoor play sectors, and that they will be given the support they need to survive the winter?