Gas and Electricity Costs

[Sir Edward Leigh in the Chair]

I beg to move,

That this House has considered the cost of gas and electricity.

It is a pleasure to serve under your chairmanship, Sir Edward. Obviously, the debate is very dear to my heart, because I represent the part of the United Kingdom that every year seems to have the lowest temperature recorded in any community: the village of Altnaharra in Sutherland.

Much of what I am about say is blindingly obvious, but I want to roll out a few statistics. It is a fact that household electricity and gas bills are predicted to rise in April by around 45%. That would see the price cap reach £2,000 a year, or £165 a month. I would suggest that without Government intervention, this rise could take the total number of households in fuel poverty to no less than 6 million. The high level of global gas prices affects the whole economy; it does not impact only on energy retailers, suppliers and household customers. It could mean between a 1% and 2% inflationary increase across the whole UK economy, which would result in more than £10 billion a year in additional Government costs from indexing debt to pensions, salaries and other payments.

Some 33% of households in rural Scotland are in extreme poverty, with a further 9% in ordinary fuel poverty. That makes a total of 42%. The figure is even more acute in the far north and my constituency, where, as I have already said, temperatures are regularly the coldest in the United Kingdom.

I congratulate the hon. Gentleman on securing the debate. He is absolutely right about Altnaharra, and the fuel poverty that is shared by his constituency and mine. The UK Government talk about levelling up, but one of the best things that could be done in that regard would be to tackle the differences and inequities between distribution costs of the electricity network, as well as the transmission costs to generate. I note that our part of the world is a net generator and contributor of electricity, particularly to the grid.

My highland colleague makes a sage and wise point. [Interruption.]—with all due reference to my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael).

The figure that I have outlined compares with 24% of households living in poverty in the rest of Scotland, which is still a high figure. I believe that fuel poverty is a clear priority issue for remote rural constituencies but, overall, I would suggest that is an unacceptable blight across society.

My hon. Friend has talked eloquently about the hardship of fuel poverty experienced in rural Scotland, and particularly in the highlands. I want to talk about disabled people, who are also disproportionately suffering as a result of the energy crisis. They have higher energy costs because of the equipment that they often need for assisted living. Just living from day to day is simply more expensive for them, so does my hon. Friend agree that the Government should be putting in place additional support—similar to the warm home discount—for families of disabled children and for disabled people of working age?

My hon. Friend must be clairvoyant, because she has anticipated a point that I shall make in due course. I thank her for her intervention.

There are two major contributory factors to fuel poverty in Caithness, Sutherland and Easter Ross: the absence of mains gas supply to many properties, and the comparative price of electricity, which costs four to five times more than mains gas and domestic oil per unit. Both of these power sources are often used to heat things that we rely on—for instance, water. Rural and remote households are more exposed to rising household costs due to paying an extra premium.

I suggest that energy policy in the UK is fundamentally broken. Consider this: the highlands and islands, to which the hon. Member for Na h-Eileanan an Iar (Angus Brendan MacNeil) referred, produce more than 300% of their electricity demand from renewable sources—we produce three times more than we use. We export the rest to other parts of the UK, but as the hon. Member pointed out, a highland or island household pays more per unit of electricity due to the transmission charging regime, which pushes up energy bills even further. This is fundamentally wrong. Root and branch reform is required to design a UK energy policy that is fit for the 21st century, and that, most importantly, puts consumers at its heart.

Turning to business, energy price hikes are having a serious impact on the viability of businesses in the far north and, indeed, across the UK. I will quote two examples. Sitting at the back of the Public Gallery, I witness today Mr Andrew Mackay, my constituent. He and his brother own three hotels in Caithness known as the Caithness Collection—excellent hotels. They are facing an annual increase in electricity costs from almost £77,000 to—can Members believe?—nearly £130,000, which is a 70% rise.

Also in Caithness, we have a local engineering company, JGC Engineering, which is owned by the Campbell family and makes excellent pieces of stainless steel for the nuclear and other industries. The company’s annual electricity bill runs into six figures. The owners have been forced—they had no choice; it was the best deal they could get—to sign a deal that, believe it or not, means an 80% increase in costs starting in March 2022. To enable sustainable economic growth and—to borrow an expression from Her Majesty’s Government—to level up the United Kingdom, it is imperative that measures are put in place to protect consumers and businesses from crippling energy costs.

Is there an estimated cost for these modular reactors? How much will it cost overall? Is there a policy for how nuclear waste will be dealt with?

A conversation with Rolls-Royce would be rewarding for the hon. Member. It is working up the proposals, but has some interesting thinking; I think we would be unwise not to take a good look at it.

Solutions do not stop there. Governments could soften the impact on consumers in the short term by providing loans up front to energy suppliers to cover the costs incurred from the significant rise in global wholesale prices for gas. I suggest constructively to the Minister that the Government could remove VAT from energy bills, or double and extend the warm home discount, taking £300 a year off the heating bills of around 7.5 million vulnerable households.

Her Majesty’s Government could introduce a new social tariff for those in fuel poverty—perhaps double the winter fuel allowance, giving up to £600 a year to 11.3 million elderly pensioners who currently face a £208 real-terms cut to their state pension next year, due to the Government’s decision to scrap the triple lock.

The Government could also implement a one-off windfall tax on oil and gas companies’ super-profits—the extra profits. This would not impact companies’ usual profits and thereby keep jobs secure, and would target the unprecedented extra profits that they have made in the last six months.

Does my hon. Friend agree there is also a role for the energy companies in all this? I suspect that he will have as many constituents as I do who, over the years, in order to compensate for the lack of access to mains gas, have taken other options, including storage heating and going on to tariffs such as “total heating total control”, which is now being used by SSE to keep their customers prisoner because it is impossible for them to switch. Does he join me in calling on companies such as SSE to treat their customers, who have been loyal for generations across the highlands and islands, rather better than that?

I have no hesitation in joining my right hon. Friend in making that plea. His points are well made.

I hope that in getting this debate under way today, we start a dialogue with energy companies, Her Majesty’s Government and all concerned parties—not least those people who stand to be faced with crippling debts. I think of a young mother I know, who lives in the village of Balintore in my constituency. She tells me that she has to budget absolutely to balance the books; it is just a few pounds between surviving and going into the red. She says to me that if the electricity bill or the cost of diesel for her car goes up, she is in trouble. To square the books, she would then have to cut down on her expenditure. In turn, that hits the local shops, the local chemist and so on, in the seaboard villages of my constituency. I hope there will be a dialogue.

There have been, in what I have said, a lot of “coulds”, “shoulds” and “woulds”. What we really need from the Government is real, urgent action. I would suggest that they have failed millions of hard-working families and thousands of pensioners, at a time when energy bills are going through the roof. At this stage, the nation is plummeting further into a fuel poverty crisis. As far as I can see, there seem to be no plans to tackle it, but I await the Minister’s comments with great interest and expectation. At the end of the day, old people, single parents and people on very limited incomes are wondering how the heck they will get through the next period, because we all dread getting into debt.

Members from across the House have put forward suggestions to the Government on how to stop this disaster in its tracks. I respectfully suggest to Her Majesty’s Government that we stop the dither and delay, get talking, and do something about it.

I thank the hon. Gentleman for securing this debate. It is a fact that all economies are facing an energy price rise, for international reasons. The hon. Member has not mentioned gas at all. No matter anyone’s views on gas, it will be part of our energy mix for a generation. I wonder if he might agree that we have been uniquely silly in diminishing our storage capacity, with the closure of the Rough field. Mother nature has given us a gift in this country: a lot of gas. No matter anyone’s view on the path to net zero, a super report by the House of Commons Library charts the reduction in our gas use over the years, and shows that we have reduced our gas capacity and production even faster, leading to imports. Does the hon. Member agree that it might be sensible to increase our domestic supply while gas is such an important part of our energy mix? That might give a longer-term solution to price volatility.

I will conclude in just a moment or two. I thank the hon. Member for his intervention. The bottom line is that if we care about the people I have mentioned, who are petrified of getting into fuel poverty, then we must look at all possible solutions. There will be a mix to the answer. I would not rule out anything that the hon. Member said. We will take a look at it.

Of course, if we get hydrogen production right, that also makes enormous sense, because it is absolutely neutral for the environment. Hydrogen is a gas, and we should be thinking about that as a possibility. I conclude my remarks there, Sir Edward. Thank you for your forbearance.

The cost of gas and electricity has been a real challenge for my constituents. Although the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) makes a good point about the rural communities in Scotland, it is not just in Scotland that this is a challenge.

Down in the south-west, we have one of the lowest-wage economies, a very high cost of living, and a disproportionate number of over-65s with complex comorbidities. Our economy depends heavily on hospitality and tourism, and that has been decimated. The hope for recovery over the Christmas period went with plan B.

The hon. Lady is making a very good speech and she is absolutely right—it is not just the north of Scotland that is affected, although I, like the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone), would argue that that is where things are most acute.

House of Commons Library figures for all the neighbouring countries in north-west Europe show that 11.7% of people in the UK are living in relative poverty by the OECD’s definition, and of the 13 countries that were looked at, the Gini coefficient of inequality is highest in the UK. That puts this problem firmly in the Government’s ballpark; they really have to get to grips with it.

The hon. Gentleman makes a very fair point—this is a real problem. The hon. Member for Caithness, Sutherland and Easter Ross made the clear point that the answer and solution has to be found now.

I look at my constituents—indeed, I was on a telephone call just this morning—and I see that the food banks are doing great business. Increasingly, I am hearing that the people who are using them are not the usual attendees. We are in a state of crisis, which needs to be addressed right now. I have constituents—mostly pensioners—who are ringing my constituency office, and are very concerned. They are worried because of the cost of living and because of everything they hear about the energy costs that they will be facing.

For me, it is that uncertainty that is most challenging, because although the Government, to their credit, recognise the problem, the real issue is that to deal with that fear, we need an answer, a commitment and a solution. Looking at what we might or might not do in April is not soon enough. I am sure that even you, Sir Edward, will have looked at the barometer as you got up this morning. It is now that we are seeing minus temperatures. It is now that people need their heating at night. It is now that they need hot food.

Clearly, it is not the Government’s fault that there has been a global challenge in terms of energy prices. Indeed, they have risen to the challenge and recognised that security of domestic supply has to move further up the agenda. I welcome their investment—or promised investment—in more nuclear. But the real challenge is that despite all those good words and despite the concept of a price cap, which was effectively intended to protect consumers from very challenging prices, consumers are not being protected.

No scheme is perfect, but what happened here is that when it became clear that the prices meant that some of the smaller suppliers would go out of business, those customers were picked up by the bigger players but were inevitably put on the highest tariffs available. Those individuals, having done the right thing by seeking out good policies and good schemes, suddenly found themselves in the worst possible position. Then we hear—understandably, on one level—that the cap will not hold and that we expect that there will be an announcement on 7 February that it will increase substantially, as the hon. Member for Caithness, Sutherland and Easter Ross has already indicated—it will be an extra £700 per household, taking the average bill to £2,000. Suddenly energy costs will be going up 50% overnight.

Will Members now keep to about five minutes, so that everybody can speak?