There is a journalistic ritual of placing the words, “the influential”, in front of the name of any parliamentary committee in order to add a bit of weight and significance to whatever subject it is reporting on. In fact, most parliamentary committees and their reports are pretty non-influential, even if they grab a few headlines.
For instance, I doubt if much ministerial heed will be paid to late-July’s effort by “the influential” House of Commons Business and Enterprise Select Committee report on energy pricing and fuel bills. In a sense, that is unfortunate since most people would agree that Government cannot be mere bystanders while bills go through the roof and fuel poverty heads in the same direction.
The problem with the report is that it went for the headline – “MPs seek windfall tax on energy profits”. And that is not a route that any sensible Government wants to go down, particularly one that is counting on the same companies to put massive investment into the renewal of infrastructure in order to ensure that we do not run short of energy supplies and that we meet our targets on carbon emissions.
The bill for both of these objectives, particularly when you include the cost of nuclear new-build, runs into many billions and a windfall tax is scarcely going to create the climate of trust which is required between Government and potential investors. So I doubt very much if we are going to see a windfall tax applied as a means of extracting money from the companies to subsidise fuel bills.
Equally, the idea favoured by the Scottish Nationalists that Scotland should have cheaper oil and gas because we are producers is bonkers. These are globally traded commodities and any government that tries to subsidise its own output for the benefit of domestic consumers soon finds itself in very deep water from which it is difficult to escape.
That is not, however, to suggest that Government can, or should, wash its hands of these issues. Politically and morally, that is impossible. The Labour Government has a very good record since 1997 on reducing fuel poverty and can hardly afford, in current circumstances, to see that achievement blown away by market forces. The particular problem with fuel poverty is that it is not an absolute, but defined as a proportion of income, so the statistics were always vulnerable to the kind of price surges we have seen in recent months.
I think it perfectly legitimate for Government to ask the industry, including both generators and utilities, to do more to meet this challenge. Every gas and electricity company has its own schemes, some of them very worthy. They have also agreed to put in an additional £225million over three years as a price worth paying to the Treasury, at the time of the last Budget, to head off more severe impositions, including, possibly, a windfall tax.
But the rate of price increases is now so sharp and repetitive that £75million a year does not begin to shake a stick at the problem. We need, in my view, to change the definition of fuel poverty, which was always pretty arbitrary, and then concentrate additional resources on the substantial minority who really do face an unsustainable burden.
There are some very basic steps that could be taken for starters, and I think that ending the indefensible penalisation of pre-payment meter users would be a good start.
I also think that Government should be engaging with the utilities in order to give a really massive boost to the micro-generation and energy-efficiency sectors. An extraordinary amount of lip service has been paid to these two policy areas and a lot of good work has been done on home insulation, and so on, particularly for pensioners. The results, indeed, are so good as to justify much bigger programmes that extend deep into the other categories of fuel-poor.
Very little, in contrast, has been done to support micro-generation, in spite of endless words of support from ministers in both Edinburgh and Whitehall. Commonsense suggests that if investment of a few thousands per home can cut a third off electricity demand from the grid, then this must surely be something that Government should support with enthusiasm, while the utilities can reasonably be expected to make a major commitment to it.
The ultimate aim should be for every home in the land to have access to at least one means of micro-generation, whether it is micro-wind, solar, ground-source heating, biomass or whatever. That would be a really exciting challenge at both local and national level, and acceptance of it, over a reasonable period, would show that both Government and industry are committed to a lot more than hand-wringing in order to counter a massive social problem that is only going to escalate.
The committee is also right to say that we should be hearing a lot more from Ofgem on these matters, and also on immensely complex issues such as the wholesale gas market and the impact on competition of vertical integration between generators and suppliers. No ordinary citizen, left to his or her own devices, can be expected to understand whether or not the price increases are justified, or if – as the report suggests – they are being exaggerated partly because of Ofgem’s inactivity on these fronts.
I doubt if many people reading this could identify any individual as safeguarder of the consumer interest on energy pricing – yet that, when stripped of the verbiage, is what the role of Ofgem is supposed to be.
This watchdog is meant to protect the consumer by ensuring genuine competition and stripping out unnecessary costs. It is high time that it was seen to be fulfilling that role more actively.
Rising energy costs are going to be the reality for a while to come. At present, there is a feeling that Government, in all its forms, is simply looking the other way and could, somehow, be doing more to prevent, or at least limit, that trend.
Ministers should act on that message. Even if parliamentary committees are not particularly influential, ultimately, the electorate is decisive.
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