HC Deb 30 July 1982 vol 28 cc1498-505

1 pm

Mr. A. W. Stallard (St. Pancras, North)

During the past year, the problems of pensioners' heating costs have been raised several times. Early-day motion 656 is the latest in a series of motions on the subject. In the short time that it has been before the House, it has attracted 50 signatures from right hon. and hon. Members on both sides. During the Supply day debate on 25 January, the Opposition urged the Government to bring forward proposals for immediate assistance with heating costs.. My own contribution, the Fuel Standing Charges (Exemption For Pensioners) Bill, which received the support of all national pensioners' organisations, is still blocked by the Government. In addition, motions on fuel disconnection and repayment policies as well as gas price increases have been on the Order Paper. However, we are still no neareer anything resembling a comprehensive fuel plicy to assist pensioners to deal with the high costs of heating.

All of us who support the urgent need for such a policy are anxious that something should be done before pensioners have to face the coming winter. We have quoted at length the cases of hypothermia that arise every year. We also know that the number of deaths generally rises in the winter. Although many deaths are brought on by the cold, the statistics mention them not as cases of hypotheria but as deaths from chest infections and heart disease. Thus, the problem of hypothermia is much more serious than we have been led to believe.

We also know, as the Electricity Consumer Council report showed last year, that on average pensioners spend less on heating their rooms in winter than families do in summer. Over 40 per cent. of pensioners cannot even heat their bedrooms. The problem is mostly caused by the high cost of heating. From April 1980 to the present, the rate of increase in gas prices was nearly double that of the rate of increase of pensions. That fact was confirmed in a reply to my hon. Friend the Member for Aberdeen, North (Mr. Robert Hughes). Sir Dennis Rooke, chairman of British Gas, said: I accept that gas prices have risen more rapidly than the rate of pension increases since April 1980. In the last six years, the increase in the fuel and light component of the price index, which includes all domestic fuels has far outstripped both the general price index and the increase in pensions. Many pensioners take great care over their fuel consumption and, in our opinion, make too many economies, sometimes with drastic results. Many keep their fuel consumption to a minimum and then they find that they have to pay much more in standing charges than for the fuel that they consume. Therefore, the price per unit or per therm for pensioners far exceeds that paid by the rest of us.

Hon. Members on both sides of the House have produced many examples of hardships caused by that predicament, so I shall not weary the House by giving the scores of examples that I have received since I introduced my Bill on 12 May. However, I shall quote the latest, which I received only yesterday.

A bill issued in June to one of my constituents shows that only eight units of electricity were used. This man tells me that in the winter, because of his strong objections to the standing charges and the resultant high price of the fuel that he consumes, he burns paraffin and uses candles. I imagine that now and again he has to switch on the light to see where the candles are. Those eight units of electricity consumed were shown on the bill as costing 43p. That was his total consumption but the standing charges and repayment charges amounted to £7.79—18 times the cost of the fuel consumed. Pensioners do not understand that; nor do the rest of us. It is ridiculous that that should be allowed to continue. I could quote many other examples, some of them worse and some of them not so bad. However, time limits me to this one.

We have been joined in our campaign in recent months by four gas consumers' councils, and I wish to make brief quotations from each of their annual reports.

The Scottish Gas Consumers' Council says in its annual report: In March 1981 the quarterly standing charge was £6. It is now £9. We feel strongly that the standing charge should not be increased further. Scotland in particular was hit by Arctic conditions in January which sent gas bills rocketing for all our consumers and caused special hardship to pensioners, who could hardly have foreseen unexpectedly large bills dropping through their letterboxes in the spring. At the other end of the scale we have customers who have tried very hard to economise in their use of gas and are dismayed to find when the bill comes that the standing charge is more than the charge for gas. The North-Eastern Gas Consumers' Council said: The Council was extremely critical of the increase called for in quarterly standing charges which, when the April and October increases are implemented, will mean that since 1976 these quarterly charges will have risen from £1 to £9Ċ20 per quarter. A break-down of the costs was provided by British Gas but Council were not satisfied with it. They rejected totally the proposed rises and requested the National Gas Consumers' Council to challenge them. The North-West Gas Consumers' Council said: The Council is particularly concerned at the rate of increase of the quarterly standing charge. At the time of the announcement of the Government's current pricing policy, the charge was £1Ċ62. By October 1982, it will be £9Ċ20, a massive increase. Whilst the Council recognises the argument for each consumer bearing a reasonable share of the cost he incurs, it is alarmed at this rate of increase. It is particularly hard on the lower paid members of society to have to meet increases of this size in charges over which it is not possible for the individual consumer to exercise economy. The South-Eastern Gas Consumers' Council called for a review of the "philosophy and general policy" in the matter of standing charges.

So these powerful bodies support the argument for a review and a serious look at fuel costs.

It is only fair to say that the Government have one supporter. The North Thames Gas Board said: During the year considerable concern has been expressed over the frequently increasing standing charge—£8Ċ00 per quarter from 1st October 1981. Many organisations and individual consumers have expressed a desire to see the charge withdrawn, particularly for certain groups of customers. Whilst we sympathise with those less able to pay we believe this remains a problem for the social services and not British Gas. It goes on to imply that the standing charge will have to be increased still further if the board is to meet its commitments.

We await with interest the deliberations that we have been awaiting for many months of the Department of Energy and the Department of Health and Social Security which are looking into this problem.

I expect that the Minister will say, first, that people can economise by using slot meters. This has been said before. But I remind the hon. Gentleman that there is now a standing charge on slot meters as well. One or two of the consumers' councils said that they were equally perturbed that these standing charges for slot meters would have risen, by October, by 83 per cent. since 1981. They were introduced only a little more than 12 months ago and already they have increased from £1Ċ80 to £3Ċ30. That needs a bit of explaining to ordinary folk who are suddenly getting these big bills.

It may be that the Minister will say that these people can be or are being helped through the social security system single payment benefits. Despite the great claim that the Government made in January about this provision, it was summed up by Age Concern when it said: It is nothing new for far too few. As I understand it, although the guidance was given to local DHSS offices and it was said that £255 million was to be spent on this scheme, only £65 million of it was new money, and of that only £21 million went to the over-70s. It did not apply to those pensioners under 70 who were on rent and rate rebates, so it was of very limited application and of very limited help, if it helped any at all. Age Concern was absolutely right when it said that it was nothing new for far too few". It is known that many other people will probably lose entitlement even to that small claim when the switch to the unified housing benefit becomes operative. The new scheme should be extended immediately to all recipients of rebates and housing benefit.

Members of Parliament, as well as Age Concern, have urged the Government to devise in consultation with interested organisations, a comprehensive fuel strategy, which will take account of the needs of the elderly and other low income consumers, and look at pricing, efficiency, insulation and regional problems.

Two weeks ago the Minister, in reply to a letter from Age Concern, made it clear that the Government had no intention of devising a new policy. I gather from the tone of his reply that it is obvious that the Government's fuel policy is being determined by short-term Treasury dogma rather than by any other considerations. For example, on the issue of assistance with heating costs, the Minister said: Much as we would like to extend it, I am afraid that in present economic circumstances the resources are simply not available to finance the kind of schemes which you appear to have in mind". He did not, of course, mention the colossal profits recently made by the various corporations, nor did he mention the effects of the Gas Levy Bill introduced recently by his Government, and the attempts being made by the telephone authorities to assist some consumers. He could have mentioned all of them in a far more constructive way, but he did not.

I also had the impression from his reply that the Minister appears to be satisfied with current attempts to improve energy efficiency in buildings through insulation measures. Many of us are far from satisfied. In its letter to the Minister, Age Concern asked for improvements in the standard and extent of domestic insulation and energy conservation. Its case was supported by the recent report of the Select Committee on Energy, dealing with energy conservation in buildings, which recommended a programme to insulate fully the houses of those in receipt of fuel allowances, currently costing the nation £240 million per year". The Select Committee laid the blame fairly and squarely at the Minister's door. It complained of the lack of political will at the heart of Government which smothers the efforts of the Department of Energy's conservation division—a very serious charge, and one which should be answered.

All that I have said so far surely shows that there is an urgent need for a comprehensive fuel policy, not based on short-sighted Treasury policy. The all-party group for pensioners knows well that it is only through Government initiative that there can be any hope for pensioners. It is clear to us from a recent meeting with British Gas that the corporation's hands will remain tied until the Government take a new look at the problem.

In addition to the major reforms in pricing, social assistance and insulation that we want to see, we believe that the Government should stimulate simple measures in the interim to assist pensioners. I believe that the National Federation of Old Age Pensioners' Associations has recently suggested that in some areas the Economy 7 tariff, which operates within the time band 1 am to 9 am, could be better used to the advantage of pensioners and others. The federation has suggested that adjustments could be made to that time band that would make a tremendous difference to some people. I suggest that such constructive proposals and suggestions should be treated seriously. I hope that the Minister, together with the electricity boards, the pensioners' organisations and the charities, will examine the matter, and find an arrangement that will better suit the needs of pensioners and others in similar circumstances.

Pensioners do not want to hear from the Minister pious words, expressions of sympathy or promises of help at some future unspecified date when and if the economic position changes, because too many by then will have died from cold. Pensioners want action now. Now is the time, during the summer. If we cannot solve the problem in summer when the weather is reasonable, there is hardly any point in solving it when the problem is at its worst. We need action now to reduce the tremendously high heating bills, to remove the fears and the worries of the people affected, and to relieve them from the savage winters and years and years of fuel poverty.

Before the House adjourns for the Summer Recess, the Minister must tell us what he proposes to do before the next winter is upon us.

1.16 pm
The Under-Secretary of State for Energy (Mr. David Mellor)

In responding to the hon. Member for St. Pancras, North (Mr. Stallard), may I first acknowledge the genuine and consistent interest that he has taken in this subject? I welcome his interest and that of other hon. Members on both sides of the House in recent months. The impact of fuel bills on poor consumers is a serious issue. It is one to which I have been paying considerable attention since I came to the Department of Energy last year and, before that, in representing a London constituency, as does the hon. Gentleman. I faced problems at my advice centres which were not much different from those which confront him It is a subject which, I can assure the hon. Gentleman, my colleagues at the Department of Energy, and certainly my colleagues at the Department of Health and Social Security, have in mind.

We took a genuine interest in trying to deal with the problems of disconnections earlier this year, with satisfactory results, which were achieved only by paying attention to the industries, to the consumer councils and to the various groups which represent some of the consumers who were worst affected, and we were able to go forward on that basis. I hope that the hon. Gentleman was not suggesting that there was anything of a sham in the present investigation or that any of the groups which have supplied him with information do not have the opportunity to put their case to us in the knowledge that the points they make will be seriously considered.

I can assure the hon. Gentleman that he will not hear any pious words from me today. I hope to paint in some of the difficulties that lie in the way of making some of the changes that he suggests. Those difficulties existed while the Labour Government were in office. Since he was able to curb his frustration about the presence of the standing charge at that time, he should realise that, when the review went forward in 1976, problems stood in the way. Although I can deliver today only an interim report on what has happened, I must tell the House that problems of some magnitude face the Government. The magnitude of those problems should be recognised by Opposition Members.

I should like to make a few general comments on energy prices. We have had two substantial debates on domestic fuel prices this year and I shall not attempt to recover all the points made in them. It is important in a discussion of this problem to have a clear perspective. When the Government came to ofice, we deliberately set out to re-establish realism in energy pricing. We made it clear that prices needed to be sensibly related to costs and the market. Artificial price restraint, related not to the industry's efficiency but simply to subsidy and cross-subsidy, paid for by the taxpayer, could not continue.

These increases affected all parts of the community and have now virtually fed through. In the case of gas, this year' increase is the last of the three-year programme. It will leave gas cheaper in real terms than it was in 1970.

One particularly relevant statistic is that, over the last 14 years, the proportion of a married couple's old age pension needed for enough gas for a cooker and a gas fire has more than halved. If one goes back further, the price of gas has on average risen at about one third less than the rate of inflation over the last 20 years.

It is also important to recognise that this has made possible the holding of industrial gas price rises to around 3 per cent. for both 1981 and 1982, a move that has been widely appreciated throughout industry at an especially difficult time. We could not perpetuate the situation that we found when we took office, when gas to industry was 25 per cent. more costly than gas to the home, even though supplying gas to industry was cheaper.

The last two annual increases in electricity charges have both been held below the rate of inflation, and in addition a rebate averaging about was given on bills in the first quarter of this year.

The price of domestic coal has also increased by less than the rate of inflation for each of the last two years. In comparison, the Government have kept their pledge to maintain the real value of the pension against general inflation.

I should now like to look in more detail at the problems faced by pensioners and other poor consumers. As the hon. Gentleman said, hon. Members have voiced considerable concern about the difficulties faced by pensioner; in particular in paying their fuel bills. I entirely understand, respect and share that concern.

A number of suggestions have also been made, not only today, about possible ways of assisting pensioners with their fuel bills. The hon. Gentleman reminded us of his proposal for the simple abolition of standing charges for pensioners, a subsidy aimed at cutting their overall bills by a given proportion and alternative tariff structures with higher unit charges and no standing charge.

I am not in a position today to give a definite answer to any of the proposals. One of the major purposes of the review that I and my hon. Friend the Under-Secretary of State for Health and Social Security have been conducting has been an investigation in depth of the possibilities of such proposals. However, a number of very difficult questions must be answered—they cannot simply be dismissed as pious words—before schemes such as these could be endorsed as sensible alternatives or additions to the current structure of tariffs and financial assistance.

The most crucial question is probably "Does it provide worthwhile help to those most in need in the most cost-effective manner?" Let me illustrate the problem by referring to the hon. Gentleman's own suggestion of abolishing the standing charge for pensioner households. At first sight, the idea may appear simple and attractive to eliminate an aspect of bills that we all know causes widespread misunderstandings and annoyance.

In the first place, the Government do not fix standing charges. That is entirely a matter for the industry, and it is for it alone to decide the level of standing charges. Secondly, such charges are not an arbitrary tax designed to raise unnecessary revenue from captive consumers. They are intended by the industries to reflect the real costs incurred in keeping supplies constantly available to consumers. It can be argued that these costs are different from the cost of generating or supplying the gas or electricity used by the consumer, which falls under the unit charge. Certain costs, it is said, exist regardless of the amount of energy consumed and are involved in installing and maintaining the system of supply.

In the light of what the hon. Gentleman said about the consumer councils, I should make it clear that the principle of the distinction between the standing charge and the unit charge has been fully endorsed, not only by independent studies such as those carried out by the Price Commission established by the Labour Government in 1979, but also by the national electricity and gas consumer councils. In my meetings with the councils during the review, I have been told that they believe there is validity in the distinction in principle between the standing charge and the unit charge.

The hon. Gentleman mentioned the observation of one regional consumer council about the increase in gas standing charges. Before 1979 there was a three-tier tariff with an additional charge for the first 52 therms of gas supplied, which bit especially heavily on poor consumers who were also small consumers. They paid a disproportionately high amount for their gas. That tariff was abolished. Had the two-tier tariff that we have been in force in 1979, the standing charge would in reality have been not the figure that the hon. Gentleman quoted of just over £1 a quarter but over £6 a quarter.

There are two distinct issues. It is one thing to decide whether the distinction between standing charges and the unit charge is in principle a proper one on which to base the tariff system. It is quite another thing to be sure that the actual costs imposed in the standing charge reflect the optimum efficiency of operation of the industry imposing the charge and thus can be considered as being fairer for consumers. That is distinct from the question whether there should be a distinction drawn in principle between a standing charge and a unit charge.

We are dealing with large sums in considering the various proposals for relief that have been put forward. As the money would have to come from the pockets of taxpayers, many of whom are not well enough off to take increases in their taxation at this moment, I must stress that to abolish the pensioner household standing charge would cost about £300 million in revenue. The taxpayer cannot be expected to make that up. The cost would not go away immediately, and perhaps it would never go away. The only way in which the industry could make up the shortfall would be by increasing the unit charge, which would pose difficulties.

I have shown sympathy to pensioners who have come to my advice centre to show me a bill on which the standing charge is larger than the charge for the number of units consumed. Our research shows that in only 13 per cent. of poor pensioner households is the standing charge higher than the units charged. A number of poor consumers, through no fault of their own, are also large consumers. To move from the standing charge to the unit charge would merely transfer the difficulties of one poorer-off section of the community to another section. That is why some of the groups that represent poorly-off sectors in the community have not shown great enthusiasm for abolishing the standing charge as an end in itself. They recognise that for some large consumers such a move would pose problems.

These difficulties are not new. I do not want to be partisan but I do not want the hon. Gentleman to make his criticism of the Government more bitter by making a few partisan observations about whether this Government, above and beyond any previous Government, are concerned to alleviate the problem if they were able to do so. The previous Labour Government carried out their own thorough study of alternative tariff regimes, which was designed to help all consumers, and published the results in a document on energy tariff reform in 1976. They met great difficulties, as we have, in finding a way of using tariff adjustments as a mechanism for helping poor consumers that did not carry severe penalties for others in great need.

General tariff adjustments, concessionary tariffs and free fuel allowances were all examined in depth by the previous Labour Government. It was none other than the right hon. Member for Bristol, South-East (Mr. Benn) who summed up the Government's conclusions on introducing the study document by saying: The Government had concluded that none of these possibilites offer a satisfactory way of helping poor consumers with their fuel bills. Although we have not yet drawn conclusions from our study, I must point out that if standing charges for domestic consumers were simply abolished and we were to recover all the revenue through the unit rate, small bills could be reduced by up to a maximum of about 65p a week. But the effect on those consumers who already face large bills could be extremely serious. Those who, through no fault of their own, are heavily reliant on electricity could face bills increased by about £2 per week.

I am sure that I need not remind the hon. Gentleman that our direct assistance to poor consumers is the highest ever. More than £250 million is to be paid out in heating additions this year and about 1½ million pensioners will benefit by between £1Ċ65 and £4 a week. In the year from November the total will increase to more than £300 million. That increase protects its value against a rise in fuel prices. It shows that the Government are not complacent about the plight of poor consumers. Our assistance is not the token relief that was offered by the previous Government in their electricity discount scheme. It is a considerable addition to helping the poor to pay their fuel bills, which we recognise are an imposition.

As the hon. Gentleman will appreciate, this must be an interim report on standing charges. We shall undoubtedly return to the matter in the autumn and, although I could not accept all of the hon. Gentleman's points today, he raised some interesting matters that I shall examine and bear in mind in bringing the review to a conclusion.