Standing Charges (Hansard, 15 November 1982)

§ 1. Sir David Price
asked the Secretary of State for Energy if he will enter into discussions with the chairmen of British Gas and Electricity Council with the object of persuading them to reduce standing charges to domestic consumers and to obtain more of their income from units actually consumed.

§ 2. Mr. Teddy Taylor
asked the Secretary of State for Energy when he expects to present new proposals on standing charges made by the gas and electricity industries; and if he will make a statement.

§ 8. Mr. Winnick
asked the Secretary of State for Energy what is the latest position regarding the review of fuel standing charges.

§ 14. Sir William van Straubenzee
asked the Secretary of State for Energy what inquiries he is currently making into the level of standing charges for gas and electricity.

§ 16. Mr. Greenway
asked the Secretary of State for Energy if he will make a statement on his proposals for standing charges.

§ The Secretary of State for Energy (Mr. Nigel Lawson)
I have asked the industries to consider limiting standing charges to a maximum of 50 per cent. of any total bill. In addition, independent consultants are examining the level and composition of standing charges and are due to report by Christmas.

§ Sir David Price
Is my right hon. Friend aware that that is encouraging news? Does he appreciate that the present level of standing charges is regarded by many small consumers as excessive, and that this is especially true of old-age pensioners? Does he agree that in the interests of distributive justice the balance between the standing charge and charges should be readjusted?

§ Mr. Lawson
I recognise the argument that my hon. Friend is advancing, but I think that readjustment should not occur until the studies to which I have referred have been completed and evaluated. The 50–50 proposal. which I very much hope the industries will accept, would help about 1 million gas consumers and up to 750,000 electricity consumers, about half a million of whom would be pensioners.

Several Hon. Members
rose—

§ Mr. Speaker
Order. I propose to call the four hon. Members whose questions are being answered and then to call other hon. Members.

§ Mr. Taylor
Is my right hon. Friend aware that his 50–50 proposal will be widely welcomed, especially by pensioners who feel cheated by the present arrangements? Does his reference to "independent consultants" mean that his mind is still open to the possibility at some stage of recommending the abolition of standing charges?

§ Mr. Lawson
I am grateful to my hon. Friend for his support. I think that he is right to talk about the response to the proposal. The many letters that my Department has received on this issue have been 4 to 1 in favour of the proposal. I think that standing charges are right in principle. There are certain costs that are independent of the amount of fuel that has been consumed. That was the view of the Labour Government, who published a booklet entitled "Energy Tariffs and the Poor" with a foreword by 3 the right hon. Member for Bristol, South-East (Mr. Benn). The document starkly reaffirmed the principle of standing charges. However, we must satisfy ourselves, first, that the components are right and, secondly, that the industries are not better at passing on these charges than cutting them.

§ Mr. Winnick
Is the Minister aware that many pensioners are angry at being charged about seven or eight times in standing charges what they are being charged for the consumption of fuel, and that they will note that this has produced at least some results? Does he accept that in winter months, when pensioners and others find it so difficult to pay their fuel bills, they will still be faced with the problem of standing charges unless some arrangements can be make to relieve those on the most limited incomes of these charges?

§ Mr. Lawson
The hon. Gentleman will be aware of the help that is being given to the needy to meet fuel costs— help that is being given on a substantial and unprecedented scale. In general I am grateful to the hon. Gentleman for his support for my proposal.

§ Sir William van Straubenzee
Is my right hon. Friend aware that since tabling my question I have received a gas bill which shows, apparently, that I have consumed no gas? The only thing for which I have to pay is the standing charge. Therefore, I feel perhaps more strongly about this issue than I did hitherto. Does my right hon. Friend understand that there is much support for the study that he has announced?

§ Mr. Lawson
I am grateful to my hon. Friend, whom I have always considered in every context to be a most deserving case.

§ Mr. Greenway
May I welcome warmly the tremendous step forward that my right hon. Friend's answer represents? What is the estimated cost of it and is there any chance of moving to the complete elimation of standing charges for old-age pensioners in the long term? Even if the 50 per cent. proposal is accepted, many of them will still face hardship and difficulty.

§ Mr. Lawson
To do that which my hon. Friend has suggested would mean a substantial increase in the cost of electricity for families. This would be hard on large families whose incomes are not very high. I should not be agreeable to taking that course. The cost is likely to be about a quarter of 1 per cent. of total revenue for the gas industry and as little as one-twentieth of 1 per cent. of total revenue for the electricity industry.

§ Mr. Rowlands
Will the Secretary of State clarify the status of the announcement? Is it a proposal by the right hon. Gentleman that has been accepted by the two industries? When will it come into force? When will people feel the effect of the decision?

§ Mr. Lawson
There are two proposals, both of which I announced early last month during the Conservative Party conference at Brighton. I issued a press statement. The House was not sitting, so I could not make the announcement to the House. The independent inquiries have been agreed by the industries and are taking place now. I expect to hear the results at Christmas. The 50-50 proposal is a request that I have made to the industries. They are considering that request. I am sure that they will be assisted by the support that the request has had from both sides of the House.

§ Mr. Penhaligon
Will the Secretary of State confirm that his 50-50 proposal will mean that in parts of the country such as mine, where people who can afford to do so own second homes, such people will make no contribution to the costs of the gas and electricity boards throughout nine months of the year? Is he aware that many people in my area would regard it as an appalling scandal that the people to receive most help are those who can afford to own second homes there?

§ Mr. Lawson
Any such proposal would affect a number of different people in different circumstances. Any proposal that is geared to need has to come from the Department of Health and Social Security. That is not a matter for my Department. However, it is clear from the response that the proposal will affect many needy people who feel a grievance at the way in which the present system of standing charges operates.

§ Mr. Warren
I welcome my right hon. Friend's initiative, but may I counsel him to be careful about the 50-50 proposal? It implies that people can reduce the amount of electricity and gas that they use to reach the 50-50 level and might therefore in the coming months risk hypothermia? Will my right hon. Friend respond to my proposal that if the standing charges were abolished income from them could be replaced by a 10 per cent. increase in the unit charge? That would eliminate standing charges, which weigh so heavily on the poorer members of the community?

§ Mr. Lawson
The abolition of standing charges would require an increase of about 15 per cent., not 10 per cent., in unit electricity and gas costs. That would be a considerable burden for large, poor families. Therefore, that is not the route that we should take. In addition, there is no economic foundation for it. However, I have listened to my hon. Friend with careful attention.

§ Mr. Stoddart
Is the Secretary of State aware that we are pleased at his touching concern for gas and electricity consumers? However, will he go further and confirm that next year he will not impose a 10 per cent. gas levy?

§ Mr. Lawson
I have already said that there will be no further massive increases in gas prices. The hon. Gentleman is aware that the increases of 10 per cent. in real terms over a three-year programme were announced by my predecessor, my right hon. Friend the Member for Guildford (Mr. Howell), at the beginning of 1980. That applied for 1980, 1981 and 1982. It does not apply for subsequent years. I am sure that the hon. Gentleman will welcome the recent announcement that the general level of electricity prices for next year will remain at this year's level.

§ Mrs. Knight
Is my right hon. Friend aware that there is a misunderstanding about standing charges? Does he agree that to provide a service inside an individual home at the touch of a switch, tap or button does not come free? For instance, for water it would be much cheaper to have a standing pipe in the street than a tap in the kitchen. How much of the amount charged to consumers goes in to providing those services in individual homes?

§ Mr. Lawson
I cannot answer that without notice. The cost varies from area to area, and between the gas industry and electricity industry. If my hon. Friend were to table a detailed question, I should be happy to answer it to the best of my ability.

Mr. Ronald W. Brown
Will the Secretary of State ask the London electricity board to return to the practice that applied until August this year, when it discounted standing charges for elderly people for whom the cost of the energy that they consumed was less than the standing charge? I asked the chairman of the LEB to consider that. Having heard about the 50-50 proposal, I am worried that it may not wish to return to the practice that it should have continued until the investigation had taken place.

§ Mr. Lawson
As the hon. Gentleman implies, that matter is entirely for the LEB. The level of standing charges is a matter for the boards, not for me. All that I can do, as I have done, is to make a request to them and to urge them to take it seriously. They are alienating customers in a way that I would imagine no private sector firm would dream of doing.

§ 3. Mr. Peter Bottomley
asked the Secretary of State for Energy if he will list the statutory powers and obligations of the gas and electricity boards to levy standing charges.

§ 6. Mr. Parry
asked the Secretary of State for Energy what representations he has received concerning the question of the abolition of standing charges for gas and electricity; and if he will make a statement.

§ The Under-Secretary of State for Energy (Mr. David Mellor)
Relevant powers and obligations are contained in section 37 of the Electricity Act 1947, section 14 of the Electricity Act 1957 and section 25 of the Gas Act 1972. Those powers and obligations are conferred directly on the industries, not on the Government. Within this framework it is a matter for the industries whether or not their tariff arrangements include a standing charge. I have received a number of representations on this subject.

§ Mr. Bottomley
Does my hon. Friend accept that there is no economic justification for the fuel boards receiving a large part of their revenue from standing charges, but that the reverse should happen, as marginal costs should rise to encourage conservation? Will he suggest to the fuel boards, as it is within their power, that they should eliminate standing charges over four years, starting by eliminating the standing charge for the heavy winter months when consumers are faced with the highest bills?

§ Mr. Mellor
The evidence does not substantiate my hon. Friend's contention. 1 recognise that standing charges are regarded as an imposition, but it is possible to see a distinction between charges that relate to maintaining the supply and charges that relate to the unit charge. All that will become clear as a result of the independent study that is currently being conducted by the City of London auditors, which I shall await with the same interest as my hon. Friend.

§ Mr. Parry
Is the Minister aware that old people have died from hypothermia because they could not pay heating charges? Is he aware that over the past three years, since November 1979, gas standing charges have increased by 55 per cent. and electricity charges by 85 per cent.? If the Minister will not abolish standing charges, will he consider making representations to the industries that old-age pensioners should be exempt from those additional costs?

§ Mr. Mellor
The hon. Gentleman will know that until we hear the outcome of the studies for which my right hon. 6 Friend the Secretary of State has asked, there will be no increase in the standing charges. I appreciate the hon. Gentleman's concern for elderly people, which I share. That is why the code of practice on disconnections was revised under my chairmanship earlier this year. It provides that no old-age pensioner household can be cut off during the winter months. It also provides for a significant number of budget plans. I urge any old person who is concerned about his bills to contact the industries, which recognise that they are under an obligation to find the right payment methods to help. Government assistance to the elderly and underprivileged of £300 million this winter for fuel bills is the largest sum that has ever been expended on that necessary task.

§ Mr. Eggar
I welcome my right hon. Friend's announcement about the independent inquiry. Is he aware that between them the electricity and gas boards last year spent over £40 million on advertising? Is that level acceptable, as the advertising charges are passed on to consumers? Will he investigate the matter urgently?

§ Mr. Mellor
My hon. Friend raises a matter that worries a number of people. It lies within the day-to-day management responsibility of the industries. He is not alone in feeling worried, and I am grateful that he has mentioned it as he has.

§ Mr. Palmer
Will the hon. Gentleman confirm that the right to levy standing charges pre-dates nationalisation, and in the electricity supply industry goes back to 1882?

§ Mr. Mellor
The hon. Gentleman may well have read, as I have, the recently published history of the electricity supply industry, which he has served with distinction for a number of years. He is absolutely right, and I am grateful to the hon. Gentleman for his words. While we want to do something to remove the problems, as they are seen to be, of the standing charges, we must recognise that they have existed for a long time. When the previous Government looked into the matter they reached the conclusion that it was hard to juggle with the tariffs without causing damage to a number of equally deserving people who may be poor but who are also substantial consumers.