§ Mr. Hayesasked the Secretary of State for Energy what further consideration he has given to the effect of abolishing the gas and electricity industries' standing charge system in order to assist pensioners and those on low incomes.
§ Mr. Peter WalkerAbolishing standing charges would significantly disadvantage a great many pensioners and also many on low incomes.
Standing charges cover the cost of necessary emergency services, as well as those of meter reading, accounting and billing. These costs arise no matter how much or how little fuel is used. They reflect the fixed costs which the industries incur in maintaining a constant and safe supply to each consumer's home.
Independent reviews carried out by consultants in 1982 found that the level of standing charges did reflect these costs. At the same time, estimates suggested that abolition of standing charges would disadvantage many in vulnerable groups, for the following reasons.
The abolition of standing charges for all electricity and gas consumers in Great Britain would mean a loss of revenue for the industries in excess of £1,100 million, or over £250 million in the case of pensioners alone. The industries would have to recover that lost revenue through an alternative tariff structure, which would give rise to substantial increases in the unit rates for fuel. Depending on the tariff structure chosen, these increases might be of the order of 15 per cent.
The higher unit rates would penalise those among the least well off who need a lot of fuel. These include many of the old, sick, disabled and those with large families. The precise effect on them would depend upon their patterns of consumption and expenditure and the tariffs in force at the time. But it was estimated that the incorporation of the standing charge into a unit rate would result in higher fuel bills for the following approximate numbers of these groups: over 2 million pensioner households; over 500,000 households relying primarily on state pensions for income; over 500,000 households on incomes a little above the level at which they would receive supplementary benefit. In many cases the bills of these consumers would be higher by a significant amount.
The corresponding benefit to other members of these groups would have been much smaller. Moreover, of the total number of consumers benefiting, most would be those who did not need it, such as proprietors of lock-ups and owners of second homes.
Since 1983, electricity and gas prices overall have fallen by 12 per cent. and 8 per cent. and standing charges by 8 per cent. and 24 per cent., respectively, in real terms. Gas standing charges were also reduced in cash terms, by £1 a quarter, in 1986.
274WStanding charges remain the fairest way of recovering the costs attributable to each consumer, and I do not propose to take powers to abolish them. They are favoured by the consumers' councils of both, industries, as well as having been endorsed in the 1976 publication by the then Government "Energy Tariffs and the Poor", and by the European Council.
Successive Governments have concluded that energy tariff adjustments do not provide a suitable means of giving social assistance. The social security system provides a more effective means of targeting assistance on those in genuine need. As far as fuel costs are concerned, the main form of help is through the supplementary benefit scale rates, and also through the heating additions which in 1984–85 totalled some £400 million. My right hon. Friend the Secretary of State for Social Services intends that the amount spent on heating additions will be included in the resources to be made available for the new income support scheme which will be introduced in April 1988. This scheme will provide assistance with all day-to-day living expenses, including fuel costs. Extra help will be made available through premiums to those in the greatest need — pensioners, the sick, the disabled, and families.