The reality of what we have been discussing has been distorted slightly by the Secretary of State. I am disappointed in him, and I am glad that he is here to hear me say so, because in many other respects regarding energy security I hold him in high regard. I have to say, however, that his trivialisation of the problem that so many families face is shameful coming from a Liberal. I would have expected such a thing from a high Tory who has so much money that he never meets real people and who has his staff deal with his problems, but from the Secretary of State it is too much to bear.
Given that a year ago the DECC Committee produced a report on energy prices, profits and poverty, those are the issues that he should have addressed. He should have indicated in some way how the Government had taken stock of what was said in that report. The changes that have happened since mean that the situation has got worse, not better, for ordinary families.
The wholesale price of gas has come down. All the analysis from the economists shows that 50% of energy bills comes from wholesale prices. Gas prices have fallen by 38% and electricity prices by 23%, yet energy prices have gone up by 10% on average. In the past year, energy companies’ profit margins are up by 21% for single tariffs and more for dual tariffs. This cannot be denied. These are the things that the Labour party wants to address by saying to the companies, “No, you are not too big to control.” Just as the banks are considered to be too big to fail, the energy companies are considered to be too big to control. Government Members have said that to do so threatens the future because they will not be able to afford to invest. I am an economist, and my understanding of investment is that it means calculating the net present value as at today to work out what will have to be raised in income to cover future investments, building in some profit margin. It does not mean taking the profits now—trousering them and giving them to shareholders in such a way that shareholder value is boosted but no income is put away for future investments. That is what is supposed to happen but it is not happening in the energy market because profits are seen as a cash cow for short-term use.
Families in my constituency and in Falkirk district and West Lothian may not face some of the big, dire problems that my hon. Friend the Member for West Dunbartonshire (Gemma Doyle) described. Yesterday I saw a chart showing that in those areas of Scotland there is over 25% unemployment among young people. The unemployment level in my area is lower, but there are still a lot of families facing real poverty. Bills have risen by an average of £300 per year, but what is more important is the affordability gap. Analysis shows that
the real income for families across these constituencies and in most of the UK has fallen by £1,600, while the energy affordability gap has gone up. It is not £300 but £480 for the average family in my constituency and across the UK. The people in part-time, short-term, low-guaranteed-hours work who are called the new employed are in fact the new benefit-dependent working poor. People are sanctioned as they struggle to find work and to cope with the devices used to get people off benefits on the basis that they are no longer seeking employment. They are no longer in employment; they are sanctioned and out of employment. That is what people are facing and what the Government should have addressed.
The root cause of the problem is partly the structure of the industry and partly the behaviour of the energy companies, which Ofgem has tried to police. I have been looking at some of the facts. SSE got a £750,000 fine for not providing connections properly. Scottish Power got a £700,000 fine for not giving the right price difference and payment type. Npower got a £125,000 fine. There was a £12 million fine for E.ON, which persisted in mis-selling between 2010 and 2013. The companies are reacting by trying to bully this Government and frighten a future incoming Government. For example, SSE announced that it would freeze energy prices at least until 2016 and legally separate its retail and wholesale businesses. Those ideas were put forward as options to be looked at seriously when we have the price freeze. On the same day, it announced that it would withdraw from five out of six wind farms and reduce its investment in renewables from £7.2 billion to £2 billion-£3 billion. This happens because these companies think they are so powerful that we cannot control them, and the Government have been so supine in their attitude to them that they are getting away with it.
The real problem is the structure of the industry. Calor Gas in my constituency, which distributes to the whole of Scotland from Grangemouth, says that trading alone trebles the price it has to pay for its own gas to supply to the people who need it, particularly in rural areas where people do not have the option of anything else. The vertical integration of the industry means that it can hide its profits and put costs in one section and not another. These companies have to be broken up, they have to be taken on, and, if need be, they have to be controlled. I have no fear of that from the perspective of the consumer.
6.29 pm