The hon. Lady makes a good point. It is reasonable to say that UK Governments of all stripes have overseen the deeply dysfunctional system of privatised energy companies, and we are where we are today. We need to get out of the hole that we are in.
It goes without saying that the situation that people are now facing has worsened considerably. In September, inflation exceeded 10%—its highest rate in 40 years.
It would be helpful if we quickly reminded ourselves what a free market is or is meant to be. Voluntary exchanges take place, accounting for supply and demand, and that is the basis of an economic system without Government intervention, with a key feature being the absence of coerced transactions or conditions on transactions. However, we all know that free market economies do not exist in the real world, because all markets are constrained in one way or another, with Ofgem and the introduction of the price cap being the obvious interventions in the market we are debating, and that is before the current energy crisis triggered even more interventions. So when the opening paragraph of the Government’s response to the petition states:
“Properly regulated markets provide the best outcome for consumers as a driver of efficiency and innovation”,
it raises various questions. Clearly, consumers are not benefiting from the best outcome. Does that therefore signal that the free market has indeed failed the energy sector, as the petitioners believe, or that the energy market is not being properly regulated? Either way, something is not working. Will the Minister tell us what the Government can do to fix it, if he does not agree that nationalisation is the right approach?
It is reported that economists who measure the degree of freedom in markets have found a generally positive relationship between free markets and measures of economic wellbeing. Unfortunately, most people in the UK are not enjoying economic wellbeing—we only have to look at the end of the Government response, which details what is described as the “unprecedented scale” of financial support that the UK Government are providing, to see that. Consequently, although Government intervention in this regard is welcome—indeed, necessary—it also serves as evidence that
“the Free Market has failed the energy sector”,
as the petitioners say.
At this point, a bit of background about the Government action in relation to the current energy crisis would be helpful. We likely all remember that the proposed solution of the right hon. Member for Richmond (Yorks) (Rishi Sunak) to situation at the time was to reduce every domestic electricity bill by £200 and then recover it over a five-year period. That initial intervention was the
“token gestures of mandatory loans”
mentioned in the petition. In case anyone is confused by the revolving doors at the top of this Government, the right hon. Member for Richmond (Yorks) was the Chancellor when David’s petition was started, not the third Prime Minister we have seen this year, as he is today.
Thankfully, that part of the petition was addressed by the then Chancellor, and his so-called loan-not-loan was ditched and replaced by the energy bills support scheme, under which domestic electricity consumers were to receive £400 of support with their energy bills, paid as a grant over six months, starting from the beginning of this month.
Then our second Prime Minister this year, the right hon. Member for South West Norfolk (Elizabeth Truss), announced the two-year energy price guarantee—an intervention in an intervention—which superseded the
proposed energy price cap increase of 80% and limited the price that suppliers can charge customers for units of gas from 1 October. That move was of course widely welcomed, not least as the right hon. Member for South West Norfolk was reported to be acting
“so people and businesses are supported over the next two years”,
but it was simultaneously criticised for being misleading. A UK Government press release on 8 September stated:
“a typical UK household will pay no more than £2,500 a year on their energy bill for the next two years from 1st October”.
However, the MoneySavingExpert Martin Lewis, who is arguably the most trusted man in Britain, commented:
“I’ve seen a lot of confusion, so let me start by saying there’s NO MAXIMUM ENERGY BILL.”
Not surprisingly, that confusion continues.
Exactly two weeks ago, the right hon. Member for South West Surrey (Jeremy Hunt), our fourth Chancellor this year—so far—announced that, instead of lasting two years, the energy price guarantee would last only until April next year. In just over five months, many could be placed back on the energy regulator Ofgem’s price cap. According to energy analysts Cornwall Insight, that means another massive hike in bills for millions of people. The current prediction under Ofgem’s existing cap methodology is an increase of 74% more than the energy price guarantee.
I hope everyone here is keeping up with the Government actions taken so far to manage the UK’s energy crisis. Recapping on these recent events demonstrates that the energy crisis could have been handled in a more straightforward way if strategic energy assets were not open to the free market economy but owned by the Government, as the petitioners call for.
In the previously mentioned UK Government press release of 8 September, the right hon. Member for South West Norfolk was reported to say:
“Decades of short-term thinking on energy has failed to focus enough on securing supply”.
I am sure that that is a sentiment the petitioners wholeheartedly agree with. Indeed, they call for a 25-year strategic plan. However, like me, I do not think they would agree that launching
“a new oil and gas licensing round”
and lifting
“the moratorium on UK shale gas production”
is the way forward. That is regressive and builds on a nonsensical investment allowance that, unbelievably, incentivises investment in fossil fuel extraction instead of a just transition. Investment in energy security should be targeted at renewables, carbon capture and storage, and our net zero future. Have the Government forgotten the commitments they made to the world at COP26 last November? Additionally, the press release was entitled,
“Government announces Energy Price Guarantee for families and businesses while urgently taking action to reform broken energy market.”
If that reference to a broken energy market does not align with the petitioner’s claim that
“the Free Market has failed the energy sector”,
I fail to see what would.
Returning to a question I posed earlier about whether the energy market is being properly regulated, will the Minister explain why the Government’s response states that they continue to believe
“that properly regulated markets…provide the best outcome for consumers and promote market competition as the best driver of efficiency, innovation and value”?
Aside from the fact that market competition has all but disappeared, with the removal of lower-price tariffs from the market, and with around 24 million households out of 28 million on standard variable tariffs at the end of August, I do not think people across the UK believe they are getting value from the energy market, not least because of the punishing standing charges that are levied before even a kilowatt of power is used. Perhaps the Minister can come up with something to change my mind on that.
The Government response also mentions that
“properly regulated markets…incentivise private capital to invest in the energy system”.
My basic understanding of investment is that private capital is invested to make money for the people who have money to invest in the first place. Would it not therefore make more sense if those energy assets were in public ownership, so that the return on investment came back to the public purse, not the coffers of the energy companies? Of course, the temporary energy profits levy gains 25% of profits from oil and gas firms, and it is reported that it will raise £5 billion in its first year. That will help, but does the Minister agree that 100% of profits would help more?
The Government response stated that
“if the Government renationalised energy companies, the British taxpayer would have to compensate directors, shareholders, and creditors to the tune of tens of billions of pounds—money that would be better spent supporting families.”
This is where I return to the Government’s lack of foresightedness. Have they considered that the taxpayer has already been saddled with the burden of paying for the Government’s cost of living support for years to come? Has any assessment been done comparing a one-off payment to directors, shareholders and creditors with the repeated, ongoing costs that have been forced on the taxpayer? Why should the public be paying for energy costs while companies rake in significant increases in profits earned from UK oil and gas extraction?
Earlier this month, the chief executive of Shell said:
“The solution should not be government intervention but protection of those who need protection.”
That was before Shell’s third-quarter profits of $9.5 billion were reported just last week—eye-watering profits for the super-rich, compared with eye-watering bills for those who can least afford them. The Government are making the rich richer at the expense of low-income and middle-income households. Can they take immediate and prudent action to protect those most impacted by this energy crisis, now and in the future?
I am reminded of a famous George Bernard Shaw quote:
“Success does not consist in never making mistakes but in never making the same one a second time.”
Can the Minister convince me, as well as David and the other petitioners, that the Government’s refusal to nationalise the country’s strategic energy assets is not, in fact, an ideological blind spot? A nationalised energy
sector would have the potential to deliver an integrated approach, guiding the country away from its dependency on unstable fossil fuels, thereby tackling climate change while, at the same time, protecting consumers. Are this Government capable of using some foresight?
I feel I have barely scratched the surface of the issues surrounding today’s petition, but I look forward to hearing the contributions of the other speakers. I particularly look forward to hearing what the Minister has to say in response.
4.44 pm