Peter Aldous writes for The House Magazine.

There is no other way of saying it: we are in the grip of a cost of living crisis. Regular reminders of the rising cost of essential goods and services dominate the news and show no sign of abating.

Inflation has been rising since last year and we know that this doesn’t affect everyone equally. Those on the lowest incomes are spending proportionally more of their incomes than those better off on essentials like food and heating. This is an example of the poverty premium: where the things we absolutely cannot live without are more expensive the poorer you are.

While the situation is very complex, there are solutions. National Energy Action and Fair By Design have published a report on the benefits of introducing a social tariff in the energy market to lower the cost of bills for low income households. It’s an idea that finds supporters on all sides of the political spectrum.

A social tariff is a targeted discount energy deal for qualifying low-income consumers. It is a safety net for eligible households struggling to afford their bills. Typically below the price of the cheapest available energy tariff, it is specifically designed to support those living in fuel poverty.

To some extent, the protections already in place within the energy market work well. The price cap is there to balance what consumers spend on energy against what suppliers can make in profit. But the cap can only do so much. The cap will not protect against unaffordable price rises that the regulator considers reasonable, such as any increases in the cost to suppliers of buying gas.

We must recognise that there are some consumers who face very real risks as the price to provide energy to our homes rises further. Since April 2022, the price cap has risen by 54 per cent to nearly £2,000. In October 2022 energy bills are predicted to rise to an average of £2,800 a year, a further increase of over 40 per cent. This will inevitably result in more fuel poverty, which is already rising: there are 6.5 million people spending over 10 per cent of their incomes on their fuel bills – the definition of fuel poverty – and if Ofgem’s predictions are correct then next year that number could be 12 million.

We need a social tariff more than ever. And for the social tariff to be effective it needs certain features. It needs to be additional to existing policies: the price cap and the Warm Home Discount Scheme which provides a rebate to some low-income households.

It also needs to be mandated across all suppliers, so some consumers do not end up losing out because their supplier doesn’t go far enough. It needs to be targeted at those most in need (such as households using prepayment meters) and at a minimum it must be priced below the default tariff price cap.

Eligible consumers must also be auto-enrolled on to the tariff. This can be done by using suppliers’ existing customer data and also from data sharing agreements with the Department for Work and Pensions (DWP).

This is an opportunity to make sure those consumers most at risk are protected from rising energy prices now and in the future. It’s a protection that will reduce the number of deaths during the cold winter months, and it ensures that household gas and electricity are affordable for those struggling most in the current economic climate.

Peter Aldous asks the President of COP26 about the Climate Change Committee’s recommendation on the need for further support aligned to net zero to help people with their energy bills.

Peter Aldous (Waveney) (Con)

T4. Will my right hon. Friend outline the discussions he has had with his colleagues in Government so as to act on the Climate Change Committee’s recommendation on the need for further support aligned to net zero to help people with their energy bills? (901201)

Alok Sharma (The COP26 President)

As my hon. Friend knows, support is being provided to help households. In particular, the most vulnerable households will receive at least £1,200 pounds of support. Of course, we also need to look at further energy-efficiency measures, and I am sure the new Prime Minister and Chancellor will look at all of that.

Hansard

Peter Aldous spoke in a debate on concerns about electricity transmission infrastructure. He called on National Grid to work with affected communities to mitigate the impact so we can press ahead with the roll-out of offshore wind which is vital for the UK's zero carbon energy ambitions and will bring much-needed well paid jobs to this area.

Peter Aldous (Waveney) (Con)

It is a pleasure to serve with you in the chair, Mr Stringer. I offer my condolences to my hon. Friend the Member for Harwich and North Essex (Sir Bernard Jenkin) for his loss. I congratulate him on his choreography to secure the debate, which is ultimately about the roll-out of zero carbon renewable energy on what is likely to be the hottest day ever recorded in the UK.

The transition to net zero provides enormous opportunities for East Anglia to be the engine room of the UK, bringing new sustainable and rewarding jobs not just for Waveney and Lowestoft, which I represent, but across the region. If we get it right, we can be a global exemplar of how to deliver the transition. That, in turn, will create enormous export opportunities.

The case for offshore wind is compelling. It is now the lowest-cost technology for generating electricity. Energy bills continue to rise, and being able to transport and deliver more offshore wind across the UK will reduce bills. We need more homegrown green electricity to move away from Russia’s influence. The weather today provides a snapshot of our future if we delay action to reduce carbon emissions.

National Grid’s East Anglia green energy enablement project, known as GREEN, should be set in the context that approximately one third of today’s UK energy demand can be met by the energy that will come into East Anglia by the end of this decade. While much work has taken place to upgrade the existing transition network, it needs significant reinforcement. GREEN is the preferred option that National Grid has worked up in accordance with the existing regulatory framework, which includes the relevant national policy statements and the so-called Holford and Horlock rules.

I acknowledge the desire of all right hon. and hon. Members, on behalf of the communities that they represent, to consider an offshore option, but it would have been disingenuous of National Grid to have consulted on such proposal, knowing that the current policy and regulatory framework within which they operate would have discounted it. In due course the Government might wish to amend the national policy statements.

It should also be emphasised that we are at an early stage of the option appraisal and assessment process, with a statutory consultation and an examination in public to follow. There is therefore an opportunity for those concerned about the proposals to engage further with National Grid, following up the meetings they had yesterday and probably before, to address their concerns.

James Cartlidge 

My hon. Friend is perfectly reasonable and has great passion about offshore wind, as we all do. He is perfectly entitled to make those points, but this is not a parallel universe. There is a sub-sea link going ahead off East Anglia called Sea Link 1. Our view is that we need far more of that. To quote National Grid about the justification:

“By connecting East Anglia and Kent, Sea Link will provide the additional network capacity needed to enable the import and export of wind energy to and from Europe.”

If it is not in policy, how can we be in a parallel universe where we are going ahead with sub-sea link off East Anglia? Our view is that we need more of them to build a connected offshore grid.

Peter Aldous 

I thank my hon. Friend for his intervention and I am about to address his point and highlight why that alternative is not viable under the existing framework. Taking into account the framework within which National Grid operates, I would make the following high-level comments on their proposals. First, they have presented the most economically advantageous solutions, as they are bound by the UK Government to do. To move it offshore not only is technically challenging but will cost an estimated 10 times the current proposal—a cost that will ultimately be paid by the consumer. To bury the cable along the entire route not only would have a huge impact on the environment—as 150-metre-wide trenches are dug—but would increase the cost some 14 times.

While other regions have benefitted from subsea links, the scale of the challenge in East Anglia is much larger, with significantly higher amounts of potential electricity needing to be delivered into the grid. To do that without multiple connections coming ashore, together with East Anglia GREEN, would be similar to redirecting traffic from the M25 on to the A140—that tortuous route, which East Anglians know well, that runs from west of Ipswich, via Norwich, up to Cromer.

James Cartlidge 

On a point of information, as it were, the sea link that I am talking about, which my hon. Friend said cannot go ahead under policy, is approved. National Grid will be going ahead with the link; it will be going from Sizewell to Kent. It will be going ahead partly because it gives more resilience to the nuclear power station, if we are completely frank. The point is that it is a reality. The justification that National Grid uses is the same one that we want to see from Sea Links 2, 3 and 4. “Sea Link 2” was rejected. The sea link that we are talking about has been approved and the current policy framework allows approval of undersea connection off East Anglia. As far as we are concerned, the quantity is too low compared with other parts of the UK.

Peter Aldous 

I thank my hon. Friend for his intervention and I am sure that the Minister will pick up on that in his speech. From my perspective, I think it is wrong to dismiss the concerns of the communities that the new pylons will run through, as we have heard from all colleagues today. The way forward at this early stage of the consultation process is for them to work in partnership with National Grid, developers and local and central Government to mitigate the impact. Developers are showing a willingness to do that.

In Norfolk, Vattenfall is delivering its Norfolk offshore windfarm zone by pursuing a co-ordinated approach to the onshore element of the transmission. Business organisations, such as the East of England Energy Group, Net Zero East, Opergy and the New Anglia Local Enterprise Partnership, together with the East Wind Offshore Cluster, are developing new ideas to help address future connection. That includes collaborative project design with shared or modular grid connections, and encouraging and facilitating hybrid projects such as wind to hydrogen and wind to storage.

I acknowledge the worries that all my colleagues are articulating on behalf of their constituents. However, there must be no holdup or delay in the roll-out of the offshore wind projects off the East Anglian coast. Already, they are making a significant contribution to the local economy. ScottishPower Renewables has a £25 million operations and maintenance base in the Hamilton dock in Lowestoft that is already running and providing jobs for people in my constituency and across Suffolk and Norfolk. ScottishPower Renewables is also planning to invest a further £6 billion up to 2030 as part of its East Anglia hub development. Such projects provide a once-in-a-lifetime opportunity, creating new, exciting and well-paid jobs for local people, which is vital as part of the levelling up process. They are also critical for the overall prosperity of East Anglia and for us to play our role in mitigating the impact of climate change, which we are feeling so forcefully today.

Hansard

Peter Aldous welcomes ScottishPower Renewables success in the Contract for Difference auction for its East Anglia Three offshore wind project, and asks about future CfD auctions which will allow more offshore wind development and bring more jobs to coastal communities such as those in Waveney.

Peter Aldous (Waveney) (Con)

T3. As my right hon. Friend has indicated, we had the very good news last week that ScottishPower Renewables had been successful in the contract for difference auction for its East Anglia Three offshore wind project. I would be grateful if he would outline what else is being done to provide certainty over future CfD auctions, which will allow offshore wind developers to invest more in order to meet the Government’s 2030 target and bring more jobs to coastal communities such as those in Waveney? (901007)

Kwasi Kwarteng (The Secretary of State for Business, Energy and Industrial Strategy)

My hon. Friend will appreciate that when he first came into the House we did not have any auctions and then for about six years we had an auction every other year. It was very much my intention as Secretary of State to introduce an annual auction, and I am pleased to say we have done so. It has given much more security and visibility to the supply chain, which was one reason why I introduced it.

Hansard

Peter Aldous MP raises concerns about energy prices this coming winter and asks if the Government is considering the introduction of a social tariff.

Peter Aldous (Waveney) (Con)

I am grateful to my right hon. Friend for outlining those measures. I sense it will be a very bleak winter; the energy price cap will play a role, but it would help if it were augmented by a social tariff. Will he advise on whether there have been any discussions in Government about the introduction of such a tariff?

Greg Hands (The Minister for Energy, Clean Growth and Climate Change)

I thank my hon. Friend for that thoughtful question. Obviously, all these things are under review, but I remind him that we replaced the social tariff with other support schemes for bill payers under the coalition. That remains our position, but we—both the Department and the Treasury, and indeed, the whole Government—study these positions and issues very closely indeed.

Hansard

Whilst recognising the need for short-term measures to support people with energy bills, Peter Aldous cautions against unintended consequences that could undermine investment in emerging lower carbon industries such as offshore wind, hydrogen production and carbon capture which are vital to the regeneration of towns such as Lowestoft.

Peter Aldous (Waveney) (Con)

This Bill is of particular interest to me, as not only is the cost of living crisis hitting hard in the Waveney constituency, but we need jobs based on the North sea to revitalise the local economy. I should also point out that I chair the British offshore oil and gas industry all-party parliamentary group, as the industry is a significant employer in the Lowestoft and Great Yarmouth area.

It is necessary to balance the need for short-term measures to support people through an unprecedented challenge, caused by covid and exacerbated by Russia’s brutal invasion of Ukraine, against our long-term priority of promoting investment in the UK continental shelf, which will not only revitalise coastal communities but help us achieve our net zero obligations. It is important to point out that the activities taking place on the UK continental shelf are not just the extraction of oil and gas, but those in emerging new lower carbon industries such as offshore wind, hydrogen production and carbon capture, utilisation and storage, all of which are inextricably linked. Any levy on the oil and gas sector, if poorly thought through and poorly drafted, could have a negative impact on investment in those emerging industries, which are so vital to our future.

There is concern that there is a lack of a coherent long-term energy strategy. This Bill, printed on 5 July, in many respects conflicts with the Energy Bill published the very next day. The latter Bill aims to boost the UK’s energy independence and security, attract private investment, reindustrialise the economy and create jobs through clean technologies. What is required is a seamless thread that runs through all aspects of energy policy, from our long-term strategy for producing energy to the need for a major step change in how we insulate our homes and our businesses, right through to the support for those who need it most at the current time. Those latter initiatives should build on policies already in place, such as the energy price cap, the warm home discount and the energy company obligation. We should also look to add to them with support such as the social tariff.

Underpinning this integrated approach should be how we ensure that we fully realise the great opportunity to create exciting, new jobs and how we can best provide people with the necessary skills. In mapping out the strategy with particular regard to this levy, the Government should have in mind the following considerations. The first is the vital importance of not inhibiting investment in decarbonised projects that will create jobs and help us meet our net zero obligations.

Secondly, the Government must have it in mind that investment in energy projects is global and footloose and, if we have an unstable fiscal regime, business will go elsewhere. Thirdly, they must ensure, and not undermine, the security of our energy supply. Fourthly, they should have regard to the negative impact on not just those high-profile oil and gas majors, but the supply chain companies located in many constituencies that are invariably highly innovative small and medium-sized enterprises and are the lifeblood of our local economies. Fifthly, notwithstanding that the Bill contains a sunset clause, there remains some uncertainty on the levy’s timeframe, which I hope the Minister will clarify.

Taking those considerations into account, the amendments and clarification that the Government have made are welcome. They include the exclusion of petroleum revenue tax rebates from the levy, reassurance that capital expenditure on electrification linked to oil and gas is included in the investment allowance, and the inclusion of the aforementioned sunset clause.

That said, more changes would be welcome to reduce the fiscal uncertainty, so I would be grateful if the Government considered the following suggestions. 

To support SMEs, they should introduce a small profit allowance to allow companies with small profits to be exempt from the levy. That would assist small companies that have been investing for many years. They accumulated significant losses when oil and gas prices were low and are now making only marginal profits.

There should also be support for decarbonisation schemes to ensure that projects such as the electrification of oil and gas production facilities benefit from the capital allowance. A regular review mechanism should be included to ensure that the levy is delivering on its aims and is not having any unintended consequences. There is also a need for regular ongoing dialogue with the industry and the sector’s investors.

I understand why the Bill is being introduced—we are in unprecedented and deeply troubling times—but I am mindful that unintended consequences could undermine much-needed inward investment into the UK, particularly along the North sea coast, which is vital to the regeneration of towns such as Lowestoft. I therefore urge the Government to do all they can to address those concerns, and I hope that the Minister will do that in her summing up.

Hansard

Peter Aldous joins North Norfolk MP Duncan Baker on a visit to Bacton Gas Terminal.

Bacton handles a third of gas coming into the UK and is a prime site for hydrogen technology in East Anglia.