John Major – 1985 Speech on Fuel Poverty

Below is the text of the speech made by John Major, the then Parliamentary Under-Secretary of State for Health and Social Security, in the House of Commons on 16 December 1985.

I listened with interest to the hon. Members for Ceredigion and ​ Pembroke, North (Mr. Howells) and for Gordon (Mr. Bruce). I understand and share many of the concerns which they have expressed and congratulate them on the way in which they have expressed them.

The issues raised by the hon. Member for Ceredigion and Pembroke, North ranged wide and covered both fuel policy and the alleviation of poverty. He spread the net even wider by referring to draught proofing, housing and a variety of allied matters. I propose to refer briefly to energy prices, although strictly speaking they are for my right hon. Friend the Secretary of State for Energy. I propose to devote most of my remarks to the help given to the less well-off through the social security system, but I shall attempt to touch upon the specific issues raised by the hon. Members for Ceredigion and Pembroke, North and for Gordon.

Both hon. Members mentioned the projects that have been undertaken by various neighbourhood energy action groups. There is not a great deal that I can say about them this evening, save that I recognise the good work that has been done by the groups. Decisions have yet to be taken on how they will be funded in future. That is a matter that we are considering. I hope that it will be understood that I can go no further than that this evening.

The hon. Member for Gordon referred to some of the absurdities of the exceptionally severe weather payments and the disapproval last year which that method of making payments received in Scotland. The hon. Gentleman will know that the chief adjudicating officer issued fresh guidance about the payments only recently. We are considering the guidance and the future of that form of assistance with heating bills. The hon. Gentleman will know that last year the payments amounted to only £1·7 million, while administrative costs were £1 million. I mention those figures, not to denigrate the help that was given, but to put them in the context of the £400 million worth of heating addition payments to which the hon. Gentleman referred.

The hon. Member for Ceredigion and Pembroke, North illustrated the extent to which the cost of fuel is relevant to those on low incomes. I accept that view. It is an important view, and I accept what he had to say on that score. Fuel is clearly a basic necessity, especially for the elderly and the sick. I recognise the concern that is felt by many on low incomes when it comes to paying for fuel. I shall come to what has been done, what is being done and what will be done under our new proposals to try to alleviate that concern.

Reluctant though I am to do so, I must take issue with the hon. Member for Ceredigion and Pembroke, North about the term “fuel poverty”. It is a phrase which is often used these days, and upon examination it is a rather curious concept. The general idea of poverty itself is far from straightforward. We can recognise it, but it is not always easy to define it. The hon. Gentleman will know that the standard rate of supplementary benefit for adults has more than doubled in real terms since 1948 and that this benefit is the primary means of alleviating poverty, and has been so under successive Governments for some years. Yet the hon. Gentleman talks of fuel poverty. We do not hear a great deal about clothes poverty, or food poverty, but fuel poverty appears in a rather curious fashion to have developed a life of its own. Fuel, like clothes, food and all the other necessities for rich or poor alike is paid for out of people’s normal income.

I recognise that individual need for expenditure on fuel can vary, but that is true of other necessities. I do not wish to make too much of what may seem to be a matter of semantics, but it is often misleading to talk about fuel poverty as if it were some special breed of poverty that necessarily requires different measures from those that are generally used to support the less well-off. An effective attack on poverty, which we all wish to see, comes in many guises—for example, benefit rates, control of price increases, economic stability and economic growth. Energy prices are a part of that tapestry, but only a part.

Although the general financial framework within which the gas and electricity industries operate is agreed with the Government, price increases remain a matter for the industries themselves. The Government do not set prices and do not have the power to so. Tariffs must reflect the industries’ costs and provide a proper return on the substantial capital resources that they employ.

They are not a means of indirect taxation. I call in evidence to support my proposition the relatively low level of price rises in recent years, which the hon. Member for Ceredigion and Pembroke, North acknowledged. They have been below the rate of inflation in the past two years and charges have therefore fallen in real terms. After allowing for inflation, the price of gas to the home is roughly what it was in 1970.

The hon. Member for Gordon addressed himself to standing charges. I know that these charges have been a cause of deep concern to many for many years, especially to the elderly. The charges reflect the necessary cost of keeping a supply available to the consumer in his own home for 24 hours a day. They cover the maintenance of the connection, meter reading, accounting, billing and emergency services. The costs arise no matter how much or how little gas or electricity is consumed by the individual householder.

The abolition of standing charges, although self-evidently attractive in some ways, is not an easy option. It would cost the gas and electricity industries more than £1·1 billion a year in lost revenue. Abolition for pensioners alone—if we could determine which pensioners should have abolition, whether it should affect people living on their own and all the other details that must be decided—would cost about £300 million. That lost revenue would have to be recovered by substantial increases in unit prices, which would penalise many of those who, through age, sickness, infirmity or some other reason, need more heat, even though they may be among the least well off.

That raises the question, which may have flashed through the mind of the hon. Member for Ceredigion and Pembroke, North, whether there should be special tariffs or free allowances for people on low incomes. That has been considered in the past, but successive Governments have concluded that it would be an expensive, ill-directed and probably ineffective means of helping those most in need. In 1976, the Labour Government announced that they had reviewed possible help through concessionary or restricted tariffs or free allowances of gas and electricity. Their conclusion—I quote from the report’s foreword which was written by the right hon. Member for Chesterfield (Mr. Benn)—was that these did not offer

“a satisfactory way of helping poor consumers with their fuel bills”.

I am sure that the right hon. Member was right, and I suspect that the Liberal party thought so too, because, as far as I am aware, it expressed no contrary view at the time. Successive Governments have therefore taken the view that help is best given through the social security system. That help is considerable.

More than £40 billion is spent on social security—about a third of all Government spending. We have kept the major benefit rates ahead of the rise in prices during the lifetime of the Government and, because of the increases in benefit last month in line with inflation, we increased our spending by a further £2 billion a year. The main help for the less well off with their day-to-day living expenses, including fuel costs, is through the standard weekly rates of supplementary benefit. Those rates increased by 6 per cent. in real terms between November 1978 and November 1984 and were increased again last month in line with inflation. They have doubled in real terms since 1948, and I think that every hon. Member welcomes that.

On top of those benefit rates, we provide extra weekly help for those with special needs. The hon. Member for Ceredigion and Pembroke, North mentioned people with special needs—the elderly, the very young, the sick and the disabled. Each is entitled to heating additions. Last year we spent more than £400 million on those heating additions, which is £140 million more in real terms than any previous Government have spent at any time. Since 1979, we have extended the help available. In November 1979 we introduced a basic rate of heating addition for pensioner householders over 75. Over the years, we have extended the age range so that this now takes in pensioner householder over 65. We have introduced a similar addition for the under-fives. Last November, we introduced a new higher rate of heating addition, worth well over £200 a year—a considerable sum—payable automatically to householders over 85. We have also assisted disabled people. Since 1980, we have paid a higher rate of heating addition automatically to severely disabled people people on supplementary benefit who receive attendance or mobility allowance or its equivalent. Last month, we introduced a further measure—automatic entitlement to a basic rate heating addition for sick and disabled householder claimants on the long-term rate of supplementary benefit. As a result of these changes, we estimate that 60 per cent. of all people on supplementary benefit and 90 per cent. of supplementary benefit pensioners now receive a heating addition. That is a dramatic improvement on the position before 1979 and represents a considerable attack on what the hon. Member for Ceredigion and Pembroke, North referred to as “fuel poverty”.

The hon. Member for Ceredigion and Pembroke, North referred to the White Paper proposals. I should like to explain why we felt it right to move forward and reform these arrangements, as announced in the White Paper which was published today. The answer is that heating additions are merely a means of giving more help to certain groups of claimants who may have extra heating needs. The additions are better, in our view, than tariff adjustments and certainly better than nothing, but they are not the only, or necessarily the best, form of assistance.

Heating additions are a rather curious mixture. Many are paid automatically on grounds such as age, but others involve detailed questioning on matters such as the claimant’s health. There is a complex array of rates, rules ​ and regulations. I am sorry that the hon. Member for Ceredigion and Pembroke, North did not feel that the White Paper would be an improvement on the present rather muddled situation. He asked me whether I was conscious of the need to modify policy to match reality. That is what we believe the White Paper is doing. I hope that, upon reflection, it will be shown that we are right, although I acknowledge that it is a controversial issue at present. In the White Paper we are proposing an income support scheme to replace the current weekly supplementary benefit. Income support will continue to provide set allowances for normal living expenses, including fuel costs. There will also be premium payments for families, pensioners, sick and disabled people and lone parents to help with the extra expenses that those groups tend to have—including extra heating costs. That will mean a system that is simpler than the present one. It will be easier for the public and staff to understand. It will cut out much of the intrusive questioning that now takes place—I think that everyone will welcome that—and it will also effectively direct extra help to groups of people who are likely to face extra expenses.

As I said in the House only a couple of weeks ago, the fact that we shall not call the premiums “heating additions” does not mean that they do not exist, that the cash is not in the claimant’s pocket and that it cannot be used towards fuel costs. We believe that income support will, in future, be a better means of delivering that help and we intend that the money spent on heating additions will be included in the resources available for the new scheme. Nor are we alone in that view. The Social Security Advisory ​ Committee commented similarly on the Green Paper in June. The committee welcomed the idea of premium payments in income support for different groups. Moreover, the Select Committee on Social Services said that it

“broadly accepted the principle of premiums reflecting the additional needs of individual client groups”.

Therefore, I think that a substantial amount has been done, is being done and will continue to be done to meet the needs of people who face difficulties with fuel poverty through poor or low incomes. I hope that the hon. Member for Ceredigion and Pembroke, North will accept that we are sincere in our intention to help those people meet the difficulties that they face.

I also hope that on reflection the hon. Gentleman will see the wisdom of the approach that we set before the House in the White Paper today and that we shall seek to carry through in a Bill early in the new year. I am confident that when the House debates the Bill, it will take that view. I hope that it will carry the hon. Gentleman and his colleagues with it at that time.

I appreciate the hon. Gentleman’s concern that people should be able to afford adequate heating. We share that concern and we shall continue to offer substantial assistance to that end, but we shall do so in a way that we regard as simpler and more effective than the current system. We believe that our proposals will meet those criteria and I hope that in due course they will be endorsed by the House and the hon. Member for Ceredigion and Pembroke, North who raised the subject.