Cutting the cost of living: simplifying energy tariffs

Last autumn the Prime Minister promised to take action to cut through the bewildering number of energy tariffs that we were left with by the last Labour Government and to put every consumer on the cheapest tariff available to them.

Today we’ve published our plans to take forward the Prime Minister’s pledge and as a result we will toughen up the Energy Bill even further to guarantee:

· People on uncompetitive “dead” tariffs no longer offered to new customers will be automatically moved to their supplier’s cheapest variable rate tariff.

· People who are on fixed deals will also be automatically moved to their supplier’s cheapest variable rate tariff when their fixed deal ends.

· Everyone will have it made clear to them what the cheapest deal is that suits their preferences and be given the opportunity to switch.

· Powers for Ofgem to take action to protect against poor practice by switching sites.

We know that the rising cost of gas and electricity bills are pushing up the cost of living. The Prime Minister has been determined to drive through this policy to support hard-pressed, hardworking families and vulnerable people.

Ofgem has estimated that people can save up to £158 by switching to the cheapest tariff deal, which our plans will give everyone the chance to do. Gone will be the days when, like it was under Labour, the existence of 4,000 different tariffs confused people about what the best deal was for them.

Instead, by limiting the number of energy deals available to four core tariffs people will be able to make a clear choice. Plus, no longer will people find themselves stuck on old expensive deals that aren’t offered to newer customers who get better rates. Instead, loyal longstanding customers will no longer be used to subsidise the bills of new customers making it fairer for everyone and reducing the ability of the big players in the market to undercut new entrants. Increased competition will put a downward pressure on prices: A downward pressure that everyone can see is needed.

Yet we need to go even further. In Labour’s last 5 years the number of people in fuel poverty rose by 2.25 million. That is why this winter we gave 2 million low income and vulnerable households, including 1 million of the poorest pensioners, £130 off their energy bills through the Warm Homes Discount. We also helped 12.7 million pensioners with winter fuel payments and made cold weather payments open to over 4 million people.

A modest fall in the number of households living in fuel poverty was confirmed on Wednesday and I am very encouraged by this.

Thanks to the Prime Minister’s determination to support people who work hard and want to get on, by 2014 we will have reshaped our energy market to give consumers a better deal. We have already given 24 million people a tax cut, frozen fuel duty and council tax. In taking action on energy bills as well we will be giving people real help on the key things that stretch household budgets.

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