Chamber and committees

Thank you.

I am happy that the levy has been introduced because of the exceptional profits, but my point is that we do not benefit from it. Much of the oil, gas and electricity that generates the additional taxation will have emanated from Scotland. On a population share alone, we would expect additional funding of £4.5 billion to provide additional targeted support to consumers and help to maintain services in Scotland.

Ofgem is consulting on energy standing charges at the same time as industry experts are indicating that standing charges might rise by 15 per cent from 1 April 2024. I hope that Ofgem identifies a way forward that provides a more equitable price structure and removes the high standing charges from Scottish consumers. However, given that Ofgem reintroduced standing charges in 2013 in a way that penalises Scottish consumers, the signs do not look promising. Only independence will give us the power to shape an electricity market that is fit for the 21st century and provide targeted support for those who need it.

I thank the members who supported my motion so that the debate could take place. It is about an important subject that impacts on virtually every family in Scotland. After mortgage or rent payments and council tax, energy costs are among the highest items of household expenditure that my constituents in Edinburgh Pentlands face. It is therefore disappointing that no Conservative, Labour or Liberal Democrat MSP supported the motion.

In principle, electricity standing charges are there to cover the cost of the energy infrastructure, which is divided among consumers equally. However, that policy does not work in practice for those who pay the bills, as the standing charge also covers network investment, maintenance, supplier failure support and net zero targets.

In its recent consultation document, which is dated October last year, the Office of Gas and Electricity Markets highlighted that the electricity standing charge for Edinburgh residents is £221 per annum, which is higher than the United Kingdom national average and 60 per cent higher than the London standing charge of £138. The result is that the 2.5 million households in Scotland are paying £212 million more than would be paid if their standing charge was comparable to London’s.

In comparison, the gas standing charge is—surprisingly—a fixed rate across the whole UK of £101 per annum. In total, my constituents have to pay £335 every year before they turn on a light, heat their home or cook a meal.

The higher electricity standing charge might have been acceptable if Scottish consumers, who live in a country that exports electricity to the rest of the UK, were compensated by a substantially lower unit charge—but they are not. The difference between the London and Edinburgh unit rates is an average of 1.5p.

Standing charges unfairly penalise households that are on low incomes. High standing charges mean that it is proportionately more difficult for low-volume users to make substantial savings by reducing their usage. Those who are on prepayment meters accrue the daily standing charge even if they have no credit on their meter. When they top up, they must pay back all the standing charges that are outstanding before they can use any electricity.

When I recently met Centrica, it highlighted that it would support the removal of the fixed standing charge and support national pricing. Back in April 2000, Centrica removed standing charges from its gas and electricity tariffs. Then, in 2013, Ofgem conducted its retail market review, when it proposed to have tariffs with a simple two-part structure—a standing charge and a unit rate. The UK Government accepted the recommendations and standing charges were reintroduced.

In their briefings, Advice Direct Scotland and Centrica highlighted the need for a progressive social tariff so that those who most need additional support because of health issues, for example, can receive it. Three quarters of the public supported that proposal.

Another option that could be considered to replace standing charges is block pricing, whereby initial usage of energy is at a lower price per unit. The rate would step up incrementally as more units were used. That would encourage home owners to invest in insulation, save money in the long term and help to achieve our environmental targets.

Scotland is a net exporter of electricity, having exported 20.3 million megawatt hours and imported only 1.5 million megawatt hours in 2022. Normal rules of supply and demand should mean that the cost of electricity is lower, as there is an oversupply in Scotland, but that is not the case. We do not get that benefit, although we help to keep the lights on south of the border, to an estimated wholesale value of £4 billion.

Northern Ireland, which is not part of the UK energy market, has its own utility regulator. Because Northern Ireland is not part of the internal market, its average unit price for electricity is among the cheapest in Europe and is significantly below the median cost in Britain and Ireland. If only we could have our own utility regulator, as Northern Ireland does, we could all benefit from Scotland’s energy surplus and have a lower electricity unit cost.

There are yet more stings in the tail for Scottish consumers in that, in the 2022 autumn statement, the UK Government introduced the 45 per cent electricity generator levy. That levy is a tax on the ordinary profits of electricity generators resulting from high wholesale prices caused by unique geopolitical events, and it will remain in force until 31 March 2028.

The levy became applicable from 1 January 2023 and is expected to raise an extra £14 billion for the UK Exchequer over the five years to March 2028. It is on top of the energy profits levy on oil and gas companies, which was introduced in May 2022 in response to exceptional profits. That brings the combined headline rate for taxing the sector to 75 per cent, and the Office for Budget Responsibility forecasts that that levy alone could raise more than £40 billion over the next five years. If those forecasts are right, the UK Treasury will benefit to the tune of £54 billion by March 2028.

In my speech, I highlighted that Advice Direct Scotland and Centrica are calling for a social tariff, so that individuals who have to use a lot of electricity for health reasons could be supported. Does the member accept that we have tried to address the issue of people using a lot of electricity because of their health conditions?

Before I ask about how we could improve the annual procurement reports, I want to speak with Stacey Dingwall about community wealth building.

In your written evidence, you highlighted two cases: Clackmannanshire Council and Fife Council. I looked at both their procurement reports, which were good. To update you, Fife is now at 49 per cent local spend, as opposed to 22 per cent back in 2010. Does having that level of detail in the procurement report encourage your members to bid when they see that the trend is to increase local spend?

Colin Smith, in your written evidence, you said that not all local authority contracts

“are being reviewed but simply renewed, preventing new bidders or suppliers from getting the opportunity to be listed”.

There is no information in the annual procurement reports about companies that have unsuccessfully bid for a contract. Should that information be contained in the report?

Joanne Davidson, what changes would you like to be made to the procurement reports?

Absolutely.

Is there anything specific that your members would like to see in the procurement reports? Are the reports useful? Would you like there to be changes to them in order to make them more useful to your members?

A one-page summary.