Parliament 2010-06-22

Debate resumed (Order, 22 June),

 

Extracts on energy policy

 

Chris Huhne: Let me make a bit of progress with the argument. The deeper answer is the profound change that must take place in our economy over the next 10 years, which will also be a great source of growth, jobs and profit. I am talking about the transition of our economy-the third, or green, revolution-to being powered from low-carbon sources. That is potentially as great a shift as some of the biggest changes in our economic history-from water to coal, from coal to oil and from gas to electricity. With each of those fundamental changes of technology, there was a wave of new investment that powered the recovery of a new and very different economy. We can look at the legacy of the rapid recovery in the 1930s from the point of maximum downturn in 1931. That was one of the fastest periods of British economic growth, with the development of new electrical appliances, other light industries and the suburbs around our major cities.

Let me cite some numbers to give a feel for the scale of the potential transformation that we face as a result of the green revolution. Thanks to the ageing of our energy infrastructure, my Department estimates that we will need £200 billion-worth of new investment in the next 10 years. That scale of investment will have substantial macro-economic consequences for businesses in the supply chain and for all those who work in them. I am pleased that my right hon. Friend the Chancellor announced in the emergency Budget, even though the focus was inevitably on averting a fiscal crisis, two measures that will support that investment. The first was our coalition commitment to remodelling the climate change levy and providing a carbon price floor to encourage low-carbon sources of energy, renewables and others. We will consult on that in the autumn. The second was, of course, the commitment to the green investment bank. We will be looking at the scope of the bank through the autumn and we hope to bring forward proposals on that.

Toby Perkins (Chesterfield) (Lab): A lot of environmentalists were deeply disappointed that there were not more green taxes. Is that just another example of how little influence Liberal Democrat policy has had on what was a classic Tory Budget?


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Chris Huhne: I honestly think that the hon. Gentleman is misreading the situation dramatically. We had three announcements; I have mentioned two of them already and I am going to expand on the green deal. It was an emergency Budget, and I would not have expected a substantial programme of reform on green taxes in an emergency Budget that was designed to take us out of the firing line. We have a clear coalition commitment, going forward, to a rise in revenue from green taxes as a proportion of total revenue. That is in the coalition agreement and I have absolutely no doubt that that is what we will see when the full Budget is brought forward in the normal way after the processes of consultation throughout Government.

Chris Huhne: I shall give way a bit more, but let me make a little progress. I have been making the argument that the need to replace our ageing energy infrastructure 
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will give enormous impetus to growth in coming years. The other part of the argument has to be about looking at the centrepiece of the Bill that my Department will bring forward later in the year and at what we are proposing on the green deal. That, too, is an enormously significant package that will have genuine macro-economic consequences for the transformation of the economy and the creation of a whole new industry.

Edward Miliband: That was not mentioned in the Budget speech.

Chris Huhne: The right hon. Gentleman mutters from a sedentary position that that was not mentioned in the Budget speech, but the Budget documents contain a clear commitment in that regard. It is very clearly something that we are proceeding with rather dramatically.

The point that I want to make is that this will be the first genuinely comprehensive attempt to make sure that all of our housing stock is retrofitted. We know that most of the homes that we will be using in 2050 have been built already, so we need a comprehensive way to get carbon emissions from our residential housing sector way down if we are to meet our 80% overall reduction targets.

Dr Alan Whitehead (Southampton, Test) (Lab) rose-

Barry Gardiner rose-

Mark Lazarowicz rose-

Chris Huhne: Before I give way, let me make a couple of points about the economic significance of that approach. First, the potential increase in demand as a result of the creation of new industry will be absolutely enormous if we can get the Bill, the framework and the pay-as-you-save measures right. By way of indication, we would be talking, in practical terms, of 14 million homes that could be insulated with the support of the green deal. Purely arithmetically, if the average cost were £6,500, for example, we would be talking about a market worth literally tens of billions of pounds-£90 billion over a substantial period.

We are talking about creating a new industry that would be genuinely jobs rich, as it would use skills already present in the construction sector and need unskilled labour as well.

Dr Whitehead: Will the right hon. Gentleman give way?

Chris Huhne: I will happily give way to my neighbour in Hampshire.

Dr Whitehead: I thank the right hon. Gentleman for giving way. He envisages that his green deal will involve insulating and raising the energy rating of 14 million homes in the UK. The previous low-carbon transition plan envisaged that that would be done through the provision of subsidised loft, cavity-wall and other forms of insulation. Has he succeeded in defending the money set aside in his Department for subsidising that, or will he rely on Tesco to do the job instead?

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Chris Huhne: I certainly do not believe that we can rely on achieving the sort of comprehensive approach that I am talking about merely through introducing pay-as-you-save measures. The reality is that there will have to be cross-subsidy, as there already is, but particularly to the fuel poor and to those in homes that are hard to heat and which need solid-wall insulation and so forth. I am afraid that the hon. Gentleman will have to wait for the final proposals in the Bill, but I very much agree that we need a comprehensive set of proposals to deal with the whole of the residential housing sector. Those proposals must cover homes owned by owner-occupiers but also the private rental sector, where many of the worst offenders when it comes to energy inefficiency are to be found. I hope that that is what he will see.
Barry Gardiner: I am grateful once again to the right hon. Gentleman. I welcome the measures that he is outlining and we will want to study them carefully, but I am troubled by his suggestion that one element of the coalition agreement was a decision that green taxes should rise as a proportion of the revenues into the Exchequer. I have heard him make the argument, from this side of the House, that green taxes should be used to change behaviour but not as long-term revenue streams on which the Exchequer can depend. I agree with that, but will he explain why that element of the coalition agreement is now seen to fund resource into the future?
Chris Huhne: The hon. Gentleman knows, as I do, that the two points that he makes are not as mutually contradictory as he suggests. There is a long history in this country of applying so-called "sin taxes" to alcohol and tobacco, and they have had the very desirable effect of helping to get people off smoking and of cutting their drinking. The success of those taxes is not perhaps as great as many hon. Members on both sides of the House would like, yet I am assured by the latest Red Book documents that the Treasury continues to raise a very substantial amount of money from both tobacco and drink excises.
The reality is that, while green taxes will change behaviour, the responsiveness of behaviour is such that revenue will continue to be raised for a very substantial period. I have to say that, in the present circumstances, that point is likely to commend itself to the Treasury, which always used to follow the motto of Colbert, the finance minister of Louis XIV, who said that the art of taxation lay in plucking the maximum number of feathers from the goose with the minimum amount of hissing. In that context, green taxes certainly are a very justifiable way to pluck the maximum number of feathers.
I shall give way once more, to the hon. Member for Edinburgh North and Leith (Mark Lazarowicz), and then I shall wind up and let the debate make progress.
Mark Lazarowicz: I am very grateful indeed to the right hon. Gentleman for giving way. I want to leave Louis XIV and return to future technologies, and I was interested in the response that he gave to the hon. Member for Chippenham (Duncan Hames) about support for wave technologies. The right hon. Gentleman will probably know that two of the UK's leading marine renewable energy businesses have their headquarters in my constituency. Can he assure me that support for marine renewables will be at the centre of his policies 
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for every constituency in the
UK, and not just those in the south-west of England? More specifically, will he tell us how the Government's support for marine renewables will be affected by the Budget that we are discussing?
Chris Huhne: Quite properly, the hon. Gentleman wants me to anticipate announcements that will be made by the Government in the normal course of events. I understand that game, as I have played it myself on many occasions. At this stage, however, I can merely tell him that I visited Aberdeen recently for the All Energy conference, where I had interesting and fruitful talks with the marine energy specialists currently testing equipment off Orkney. I am deeply committed, as I believe the Government are, to making sure that what is a genuinely interesting source of potential future prosperity and jobs continues to get the support that it needs to get off the ground.
Obviously, we are in very tough times and have had to cut our cloth to fit our straitened circumstances, but I believe that marine energy offers real opportunities. We have made a number of proposals in that regard, and we will continue to support the sector.
Chris Bryant: Will the right hon. Gentleman give way?
Chris Huhne: No. I said that the previous intervention would be the final time that I would give way before winding up, and I have given way to the hon. Gentleman before.
By the way, I should add to my response to the previous intervention by saying that we have confirmed some of the grants and soft loans made available, for example, for wind energy.
Dr Sarah Wollaston (Totnes) (Con): Will my right hon. Friend give way?
Chris Huhne: I am not going to give way again. I am sorry, but I am going to end up-[Hon. Members: "But it's a new Member!"] I am sorry, I did not realise that the request came from a new Member.
Dr Wollaston: I am extremely grateful to my right hon. Friend for giving way. My constituency is home to Transition Town Totnes, of which he may have heard. It leads the way in looking at climate change and peak oil, and I am sure that the people involved will be very interested to know the size and scale of the projects that will be funded by the green banks. What will be the time scale? When might they be able to start looking forward to making applications?
Chris Huhne: I thank my hon. Friend for that intervention. [Hon. Members: "Answer!"] Opposition Members know perfectly well that there are certain processes in Government that we have to go through. We have to consult. We have to make sure not only that we produce decisions at the moment that both Opposition and Government Members would like, but that those decisions are right and have gone through all the normal processes.
However, I want to pick up on one very important point. My hon. Friend mentioned peak oil, something that, especially in the context of Deepwater Horizon in 
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the gulf of Mexico and our exploration west of Shetland, opens up a terribly important point about the whole thrust of what we are intending to do. That is that we have been given a wake-up call to move towards a low-carbon economy even more rapidly than before. That is not merely for climate change reasons but because an economy that is more independent of volatile sources of energy from geopolitically troubled parts of the world is also more resilient to oil price shocks. If the name of the game is not to end boom and bust, as the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) used to promise, but at least to moderate boom and bust, then an important objective for my Department has to be to ensure that that moderation takes place by making energy security a more serious objective and defining energy security not merely in terms of physical interruptions-problems, say, in the straits of Hormuz-but in terms of our ability to withstand price volatility and price shocks.

I think I have gone on far too long- [ Interruption.] As the hon. Member for Islington South and Finsbury (Emily Thornberry) says from a sedentary position, and I can agree with her- [ Interruption.] Sorry, the hon. Member for Wallasey (Ms Eagle)-I was being barracked. I want to make a key point about the prospect of the move to a low-carbon economy providing us with a new type of economy that will be more resilient to shocks, will be jobs-rich and will provide genuine prosperity, employment and profit for British businesses, including opening up enormous opportunities in export markets. The framework that we have set out enables us to do that, and I commend the Budget to the House.
12.51 pm
Edward Miliband (Doncaster North) (Lab): May I start by congratulating the Secretary of State? He is by my reckoning the first Liberal to open a Budget debate in peacetime since 1914. That is a remarkable honour, which we should note today…….A further problem with the Budget is that it has no plan for growth. The right hon. Gentleman waxed lyrical about green industries, but he can point to nothing in the Budget that will support the green industries of the future. The Liberal Democrats said at the election that they opposed cuts this year, but they are making not only the efficiency savings that the Conservative party promised at the election, but real cuts to regional development agencies, university places and Government support for industries of the future, the most outrageous example of which is the case of Sheffield Forgemasters.


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During the debate on the Gracious Speech, I told the right hon. Gentleman that we would hold him to account on the Sheffield Forgemasters decision-and he will be held to account for it. I have to say to him in all honesty that the decision is short-sighted, damaging and wrong. The Labour Government approved a loan to Sheffield Forgemasters-not a grant, a loan. We had money from the European Investment Bank-those people do not throw money at problems when it is not required-and Westinghouse, which was going to order parts for the nuclear power stations that it wants to build in the UK, which will involve one of the only two reactor designs that we are going to have in the UK. The decision was therefore central not only to our economic strategy but to our green strategy. I know that the right hon. Gentleman does not like nuclear power, but prejudice against it will get us nowhere, either economically or in relation to the green industries of the future.

The grant to Sheffield Forgemasters would have given us the ability to make key components for the nuclear industry that currently have to be sourced from outside Britain, but the Government have turned their back on it. The Minister of State, Department of Energy and Climate Change, the hon. Member for Wealden (Charles Hendry), who is in the Chamber, is an honourable guy whom I respect, because he supports nuclear power-that is slightly complicated given his Secretary of State-but during a debate on Tuesday, he said about Sheffield Forgemasters:

If one went to a bank and said, 'I need an overdraft because I want to give more money to charity,' the bank would question the wisdom of that approach."-[ Official Report, 22 June 2010; Vol. 512, c. 26WH.]

Sheffield Forgemasters is not a charity. It has the potential to be at the centre of the green industrial revolution that our country needs. I have spoken to the management of Sheffield Forgemasters, the unions and people in Sheffield, so I know that they are bemused by the Government's decision.

I was the Minister who, along with Lord Mandelson, signed off the loan-it is not a grant-after we had looked at the arrangements over 18 months in government. It passed a whole set of value-for-money considerations, yet the Government have cut it off. I hope that the Secretary of State can force a reconsideration of the decision-

Chris Huhne rose-

Edward Miliband: I have given way to the right hon. Gentleman a number of times, but if he is going to say at the Dispatch Box that he will reconsider the decision, I shall give way, albeit more in hope than expectation.

Chris Huhne: Does the right hon. Gentleman really think that an appropriate use of public money would be to ensure that the major shareholders in Sheffield Forgemasters do not have to reduce their equity holdings below 51%? I do not think that it would be.

Edward Miliband: That is an extraordinary statement to make on the Floor of the House. A set of commercial negotiations was carried out with Sheffield Forgemasters. The decision was signed off by the permanent secretaries of DECC and the Department for Business, Innovation and Skills as a value-for-money loan, but now the right hon. Gentleman questions that.


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The right hon. Gentleman's explanation is different from that offered by the Chief Secretary to the Treasury, who said that the loan represented value for money, but the Government did not have the money. The Secretary of State is not only wrong to oppose the loan, but confused about the reason why it is not being offered. I am afraid that the Government are hampering the green revolution that we need.

Toby Perkins: Does my right hon. Friend agree that the fact that a Liberal Democrat Chief Secretary to the Treasury came to the House to tell us the decision about Sheffield Forgemasters, and that a Liberal Democrat Secretary of State is supporting that decision today, is just another sign of how the Conservative Government are using the Liberal Democrats as a fig leaf, which will shame the leader of the Liberal Democrats in his Sheffield constituency?

Edward Miliband: My hon. Friend is completely right. He has experience of booting out Liberal Democrats locally-something that will happen in many constituencies at the next general election. It is blinkered short termism: that is the only way to describe what they have done.

What is the assessment of the Budget from a green point of view? Friends of the Earth says that the

"June Budget does little to suggest"

that the coalition will keep the

"promise to be the greenest Government ever."

That is not a very good start, but I want to reassure the Secretary of State by telling him that there is praise for the Budget from an unlikely quarter. Roger Helmer, a Conservative MEP and a well known climate change denier, quite likes the Budget and says:

"Green lobbyists are whingeing that 'this is the least green Budget for years'. Brilliant! Well done George. Maybe we've come to our senses".

I have to tell the Secretary of State that for the first Budget in which he was involved to have congratulations from Roger Helmer and condemnation from Friends of the Earth is not a very good start.

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1.26 pm
Simon Hughes (Bermondsey and Old Southwark) (LD): I am happy to take part in what is clearly an important debate, in which we are invoking the spirits of forebears of mine, of ours, whom I pray in aid as part of the traditions to which I belong. Lloyd George, Keynes and Beveridge are indeed part of the family of progressive liberals, of whom I regard myself as a modest inheritor.
The most important thing that was announced in the area of energy and climate change and environmental policy, the specific theme of today's debate, was the green investment bank. It had been a Labour party commitment, and the Conservative party and Liberal Democrats were clear that it should be invented, created and got up and running. It is absolutely central to this Parliament's strategy that we set up that bank in the near future. It must not be a modest little invention hidden away in a corner; it must be a central part of the new stage of the British economy and it must draw on money from the private sector, which will be used for projects that would not otherwise be funded. But it must also help us to invest in the new generation of green jobs that will make us again the country that can export our manufacturing abilities and the success of the world. For the last 25 years, we have slipped back in manufacturing and exports in these areas and have relied too much on the City, on finance and on banking. That is not enough to sustain a modern economy, and it is not enough to change the environmental way in which we do our business and honour our international obligations.
 

The second specific area that was much discussed when I shadowed the right hon. Member for Doncaster North (Edward Miliband) and my neighbour the right hon. Member for Lewisham, Deptford (Joan Ruddock) was how to ensure that households and individuals play their part. The Labour party started that process and I pay credit to the right hon. Lady and her right hon. Friend for beginning to ensure that we make households energy efficient, reduce bills, insulate homes properly, protect the vulnerable, and so on. But the scheme was never big enough; it was always a set of schemes that were confusing and lacking in coherence. The phrase "Green Deal" comes from the Conservative manifesto, but the idea comes from both manifestos. That we have a green deal for households must also be a central part of the Government's strategy. We need to ensure that the new housing that is built and the housing that needs to be renovated and improved give us the safe, warm and pleasant housing that we need. My right hon. Friend the Secretary of State knows as well as anybody else, because he was the architect of the policy in our party a mere three years ago for a carbon neutral Britain, that the crucial area here is to ensure that the poor and the vulnerable are protected first, and that the people who spend a huge amount of their money on fuel when they cannot afford it are given the help that they need. One of the criticisms that I must repeat of the Labour Government, which I made when they were in office, is that when it came to helping the fuel poor-those who pay more than 10p in the pound of their income on fuel-they sadly failed. They tried, and I do not doubt their integrity in trying, but they failed, and we have to do better than that. We have to ensure that single people on their own, who make up 40% of 
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households, and those with families do not have the ridiculous, out-of-control bills that they had; that we save the fuel and reduce the energy that we need as a country; and that we reduce our climate change liability.

Dr Whitehead: Does the hon. Gentleman agree that, if a programme such as that which he envisages is to have any real traction, there is an absolute imperative to defend and increase the almost £200 million that was set aside for the insulation of hard-to-treat homes and social housing? Will he put that in his book as a red line on Government investment in the energy efficiency uprating of social housing? If that investment does not appear, will he publicly underline his opposition to energy efficiency improvement methods that are not underwritten properly by Government funding?

Simon Hughes: The hon. Gentleman has a good, honourable and knowledgeable track record on the issue, and, as he would expect, in this Parliament I have already met the Housing Minister, the Secretary of State for Communities and Local Government and my friend the Secretary of State for Business, Innovation and Skills to ensure that those points are made. We are just beginning the debate about where the spending cuts must be made, and a coalition of Members needs to put the case for retaining that expenditure which is necessary to pump-prime, drive and incentivise the housing stock change that we clearly need. The other central point, on which the Government have made a commitment, is to introduce the power of general competence to local councils, so that they have much more flexibility over how they address such issues.

Thirdly, on the green agenda, I note the comments that my right hon. Friend the Secretary of State for Energy and Climate Change made about the carbon price, and we await with interest the publication of the proposals to reform the climate change levy. However, I remind him that we ought to reconsider introducing the emissions performance standard, which both our parties were willing to do. Labour resisted it, but I hope that it gets back on the agenda as a way of ensuring that we make progress not just in our country, but throughout Europe.

Fourthly, and more controversially, there is nuclear power, to which the Budget referred not specifically, but indirectly in relation to Sheffield Forgemasters. I made my position clear about nuclear power before the election, and when the initial announcement was made about the Sheffield Forgemasters loan, and I have always believed that the nuclear industry will not have a viable future unless it receives public subsidy. I have never had a theological opposition to nuclear power. I believed that it was the wrong answer, contributing too little to emissions reduction and to the country's power needs, but in that context the Sheffield Forgemasters loan was inconsistent with a policy of not subsidising the nuclear power industry.

The announcement is difficult for Sheffield and for south Yorkshire, but we have to have a policy that applies from the beginning to the end, and we have to be tough on that. In reality, other countries such as Germany have now introduced a tax on nuclear power stations to make up for the fact that the industry benefits from a carbon price but does not pay for the clean-up of the legacy nuclear waste. There must be 
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economic realism in the nuclear industry. That has been our position, and it has been accommodated in our parties' agreement.

There is another matter on which I have lobbied the Government but not yet seen anything emerge, and if it could be dealt with in the ministerial winding-up speech that would be helpful. It is about helping with biodiesel that is made from recycled vegetable oil. I declare two interests: I drive a vehicle that uses it; and there is a firm in my constituency from which I purchase it, and which in turn takes it from firms locally. It is a good and environmental product, but the financial incentives for biofuels do not yet encourage the industry to grow. It is an industry of small businesses, it ought to be incentivised but the Treasury loses out because of the wrong incentives as well as inadequate incentives for the sector. I hope that that issue will be looked at, and that we might introduce an amendment to the Finance Bill in order to pick up on that individual and ring-fenced item.

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Graham Evans: To ask the Secretary of State for Energy and Climate Change what criteria have been set for companies investing in new build nuclear power plants. [4265]

Charles Hendry: Government's position on new nuclear power is clear. It is for the private sector energy companies to construct, operate and decommission new nuclear power plants, as long as they are subject to the normal planning process for major projects and that they receive no public subsidy. Operator's plans will also have to satisfy the independent safety regulators. The Government will complete the drafting of the Nuclear National Policy Statement and put it before Parliament which if approved will clear the way for planning applications for new nuclear.