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The Minister of State, Department for Business, Energy and Industrial Strategy (George Freeman)
It is a great pleasure to serve under your chairmanship, Mrs Murray. May I take this opportunity to say what a pleasure it is to be back on the Front Bench after the turmoil of the last few months?
Let me first congratulate the hon. Member for Linlithgow and East Falkirk (Martyn Day) on securing the debate, and David and the 100,000 public petitioners who triggered it. As an open democrat, I welcome the fact that the public are able to trigger debates. It is important that we respond, and I am glad that the public will be able to see the response both in real time and recorded. I thank hon. Members for their contributions, and I am grateful to all those who have taken an interest in the topic.
The petition received over 100,000 signatures and calls on the Government to do two things: to set out a coherent 25-year plan for UK energy security and strategy, and to take back ownership of our strategic energy assets. As the Minister for Science, Technology, Research and Innovation in the Department, I am delighted to be replying on behalf of the Minister for Climate, my right hon. Friend the Member for Beverley and Holderness (Graham Stuart).
Let me put everyone out of their misery of expectation and anxiety about what I might say. I absolutely agree that we need a 25-year coherent plan for energy, which is why the Government have put just that in place. I also agree that we need to think much more strategically about our energy security resilience and energy economy, but the Government do not agree that nationalisation is the right way to achieve the objectives that many, but not all, of us share. I say that not in the spirit of complacency at all.
It is fair to say that successive Governments over the last 40-odd years have taken cheap energy rather for granted, and have not foreseen the urgency of decarbonising our energy supply nor the geopolitical perils of being dependent on overseas suppliers, often from hostile or unsavoury regimes.
George Freeman
I will just finish this list, if I may. I approach this issue with no ideology, either. All parties have had their problems in the past: in the ’60s and ’70s Labour was rather heavily dominated by the union barons, and the nationalised industry did not do nearly enough to promote innovation. I notice no Liberal Democrat Members here; theirs and the Scottish National party’s tribal opposition to nuclear leaves them playing one-club golf. I do not think there are any easy solutions to this issue, but I do not want to dismiss the urgency of the problem.
Margaret Greenwood
The Minister is talking about a 25-year strategy. Given that we are facing a climate emergency, could he explain what the thinking was, and presumably still is, on allowing companies to shield 91% of their profits from a windfall tax designed to tax profits? That means that they are able to invest those profits in fossil fuels.
George Freeman
I will happily set out the explanation for our position, which I think will deal with that point. If it does not, I am sure that the Climate Minister will want to follow up with the hon. Lady. We profoundly believe that the way to deliver a low carbon, net zero, sustainable, resilient British energy market and supply chain is to harness the market—the enterprise, the investment, the leadership and the management excellence of the free market—but not in an untrammelled way. I will set out in a moment how our approach is not at all about the free market but about harnessing the market with a lot of regulations, shape and structure, harnessing the genius of the market to public ends. That is a fundamental difference.
Margaret Greenwood
I thank the Minister for giving way; he is being generous with his time. He talks about harnessing the market, but he is talking about directing that investment at fossil fuels. How does he square that with our need to meet net zero? That does not make sense.
George Freeman
I will deal with that point as I come on to explain our position on net zero and the extraordinary success that the market has had, with appropriate regulation.
George Freeman
I would like to make some progress as I have hardly even got through my first paragraph, but I will give way.
Alan Brown
I thank the Minister for giving way again. On energy resilience and his point about harnessing the market, we know that energy resilience requires long-duration storage. That can be provided by pumped-storage hydro, a technology that already exists. SSE has all the permissions in place to build a new pumped-storage hydro scheme at Coire Glas. It will have 1.5 GW output. All the private investment is there—we are talking about harnessing the market, but the private investment is already there. All that is needed is for the Government to negotiate a cap and floor price mechanism for the sale of electricity. Will the Minister commit to having officials speak to SSE and other operators in the pumped-storage hydro market to bring these schemes forward?
George Freeman
I did make clear that I am not the Climate Minister, so I am not going to make that commitment on his behalf, but I will make the undertaking that he will follow up that specific point with the hon. Member.
I will make some progress and summarise, not least for those listening and watching, the background to this debate and where we have been with British energy policy. Almost four decades have passed since the privatisation of the British energy system began—long enough that I forgive all those watching who may have forgotten why the original decision was taken.
Back in the 1970s, nationalised industries were run by Government, along with many others, and they were in a very bad state, not least the energy industry. These inefficient monopolies were leaking cash, and they needed much more money to upgrade their age-old and similarly leaky infrastructure. Privatisation, beginning in the 1980s, has completely transformed that situation. I am not suggesting that the energy market is functioning perfectly, but it has transformed that situation.
It is a shame that this debate has had so little balance and so few references to any of the successes of any private industry. Indeed, at times it sounded like a Corbynite litany of anti-capitalist, anti-business complaints. This debate needs some balance. I am not saying that the energy market is perfect, but let us at least acknowledge the extraordinary progress in the last few years.
George Freeman
No, I am going to make some progress. Since privatisation, the UK’s energy sector has attracted around £20 billion a year of private capital investment into our energy infrastructure. That money would otherwise have had to come from higher taxes or additional borrowing. Those are policies that the Opposition may prefer, but we prefer to secure private capital to secure those public goods.
The cost of transporting a unit of electricity has fallen by 17% since the 1990s, while investment has increased. Energy efficiency has gone up. Reliability has increased. Customer service has improved—though it is still not perfect. The number of power cuts has almost halved. These are the real lived experiences of people over the last 30 or 40 years of privatisation. Finally, current market arrangements have allowed for massive decarbonisation of our energy system, with dramatic drops in the cost of renewables.
It is worth making the point that between 1990 and 2019, we grew the UK economy by 76%, and we cut our emissions by over 44%, decarbonising faster than any other G7 country. That is an extraordinary achievement, secured by the private sector working in partnership with Government. There is more. In the last 15 years, not only have we led the way in decarbonisation; we have also led the way in many of the specific areas of clean energy. We have put it at the heart of the UK’s commitment to reduce emissions as we expand our economy.
Personally, having arrived here following the 2010 election, I would have liked to have seen the coalition and the Lib Dem-run Department of Energy and Climate Change take the opportunity of a “buy one, get five free” nuclear deal and double and modernise our nuclear capacity. The Lib Dems were religious in opposition to anything nuclear—a position seemingly mirrored by the SNP—but they also thought it would take too long to come on stream. I have news for listeners. It would have been on stream now. We would have had a high-quality, green, resilient supply of nuclear energy for one more generation, guaranteeing clean and green resilience, and many jobs in Scotland, and we would have been able to use this period to invest in the range of renewables that hon. Members have hardly mentioned. I will come to those in a minute.
Nobody can look back and say that this was all easy. A lot of mistakes have been made, but the truth is that our net zero strategy is the most comprehensive of its kind. The British energy security strategy sets out extra ambitions to those we set out in 2010. It is on track to secure 480,000 well-paid jobs by the end of the 2030s, unlocking £100 billion in private investment by 2030 and mobilising £30 billion of Government investment. That is not the free market with no support from Government. It is a massive programme of Government in partnership with the private sector, and that is why we have driven down emissions at the fastest rate in the G7.
Dr Whitehead
Does the Minister agree that, as has been suggested in this debate, quite a lot of the investment that has been achieved for future energy—indeed, it is coming in now—is from companies representative of other states in Europe putting forward that investment, so we could say that he would be happy to have publicly owned investment in this country, provided it is not from the UK? Is that the right conclusion to come to?
George Freeman
I am not totally sure I understand the question. The point is that we live in a modern global economy. I do not think anyone other than political dinosaurs would think we can ring-fence all investment to only one country. We live in a global economy, and that is all to the good. This country benefits hugely from that investment. A huge risk of the proposed renationalisation is that, internationally, it would destroy investors’ confidence in the UK, and that is something we have to think seriously about. We do not have a right to attract international investment. We need to be competitive, and this debate has lacked that point.
We are a world leader in offshore wind, with an ambition to deliver up to 50 GW of offshore wind power by 2030, including 5 GW of floating wind. That is something to be proud of. In my part of the world in East Anglia, the southern North sea is rapidly becoming the Saudi Arabia of wind energy. With proper interconnected offshore grid connectors, we will be able to use off-peak energy to generate green hydrogen. That is an exciting development and it has all been provided by the market—not the free and untrammelled market of the profiteering stereotype, but businesses investing in partnership with Government.
We continue to break records in renewable energy, which has more than quadrupled since 2010, with low-carbon electricity overall now giving us more than 50% of our total generation. It would have been nice to hear Members at least pay tribute to that achievement, rather than attack the profiteering businesses that have been at the frontline of delivering it.
We have installed 90% of our solar capacity in this country since 2010, which is enough for 3 million homes. That has happened—
George Freeman
No, I am going to make some progress.
That capacity has happened by harnessing the power of the market. I do not think anyone would suggest we have had an untrammelled free market. I am not here to make that case; others may. It has been a partnership of the private and public sector. That is why the Government continue to believe in properly regulated markets.
I have written and spoken widely about the opportunity Brexit gives us to set our own regulatory standards—not in a race to the bottom, but in a race to the top—and to set the standards in the smart grid, in digital energy and in new forms of energy. There is a huge opportunity for us to use that freedom to incentivise private capital to invest in the energy system, provide the best outcomes for consumers, and promote market competition as the drivers of efficiency, innovation and value.
My party believes profoundly that private ownership of energy assets, properly regulated, improves performance and reliability, and offers consumers greater choice and higher standards of products and services. No market is perfect. There are always pay-offs and balances, but it is very difficult to see how nationalisation would work, particularly as it has been set out this afternoon, with no detail, vague assumptions that there will be lots of money, which would come in the end only from taxation or borrowing, and very little understanding of how it would be done. Anyone listening to this debate has not heard a serious proposal for how nationalisation would happen. They have simply heard a ragtag of arguments against the private sector and against business.
The argument becomes even more important when we look at the global market and the international energy market in which we find ourselves. These days, no energy market exists in isolation. We do not exist in a vacuum. The pandemic and the war in Ukraine have revealed painfully the interdependence of our global energy supplies. We are not in a position where we can unilaterally declare independence from the global markets. Any renationalised energy company would still have to buy its gas on the global market at the same price—there is no way round that. But it does heighten the urgency of reducing our dependency on foreign actors, hostile states and those who might use their energy power to exercise geopolitical influence on us.
We are absolutely committed, as we have set out, to diversifying our energy supply and resilience. We understand that sky-high global energy prices, caused by Russia’s appalling invasion of Ukraine, are having real consequences for consumer bills across the country, exacerbating the consequences of the pandemic shutdown of the global economy and its refiring up and opening, which has driven inflation into the system. European gas prices soared by more than 200% last year, and coal prices by more than 100%, leading to an inevitable increase in the cost of energy, which drives the cost of living across our economy.
That is why, through our British energy security strategy, we are absolutely committed to—and are already implementing—support for diverse sources of home-grown energy to provide greater energy security in the longer term. Let me unpack that: we have set out, first, a comprehensive long-term plan, just as today’s motion calls for, to 2050 for our energy system in 2020’s 10-point plan for a green industrial revolution and the energy White Paper. It needed doing and it has been done. Secondly, the British energy security strategy, published in April this year, charts a pathway to reducing our vulnerability to international energy prices by reducing our dependence on imported oil and gas.
We will achieve our ambitions by accelerating the deployment of wind, solar and new nuclear energy, supercharging our production of low-carbon hydrogen, and within my portfolio supporting next-generation energy sources including fusion and small modular nuclear. We will support North sea oil and gas in the near term for security of supply, and the important work that is being done in Scotland, particularly on the North sea transition, to turn that infrastructure into the infrastructure for clean, green energy.
Thirdly, we will ensure a more flexible and efficient system for both generators and users, undertaking our comprehensive view of electricity market arrangements to ensure that consumers fully benefit from the next phase of our energy transformation. That is why we have committed to publishing, with Ofgem, a strategic framework this year on how networks will deliver net zero. Fourthly, not only are we thinking about reforming energy supply, but we have an ambitious programme of energy efficiency measures to lower demand, and to bring down bills and emissions.
Nationalisation, however, will not solve or help to tackle those challenges, for a number of reasons. First, as I have said, nationalised energy companies would still have to buy gas on the international markets. There is no price reduction that comes with being nationalised. Secondly, if a Labour Government, or perhaps more likely a Labour-SNP-Lib Dem coalition, who were committed to renationalisation came into office, their measures would mean that the British taxpayer would have to compensate directors, shareholders and creditors to the tune of tens of billions of pounds—money that would otherwise be spent on schools, hospitals and public services. Thirdly, the sort of nationalisation that has been talked about blithely but not explained would hugely damage our ability to attract the international investment that I have set out, which is key to delivering net zero.
Dr Whitehead
The Minister is either not hearing what is being said by the Opposition, or he is going out of his way to put it in an entirely different light. Neither the Scottish nationalists nor the Opposition have said that we want to renationalise the whole energy industry; we have said that different ways of working from the complete market fetishism that has been going on would be much better for attracting investment from the private sector. A reliable partner in Government could, among other things, bring the cost of capital down. That is very different from what he is talking about.
George Freeman
It is. It is also different, as the record will show, from what Opposition Members said. For an hour, I listened to a reheated hash of the same old anti-capitalist, anti-business, easy—
George Freeman
Yes, I did, and the record will show it. Those interested in how we might build a modern energy economy will observe that there was very little detail on how nationalisation will be done. Very little was said about innovation, new sectors, or how we create exciting areas of innovation, use the smart grid, create a network of incentives, penalties, rewards and points, and empower consumers. There was none of that. It was a litany of the same old Labour and SNP anti-business, anti-capitalist talk of profiteering companies. Those are, by the way, the same companies that pay dividends into the pension funds of our constituents—and probably the trade union barons who are lobbying for this nationalisation. It is old-fashioned economics that has been proven not to work. I was hoping to come this afternoon and hear—
George Freeman
No, I have had enough of giving way. All Members are doing is repeating the same points that we have already listened to, and I want to make some progress.
I will turn to the winter support for energy bills, which is a really important issue and relates to the second half of the petition. We are absolutely committed to reducing the impact on people’s bills of the terrible global events that I have described, including the impact of the war in Ukraine and of the reopening of the global economy after the pandemic. As this Prime Minister and the two previous Prime Ministers have made clear, we are absolutely committed to helping the British public through this, and we are taking action at an unprecedented scale.
First, our energy price guarantee will save a typical British household about £700 this winter. Secondly, that comes on top of the £37 billion package of support announced earlier this year, which will give all households circa £400 off their energy bills through the energy bills support scheme. That means a typical household saving about £1,100. Thirdly, we are taking further, targeted action to ensure that the most vulnerable can stay warm this winter: the UK’s poorest families will continue to receive £1,200 of support—including £400 from the energy bills support scheme—provided in instalments over the year, with additional support for pensioners and those claiming disability benefits.
Fourthly, the Government are investing more than £6.6 billion across this Parliament in critical work to improve energy efficiency and decarbonise heating. We will deliver upgrades to more than half a million homes in the coming years through our social housing decarbonisation fund, home upgrade grant schemes and energy company obligation scheme, delivering average bill savings of £300. Fifthly, we have extended the energy company obligation from 2022 to 2026, boosting its value from £640 million to £1 billion a year, helping an extra 450,000 families with green measures such as insulation.
Sixthly, it is not just households; we are also taking action to support schools, hospitals and businesses. Through the new energy bill relief scheme, the Government will provide a discount on wholesale gas and electricity prices for all non-domestic consumers in Great Britain and Northern Ireland.
This is not the free-market, laissez-faire, devil-take-the-hindmost economics that has been portrayed this afternoon. This is a Government taking huge and unprecedented steps—on a scale with those we took in the pandemic—to help families, households, businesses and charities to deal with the global cost of living crisis. Again, it would have been nice to hear some reference from Opposition Members to the immensity of that package.
I come now to energy profits—an issue that Opposition Members raised. We are not just cutting bills in the short term; we are thinking about how we can guarantee an affordable, clean and secure supply of energy for this winter and beyond. We have listened closely to the public debate about the profits enjoyed by energy generators thanks to high international gas prices. We have not just listened; we have acted. That is why in May we introduced a 25% surcharge on extraordinary profits in the oil and gas sector, which will raise about £5 billion over the next year. That revenue will support our support for those hardest hit by the rise in the cost of living and cost of energy.
We have brought forward primary legislation to give us powers to deliver a temporary revenue limit for renewable generation in the wholesale market. The details of that proposal will be set out in subsequent secondary legislation, and we are committed to collaborating closely with industry to develop it further. This will return a substantial amount of excess profits—profits made through the price surge—to consumers via suppliers.
Alan Brown
To get some sort of level playing field, why is there not a renewable energy investment allowance that allows tax write-offs for greater investment in renewable energy, when there is one for oil and gas. It just makes no sense if the Minister is talking about having a cleaner, greener system going forward.
George Freeman
I refer the hon. Gentleman to the facts as I have set them out. We are attracting billions of pounds of investment into clean energy—into a whole raft of new renewables. I do not think anyone would argue that the UK is struggling to attract international investment. What we need to do, which I completely accept, is not just to accelerate the deployment of wind and solar, but to continue to invest in the technologies of tomorrow to ensure that we are able to increase global and UK energy supply for a modern society and economy in a way that is clean, green and smart and that develops new jobs.
I am surprised that Opposition Members are not more excited by the opportunities in this sector for Scotland, which would be recklessly undermined by an uncosted, unthought-through plan for both nationalisation and independence, without credibility for how those plans are going to be funded. That is why our energy security strategy sets out a long-term plan for the whole UK that reduces our vulnerability to international energy prices by reducing our dependence on imported oil and gas.
We know that this is a very difficult time for families and businesses who are struggling, and that this issue is a matter of genuine public concern—as this petition rightly shows. However, I hope that I have reassured the hon. Members who are present in Westminster Hall and the constituents who they nobly represent that we are addressing this issue with the seriousness that it deserves.
Margaret Greenwood
I thank the Minister for giving way; he is being very generous with his time. Recent reports have shown that a lot of people on prepayment meters are not taking up the support. What steps can his Government take to make sure that 100% of people can take up the support that they need, because my big concern is that the most vulnerable people will struggle in this situation?
George Freeman
The hon. Lady makes an important point about the particular circumstances of those people on prepayment meters and those who are most prone to energy poverty and vulnerability. Again, I am not the energy Minister so, with permission, I will allow the Minister for Climate, my right hon. Friend the Member for Beverley and Holderness, to follow up that point with her.
This is a long journey. It is one that we, as a country, started on a little late, but we have led the world in moving at pace, and that is a tribute to all the parties involved, to be fair. The last Labour Government before 2010 began some important measures; we in the coalition took things forward; and the Conservative Governments have pursued things at pace since. I believe that we are on the road to success and I have no doubt that consumers will be at the heart of Government policy every step of the way.
Right now, that means we are focused on doing all we can to support consumers through the very difficult winter ahead, but nationalisation is not the right solution. I will just say that it has been rather extraordinary for me this afternoon to see how strongly the old anti-capitalist politics of the hard left have been shown to continue to thrive in the Labour party and the Scottish National party. We have heard aeons about anti-business millionaires and profiteering, and there has been no talk about companies generating the profits that drive dividends that supply pensioners with revenue, or public sector workers with their pensions, or, for that matter, the trade unions with their pensions.
We have heard nothing serious from the SNP about how it would pay for independence, which has traditionally been based—on its own assumptions—on the revenues from oil and gas. The SNP is anti-nuclear—it appears to be anti-everything that will score a point—but there is no serious and costed plan for how Scotland could be in the vanguard of the new energy economy. The Liberal Democrats, who are not present here today in Westminster Hall, have described Labour’s policy of nationalisation as “pointless and costly”.
Dr Whitehead
We have not got a policy of nationalisation. The Minister is not telling the truth.
George Freeman
Thank you, Mrs Murray.
We have heard nothing today about the really exciting opportunities in our energy sector: the new renewables, including those in marine, tidal, geothermal, hydrogen and fusion, that this Government and I, as Minister with responsibility for research, are supporting. There are also opportunities for the UK’s cleantech sector—the small and large companies that are in the frontline of developing global solutions for new energy. We have heard nothing about the smart grid, the importance of incentives or the digitalisation of the grid to create a micro-market and bring net zero down to the ground in different communities. We have heard very little about energy use. We have heard a lot about generation, but very little about how transport and agriculture—the two big industries on the frontline of energy usage—are making huge strides in decreasing their reliance on energy. Instead, we have heard quite a lot of the old dogma of decline.
To be honest, I think that explains why there are so few colleagues from other parties here this afternoon; most of them are more interested in trying to develop practical solutions. I honestly think that the 100,000 people who petitioned for a proper debate about long-term energy strategy deserve something slightly better than we have heard today, and the Government are determined to provide it.
Mrs Sheryll Murray (in the Chair)
Mr Martyn Day, you have two minutes to wind up.