Draft Pollution Prevention and Control (Fees) (Miscellaneous Amendments) Regulations 2022

Alan Brown Excerpts

Tuesday 24th May 2022 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

I beg to move,

That the Committee has considered the draft Pollution Prevention and Control (Fees) (Miscellaneous Amendments) Regulations 2022.

It is a pleasure to serve under your chairmanship, Ms Bardell.

The draft regulations were laid before the House on 25 April. As the environmental regulator of the offshore oil and gas sector, which I will refer to as the offshore sector, the Department for Business, Energy and Industrial Strategy’s Offshore Petroleum Regulator for Environment and Decommissioning—snappily abbreviated to OPRED—recoups the costs of its regulatory functions from the offshore sector rather than the taxpayer.

OPRED minimises the impact of the offshore sector on the environment by controlling air emissions and discharges to sea, and minimising disturbance over the lifecycle of operations, from seismic surveys through to post-decommissioning monitoring. Its recoverable costs are covered in two ways: in regulations covered by the fees regulations; and by five fee schemes that do not require legislative change and which will be amended administratively.

OPRED’s average annual fees income is £6.2 million, which is recovered from about 120 companies. It recovers its costs via fees based on hourly rates. The fees that OPRED charges are currently based on hourly rates of £197 for environmental specialists and £108 for non-specialists. Specialists are technical staff who carry out the functions of the Secretary of State, and non-specialists are support staff. The current hourly rates have been in force since June 2021. OPRED reviewed the cost base and concluded that the existing hourly rates needed to be revised to reflect the present costs to OPRED for providing regulatory services.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Will the Minister provide a bit more detail about the qualification level of environmental specialists that merits their high rate, and the qualifications of non-specialist support staff, given that their rate is still very substantial at £104 an hour?

[Paul Scully]

The headline figure is less to do with personal specialisms, and more to do with admin and back office specialisms. Support staff obviously have a different point of view from the specialists looking at the exact decommissioning services that OPRED tackles.

The draft regulations will amend the charging provisions by increasing the existing hourly rates for environmental specialists to £201 and decreasing the hourly rate for non-specialists to £104; that reflects the administrative whole, rather than the individuals themselves. The fees are determined by adding together the hours worked by specialists and non-specialists on cost-recoverable activities, multiplied by the hourly rates. The new hourly rates were approved by the Treasury in March and were calculated in line with the Treasury’s “Managing public money” guidance. They cover the expenditure on all resources used by OPRED to support its activities—for example, staff salaries, accommodation, IT and legal services.

OPRED’s costs-recoverable functions include, for example: the evaluation of applications and issuing of consents for seismic surveys, and conducting assessments of the likely environmental effects of proposed projects; assessing operators’ oil pollution emergency plans; and compliance monitoring through inspections. The payable fees will be revised by small amount to enable OPRED to recover its eligible costs. OPRED’s fees regime guidance will be revised to reflect the new hourly rates. OPRED informed the offshore sector of the planned revisions to the hourly rates, and no representations were received.

The revisions to the hourly rates introduced by the regulations will allow operators to recover the costs of providing regulatory services from those who benefit from them, rather than the costs being passed on to the taxpayer. I hope that hon. Members will support the regulations, which I commend to the Committee.

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[Alan Brown]

It is a pleasure to serve under your chairmanship, Ms Bardell.

I will not delay the instrument much longer and will certainly not vote against it, because as the shadow Minister—the hon. Member for Southampton, Test—said, it is pretty non-controversial. I just wonder whether the Minister will provide a wee bit more information on the different duties and qualifications of specialist and non-specialist staff. Paragraph 7.4 of the explanatory memorandum mentions that the number of hours worked in recoverable duties is 1,243, which is less than one full-time equivalent person, so will he provide some more information on staffing levels?

Draft Contracts for Difference (Miscellaneous Amendments) Regulations 2022

Alan Brown Excerpts

Monday 23rd May 2022 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Lee Rowley)]

I beg to move,

That the Committee has considered the draft Contracts for Difference (Miscellaneous Amendments) Regulations 2022.

I am grateful for the opportunity to contribute today. In the sixth carbon budget, the Climate Change Committee emphasised the crucial role that carbon capture and storage will play in reducing emissions from industrial processes, combustion, electricity generation and hydrogen production. The energy White Paper 2020 set out the Government’s view on how to achieve a low-cost, low-carbon electricity system. Although we cannot predict exactly what the generating mix will look like in 2035, we have made a commitment to decarbonise the UK’s electricity system by then, subject to security of supply, and we are confident that renewables will play a key role. However, in order to decarbonise while maintaining security of supply and ensuring that costs are kept low, we will need to balance renewable variability against continuing demand. To do that, we will need system flexibility, energy storage and non-weather-dependent, low-carbon power generation.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

On the Minister’s comment about being unable to predict the energy generation mix in 2035, can he at least predict what the mix will look like in 2030? Clearly, the Government have set their own targets—for example, on what offshore wind will look like in 2030. We have a so-called energy security strategy, which I would have thought is key to the Government being able to predict what the mix will look like and then plan accordingly to facilitate that.

[Lee Rowley]

I am grateful for the hon. Gentleman’s intervention. The point of what I am trying to articulate is that this is a journey that will potentially vary over the course of a number of months and years. We will not know whether it is 1%, 5% or 10%, but the journey of the overall mix is towards a renewable and clean energy future, and we are absolutely committed to getting there. We consider that thermal power with carbon capture and storage is one technology that will provide this at scale and help in the journey that the hon. Gentleman outlines.

In the subsequent net zero strategy, the Government committed to use consumer subsidies to support the construction of at least one power CCS plant, which is to be operational by the mid-2020s. In the round, these strategies illustrate the critical importance of carbon capture and storage technologies, and we have developed specific business models to bring forward carbon capture, utilisation and storage projects. Existing schemes are not considered fit for purpose, because such projects require specific support, given the need for co-ordination across the sector, with supporting infrastructure yet to be built. To enable this, we have developed the dispatchable power agreement. This is a carbon capture storage subsidy for gas-fired projects connected to a full carbon capture and storage system, and it is intended to provide low-carbon, flexible power generation.

The dispatchable power agreement contract is a bespoke contract based on the standard terms of the contracts for difference used previously in allocation rounds, but with specific amendments to ensure suitability for power carbon capture and storage. The dispatchable power agreement will be a key tool used to ensure low-carbon electricity generation by bringing forward investment in power carbon capture storage plants, and to incentivise such facilities to operate in a manner that benefits the UK energy market. The DPA incentivises investment in order to bring forward projects that are ready to build low-carbon generation capacity. The availability payment incentivises power CCUS projects to maintain a high level of capture rate throughout the life of a contract. It is commonly referred to in the business model and is intended to implement our commitment.

The draft regulations were laid before the House on 31 March 2022. The amendments in the instrument laid before the House today are therefore needed to ensure that existing regulations under the Energy Act 2013 can be used to award DPAs. Those regulations are used to award contracts for difference currently: the proposed amendments are not intended to impact the standard CFDs for the current allocation round or future allocation processes of the standard contract for difference.

This statutory instrument introduces three changes to the existing regulations: the Contracts For Difference (Allocation) Regulations 2014—the allocation regulations —and the Contracts for Difference (Definition of Eligible Generator) Regulations 2014—the eligible generator regulations. The statutory instrument amends the eligible generator regulations specifically with regard to the definition of an eligible generator. Currently, new-build generating stations connected to a complete carbon capture storage system are eligible generators. The change we propose allows a retrofitted carbon capture storage project to constitute an eligible generator. It does that by widening the criteria for carrying out a generating activity to include altering an existing generating station into a generating station connected to a carbon capture storage system. By making that change, retrofitted power carbon capture storage plants can be eligible for the dispatchable power agreements.

The statutory instrument also amends the allocation regulations. Currently, the allocation regulations include a specific reference to the contracts granted pursuant to section 10 of the Energy Act 2013. The regulations refer to such contracts and the language suggests that they will include a strike price and a reference price within their payment mechanism. The amendment retains the reference to a strike price and a reference price, but also amends the language to state that such prices may be included, although an alternative payment mechanism that does not use those terms could be used in future. That ensures that contracts that do not specify a strike price and a reference price can be contemplated. It means that there will not be a requirement for those specific terms to be used in dispatchable power agreements, which will allow for the alternative mechanisms that I have suggested.

Finally, the statutory instrument amends the eligible generator regulations. Currently, an eligible generator is defined as connected to a complete CCS system, and a complete CCS system is defined as a system of plant and facilities for capturing some or all the carbon dioxide, or any substance consisting primarily of carbon dioxide, produced by or in connection with the generation of electricity by a generating station, and transporting the carbon dioxide or the substance captured and disposing of it by way of permanent storage. The proposed amendment was to add the words into limb (b) after transporting—

“including by way of non-pipeline transport methods”—

to make it clear that transport can contemplate alternative transport methods. The existing language does not necessarily limit the potential methods by which transport can be done, but it makes it unambiguous that this definition is not intended to be limited to pipeline methods. That is consistent with the consultation respondent who noted that it would be helpful that transport could be carried out by way of non-pipeline methods.

The proposed amendments in this statutory instrument are intended to facilitate non-pipeline transport generally. The proposed changes to the eligible generator regulations aim to be neutral regarding what those possible configurations could be.

To confirm that this statutory instrument is the most appropriate way to approach this area, in accordance with the Energy Act 2013, a consultation was carried out last year between July and September, and a response was given two months ago on gov.uk. We received 16 responses to the consultation; some directly involved in power CCS, some trade associations, some non-governmental organisations and other interested parties. The responses were largely positive and in favour of the proposed changes. Respondents requested some clarification, which have been provided in the official published Government response.

[Alan Brown]

Will the Minister explain why no impact assessment was done for the draft regulations? We are talking about consumer subsidies, so we should have an impact assessment of what it could mean for people’s energy bills.

[Lee Rowley]

I will be happy to answer the important point the hon. Gentleman raises when I conclude, along with any other comments made.

Let me conclude in order to give Members the opportunity to comment. The draft regulations facilitate the Government’s CCUS programme generally, but the decision to award support is separate. Decisions about the specific support that will come through those remain subject to the outcome of a separate process and value for money and affordability considerations. The measures introduced by the SI are aligned with the Government’s carbon budget and net zero targets, as they help to enable power carbon capture and storage projects. I commend the draft regulations to the Committee.

--- Later in debate ---

[Alan Brown]

It is a pleasure to serve under your chairmanship, Mr McCabe. I welcome the regulations, as far as they go, although, frankly, they do not go that far in the big picture. It is mystifying why it has taken so long to get to this stage, considering just how important carbon capture and storage is going to be. As the Minister stated, it is part of the pathway to net zero, and it will also be critical for meeting the 2030 nationally determined contribution, with its target of a 69% reduction in emissions.

With that in mind, it is surprising that paragraph 7.1 of the explanatory memorandum states that the DPA

“is in the process of being finalised”.

Can the Minister confirm the timescale for the creation of the DPA documents? Paragraph 7.1 also restates the intention, which the Minister mentioned, to have at least one CCS power plant operational by 2030, supported by consumer subsidies. What is his anticipated timescale for getting agreement and sign-off of the final investment for that power station, because 2030 does not give us that long to have a new CCS power plant operational? Is it still the case that consumer subsidies will be allocated to only one single CCS power station pre-2030? If so, does that mean that the favourite for the new station is the one in the Humber and Tees cluster? Does that mean Peterhead and the Scottish cluster will still be lagging behind and remain in reserve status, rather than being put into track 1, which frankly is still letting down the north-east of Scotland?

Paragraph 7.4 of the explanatory memorandum mentions that applications have been made by power station companies. How many applications have been made and when will the Government sift through them and begin to take them forward?

It seems clear from paragraphs 7.4, 7.11 and 7.13 of the explanatory memorandum that the strike price or pricing mechanism is an all-in price for the electricity and the carbon storage element. Can the Minister confirm that I have read that correctly and that there is no intention to have a separate pricing mechanism for the storage of carbon dioxide? I ask that because there have been discussions previously about formulating a business model for carbon dioxide storage. Is there an intention to bring forward a pricing mechanism for the storage of carbon dioxide? That will probably be required when looking at storing emissions from the industrial clusters, because they need some sort of reward mechanism. Or with a carbon pricing mechanism will be developed such that it becomes just as cost-effective to store the carbon dioxide as to pay a carbon tax?

How will the Government assess the relative merits of a new build CCS power station versus retrofit in terms of value for money? If the carbon dioxide is transported by heavy goods vehicle or ship, how will the Government take cognisance of the additional carbon footprint of such projects? It would be self-defeating to have a so-called zero carbon power plant that relied on diesel ships to transport the carbon dioxide to be stored somewhere else.

Paragraph 7.13 of the explanatory memorandum makes it clear that the payments will effectively be for the additional costs associated with carbon capture, with a separate payment for the plants being available to dispatch power when required. Is that the correct approach, or should the Government consider even greater flexibility? The shadow Minister touched on biomass carbon capture and storage. Biomass plants have a constant output of electricity. Surely, the Government need to consider a strike price for electricity generated on a constant basis from the likes of biomass plants. Is that something that they will look at? Will further amendments to regulations, or separate regulations, be required to help facilitate that?

On dispatchable electricity, the approach illustrates perfectly why a similar attitude is needed from the Government towards pumped storage hydro. That would be really beneficial. Pumped storage hydro technology has been in place for decades. I have constantly raised the fact that SSE has all the permissions in place for the proposed new pumped storage scheme at Coire Glas in the highlands, and Drax is almost there for its proposed doubling of output at Cruachan dam. Why are the Government not looking at dispatchable power agreements or a minimum floor price for electricity for those projects?

Coire Glas could be operational by 2030. With more proactive support, it could have been delivered quicker than that, and it is quite possible that it could still come on stream before Hinkley. Where are the Government with dialogue and discussions on business models to allow pumped storage hydro to proceed? Getting these shovel-ready projects going will send a signal to investors who will bring forward other pumped storage hydro schemes.

It was reported on Friday that that Hinkley Point C is now plus 50% in cost, and that it will be summer 2027 before reactor 1 comes online. Hinkley will cost about £26 billion. The Government will argue that, nominally, that additional cost will be swallowed by EDF, but no company can swallow £8 billion in additional cost without trying to recover it from consumers or, frankly, it would go bankrupt. Coire Glas pumped storage hydro would be built for a maximum of £1.5 billion. Instead of spending so much on nuclear, the Government would be better investing in more dispatchable energy. That is something that they need to look at as part of the big picture.

On power stations with CCS, whether they are new or retrofitted, does the Minister envisage that each agreement will be bespoke, depending on the plan and individual negotiations, or will there be an auction process, in the way that conventional CfD auctions are held? If the arrangements are bespoke, what does that mean for utilising cost consultants, and is the existing capacity in the Low Carbon Contracts Company enough to deal with such new contracts? Why is there no impact assessment for what this could mean for consumers’ bills, especially as we are in this cost of energy and cost of living crisis?

I put it to the Government again: why is everything done in dribs and drabs? When will they amend the Electricity Act 1989 to define electricity storage as a distinct subset of generation? This is the third Parliament in which I have been getting the same answer to my written parliamentary questions on this matter: “When parliamentary time allows.” Why are we not doing a strategic look at the legislation and all the policies required to facilitate storage and dispatchable energy, instead of a wee bit here and a wee bit there? When will we have an energy security strategy that is actually a strategy and not simply targets?

I have to say that I welcome the offshore wind and floating offshore wind targets that have been set for 2030, but what is being done to have a holistic, forward-looking look at what grid upgrades are required to facilitate these new targets? RIIO-2 probably already needs to be revised because of the new 2030 targets. Such a strategy should also determine what additional dispatchable energy will be required—and any coherent strategy would eliminate nuclear, which I have already touched on.

Much more work is required urgently, strategy-wise, to address key issues, to get the Scottish CCS cluster into track 1, and to get agreement for pumped storage hydro schemes as a priority. I hope that the Minister can address those questions.

[The Chair]

A few things there to get your head around—Minister.

[Lee Rowley]

I thank everyone for their contributions. I welcome the welcome: as a Committee, I think we are broadly in assent with the substantive points in the regulations. Alongside that, there were a substantial number of questions, some about the specifics of the statutory instrument, which I shall address as best as I can, and some about energy policy more broadly.

While I accept hon. Members’ challenge to contextualise what we are talking about today, I hope that they will forgive me if I do not seek to delay the Committee too long by debating aspects of broader energy policy, such as the validity and value of nuclear, the potential alternative approaches with hydro, grid upgrades and the like, simply because they are broader than this relatively narrow SI and there are opportunities elsewhere in this place to debate them.

I completely understand and acknowledge the points made by the hon. Member for Kilmarnock and Loudoun, but “dribs and drabs” is perhaps a little unfair. We are trying, in a careful, cautious and incremental way, to address the specific issues that we need to address to ensure that our statute book works for some of the changes that we are making, with a very ambitious and broad-based approach to transforming and decarbonising the energy system over the long term.

The hon. Gentleman asked about the impact assessment. There is no requirement at this stage to undertake an impact assessment, although he can see from the process that we have undertaken, particularly around the consultation, that a significant amount of work was done to understand people’s views. When we have changed the law and we are seeking to put things through the process we are changing today, appropriate consideration can be given to various mechanisms. We have been clear that there will be changes, and I referred to some of them in my opening speech.

The hon. Member for Southampton, Test asked a number of detailed questions about biomass. My understanding is that BECCS could be eligible, provided that it is connected to the complete CCS systems that I talked about in my opening speech and that are mentioned in the broader contextual documentation that is available. However, on the broader questions about biomass, I again defer to the strategy, which will be published in due course.

[Alan Brown]

Paragraph 7.13 of the explanatory memorandum states clearly:

“It is not directly linked to the actual amount of electricity it produces but rewards the plant for being available when needed and capturing the level of CO₂ as required.”

That is still talking about dispatchable energy, whereas biomass would be a constant output. I do not see how that would allow BECCS to be included in the scheme, so I am looking for further clarity.

[Lee Rowley]

I am grateful for the hon. Gentleman’s question. My understanding is that we are allowing BECCS to be eligible in general, but the specifics and the detail—recognising that there are two different elements of both generation and capture through the energy value chain and how they interact—will need to be dealt with on a case-by-case basis and looked at in the round when we launch a process to move on as part of this process of changing the statute book.

My hon. Friend the Member for Windsor asked about the reference price and the strike price. I do not think there is anything more apparent here than simply adding an additional layer of flexibility. We are not saying that we are definitely doing something else, or that we definitely want to move away from reference prices and strike prices; to the point raised by the hon. Member for Kilmarnock and Loudoun, this is just about ensuring that we do not have to come back again if we determine in the future that a different model is appropriate—one that does not mention reference prices and strike prices but potentially mentions some other element.

Energy Security Strategy

Alan Brown Excerpts

Tuesday 19th April 2022 Commons Chamber

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Clearly, this is not a strategy at all, but a series of high-level targets or rehashed information that the Government have spoken about several times. The reality is that the 2022 energy price cap is 75% higher than the April 2021 price cap, putting 6.5 million UK households into fuel poverty. People are going to die and yet there was no additional support announced to alleviate fuel poverty. How many fuel-poor households does the Secretary of State think is acceptable in modern-day Britain? Will he confirm that less than a third of his £9 billion support package is actually direct money from the Treasury that will not be clawed back?

Charities and energy companies alike are calling for much greater investment in energy efficiency, so why is there no additional funding for that? I am pleased that no new money has been announced for the Secretary of State’s nuclear fantasy. Does he stand by the impact assessment that states that the cost of a new nuclear power station, including capital finance, is as high as £63 billion?

The Government have included a blue hydrogen target, so why is the Acorn carbon capture and storage cluster still a reserve? Why is there no additional funding to match the doubling of the green hydrogen target? The 50 GW offshore wind target is very welcome, but what is the Secretary of State doing to upgrade the offshore transmission network strategy and to take account of the ScotWind leasing round? When, oh when, will they remove the iniquity of the transmission charges that prejudice Scotland, and does he understand the concerns about the new nodal pricing proposal that has been announced?

When will the Secretary of State get to grip with a funding mechanism for pumped storage hydro, so that SSE can get on and complete the Coire Glas project? If the new dash for oil and gas is to provide energy security, will the Secretary of State advise what percentage of North sea oil and gas gets traded and exported and how much goes abroad for refining?

Finally, will the Secretary of State commit to working with the Treasury to publish figures showing how much in additional oil and gas revenues, how much additional VAT from our energy bills and how much additional VAT on the petrol prices increase it has received, so that we can see the Treasury windfall that has happened during this cost of living crisis?

[Kwasi Kwarteng]

I am very grateful to the hon. Gentleman for his barrage of questions; I will try to answer a few of them. His position on nuclear and mine could not be more different, and I am very glad that he is honest and frank about nuclear. I still do not understand what his answer is on decarbonised baseload, in terms of security of supply, but I am grateful for his honesty. He will know that the transmission charges are a matter for Ofgem, and I would be very happy to speak to him and Ofgem about how we can move forward on that.

Shale Gas Production

Alan Brown Excerpts

Tuesday 15th March 2022 Commons Chamber

[Mr Speaker]

I call the Scottish National party spokesperson, Alan Brown.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a rare thing in the Chamber but I completely agree with the hon. Member for Fylde (Mark Menzies) and the Minister’s opening remarks: now is not the time for knee-jerk reactions. Given that we have this energy crisis, now is the time to stay strategic and not make daft decisions. Clearly, doing fracking would not do anything to change the west’s reliance on gas, even if, as the Minister’s says, the UK does not rely on Russian gas. He can reconfirm that fracking would not release enough gas to change the international market price, so we would still be paying the same wholesale prices. Is it not the case that there is not enough geological and scientific coring information, to the right depths, to understand the viability of extraction, let alone the risks of seismic tremors, which, as we have already heard, occurred at Preston New Road? Therefore, fracking should be ruled out, in the way the Scottish Government have done. Do we not need to invest heavily in renewables? We keep hearing about nuclear from those on the two Front Benches, but committing £63 billion of capital and financing costs to Sizewell C is madness. Our approach should be straightforward renewable energy. I keep going on about pumped storage hydro. Last week, the Secretary of State said that I had been going on about it for 18 months and that it is a good solution but he needs to assess value for money. When are we going to get that value for money? When are we going to get a change to the transmission grid charging system, which is blocking the deployment of Scottish renewables? We need to invest more in tidal stream, to increase the floating offshore target and to set an onshore wind target as well. Let us maximise investment in renewable energy.

[Greg Hands]

I thank the hon. Gentleman for that response. He is right in the first part of what he says: fracking is unlikely to change gas prices—or UK fracking is unlikely to do so. It is certainly unlikely to change it quickly, which is what I said in my opening statement. He is also right to point to the importance of following the science, and geological information is really important. However, I have to say to him that on nuclear he continues to be wrong. The SNP’s ideological hardcore opposition to nuclear is against Scotland’s interests. We have just seen the closure of the Hunterston nuclear power station, which provided enough nuclear energy to supply every home in Scotland for 31 years. It was a great Scottish, as well as UK, solution. Our other great source of gas is the North sea, where I would like to see the SNP approach becoming more constructive and supportive of the North sea transmission deal that the UK Government did a year ago.

Russian Oil Import Ban

Alan Brown Excerpts

Wednesday 9th March 2022 Commons Chamber

[Kwasi Kwarteng]

My hon. Friend will appreciate that there is a diversity of sources for coking coal; we are not just looking to Russia. He makes an excellent point about critical minerals, and he will appreciate that this is the first Government ever to have a critical minerals strategy. It will be published in the next few weeks, and the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for North East Derbyshire (Lee Rowley) is leading on that within the Department.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Electricity from gas power stations is one of the ways that we meet peak electricity demand. The Secretary of State knows that dispatchable energy can also be created from pumped-storage hydro, which is a completely renewable source. To minimise our reliance on gas and our switch to renewables, he knows that SSE is ready to go ahead and build Coire Glas in the highlands. Will he commit to agreeing a minimum floor price with the SSE, so that it can get on and build, and will he confirm the timescale for such an agreement?

[Kwasi Kwarteng]

I am really delighted that the hon. Member raises this. I think he has raised it at every BEIS questions for the past 18 months, and I will keep saying what I have said before. We are interested in the technology, but I need to look at the specific proposals he is suggesting, and we obviously need to work out whether it is value for money. Those are the parameters we always look at.

Oil and Gas Producers: Windfall Tax

Alan Brown Excerpts

Tuesday 1st February 2022 Commons Chamber

[Edward Miliband]

My hon. Friend has made a powerful point.

Labour has come up with a clear and costed plan. We plan, by levying the windfall tax, to reduce VAT to zero, to increase the warm homes discount from £150 to £400, and to extend it from the 2.2 million families who currently receive it to 9 million. On top of that, we have set aside £600 million to help our businesses out. This is in stark contrast with what is being proposed by the Conservatives—the Government of the day, who, six days before the announcement of the rise in the price cap, seem to have nothing to say. What is their explanation for why they are not acting? It is very hard to find the explanation, although perhaps we will hear one today. The one person who has ventured to provide one is the Education Secretary, who has said:

“A windfall tax on oil and gas companies that are already struggling in the North Sea is never going to cut it.”

Even the oil and gas companies do not describe themselves as struggling. They say that this is a cash machine. I have to ask what planet the Government are living on. Does it not say everything about them that it is the struggles of companies making billions from an expected windfall that stir them, not the struggles of the British people? How dare they leave families in the lurch because of their refusal to stand up to vested interests in the oil and gas sector?

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

In 1998, when Labour was in power, oil prices bottomed out at $12 a barrel. By 2008, the price had risen to nearly $100 a barrel. What did Labour do with that money? It is regrettable that it did not create an oil sovereign fund, as Norway did.

[Edward Miliband]

I am very proud of the investments that the last Labour Government made in our public services.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Lee Rowley)]

Thank you, Madam Deputy Speaker, for giving me the opportunity to open yet another Opposition day debate on behalf of the Government.

Another chunk of time has rightly been set aside for Her Majesty’s Opposition to explain their mature approach to politics—their open and transparent methods for taking difficult decisions or balancing nuanced trade-offs—and to articulate their thought-through programme for government if, heaven forbid, they ever win an election. At least, that is what I assumed these Opposition day debates would be like, as a new Minister. Now, on my fourth in relatively quick succession, I realise that that is not the purpose of such debates at all. How foolish of me to assume such laudable ideas when, instead, we are presented with further half-baked, sensationalist ideas solely for the headlines. We can do better than this.

None the less, let me try again to make sense—[Interruption.] If Opposition Members would give me a moment, I will try to make sense of the motion for which they are about to argue. The motion splices together two very important matters, the cost of living and business taxation, in a proposition whose coherence is inversely proportional to its attempt to grab the headlines. As this is a motion of two halves awkwardly coupled together for effect by the Opposition Front Bench, I will take each half in turn.

First, on the cost of living and in the spirit of being constructive, I will try to find areas where we can agree. There is no doubt that this is a difficult time, with rising energy prices, growing demand, stretched supply chains and the most unique set of economic and political circumstances in a century. Latent demand has been held back across the world by health factors, with countries competing among themselves to serve people, businesses and society.

I acknowledge the concern of industry, businesses and consumers. The right hon. Member for Doncaster North (Edward Miliband) may be wrong on many things, but he is right that this is a challenging time. I make it clear that the Government are committed to working with industry, businesses and consumers, both now and over the long term. We know some things are challenging at the moment, and we will continue our extensive engagement with them, not least the large energy users, businesses, consumer groups and energy retailers, to consider what action may be necessary.

[Alan Brown]

The right hon. Member for Doncaster North (Edward Miliband) pointed out that Ofgem will be setting the cap in just a few days’ time, so there is no point in this endless consultation looking ahead. What will the Treasury do in the here and now to mitigate the energy cap rise?

[Lee Rowley]

I will come to that in a moment, just as I will come to the sedentary exhortations from the right hon. Member for Islington South and Finsbury (Emily Thornberry).

--- Later in debate ---

[Alan Brown]

On the energy cap, is it not the case that it is not Government money that is protecting people? Other consumers pay for it in the long run—we are all paying for it—so it is not a direct Government intervention.

[David Duguid]

The hon. Member may have some data to back up his claim, but the decision, as was voted for in this House, was to apply the energy cap.

Another scheme is the winter fuel payment, which delivers an annual tax-free payment of between £100 and £300 to help to meet heating costs. The £25 cold weather payment was also awarded to 4 million vulnerable households in England, Wales and Scotland in the last financial year.

The Opposition have proposed a cut in fuel VAT, which is already at a reduced rate of 5%. That was not included in today’s motion, although it was mentioned by the shadow Secretary of State, the right hon. Member for Doncaster North (Edward Miliband). The fundamental flaw with that approach is that, unlike the measures I mentioned earlier, such a cut would disproportionately benefit wealthier people with larger houses and higher fuel costs. It is far better to focus support on the most vulnerable who need it most, which is what the Government’s measures do, such as the £500 million household support fund. That includes £41 million for the Scottish Government, which I am pleased they are passing on as the winter support fund.

As well as support for energy bills, the Government have a great record on improving support in general for those on low incomes or looking for work. The national living wage increases to £9.50 later this year. The reduction in the universal credit taper means that workers on low incomes keep 8% more of what they earn. The double lock on pension increases means that state pensions will increase by 3.1%. This morning in Treasury questions, the Chancellor reminded us that since 2010, 1 million fewer people across the UK are in poverty.

I welcome the Government’s action on reducing the reliance on hydrocarbons and on growing renewable and low-carbon sources of energy, heat and transport. Renewable energy has quadrupled since 2010 and coal is due to be phased out completely by 2024. The energy transition to net zero is already under way—it has been for a long time; I saw evidence of it when I was still working in the industry—but we are not there yet. There is still a demand for oil and in particular gas to meet our energy, heat and transport needs, and we must do what we can to ensure that as much as possible of that demand, albeit declining, is supplied from our own local sources.

Nearly three quarters of the UK’s energy currently comes from oil and gas, of which production from the UK continental shelf—UKCS—was equal to around 70% of demand in 2020. Even as we transition to a net zero future, the work of the Climate Change Committee shows that around half of the UK’s cumulative energy requirements between now and 2050 will be met by oil and gas. Almost 200,000 jobs are supported in the industry, not just in Scotland but right across the United Kingdom. Those jobs, which the motion puts at risk, are a key part of driving the energy transition, as I have mentioned previously.

British companies such as BP and Shell, as well as Total, Equinor and other international energy companies, already have access to the skills, expertise, technology and capital to help deliver net zero. The current offshore oil and gas tax system is one of the most competitive and progressive regimes globally; through it, the sector will pay an additional amount of at least £3 billion over two tax years. That is due to the automatic mechanisms that are part of the specially designed tax regime by which the oil and gas sector already pays a total of 40%, made up of 30% in corporation tax and an additional supplementary charge of 10%.

The current tax regime was developed as a result of lessons learned from three previous significant increases in UKCS corporation tax. After each increase, as has already been mentioned, a range of incentives was needed to win back investment into the UKCS that had been lost as a result of the increase. Windfall taxes such as the one proposed today have been tried before; although they were intended to increase returns to the Treasury, tax revenues actually fell.

As I said earlier, the oil and gas industry already plays a key part in efforts to deliver the UK’s climate change objectives; it was actually one of the first sectors to come out in support of those goals. The industry’s own “Roadmap 2035” is underpinned by the groundbreaking North sea transition deal between the sector and the UK Government. I know from my background in the industry and my ongoing engagement with stakeholders that they remain committed to providing that reliable home-grown source of energy for consumers, including in renewable energies such as offshore wind and in much-needed low-carbon technologies such as carbon capture and storage and hydrogen, to name a few.

A one-off windfall tax on oil and gas companies would significantly undermine the sector’s ability to sustain its investment in the oil and gas industry, make us more dependent on foreign imports of hydrocarbons—which are not just used for fuel, by the way; they are also used for manufactured products such as recycled plastics, detergents, and even medicines and personal protective equipment—and put security of supply, as well as thousands of jobs, at risk.

The main factor against this windfall tax—alongside the uncertainty that it would bring to the industry, its investors and the workers whose families have the very same cost of living worries that have been discussed in this debate—is the restrictions that it would place on the oil and gas industry’s vital contribution to driving forward the energy transition to net zero.

--- Later in debate ---

[Peter Aldous]

I thank the hon. Gentleman for that intervention. He may well be right, but that decision was made 55 years ago. Norway has, I think, far bigger resources than we do, and of course it is a much, much smaller population and country. So that is a debate for another time. I understand where he is coming from, but there is another side to that argument.

[Alan Brown]

The fact that Norway is a small independent country actually backs up Scotland’s argument for independence, does it not, considering Norway has a $1.3 trillion sovereign wealth fund?

[Peter Aldous]

I think we are actually on the same side of the argument here. Norway has done remarkably well and there are lessons to be learned. I was actually pointing to the fact that they have had that stable fiscal taxation regime, which has enabled them to be at the forefront of the drive towards a low-carbon economy.

The North Sea transition deal from last March has enabled the industry to deliver investment of £14 billion to £16 billion by 2030 in new technologies such as carbon capture and storage and hydrogen. While the supply chain of the oil and gas industry extends across the UK, activity tends to be concentrated on the North sea coast in north-east Scotland around Aberdeen, on Tyneside and Teesside and in East Anglia around Great Yarmouth and Lowestoft. These are coastal communities that have their own particular challenges and it would be very wrong to add to them at this particular time.

Off the East Anglian coast, there are exciting opportunities to promote a prosperous transition in the southern North sea by redeploying infrastructure and expertise from the oil and gas industry to create a leading hydrogen production and carbon capture, usage and storage hub around the Bacton gas terminal in the constituency of my hon. Friend the Member for North Norfolk (Duncan Baker). The energy price crisis presents many people with enormous challenges, and I look forward to scrutinising the Government’s proposals to address it, which will probably come forward next week. A windfall tax might, at first glance, be a compelling way of meeting that challenge, but it would have untold negative consequences.

--- Later in debate ---

[Sir Robert Syms (Poole) (Con)]

We have had a pandemic, and the Prime Minister and the Chancellor put £400 billion into the economy to support businesses, people and employment. At one point, 11 million people—a third of the workforce—were being paid by the Treasury. If at that point one had said, “We will emerge with a growing economy, falling unemployment and 1.5 million vacancies,” it might have been thought to be a very optimistic scenario.

Yet the British economy is growing, and Europe, America and Canada are growing. The reason for the inflation spike and rising oil prices—they were zero during lockdown—is that the world economy is recovering. I make the gratuitous point that that is rather good news. It causes a problem for the Government in how to deal with some of the shortages and some of the price increases, but it is all good news. There are jobs out there, and people have a great opportunity to get into employment. The key point is that the Government’s policy of saving jobs has been a tremendous success.

The North sea has been a tremendous British success story, as my Scottish colleagues have said, but it is now in a mature phase. It needs stable, calm husbanding and tax rates so that less viable fields are eked out to their maximum life and so that newer fields in deeper waters are able to be developed. That is why we need a stable tax regime.

The arguments that have been made are perfectly sensible. Companies were losing money only a year or two ago, and now they are making money. The corporation tax regime and the petroleum revenue tax generate money when they make profits, which is the fair solution. The oil companies are owned by pension funds, and most of the people in those pension funds are ordinary people up and down the land. We have already heard about the 100,000 jobs that rely on the North sea. Why kick a successful industry when it can generate a lot more wealth, a lot more jobs and a lot more gas and fuel for the benefit of our nation, just to make a quick political point and make a few runs?

One of the things the last Labour Government did not do was develop the nuclear industry, which will be vital if we are to get to net zero. Hinkley Point C is being built, and I hope we will soon sign off Sizewell C. Rolls-Royce’s proposal for small nuclear reactors is excellent. The Nuclear Energy (Financing) Bill, introduced by the Minister for Energy, Clean Growth and Climate Change, allows more sustainable financing for these companies, and I think it will be a game changer.

We need more nuclear power, so we need to give it a big push. We need to value and to continue supporting the North sea. We should leave alternative measures, on top of all the measures the Minister set out at the beginning of the debate, for a statement from the Treasury. I think the Government’s policy is perfectly sensible and will get more supply of energy and a stable tax regime.

[Alan Brown]

The impact assessment for the Nuclear Energy (Financing) Bill gives an upper-limit estimate of £63 billion for the capital and financing costs of a new nuclear station. Is that really good value for money for bill payers?

[Sir Robert Syms]

Yes, it is very good value for money, because that is a lot cheaper than Hinkley Point C. The reality is that the Government are underwriting the industry, and if the industry overspends when it is producing a nuclear power station, it either gets equity or gets paid in cash. That is a very sensible way of doing it.

The only way that we will get to net zero is with a vibrant industry. Let us not forget that all the Magnox stations will close down over the next 10 or 15 years and we will have to replace that capacity. The solution to our problems is to have a balanced energy policy, with renewables, nuclear and the use of gas. If we have that, and if we do all we should to insulate homes and make people’s use of energy more efficient, we have a good policy. The Government have an excellent policy; I think they should say more about it.

--- Later in debate ---

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

One thing we all seem to agree on is that there is a cost of living crisis, although the Tories seem to agree on that only now, and they are using it as an excuse, having done nothing about it, for the Prime Minister needing to stay in his place. That makes no sense. Given that we agree there is a cost of living crisis, I understand why many people would sympathise with the proposal that Labour has brought forward. In reality, however, it may be an easy political soundbite, but it does not seem well thought out, and it does not address the immediate practicalities of this cost of living crisis. Nobody has yet explained how the proposed windfall tax will work. Either it will be a retrospective tax to try to claw money back once profits are announced at the end of the financial year, or it will not kick in for a year’s time. We need to bring in money here and now, so that it can be used to help households that are struggling with eating, or heating their houses.

The motion also illustrates that Westminster always views Scotland’s oil and gas as a cash cow. There is no strategic planning whatsoever; it is another cut and run move. If we are talking about excessive profits, why just the oil and gas industry? Where is the line drawn for sectors in profit, given that many companies did very well out of covid? Should we debate that and target their profits as well? What discussions has Labour had with the oil and gas industry about this matter? What assessment has been made about levels of investment—investment that could be part of a decarbonisation agenda—that might be rowed back? As others have said, the harsh reality is that every previous windfall tax has led to a drop in investment.

There is clearly room for a sensible debate about long-term tax policies, particularly carbon taxes, and we must do that. I get uneasy when I hear about companies such as Shell not having paid corporation tax for a couple of years, or BP talking about its company being a cash machine. We must have a serious debate about this, but policy on the hoof is not the answer.

The North sea has contributed £375 billion in revenues over the years, but as we have heard, unlike Norway’s $1.3 trillion oil and gas fund—the largest sovereign wealth fund in the world—we have no legacy from that money. As well as having that fund, Norway has used its money to invest in renewable energy such as hydro, to create a much greater uptake of electric vehicle ownership. More importantly, it has created a much fairer, equitable and happier society. Meanwhile, in Scotland we are tied to Westminster, and we are getting blocked with pump storage hydro, the Acorn CCS project is still a reserve, and we could have had higher levels of investment in tidal stream.

Unlike Norway, here in the UK there are much greater levels of fuel poverty. We have heard about the 6 million fuel poor, when the energy price cap rises to £2,000 in April. Again, that is due to a lack of long-term strategic thinking. Earlier I pointed out that, under Labour’s watch, we saw the price of oil bottom out at $12 per barrel, rising to nearly $100 per barrel in 2008. There is no legacy to show for that, and no sovereign wealth fund created. Times have moved on, and the Scottish Government have created a just transition fund for north-east Scotland, but Westminster is not providing any match funding for that.

As I have said many times, at the moment during this crisis the Treasury is raking it in, compared with what it predicted would happen in the March 2021 Budget. The November Budget already estimated that this financial year will see an increase of £1.1 billion in oil and gas revenues, an extra £2 billion next year, and £6 billion in total over the Parliament. That is money that the Treasury has got here and now, which should be used to help households—and we should also consider what the additional VAT from our energy bills and extra fuel duties are bringing in.

The Treasury allocated £1.7 billion in the November Budget for the development of Sizewell C. If that money was reallocated, that would mitigate the cap for those households who qualify for the warm homes discount. Once more, I say to Labour: rethink this madness on nuclear, spending up to £60 billion, adding that to our energy bills, for a new nuclear station. The phrase “Let’s speed up investment in nuclear” is an oxymoron because nuclear projects take that long to come to fruition.

Households do need help and the Treasury has got money that it should be using to help people. We have not heard one new Treasury-funded policy from the Government—hopefully the Minister will be able to provide one in summing up. In the meantime, that is why I make the case for Scotland to go its own way.

--- Later in debate ---

[Greg Hands]

I would say this: we are providing support. We have the warm homes discount, we have winter fuel payments, we have cold weather payments, we have the household support fund, and, of course, we have the energy price cap itself to protect customers.

The latest CfD round is the largest yet, with a goal of about 12 GW, more capacity than the last three rounds combined. The offshore wind that this round will deliver could be enough to power up to 8 million homes.

[Alan Brown]

All the policies that the Minister has described as helpful are policies that already exist. Is he having any discussions with the Chancellor about new Treasury-funded policies that will kick in to mitigate the cap rise in April?

[Greg Hands]

I have been clear that matters of taxation are for the Chancellor, but of course the Government continue to monitor the situation very closely. I was answering a specific point about what support is already available for consumers.

I did not hear a word from any of the Opposition parties in support of our incredible North sea transition deal, concluded just last March, between the UK Government and the oil and gas sector. It will support workers, businesses and the supply chain through this transition by harnessing the industry’s existing capabilities, infrastructure and private investment potential to exploit new and emerging technologies such as hydrogen production, carbon capture, usage and storage, offshore wind, and decommissioning.

Gas and Electricity Costs

Alan Brown Excerpts

Tuesday 18th January 2022 Westminster Hall

[Jamie Stone]

My hon. Friend must be clairvoyant, because she has anticipated a point that I shall make in due course. I thank her for her intervention.

There are two major contributory factors to fuel poverty in Caithness, Sutherland and Easter Ross: the absence of mains gas supply to many properties, and the comparative price of electricity, which costs four to five times more than mains gas and domestic oil per unit. Both of these power sources are often used to heat things that we rely on—for instance, water. Rural and remote households are more exposed to rising household costs due to paying an extra premium.

I suggest that energy policy in the UK is fundamentally broken. Consider this: the highlands and islands, to which the hon. Member for Na h-Eileanan an Iar (Angus Brendan MacNeil) referred, produce more than 300% of their electricity demand from renewable sources—we produce three times more than we use. We export the rest to other parts of the UK, but as the hon. Member pointed out, a highland or island household pays more per unit of electricity due to the transmission charging regime, which pushes up energy bills even further. This is fundamentally wrong. Root and branch reform is required to design a UK energy policy that is fit for the 21st century, and that, most importantly, puts consumers at its heart.

Turning to business, energy price hikes are having a serious impact on the viability of businesses in the far north and, indeed, across the UK. I will quote two examples. Sitting at the back of the Public Gallery, I witness today Mr Andrew Mackay, my constituent. He and his brother own three hotels in Caithness known as the Caithness Collection—excellent hotels. They are facing an annual increase in electricity costs from almost £77,000 to—can Members believe?—nearly £130,000, which is a 70% rise.

Also in Caithness, we have a local engineering company, JGC Engineering, which is owned by the Campbell family and makes excellent pieces of stainless steel for the nuclear and other industries. The company’s annual electricity bill runs into six figures. The owners have been forced—they had no choice; it was the best deal they could get—to sign a deal that, believe it or not, means an 80% increase in costs starting in March 2022. To enable sustainable economic growth and—to borrow an expression from Her Majesty’s Government—to level up the United Kingdom, it is imperative that measures are put in place to protect consumers and businesses from crippling energy costs.

Looking ahead at the UK’s future energy mix, it is crucial that investment in renewables is kept up to pace. However, I believe that the Government can also look seriously at novel solutions to age-old problems. In terms of nuclear power, small modular reactors, such as those being designed by Rolls-Royce, could provide districts with heating and electricity in areas where it is costly to receive utilities on the national grid.

This kind of out-of-the-box thinking could reduce the cost of gas and electricity, reduce reliance on fossil fuels, and ensure the economic future of areas that consider themselves left behind, such as Caithness.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Is there an estimated cost for these modular reactors? How much will it cost overall? Is there a policy for how nuclear waste will be dealt with?

[Jamie Stone]

A conversation with Rolls-Royce would be rewarding for the hon. Member. It is working up the proposals, but has some interesting thinking; I think we would be unwise not to take a good look at it.

Solutions do not stop there. Governments could soften the impact on consumers in the short term by providing loans up front to energy suppliers to cover the costs incurred from the significant rise in global wholesale prices for gas. I suggest constructively to the Minister that the Government could remove VAT from energy bills, or double and extend the warm home discount, taking £300 a year off the heating bills of around 7.5 million vulnerable households.

Her Majesty’s Government could introduce a new social tariff for those in fuel poverty—perhaps double the winter fuel allowance, giving up to £600 a year to 11.3 million elderly pensioners who currently face a £208 real-terms cut to their state pension next year, due to the Government’s decision to scrap the triple lock.

The Government could also implement a one-off windfall tax on oil and gas companies’ super-profits—the extra profits. This would not impact companies’ usual profits and thereby keep jobs secure, and would target the unprecedented extra profits that they have made in the last six months.

--- Later in debate ---

[Layla Moran]

I could not agree more with the hon. Gentleman. It is for exactly that strategic reason that the Liberal Democrats are calling for a Robin Hood tax on the super-profits of oil and gas companies. This one-off levy would raise over £5 billion to support households in need of help. Surely that is the fairest way to help the worst off.

However, there is a wider geopolitical point. Gazprom, as we know, is owned by the Russian state, and Gazprom, at the behest of Putin, sent 25% less gas than before to Europe in the last year. We all know that Putin is playing politics with our energy prices, and that is making all of us and our constituents suffer. On one hand, the Government say they will not reward Russia for aggression; on the other hand, by doing nothing about the situation, they are allowing Putin to manipulate the energy market and he is being rewarded for it. We believe that instituting a Robin Hood tax would have many advantages, but one would be to send a powerful message to Putin in Moscow: “You cannot interfere with our energy market”.

Fundamentally—this comes to the point that the hon. Member for Na h-Eileanan an Iar (Angus Brendan MacNeil) made—in the long term we need to wean this country, and indeed the entire world, off gas and oil altogether as soon as possible. That is why the answer to this problem is not to cut investment in green energy, as some have suggested. Whether it comes into general taxation or there is another way to fund it—that is the conversation that needs to be had—we need to increase investment in renewable energy, because to protect people now we need to think strategically in the medium and long term. The answer is to end our dependency on rogue states and protect the poorest in our communities.

[Alan Brown]

I just wonder how a Robin Hood tax on oil companies operating in the North sea would affect reliance on Putin or Gazprom, or how it would affect Gazprom’s share price or dividend. Those things seem to me to be almost diametrically opposite.

[Layla Moran]

We need to ensure that there is fairness in the system, and we know that all oil and gas companies have made enormous profits. My right hon. Friend the Member for Orkney and Shetland (Mr Carmichael) made the point earlier about customers who had been loyal to oil and gas companies but who now face high bills, when the companies themselves are profiteering. There are many reasons why a Robin Hood tax would work, but one is the geopolitical point that I am making today.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure, Sir Edward, to serve under your chairmanship.

As others have done, I congratulate the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) on securing this debate. He highlighted that the gas and electricity issue is a UK-wide one, but he also made relevant and pertinent points about just how much it affects rural Scotland, and in particular his own constituency. His illustration of the effect that it will have on his constituent who is sitting in the Public Gallery, and on an already struggling hospitality industry, was really stark. I hope that the Minister thought the same and pays heed to what was said.

I thank all other right hon. and hon. Members for their contributions. A clear theme seemed to come from all the contributions: basically, we have this cost-of-living crisis and the UK Government are doing nothing about it. The UK Government really need to start taking action.

The UK Government have sat back as household incomes have dropped in real terms by up to £1,200 and energy bills are sky-rocketing. We have had the broken promises about lower energy bills post Brexit, and yet when Labour proposed a 5% cut in VAT in last week’s Opposition day debate, we had the absurd situation of all the Tory Brexiter MPs questioning the validity of such a VAT cut and voting it down. That makes no sense to me, given the broken promises. As a couple of other Members have done, I pay tribute to the hon. Member for Newton Abbot (Anne Marie Morris), who followed the courage of her convictions and voted for something that her Prime Minister had promised us.

To return to the theme, without further action, a real crisis is looming—if it is not already upon us, if truth be told. As others have said, it is not credible for the cap to rise to approximately £2,000 per year in April. Previously, National Energy Action estimated there were 4.5 million fuel-poor households in the UK. When the October cap increased, that added a further 500,000. If the cap goes ahead in April as predicted, we will end up with 6 million fuel-poor households in the UK. That is a 33% increase in the number of fuel-poor households in two overnight increments. It is disgraceful, and something needs to be done to prevent it getting worse.

Worse, National Energy Action previously estimated that there are roughly 10,000 premature deaths a year arising from fuel poverty. How many more premature deaths are likely to occur, given the number of households that will be plunged further into fuel poverty? One cohort who have not been mentioned so far today are the terminally ill, who suffer badly from fuel poverty. I cannot think of anything more distressing than someone who wanted to spend the end of their life in a dignified way in their own home being forced, because of fuel poverty, to spend their final days in a hospice. It is distressing for them and for their family, and that is the real impact of fuel poverty.

A common theme has been the impact of a VAT holiday on fuel Bills, which it is estimated would save £80 a year, so on its own it is insufficient—it is hardly even a sticking plaster—but it could provide a small amount of help.

It is critical that the UK Government take proactive action to ensure that this cap rise is not passed on to consumers in April, so direct intervention is required. Some of that intervention could be in the form of loans, to smooth out the £2 billion of additional costs that are estimated to have arisen from the 28 energy companies that went bust in 2021—money that will otherwise be lumped on to consumers’ bills. Again, that is due to the failure of the Government and the regulator.

As others have said, a proper debate is required about the merits of different levies currently on our electricity bills, which contribute 23% of our bills, according to Ofgem. The reality is that these levies are a regressive tax and general taxation is much fairer. At the moment, the Government are putting out to tender the Contracts for Difference fourth allocation round, which commit £265 million per year for renewable energy projects. I am all in favour of that financial commitment, because we need more renewable energy, but again that money will be lumped directly on to our electricity bills, where it disproportionately affects lower income households and does not form part of a wider just transition.

Last week, the Nuclear Energy (Financing) Bill was considered on Report. The impact assessment for the Bill estimates the capital and financing costs to be as high as £63 billion for a new nuclear power station. Again, it is proposed that that will be added to our energy bills.

[Angus Brendan MacNeil]

Does my hon. Friend agree that this Government, going back to 2015, have taken their eye off the ball? They have scrapped the Department of Energy and have lost focus on energy. Then they have had 10 years trying to do a smart meter roll-out, which has been bungled, depriving consumers of information about when they could get the best tariffs, which adds to the present problems. The Government have to own the responsibility of the trouble that UK consumers find themselves in at the moment.

[Alan Brown]

I agree wholeheartedly that the Government have taken their eye off the ball. The previous Prime Minister, David Cameron, talked about cutting out all the “green crap”. That set back the renewable industry badly. Not only did they scrap the Department of Energy but, given that we now have a legally binding target of net zero by 2050, it beggars belief that there is not a stand-alone Department for energy and climate change, or for energy and net zero. The Government need to take responsibility on that.

I have a question on nuclear for the hon. Member for Caithness, Sutherland and Easter Ross on small modular reactors. Rolls-Royce is looking for something like £30 billion in capital costs to deliver 15 or 16 small modular reactors. Again, that is money that will be lumped on to our bills. With the financing on top, the costs are eye-watering. Nuclear is not a solution; renewable energy is the solution.

In terms of direct spending, the Treasury allocated £1.7 billion in the Budget for the development of Sizewell C. That is something like £60 from every household in Great Britain going towards a new nuclear station, instead of helping them pay their bills. That £1.7 billion could offset the cap for the estimated 3 million households that are eligible for the warm home discount this year, or completely fund a VAT holiday for one year for everybody. Under present policies, not only are the UK Government not doing anything; they are making things worse with their long-term planning. At the moment, costs will be added to energy bills, making things more difficult.

As the hon. Member for Caithness, Sutherland and Easter Ross said, people in the Scottish highlands not only have more challenging weather to deal with and risk being off the gas grid, which makes fuel immediately more expensive, but pay up to £400 more to heat their homes because they are on restricted meters—paying up to 4p more per unit of electricity. Why does the Minister think that it is fair that this surcharge is added to an area that is actually supplying energy to the rest of the UK?

Direct intervention could be paid for through a windfall tax on the Treasury. As our energy bills have increased, so have the VAT returns to the Treasury. As fuel prices have increased, the Treasury has raked in more money in fuel duty and VAT. The November Budget’s Red Book showed that, over the lifetime of this Parliament, North sea oil and gas revenues will contribute an extra £6 billion compared to what was predicted just in March 2021. The Treasury should unlock the extra money that it is getting from the North sea.

[Angus Brendan MacNeil]

It is a subsidy from Scotland.

[Alan Brown]

Yes. It is the broad shoulders of the UK working in the opposite way from the way in which we are always told it is supposed to work.

By contrast, the Scottish Government are doing their best while operating on a fixed budget. The hon. Member for Caithness, Sutherland and Easter Ross can at least tell his constituents in Scotland that they can benefit as follows. The Scottish Government’s child winter heating assistance, introduced in 2020, supports the families of around 14,000 of the most seriously disabled children and young people with automatic payments of £200 a year. Low income winter heating assistance, which will replace the UK Government’s cold weather payment, will give 400,000 low-income households a guaranteed £50 payment, instead of that “maybe” £25 payment.

[Jamie Stone]

There is an economic point here. The money that the hon. Gentleman is talking about, whichever level of Government is giving it to individuals or businesses to see them through all of this, is money that, as well as giving assurance and comfort, ultimately will be spent in shops and other businesses, and will boost local economies. I might suggest that the Government can then recoup that through corporation tax and other means.

[Alan Brown]

I agree. People on lower incomes are the ones who spend all of their disposable income, and they spend it in local businesses and support local businesses. For families in Scotland, there is also the game-changing £20 a week Scottish child payment. As my hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson) said, that compares with the heartless £20 a week cut to universal credit by the UK Government. Again, that universal credit uplift was spent in local businesses. It was direct support.

It is absurd that Scotland has paid £375 billion of oil and gas revenues to the Exchequer and that it has been squandered over the years. There should have been an oil and gas fund, which would have provided an additional buffer that could have been used in this time of need. It is time that the UK Government take short-term action to deal with the cost of living crisis and energy crisis, but there needs to be a change in long-term planning, for a fair and equitable energy policy. Perhaps that is why Scotland needs independence, so that we can do things differently.

Oral Answers to Questions

Alan Brown Excerpts

Tuesday 11th January 2022 Commons Chamber

[Greg Hands]

I thank my right hon. Friend for that further question, and I totally agree with him on where the SNP is. On energy in general, SNP Members are not the friends of Scotland on nuclear or the North sea. He is also absolutely right on hydrogen. On the Government Benches we recognise that net zero needs nuclear for security of supply, to meet our decarbonisation targets and to support new industries such as hydrogen.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

When it comes to new nuclear, there is not a single successful EPR plan operational anywhere in the world. The regulated asset base—RAB—model has not been shown to work for new nuclear, so why does the Minister think that it is a good investment of £63 billion of bill payers’ money to sign up for Sizewell C when it is just going to be another white elephant?

[Greg Hands]

I repeat my disappointment. Scotland has an amazing nuclear past and I would like it to have a very good nuclear future, but unfortunately the Scottish Government stand in the way. This country needs nuclear, and net zero needs nuclear. Hinkley is being built, and we are very confident of the numbers and of building new nuclear power stations in this country. That is what the Nuclear Energy (Financing) Bill—which secured its Third Reading yesterday with the support of the official Opposition but not of the SNP or the Lib Dems—is all about.

Nuclear Energy (Financing) Bill

Alan Brown Excerpts

Report stage & 3rd reading
Monday 10th January 2022 Commons Chamber

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I beg to move, That the clause be read a Second time.

[Mr Deputy Speaker (Mr Nigel Evans)]

With this it will be convenient to discuss the following:

Amendment 1, in clause 1, page 1, line 15, at end insert—

“(6) “Owned by a foreign power” means owned by a company controlled by a foreign state and operating for investment purposes.”

This amendment is a definition of “foreign power” set out in Amendment 2.

Amendment 2, in clause 2, page 2, line 14, at end insert—

“(c) the nuclear company is not wholly or in part owned by a foreign power, and

(d) the fuel rods for the company’s reactor are supplied by a UK based company.”

This amendment prevents the Secretary of State from designating a nuclear company owned or part-owned by the agents of a foreign power and ensures that the fuelling of the designated company’s reactor is provided by a UK based company.

Amendment 6, in clause 3, page 3, line 8, at end insert—

“(e) detail of any public funding agreed as part of the project development and the services being provided for this funding.”

Amendment 9, page 5, line 21, at end insert—

“(4A) The Secretary of State must lay a report before Parliament in respect of each project in relation to which a nuclear company has been designated under section 2(1) before exercising the power under section 6 (1), setting out—

(a) the expected overall capital cost of the prospective project,

(b) the expected up-front cost of the prospective projects,

(c) the general terms of the project for the sale of electricity onto the grid, including—

(i) a statement of whether the Government has offered the nuclear company a minimum floor price mechanism for the sale of electricity onto the National Grid,

(ii) the minimum floor price mechanism included in any arrangement including any inflationary or baseline indices, and

(iii) the duration in years of any such arrangement under sub-paragraph (ii); and

(d) how decommissioning costs of the project will be met, including in the event of insolvency of the nuclear energy company, setting out any role for—

(i) revenue collection contracts, including any percentage specifically dedicated to decommissioning costs;

(ii) protection of decommissioning payments for time of need;

(iii) insurances; and

(iv) consumer risk.”

In respect of new nuclear projects, this amendment would require the Secretary of State to lay before Parliament a report on the up-front and overall expected cost of the project, details of any agreement reached terms for the sale of electricity onto the National Grid and how decommissioning costs will be met, including in the event of the nuclear company becoming insolvent.

Amendment 8, page 6, line 15, at end insert—

“(n) provision about penalties the Secretary of State may apply if the level of power outages of a nuclear reactor results in up to 60 non-operational days in a 12 month period.”

Amendment 3, in clause 7, page 7, line 8, at end insert—

“(3A) When exercising the power in subsection (1), the Secretary of State must not cause the excess of expenditure being incurred over the allowable revenue cap to lead to further charges upon revenue collection contracts.”

This amendment prevents the Secretary of State from allowing the levy of further consumer charges should an increase in allowable revenue be agreed following increases in costs or timescale of a nuclear project.

Amendment 4, page 7, line 8, at end insert—

“(3A) When exercising the power in subsection (1), the Secretary of State must publish a statement setting out how an adjustment in the company’s allowed revenue is to be made without relying on revenue collection contracts.”

This amendment requires the Secretary of State to set out how an adjustment to allowed revenue, following an increase in costs or time, is to be provided for by means other than additional customer levies.

Amendment 7, in clause 11, page 10, line 2, at end insert—

“(1A) The Secretary of State must exercise the power under subsection (1) to require each designated nuclear company to make an annual report of—

(a) the number of outages of each reactor, the reasons for outages and the total number of non-operational days per outage, and

(b) an assessment of the operational lifespan of the reactor and its key components and details of all safety inspections carried out.”

Amendment 5, in clause 32, page 24, line 24, at end insert—

“(5A) In the event that a relevant licensee nuclear company cannot be rescued as a going concern, or if a transfer of the undertaking to a wholly owned subsidiary does not result in the establishment of a going concern, the Secretary of State must establish a Government-owned company into which the assets, liabilities and undertakings of the relevant licensee nuclear company may be transferred in order to allow electricity supply to be commenced or continued at the nuclear installation in respect of which the relevant nuclear licensee holds a nuclear licence.”

This amendment ensures the continuation of a nuclear project where a failed company cannot be rescued as a going concern or successfully have its assets transferred to a subsidiary.

Amendment 10, page 24, line 26, at end insert—

“(7) Prior to a transfer falling within section 32(3), the Secretary of State must lay a report before Parliament.

(8) The report under subsection (7) must set out—

(a) the liabilities associated with the nuclear company;

(b) any estimated costs of getting the plant operational again if it has been temporarily shut down;

(c) the estimated lifespan of the nuclear power station; and

(d) decommissioning costs and confirmation of any funding provided by the nuclear company for this purpose.”

This amendment would require the Secretary of State to publish a report on the matters listed prior to any transfers falling within clause 32(3).

[Alan Brown]

I express my condolences on the untimely passing of Jack Dromey. I pass on my sympathies to his family, particularly the Mother of the House.

I rise to speak to new clause 1 and amendments 6 to 9 in my name. I make it clear at the outset that I still oppose the Bill. The strategy is completely wrong, but I tabled these amendments to seek transparency and to see whether there is any seriousness to ministerial words about their willingness to consider amendments and their openness to further parliamentary scrutiny.

Let me start with amendment 9, which is all about ensuring that Parliament has a fuller understanding of what sums are involved and what commitments the Government will be making as regards any new nuclear project. The Minister has been very good at telling us about the mythical savings that will accrue via the regulated asset base funding model introduced by this Bill—they are estimated at between £30 billion and £70 billion.

What the Government are not so good at is telling us what money they want to commit for the likes of Sizewell C. In effect, they are telling us, “Let’s save money for bill payers by signing up to a less bad deal for a new nuclear project.” According to the impact assessment, the capital and financing cost is going to be in the region of £40 billion to £60 billion for a new nuclear power station. It is a strange logic to tell us that £50 billion being added to our energy bills at the time of a cost of living energy crisis is somehow a good thing. By default, the Government are also confirming just how much of a stinking, rotten deal Hinkley Point C was for bill payers if we are saying that we can save that much money compared with the contracts for difference model for Hinkley C.

We know that eye-watering sums are intended to be committed, but the Bill, as it stands, gives the Secretary of State carte blanche to sign off on a new nuclear deal. Amendment 9 tries to address that by setting out key criteria that should be laid in a report before Parliament. In Committee, and at other times when there has been quizzing on cost transparency, we have been given the con trick, “We cannot share that information for commercial confidentiality reasons.” If Parliament is told that the capital cost of a new power station is some £23 billion, which is the current estimated cost for Hinkley Point C, we do not know what the breakdown of that £23 billion is, so there is no way that that would breach commercial confidentiality. We have a right to know what up-front costs are being committed to or forced on bill payers, and it is important we know that for any deals on the sale of electricity. As I said, at the moment the Government tell us how much money the RAB model will save, but they want to continue to be vague on how much a new project will actually cost. We have the smoke and mirrors argument that it is a basic RAB payment that somehow, in the future, gets partially negated with the sale of electricity to the grid.

In Committee, the Minister also argued that if the capital cost of the project was somehow known, it would be harder to raise capital in the private markets. That is a nonsense argument, given that other infrastructure projects have their costs put in the public domain while capital is still to be raised. I would have thought it advantageous for it to be in the public domain how much capital is required to be raised, in order to generate competition for that capital investment. Initial capital-raising discussions would need already to have been held to get some assessment of the viability of the project as it was being developed. Lines about market sensitivity and best value just do not stack up as a counter argument.

We also need to know what other costs are committed to during the anticipated construction period. Under the RAB proposals, consumers will start to pay money as soon as construction begins, but they are not committed to the full construction cost because that gets spread out over the 60-year operational contract period. It is only right that bill payers know what costs are being committed to at the outset before that final sign-off of a 60-year contract.

Amendment 9 also tries to get transparency about the sale of energy. We are told there will not be a strike rate, but to me it is not credible to believe that some £50 billion-worth of capital and financing costs will be committed for a 60-year operational plan without sufficient confidence on the returns from the sale of electricity. Ministerial clarity is required, and that is why it would be good to have the Government commit to having to report on that.

For example, in a briefing in favour of the Bill, the Prospect union has come up with the ridiculous supposition that if energy prices in the market are at the right level in the future, RAB payments could reduce to zero. Are we seriously supposed to believe that is a credible proposition? Equally, are we supposed to believe that if wholesale electricity prices drop to a certain level way below the operational costs of the nuclear plant in generating electricity, the nuclear company will just carry on regardless, because it carries all the risks? It might not be a strike rate as we understand it in terms of the contract of difference scheme, but given the scenarios I have painted, some sort of guarantee will be looked for and it might be a minimum floor price on the sale of electricity. If so, we should know about it as parliamentarians and bill payers. If there is not a minimum floor price in future and the risk lies with the developer or is somehow baked into the RAB payments, we should know and understand that as well. Otherwise it is about continued closed-door negotiations hidden from the public who are actually paying for it.

Amendment 9 tries to shine a light on what would otherwise be that closed-shop negotiation by a Government who still have not learned the lessons from their desperation to sign off on Hinkley Point C at any cost whatsoever and seem destined to do so again with Sizewell C, just this time with a different model and the bill payers carrying a greater level of risk through the RAB model. I would expect any parliamentarian here who believes in some form of parliamentary scrutiny to be happy to have the Secretary of State obliged to report on the capital cost, any up-front committed costs and any future sale of energy contracts as a basic form of transparency, as amendment 9 seeks.

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[Alan Brown]

My ideal recommendation would be not to invest in a new nuclear plant. That would be the first thing, but if we take the situation as it is and look at the position going forward, the Government first need to satisfy themselves on the design. Bear in mind that the EPR system is still not working anywhere in the world. The whole point of the amendment is to at least have yearly assessments and reports to Parliament that advise on reliability. As I say, that would allow parliamentarians to understand that, challenge the Government if need be, and help to put pressure on nuclear consortiums if they were not performing to plan. That, for me, is critical to actually getting what has been signed up for.

[Wera Hobhouse (Bath) (LD)]

Does the hon. Gentleman agree that increasingly, the view that we need a permanent base-load for energy supply is outdated thinking, and that most modern thinking around the idea of energy supply all day, every day is that we do not need the idea of base-loads anymore?

[Alan Brown]

I agree wholeheartedly with that. Actually, as far back as 2015, Steve Halliday, the then chief executive of National Grid, said that baseload was an “outdated” concept and a false argument, so I agree with that. This goes back to my point that nuclear is too inflexible because it is either on or off, and it is actually nuclear that leads to wind turbines being turned off so often. The bizarre thing is that nuclear has hidden costs because of the energy constraint payments that are made.

To return to the amendments, our amendment 10 relates to clause 32, as does Labour’s amendment 5. I would point out, as I stated in Committee, that I do not support the Labour amendment because I believe that compelling the Government to take over a plant confirmed to have been economically unviable would be throwing good money after bad, which is the polar opposite of the rationale behind our amendment 10. However, to be fair, I certainly support all the other Labour amendments, particularly those about foreign ownership, and I will be happy to support them if they are pushed to a vote.

Finally—people will be glad to know—I turn to new clause 1. This is another attempt at transparency in what could otherwise be the Secretary of State committing huge sums of money via the special administration route. Again, I do not think it too onerous for the Secretary of State to have to report to Parliament on the likely costs of a bail-out of an insolvent company.

In Committee, the Minister argued that it would hamper the process, but given that the SAR process is only being implemented for the first time through Bulb going bust, it is unclear to me why a report to Parliament would unduly delay the anyway complicated process of going through the courts. The Minister stated that the court process would provide enough transparency, but also that the reporting requirement might have commercial implications and affect the Secretary of State’s ability to bring the administration to an end. Both aspects of that cannot be true: there is enough transparency or there is not. It seems to me that reporting to Parliament should not hinder the transparency process, and it should not have commercial implications, so this new clause has been put forward to ensure clear reporting of information to Parliament.

In conclusion, I have made it clear from the outset that this Bill lacks transparency. Clauses 2 and 3 give way too much power to the Secretary of State to assess what he or she believes to be a value-for-money nuclear project and then commit bill payers to paying for it. While I am opposed to the Bill, I have not even proposed wrecking amendments because the amendments today are all designed to ensure that, first, parliamentarians and, secondly, bill payers know exactly what money is being committed and for what reasons.

If the Government have faith in their arguments that nuclear energy is required and that it represents true value for money, it seems to me that they should willingly accept these amendments and new clause 1. If the amendments get defeated in votes, we will know that it is all about continued backroom deals that they fear will not stand up to scrutiny if they were to report on the actual sums.

[John Redwood]

I welcome proposals that will create more generating capacity in the United Kingdom. As the Minister knows, I am extremely worried that we are already typically 10% dependent on imported electricity and that the current plans envisage our becoming more import dependent, with the preferred route for electricity provision being the construction of more interconnectors. I am worried about this on security grounds, because we link ourselves at our peril into an energy-short system on the continent of Europe that is far too dependent on Mr Putin and Russian gas. I also worry about it because we are short of electricity and gas at the moment, and we see the price pressures that that creates. I think we should be doing more to expand the supply of both electricity and domestic gas.

I think the Scottish National party has made some important points, although it comes at nuclear power from a different perspective from that of the Government. While we could usefully enjoy more nuclear power, it is very important that those projects are timely and cost-controlled, with technologies that will deliver reliable power on a sustainable basis. Does the Minister agree that nothing in this legislation, and nothing that he can now do, can prevent the proportion of our electricity that is generated by nuclear from declining for the whole of this decade? As I understand it, these projects take a long time to get type approval and financing, and a long time in construction. As I also understand it, all but one of our current nuclear power stations is scheduled to close by 2030, and although one large new nuclear power station should come on stream during that period, it will not offset all the capacity that is taken out.

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[Virginia Crosbie (Ynys Môn) (Con)]

It is a pleasure to speak in this debate. As the co-founder of the nuclear delivery group, along with my fellow atomic kitten, my hon. Friend the Member for Copeland (Trudy Harrison), I have been at the forefront of campaigning for nuclear energy to form a key part of our 2050 net zero strategy since becoming MP for Ynys Môn.

I can talk about the various amendments tabled by the Opposition, but the reality is that this Bill is critical if the UK is to tackle climate change, and it is critical for the UK’s energy security and stability. The demand for electricity will only rise as we phase out carbon-based energy. Although renewables such as solar, wind and tidal energy must form part of our zero-carbon mix, they simply do not currently offer the capacity or reliability that we will need to go forward. Nuclear power is the only viable alternative to fossil fuels that the UK can implement in the timeframes required.

[Alan Brown]

When the hon. Member speaks to the amendments, will she explain why she opposes any of them? I would have thought that tabling amendments about transparency and to highlight the costs of nuclear would be a good thing.

[Virginia Crosbie]

Several of the amendments that the hon. Member mentioned relate to information flow and financing. I will talk more about financing and how that is so important to my constituents on Ynys Môn.

In recent years, we have seen our nuclear generation capacity drop and UK progress on the decarbonisation of power stall. Over the past year, I have been working hard to raise the issue of financing for nuclear power with Ministers and officials, because it is a key blocker to bringing more nuclear power online. The majority of my constituents support Wylfa Newydd. It is recognised as the best site in the UK, possibly the world, to host a nuclear power plant.

I will end by saying that the Bill will make a huge difference to Ynys Môn. My constituency has one of the lowest levels of gross value added in the UK and we desperately need these jobs to come through. On behalf of the nuclear delivery group, I would like to thank all my constituents and, in particular, the community of Llanbadrig for remaining positive and united in the hope that Ynys Môn sees the fruits of this important piece of legislation.

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[Bob Seely]

I am half German and I think my German relatives would confirm that they have wind in Germany. [Interruption.] And the Baltic sea—thank you very much indeed. There is no reputable case, including in reports from the UN and others, that disagrees that, if we are to meet zero carbon at some point in the next 20, 30 or 40 years, nuclear will play an increasingly significant element, whether we like it or not. It is a very low-carbon form of energy, with no greenhouse gas, and it is important for us to take that on board.

On foreign ownership and foreign funding, would I start from here? No. I am uncomfortable with the idea that we would ever want to build an untried, untested Chinese nuclear reactor in this country, especially one that has not been built anywhere else, to say nothing of the geopolitical ramifications of that. I am not hugely happy that we have Chinese funding in place, but I understand the critical point that we need a sense of momentum to make progress on this issue. In a perfect world, though, we would not be starting from here.

[Alan Brown]

The hon. Gentleman spoke about the importance of nuclear to get to net zero, but the UK Government are committed to decarbonisation of the electricity grid by 2035. If we are going to rely on nuclear, there is no way on earth that we can fully decarbonise the grid. Other things are needed, such as carbon capture and storage and green hydrogen.

[Bob Seely]

The hon. Gentleman makes a perfectly sensible point, but his argument that we can do it all with renewables is a bit of a cop-out. We are not doing so. I want tidal energy for the Solent and for the Isle of Wight as much as he does for the west of Scotland, but the argument that renewables will solve our problems—especially when, as the right hon. Member for Wokingham (John Redwood) says, there is no wind— is a difficult one to sustain.

Moving back to amendments 1 and 2, it is perfectly sensible for the Government to make the point—the Minister did so when we were in conversation last week, and I thank him for his time—that we need foreign institutional funding, especially from friendly states, such as the United States, Australia, Canada, and the European Union, and a RAB system to make that investment in nuclear, which is expensive and which we need for the long term, but we need to be getting on with it. Having argued against those two amendments, I have to say that we have had two decades of incredibly poor leadership on energy supply. The hon. Member for Warrington North (Charlotte Nichols) spoke eloquently about the attractions of the nuclear industry, but, unfortunately, the point she missed out was that nuclear was killed as an investment discussion early on in the new Labour years. Unfortunately, the coalition carried on with that, because, effectively, we were appeasing a rather extreme green lobby in our country. We are coming to this very late. As my right hon. Friend the Member for Wokingham said, in a decade’s time, we will lose 12 out of the 13 nuclear reactors that we have. That means that we will go backwards when it comes to producing low-carbon, low-greenhouse-emission energy, even if more renewables come on stream, which I hope they will, so we need to get on with this.

Are we in a perfect position with Chinese funding? No. Do I want to see a Chinese nuclear reactor in this country? Absolutely not. Do I want to see Rolls-Royce nuclear reactors, which I hope will be the Rolls-Royce solution in all senses of the word? Absolutely, and we need to get cracking, because that will lower the price. It is also British technology and we will be keeping those high-quality jobs. We need to get moving. On that principle, I oppose amendments 1 and 2. I am happy with where we are with the Government at the moment, but let us just crack on, get this done, get another Bill for another nuclear plant this side of an election and then get in place the laws and the Bills that we need for modular nuclear to come onstream.

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to speak in this debate, and I am grateful for the opportunity to do so.

In the past, I have spoken in the Chamber and in smaller debates about nuclear energy and its importance in today’s society. I will put on record once again my support for nuclear energy and for what it can deliver for all of this great United Kingdom of Great Britain and Northern Ireland. We need nuclear generating capacity for the United Kingdom, and I believe that this Bill gives the opportunity for that to happen.

The hon. Member for Kilmarnock and Loudoun (Alan Brown) put forward a very good case for his proposals in new clause 1 and amendments 6, 9, 8, 7 and 10. I believe that, ultimately, it comes down to whether we support nuclear energy and the benefits that it brings or whether we have some concerns, which, obviously, the hon. Gentleman has.

Nuclear energy in the UK is minimal, with only 13 nuclear reactors and six plants, which are able to supply only about 20% of the UK’s electricity demand. It is worth pointing out that Northern Ireland is the only devolved institution in the UK without a nuclear plant or power station. I note from the papers supplied to us by the Minister that

“For the RAB model and revenue stream measures in Parts 1 and 2, these will extend and apply to England and Wales and Scotland only. This is because the unique energy position of Northern Ireland means they would not benefit from energy produced by nuclear energy generation projects under a RAB model in Great Britain, and so should not be obliged to pay.”

It is clear that the Government have provided protection for us in Northern Ireland. It is also important to remember that in the context of the Government’s levelling up agenda as well as the Bill, the funding is not relative.

Nuclear energy in the UK has not peaked since 1995 and the opening of Sizewell B, the last commissioned plant to be built.

[Alan Brown]

I appreciate that the hon. Gentleman is saying that he would welcome new nuclear power. I mentioned earlier that the impact assessment stated that the capital and financing costs of a new nuclear power station would be some £50 billion. If I were to offer the hon. Gentleman £50 billion for an investment in Northern Ireland, would a new nuclear power station really be it?

[Jim Shannon]

If only we had the opportunity of a nuclear power station in Northern Ireland! We do not have that possibility at this moment, but I would certainly be keen. I have supported this throughout my years as an elected representative—as a councillor from 1985, in the Northern Ireland Assembly, and now today.

This group of amendments also deals with reports to Parliament on costs of nuclear projects, provision of information on outages, and limits on additional charges to revenue collection contracts.

We are expecting the next nuclear plant to be built in Hinckley Point C in Somerset in 2025, some four years from now. |There is no doubt that there is a huge cost implication when it comes to safe nuclear energy, but I look to Members today to see the good that comes along with it. It ensures that we keep our carbon footprint to a minimum, which is one of the main goals that we addressed at COP26. It is also essential in addressing the energy gap and relaying our response to climate change and lowering gas emissions.

The new RAB model is expected to allow new nuclear projects to be financed privately, which is the thrust of what the Bill is about. However, it is the responsibility of our Government, and our Minister, to ensure that private investors are protected. I should like to hear from the Minister how he plans to include Northern Ireland in this strategy, so that we can gain some benefits. What will happen to private investors should things change in future? I encourage the Minister to engage with the relevant Ministers back home to ensure that similar opportunities are within reach for Northern Ireland. I have historically encouraged him and his Department to ensure that there are the correct provisions for nuclear energy improvement across the UK. While this is a long and costly road, I urge other Members to look at the benefits and sustainability factors that come along with it. Additional funding must be secured for successful and green living throughout the UK.

What is important in this debate is that we understand the essential role that nuclear power has to play, and allow that role to be played in a regulated and possible manner. I support the aim of the Bill to allow the Secretary of State—or the Minister, in this case—to regulate for revenue collection contracts, which will be used to fund a nuclear company. Payments will be managed by a “revenue collection counterparty”. Projects will be paid an “allowed revenue”, which is broadly the agreed capital cost of a project along with other relevant costs. Payments will be made by electricity supply companies which are expected to pass the cost on to consumers. Costs will start to be charged to consumers during construction, based on the allowed revenue due for that period. During operation, the cost will be the allowed revenue due, minus the value of selling the energy generated.

All this seems to me to be common-sense and logical. It is important that we regulate effectively and ensure maximum security. This is not a matter that we can ever take lightly, and I believe that the Bill’s progress has been right and proper. I therefore support the Bill, but ask the Minister to reconsider the role of Northern Ireland in our nuclear power plan. Now that the potential for a plant has been removed from the old equation, there must be a place for us in the new equation.

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[Richard Graham]

I am grateful for my hon. Friend’s comments because they lead in to the Bill and what we are debating today, which is largely about finance and the optimum way to ensure that a new, large nuclear power station is constructed, following the success of Hinkley Point C. Indeed, obviously, the ideal thing would be to move the team seamlessly from one project to another. In all of this, it is worth paying tribute to the hugely successful operational nuclear headquarters for the whole country at EDF Energy’s offices in Gloucestershire in my constituency. One thing I hope the Minister will touch on today is how important a part they will play in the future development of our nuclear capacity, whether in further large stations such as the one at Wylfa, talked up—rightly and so effectively—by my hon. Friend the Member for Ynys Môn (Virginia Crosbie), or in any other part of the United Kingdom, as well as in the small modular reactors that have been mentioned by several Members as a key way of generating more nuclear power, and probably faster, to answer the question raised by my right hon. Friend the Member for Wokingham (John Redwood).

[Alan Brown]

I issue the challenge again to the hon. Gentleman to speak to the amendments. For example, can he explain why, if he is pro-nuclear, he will vote against amendment 9, which is about providing transparency on cost? Why does he oppose amendment 7, which would compel the Secretary of State to report on the operation of the new nuclear stations in the future, including outages and their condition and operability?

[Richard Graham]

The hon. Gentleman has tabled several amendments, including amendments 6, 8, 9 and 7. Largely speaking, my perception is that they are designed to tie down the Government in as much detail as possible, avoiding the uncomfortable truth for the Scottish National party that the whole process of regulated asset base funding, which the SNP opposes, has already been used very successfully for infrastructure projects around the country, not least the separation of ScottishPower and Scottish Hydro Electric in 2005. It has also been used for the Thames tideway tunnel and Heathrow terminal 5. I do not recall those projects ever being criticised for the concept and detail of the regulated asset base funding, which is precisely what we are discussing for Sizewell C.

[Alan Brown]

Will the hon. Gentleman give way?

[Richard Graham]

I am happy to carry on taking interventions if time allows.

[Alan Brown]

The RAB model has been used successfully for some infrastructure projects, but as outlined earlier it has not been very successful in the United States when applied to nuclear power stations. Can the hon. Gentleman tell me of a successful application of the RAB model to a nuclear power station?

[Clive Lewis (Norwich South) (Lab)]

rose—

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I turn now to amendment 6, also tabled by the SNP. It would introduce a RAB designation notice, which I cannot accept. The legislation already creates a clear and transparent process for Government decision making, including scrutiny from economic, environmental and nuclear regulators. It may be used to develop a project to a suitable point of maturity prior to entering into the RAB regime, or to take a direct stake in a project, partly to help mobilise private investment.

[Alan Brown]

Will the Minister explain why he does not want to put forward a report that explains the public funding that is allocated to a project? I do not understand why that would be so difficult for him.

[Greg Hands]

We think those processes are already in place, and it is right that this should be a commercial decision and negotiation, but with transparency. We think the balance in the legislation as proposed currently meets that.

On amendment 9, also tabled by the SNP, the additional reporting obligations are unhelpful and unworkable. The requirement to publish up-front capital costs of a project could jeopardise our ability to complete a complex and lengthy capital raise. The amendment’s requirement to publish the floor price is simply not workable. In the context of a RAB model, there is no minimum floor price, and nuclear companies’ allowed revenues are determined by the economic regulator throughout the life of a plant.

[Alan Brown]

Will the Minister give way once more?

[Greg Hands]

No, I will not. I will try to respond to the debate.

Amendments 3 and 4, tabled by Labour, address how additional costs beyond the financing cap could be paid for. I agree that any RAB scheme must have adequate protections in place for consumers. However, given the size and importance of a new nuclear project, there must be a mechanism in place, with appropriate protections, to allow additional capital to be raised to ensure completion of a project where the financing cap is likely to be exceeded. The amendments proposed by the official Opposition would nullify the ability to be flexible. We are making sure that we do not have to go down that course to carry out robust due diligence on the project in the first place, having learned from existing and current projects to set a robust estimate of project cost.

SNP amendments 7 and 8 refer to reporting requirements. Planned outages at nuclear power stations may happen for a variety of reasons, and it is right that they are governed by the amount of time required to complete the maintenance—the actual cause of the outage in many cases—rather than the arbitrary time limit set out in the SNP’s amendment. Both the Office for Nuclear Regulation and National Grid already work closely with nuclear operators with regard to outages and availability, and they should do so independently of the Government. Nevertheless, I would like to reassure the hon. Member for Southampton, Test that we are aiming to design the RAB regime so that the nuclear company is incentivised to maintain availability.

I turn now to amendment 5, tabled by Labour. It deals with situations whereby a RAB project

“cannot be rescued as a going concern”,

having entered special administration. Of course, I share the wish of the hon. Member for Southampton, Test that the special administration regime should protect consumer interests, but the amendment could have the impact of damaging those interests. We expect the insolvency of a nuclear RAB company to be a highly unlikely event. However, there may be even rarer circumstances within this where it is actually in the best interests of both consumers and taxpayers to discontinue the project, and for it to be safely decommissioned—for example, if a safety fault, which is very unlikely, discovered at a plant made it, in practical terms, inoperable. It is important that the Secretary of State retains the discretion to act in whichever way can achieve the best outcomes for consumers or taxpayers during the insolvency of a relevant licensee nuclear company, and the Opposition’s amendment would remove this discretion.

Finally, I would like to discuss amendment 10, tabled by the SNP. It is important to make it clear that special administration is a court-administered procedure and that the nuclear administrator is an appointee of the court. There is already an appropriate level of transparency through the court process for the transfer.

I will now deal with other points raised in the debate. My right hon. Friend the Member for Wokingham (John Redwood) asked about new supply, particularly in relation to gas, which is not on the face of the Bill. I can tell him that six new gas fields came on stream in the last quarter of the last year: Arran, Columbus, Finlaggan, Tolmount, Blythe and Elgood. It is not the case that there are no new gas fields coming on stream. Gas is, of course, heavily incentivised at present, simply by the price, for there to be more extraction. According to the developers’ estimates, Hinkley Point C could be online or start to come online as early as 2026. However, my right hon. Friend is right that we need to think ahead. I should Make it clear that I welcome the official Opposition’s support for the Bill overall, but let us not forget that awful 1997 Labour manifesto, which said:

“We see no economic case for the building of any new nuclear power stations”—

not just state-owned nuclear power stations, as my right hon. Friend said. Hinkley Point is being built, and an amazing job has been done to keep that construction work going through the pandemic. Our nuclear industry deserves congratulations.

The hon. Member for Bath (Wera Hobhouse) said that we should be rolling out renewable energy. That is exactly what we are doing. We have massively expanded our offshore wind power, and we are quadrupling it over the next decade. I think she said that Germany did not have any wind, but it has a target of 30 GW of offshore wind. There is a lot of wind in Germany. I know that she is from Hanover, which is a long way from the sea, but there is even a famous film—it is one of the best German films—called “Mit dem Wind nach Westen”, which is all about wind carrying people in balloons from east Germany to west Germany. There is most definitely wind in Germany.

--- Later in debate ---

[Greg Hands]

No, I am winding up now. For the reasons that I have set out, I cannot accept the amendments tabled and therefore ask right hon. and hon. Members not to press them. I hope that I have nevertheless shown that our aims are closely aligned for Britain’s brilliant nuclear renaissance, and the Bill will be a key part of that. I urge the House to reject new clause 1 and amendments 1 to 10.

[Alan Brown]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Clause 1

Key definitions for Part 1

Amendment proposed: 1, page 1, line 15, at end insert—

“(6) ‘Owned by a foreign power’ means owned by a company controlled by a foreign state and operating for investment purposes.”—(Dr Whitehead.)

This amendment is a definition of “foreign power” set out in Amendment 2.

Question put, That the amendment be made.

--- Later in debate ---

[Kwasi Kwarteng]

My right hon. Friend will be aware that the small modular reactors cannot be brought onstream in the next few months, but with the right investment and the right incentives, all this technology can be brought onstream very quickly. I cannot say that it will be five years or 10 years, but it will be brought onstream and will help us to reach the decarbonising targets that we have set ourselves.

[Alan Brown]

Will the Secretary of State give way?

[Kwasi Kwarteng]

I must make progress—forgive me.

Since the publication of the Prime Minister’s 10-point plan in November 2020, £6 billion of new investment has already poured into the energy sector—just in a period of barely 15 months. It was notable at the global investment summit in October last year that a further £9.7 billion-worth of deals was announced. Foreign investment is particularly eager to help to finance our way to net zero. But I have to state that foreign investment must not come at the expense of our national security. That is precisely why the National Security and Investment Act 2021 was introduced to safeguard our key strategic industries.

The final issue that we have debated is the necessity of ensuring that there is adequate protection for consumers. With this approach, private investors will be given greater certainty through a lower and more reliable rate of return, but that will, in turn, lower the cost of financing projects and ultimately, in the medium term, help sharply to reduce consumer electricity bills. To protect consumers, the Government will of course put any potential projects through a rigorous due diligence process, allowing detailed scrutiny of a project’s cost along with its delivery plans. The RAB regime will be designed to incentivise the company to deliver the project to time and to budget.

Britain once led the world with our civil nuclear industry, and we fully intend to clear a path to leadership and innovation in this critically important piece of infrastructure.

[Alan Brown]

If there is such a desire for investment, why was £1.7 billion allocated in the last Budget just to develop this project to final investment stage? What are we getting for that £1.7 billion of taxpayers’ money?

[Kwasi Kwarteng]

We all know that the hon. Gentleman’s party is against nuclear, but we also appreciate that the comprehensive spending review that he alluded to was all about ensuring our commitment in the 10-point plan to at least one further final investment decision before the end of the Parliament, and that is the sum of money that we have allocated to ensuring that that happens.

I look forward to following the progress of this Bill and pursuing our plan for greater nuclear investment, greater resilience and greater affordability in our energy mix. On that basis, I commend the Bill to the House.

--- Later in debate ---

[Alan Brown]

Unlike the hon. Member for Morecambe and Lunesdale (David Morris), I do not support the Bill, which may come as a surprise to some.

The basis of the Bill, as outlined by the Secretary of State, is that the Government recognise market failure in nuclear power, with Hitachi and Toshiba walking away from the sites they were developing. It is interesting that the Government now admit what we have said all along, which is that Hinkley Point C is a bad deal for bill payers. The Secretary of State dresses it up as being the right deal at the right time but, if we look at the impact assessment, it says the new RAB model could save up to £80 billion. By default, the impact assessment is telling us that the Government believe the model for Hinkley Point C cost bill payers an additional £30 billion to £80 billion.

Looking at the 35-year contract for Hinkley Point C, this means the Government are now telling us that bill payers will pay an additional £1 billion to £2 billion every year of that 35-year contract if Hinkley Point C starts generating electricity. That is a disgraceful waste of money.

[Alison Thewliss (Glasgow Central) (SNP)]

My hon. Friend is making a good point about the waste of money. It sounds like he agrees with my constituent Maureen from Kelvingrove, who says she believes

“the money being poured into this would be better spent on smaller scale more local solutions such as tide, wind, solar, hydro…and of course the key to it all, energy storage.”

Does my hon. Friend agree?

[Alan Brown]

I agree wholeheartedly, and I said earlier that the £1.7 billion allocated for the final investment stage of Sizewell C could deliver two pumped-storage hydro schemes in Scotland—two schemes that provide dispatchable energy when it is required.

My other big concern about the Bill and the RAB model itself is that the savings will not accrue and, worse, bill payers will carry too much of the construction risk. We keep hearing how successful the RAB model has been for other infrastructure projects, but nobody can demonstrate that it is proven to work for delivering nuclear power stations. As we discussed earlier, the examples from the United States suggest otherwise. Abandoned projects are costing bill payers billions of dollars, including $9 billion for the abandoned South Carolina project.

At the present time, in the here and now, we have a cost of living crisis, so it is absolutely scandalous to commit an estimated £50 billion to £60 billion in capital and finance costs and pass those on to bill payers. The Government tell us that is only £10 per household over the construction period, but what they do not tell us is how much more it will be when the 60-year RAB model contract kicks in.

We are in a bizarre situation where the trade body Energy UK supports the RAB model while arguing that consideration needs to be given to the removal of levies from our existing electricity bills due to the impact on the cost of living crisis. That is contradictory. Why support a payment mechanism with contractual payments of some 70 to 75 years being added to our bills during the current energy price crisis? E.ON has confirmed that it opposes such a move, and particularly the concept of bill payers starting to foot the bill as soon as construction commences.

Instead, if we retrofitted 11 million homes with energy efficiency measures, it is estimated that peak heat demand could fall by 40%. That is where the Government should start the targeted investment. We do need to consider whether we need new nuclear at all, and therefore whether we need this Bill or alternative funding mechanisms. Of the eight existing power stations, Dungeness went offline last year, seven years early; Hunterston B has now stopped production; Hinkley Point B will stop later this year; and Heysham and Hartlepool will stop in 2024. So five of the existing eight stations will be down by 2024, way before Hinkley will be up and running.

If nuclear is so critical to baseload, how will we live without it for these years? It actually undermines the Government’s own argument, particularly when we realise how often nuclear power stations go down and outages need to be managed. The wind might not be blowing and the power stations might go down as well, so what is the answer then? That is why we need investment in alternative renewables.

Worse still, the proposed EPR model developed at Hinkley looks set to be used at Sizewell. There is no functioning EPR model anywhere in the world. Taishan in China is still shut down, and according to a French whistleblower more fuel rods are damaged than China has acknowledged. Indeed, at Flamanville in France, which is already predicted to be 12 years behind, construction has stopped again because the French nuclear authorities are investigating a possible flaw in the EPR design. Surely this Government would not be so daft as to sign a new nuclear contract with an EPR design that has still not been shown to work.

This Bill represents the wrong priorities for the Government. Instead of mitigating the cost of living crisis and the cost of energy crisis, they are looking to compound the misery by adding further burdens on bill payers. I know that the Labour party has said that it will support the Bill, but I strongly recommend that it reconsiders its position, given the commitment of £50 billion to £60 billion in capital and finance costs being added for bill payers. We do not require another Tory white elephant nuclear project. I will certainly be voting against it.

Storm Arwen: Power Outages

Alan Brown Excerpts

Monday 6th December 2021 Commons Chamber

[Greg Hands]

I thank my hon. Friend for that, and it was invaluable to have his assistance on Friday when visiting his community in Banff and Buchan. I met the SSE engineers at Methlick, and this is also a good occasion to thank in particular Mike Coull from the Little Kitchen, who has been working flat out to provide free fish and chips to the community affected in Methlick. I thank my hon. Friend for everything that he has done to keep his constituents posted and to make sure he fulfils his role here in the House, scrutinising the UK Government.

It was also a pleasure in particular to meet in Aberdeenshire those who had come from across the UK to assist. I was talking to one of the engineers who had come up from Liverpool, and there was a genuine professional satisfaction in coming from right the way across the country to help people in their time of need. I saw that from right across the UK, and I think people were very thankful for that. I also join with my hon. Friend in thanking the local communities.

On the review, of course people have become more dependent on electricity. Generally, that can be a good thing for us, particularly with electric vehicles and electricity as a source of power, but we also need to recognise that greater dependence means a greater responsibility, which I am sure will be part of the joint BEIS-Ofgem review coming up.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I, too, pay tribute to the fortitude of those who have been affected and the fantastic community support that has been provided, as well as to the workers doing the work and challenging the elements. However, the reality is that it is completely unacceptable for people to be without power for 10 days, and it is unacceptable for the Minister to stand here and say it is unacceptable—and that communications are unacceptable—without telling us what he is doing to sort out these unacceptable conditions.

With so many faults—way more than were predicted by modelling—what discussions have the Government had about whether the modelling is robust enough? What assessment are they making of the robustness of the network itself, of the recovery plans, and—we knew the storm was coming—of whether people understood the effects of the storm and other factors, such as trees being felled by the wind?

Customers and Parliament were given dates for when electricity would be restored, but those have proven to be wrong, so what assessment have the Government made of how the electricity companies have undertaken that work? It is quite clear that they did not have a grip of the situation. Was all the technology deployed that could have been deployed, such as drones and other remote working devices? Was sufficient tree-clearing equipment and labour deployed in the aftermath?

The Minister spoke about the mutual aid, but that clearly has not been sufficient to resolve the situation. It is quite clear that the Army should have been deployed more quickly. Why did the Government not offer the use of the Army? What compensation will be provided to customers, particularly hospitality business, and how will lessons learned be conveyed to Parliament? The Minister spoke about lessons learned from Storm Desmond. Why were those lessons not sufficient?

[Greg Hands]

As I mentioned, I spent Friday in Aberdeenshire seeing the situation on the ground. I was joined by Chris Burchell, the managing director of SSE, and I put him on the spot about his communications. I think they were better in the first few days than those of Northern Powergrid, but it has been a difficult time for everyone concerned.

On the calling out of the Army, the hon. Gentleman will know that that is a role for the local resilience forum, the Grampian local resilience partnership. On Friday I also met Jim Savege, the chief executive of Aberdeenshire Council, who I think chairs or leads the local resilience partnership. He was very satisfied, I think, with the response of the Army and others. I met the 3 Scots when I was in Aberdeenshire; I understand that 45 Commando and the 39 Engineer Regiment have also been deployed. I am sure the hon. Gentleman will join me in thanking them for the work they have been putting in to help the community.

In terms of assistance—the NEWSAC scheme and the ability to deploy engineers from right across the United Kingdom—the hon. Gentleman may wish to reflect on the message from the industry about the importance of the UK response in being able to deploy people. A lot of engineers were deployed in Scotland; 630 were deployed from elsewhere in the UK. These are highly qualified, highly capable, very technical people. Two hundred and eighty-five of them came from the rest of the UK to Scotland, and 400 are currently in the north-east of England. I particularly want to minute my thanks for the efforts they have put in right across this United Kingdom.