Infrastructure Bill [HL]

Debate between Baroness Verma and Lord Davies of Oldham

Wednesday 19th November 2014 Lords Chamber

[Lord Davies of Oldham]

My Lords, as the House is in congratulatory mood, I briefly congratulate the noble Lord, Lord Jenkin. I first met his formidable intellect, advantages and knowledge on energy Bills a decade or so ago, when we went through a very long energy Bill. From what I can recall, he was present for virtually every minute of a Bill that went through 13 days or so in Committee, to say nothing of the extensive consideration elsewhere. Others will have the chance to congratulate him later, but with regard to this Bill, he has displayed his usual insight and talent to improve the legislation. I also, of course, second his point about congratulating the noble Baroness, Lady Verma, and the Bill team—although I may say that they have only started the long road. I predict challenges yet to come on all parts of the Bill but in the area of fracking, I think that they will have quite an interesting time in the other place.

[Baroness Verma]

My Lords, I am extremely grateful to all noble Lords for their participation in our proceedings on this Bill, particularly our discussions outside the Chamber, which have been very helpful. I end by thanking my noble friend Lord Jenkin for being there throughout all the energy Bills that I have worked on. He has provided a stream of information and expertise, and I have learnt a great deal from him in the past two and a half years at the Department of Energy and Climate Change. I wish him well. His forensic examination of legislation has made us all realise that this House has such excellence to offer that we should never underestimate the expertise among those who sit here.

Infrastructure Bill [HL]

Debate between Baroness Verma and Lord Davies of Oldham

Tuesday 14th October 2014 Grand Committee

[Lord Davies of Oldham]

My Lords, I will be very brief. First, I congratulate the noble Lord, Lord Hodgson, on his excellent exposition of a very important concept. We see much merit in it. The one thing that we cannot replicate as far as the Norwegians are concerned is that they launched their fund at a time of great and increasing prosperity. Any Government in power at present or for the foreseeable future in the United Kingdom are not faced with that same position.

Secondly, there is a community dimension to the issue of shale gas. We are all too well aware of the price that local communities might pay in terms of disruption while the shale gas is mined. Thirdly, I emphasise that while we may underestimate how much is there, of course we may overestimate it too. It is much easier to identify how much is there than to actually extract it. Therefore, we must be able to follow the greater balance of optimism that exists in some places. None the less, the Committee ought to be enormously grateful to the noble Lord, Lord Hodgson, for raising this issue. I hope that the Minister will give him a positive response.

[Baroness Verma]

My Lords, first, I thank my noble friend Lord Hodgson for his amendment and for the most eloquent way in which he explained the merits for the Norwegian people of having a sovereign fund. Of course, shale represents a huge economic opportunity for the UK. It could potentially create thousands of jobs, generate significant business investment and provide substantial revenue for the Exchequer in future.

However, unlike the offshore industry in Norway, the shale industry in the UK is still very much in its early stages. The Norwegian Government’s petroleum fund was established in 1990, as my noble friend said, but that was nearly 20 years after oil first started being produced and when the levels of revenue were well known. In the UK, shale gas is still in the exploration phase. My noble friend said that it was a potential but as yet an unknown. The Government will not be able to forecast the scale or timing of shale revenues until more work is done to determine the extent of gas that can be technically and commercially recovered. It would therefore be inappropriate to indicate now how potential future revenue would be used. As a result, the Government have no current plans to assess the possibility of creating a sovereign wealth fund from this revenue.

I recognise the arguments behind this amendment. Diverting future revenues from government finances to a specific shale fund, or one created by revenue from other natural resources, would come at a cost. Shale revenues may also be needed to make up for shortfalls elsewhere. The UK continental shelf is a mature basin and oil and gas revenues from the North Sea are declining; the Government would likely need to either raise additional tax revenue elsewhere or cut spending to maintain the fiscal balance. The Government consider that, in general, hypothecation, or earmarking revenues for a particular spending purpose, is not always an efficient way in which to manage the public finances. Like all government receipts, revenues are remitted to the consolidated fund to support general expenditure. My noble friend Lord Teverson recognised that fact. Once it goes to the Treasury, it becomes slightly difficult to extract it—but that is because of the methods that we have used, whichever Government have been in power. It allows the Government to allocate resources most efficiently across the economy.

I thank all noble Lords for contributing. It has been a very informative debate, which has raised some very important points. The noble Lord, Lord Davies, said in his concluding sentence that I should be sympathetic to this proposal. Is it something that the Labour Party will put in its manifesto for the next general election? It would be interesting to know how that debate would follow.

[Lord Davies of Oldham]

Could I ask the Minister whether she thinks she will put it in her manifesto?

[Baroness Verma]

I have laid out very clearly our position in government. Generally, hypothecation of revenue is not something that we support.

I conclude by recognising that the noble Lord has made some incredibly important points, but I feel that I cannot accept his amendment and hope that he withdraws it.