Environment: Green Growth

Baroness Worthington Excerpts

Wednesday 16th May 2012 Lords Chamber

Asked By

[Baroness Worthington]

To ask Her Majesty’s Government what assessment they have made of the recent Green Alliance report into the use of tax reliefs to promote sustainable, green growth.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the views of stakeholders, including the Green Alliance, are given serious consideration when formulating policy. The Government remain committed to increasing the proportion of revenue from environmental taxes. This needs to be balanced with ensuring predictability, stability and simplicity in the tax code. In Budget 2012 the Government further demonstrated their intention to meet their environmental commitments while reducing unnecessary administrative burdens.

[Baroness Worthington]

My Lords, I thank the Minister for his response. I imagine that, as a member of the “greenest Government ever”, the Minister will have warmly welcomed the Green Alliance’s recent report into using tax relief on savings products to bring about green growth. Will he comment specifically on the suggestion that those companies offering products that receive reduced tax relief should be required to adhere to the standards code, which is currently voluntary, and that there should be greater transparency in how they invest the money that is saved?

[Lord Sassoon]

I am grateful to the noble Baroness for confirming the green credentials of this Government. She raises an interesting point because, on the question of transparency, the Green Alliance report refers to all ISAs—so to a broader suite of savings products than merely green products. Any contribution to the debate about increasing transparency is to be welcomed. Other reports have been written recently about transparency around fees in particular, while this one is more about the transparency of the investments in the portfolio. I note that a number of green ISAs already on the market make a virtue out of the transparency that they offer. Generally this is an important debate but one in which the voluntary approach, backed up by the code that the noble Baroness refers to, is right.

Queen’s Speech

Baroness Worthington Excerpts

Wednesday 16th May 2012 Lords Chamber

[Baroness Worthington]

My Lords, I am honoured to be able to contribute some words to this debate on the humble Address. We are living through difficult times: economic growth eludes us; long-term unemployment, particularly among the young, is rising; the divide between the haves and the have-nots grows ever wider; and the core elements that provide a safety net for those most in need are being eroded. Doctors’ surgeries are closing; morale in the NHS is rock bottom; swingeing cuts are closing front-line services; access to legal aid has been drastically curtailed; policing is being privatised by the back door; welfare reforms make it much more likely that people will fall between the cracks even while philanthropy and charities are being undermined; and, to top it all, the cost of living is rising.

It is sad to say that the contents of the gracious Speech will make matters worse, not better. It seems that the Prime Minister and his Government continue to govern the country for the benefit of the few and to the detriment of the many. This is perhaps not a surprise. The Government have repeatedly shown that they are incapable of empathising with people born into less fortunate circumstances than themselves. They like to tell themselves the lie that we are in this mess because somehow the British public are not working hard enough, quite forgetting that the cause of the recession was brought upon us by the financial elite, who also have become detached from the real world, risking our future on ever more complex and risky financial products in the belief that growth can be magicked out of thin air with clever algorithms and confusing products and not by investing in productive companies and in people.

The only way out of this mess is to begin to rebuild our economy in the real world, reducing our reliance on the financial sector, investing in the things we excel at: high-quality and precision engineering; the digital economy; higher education; tourism; the media and the arts; and, critically, leading the world in tackling climate change and reinventing our energy systems to beat our addiction to expensive fossil fuels.

On this last point, the Government are to bring forward legislation to deliver reform of our electricity markets. But are these reforms in the interests of the many? Will they reduce consumer bills? Do they guarantee that investment will flow into low-carbon technologies? The answer, sadly, on all fronts, is no. The Bill has been written at the behest of the nuclear industry, which, in reality, is represented by just one state-subsidised French company. Those who want to build today’s reactors know that they cannot compete on the open market and have persuaded the Government to offer long-term contracts which guarantee prices. The chosen mechanism of support—contracts for difference—suits large-scale, base load providers but does not suit the development of offshore wind and other renewables. It is not certain whether they will clear state aid rules and they will do nothing to oblige the companies winning the contracts to build anything. We hear that they will be underwritten by the consumer—not the Government—which is a novel legal arrangement that may not give the investors the confidence that they say they need. Just today, six energy companies, including one of the big six, have written to the Government describing the proposals as a potential train wreck. We urge a rethink. It is likely to be a bad Bill because the existing nuclear industry is still the cuckoo in the nest of the UK energy policy, distorting it and robbing resources from the other elements of energy policy.

On top of this, in these difficult times of record energy prices, rather than saving consumers’ money, it will cost them more. The one element that we were promised, which would help to reduce consumer bills, was the creation of a market for reductions in energy demand—so called “negawatts”—but now we hear that this important element of the Bill is unlikely to be included. Why? The answer is because it would serve the interests of the people, not the powerful elite who control our current energy policy and markets.

Another major failing is that the Government are interested only in electricity market reform. What about the two other elements of energy policy: how we heat our homes and how we fuel our vehicles? Here the rising price of oil and gas has had a great impact on the household budgets of millions of people who are still dependent on their gas boilers to heat their homes and the petrol pump to get to work. On these markets the Government have been silent, despite the fact that there is a growing problem that they must face up to: falling tax receipts from fuels. Squeezed by rising prices, people are taking action to insulate themselves by buying smaller and more fuel-efficient cars and turning down the thermostat. However, as the Daily Telegraph mentioned yesterday, it seems that the only answer that the Government have is to increase fuel duty, instead of having a complete rethink and ushering in market reforms that help to provide a smooth transition to a lower carbon future across all energy sectors. They are, after all, all interrelated and we need a thorough and much more imaginative take on how to do this market reform and not simply to focus on electricity.

Rising fossil fuel prices are a huge issue that we must address. However, we do not need all our time to be taken up with considering a nuclear subsidy Bill that masquerades as a market reform Bill because no one is brave enough to be honest that that is what they are doing. For those struggling to pay their gas bills, we need to look again at how to improve the quality of our houses and to encourage greater use of electricity for heating. We need a return to the Economy 7 policies of the 1970s but, this time, with a view to enabling people to benefit from the increased use of energy from wind and solar power when the wind is blowing and the sun is shining. In transport we need to challenge the might of the oil companies and introduce real competition, not just between the oil majors, at every level of the supply chain, but also to enable alternatively fuelled and electric cars to penetrate the market more quickly.

Above all, we need a Government who can empathise with the real difficulties experienced by people around the country. We do not need a group of people detached from the real world governing the country for the benefit of the elite. Sadly, there is little or nothing in this gracious Speech to show that the Government have either the desire or the imagination to do this. This legislative agenda will not lead the country towards a more prosperous and secure future and it is a missed opportunity. I am sorry I cannot be more positive and that, ahead of us, we have three more years of trying to correct and prevent some of the Government’s worst mistakes.

Economy: Budget Statement

Baroness Worthington Excerpts

Thursday 22nd March 2012 Lords Chamber

[Baroness Worthington]

My Lords, I aim my comments towards the measures in the Budget that address green energy and the environment. The grouping of these topics within the Budget might imply that there is some overall cohesive vision linking our green future and energy together. Sadly, as the Budget shows, that is not the case. The Budget has been described by Greenpeace as a “polluter’s charter”. It is a ragbag of measures that appear to give great benefit to the fossil fuel industry at the expense of the green energy industry.

In opposition, the current Chancellor George Osborne made a great pretence of being green. He talked about how he would make the Treasury join DECC in championing action to tackle climate change. He said:

“The Treasury will no longer be the cuckoo in the Whitehall nest when it comes to climate change”.

He was right. It has become an albatross sitting round the neck of the low-carbon industry. We can be grateful that he seems to have dropped his more obviously outright hostility towards the UK leading on climate change but this is a long way from being a green Budget. He does not seem able to help himself. Even as he praises renewables, he then immediately undermines that by making a veiled reference to the fact that he obviously considers the renewables sector to be costing industry and consumers too much. He said:

“Renewable energy will play a crucial part in Britain’s energy mix, but I will always be alert to the costs that we are asking families and businesses to bear”.—[Official Report, Commons, 21/3/12; col. 798.]

Why single out renewables in that case? It is obviously clear that we need to subsidise low-carbon technologies but why single out renewables?

The policy that the Treasury introduced that supports investment in low-carbon technologies is the carbon floor price. It is quite a controversial policy. The announced level for 2014-15 in the Budget is now as high as £9.55 per tonne of CO₂—almost double what it was—because there has been a big falling-off in carbon prices in Europe. We have to pay more to meet our desired level. We are now paying more than double the traded price in Europe. This is having an impact on businesses and consumers, but to what end? Essentially, it does not guarantee investment and it rewards existing generators who already built their infrastructure many years ago. It is accruing large amounts of money to our nuclear generators. Why no mention of the costs that nuclear puts on the consumer and business?

The Chancellor also appears to have some strange logic. He says that, “Gas is cheap”. In what way is gas cheap? If it is cheap, why would he also then have to announce a call for evidence on the barriers to investment in gas? The answer is that gas is not cheap at all—quite the opposite. Increases in gas prices are what are putting pressure on energy bills, not renewables. I am not against the increased use of gas. What concerns me is the Chancellor’s blithe disregard for the facts. People cannot invest in gas because it is expensive. There is a real possibility that it will remain so in future. Instead of making sure that we have a sensible contingency plan by giving unqualified support for renewables—a sector that is delivering investment, jobs and growth now—he sets about undermining them.

Why is gas expensive? In part, that expense has been driven by record oil prices. A couple of weeks ago, the oil price hit £80 a barrel. No one really considers or seriously believes that that will come back down in a significant way. That then makes the Chancellor’s fair fuel stabiliser policy completely redundant since it only kicks in if oil returns to £45 a barrel. Could the Minister help us understand the logic of this policy and tell the House when he expects oil prices to return to that level? That would certainly help our economy. I guess that the answer is never, and that the oil majors must be delighted to have successfully negotiated a break on the taxation of their product.

It does not stop there. They have also received more help in the form of substantial tax breaks for offshore drilling and decommissioning. In these difficult times, the Budget rewards not just rich individuals but also the most profitable businesses. Why does an industry making such huge profits need to receive yet more help from government? The noble Lord, Lord Marlesford, said that,

“it is immoral to give … handouts to those who do not need them”.

The offshore oil and gas industry is not a poor one. We do not need to spend £3 billion of lost tax revenue helping it get more oil out of sensitive areas in our seas.

It is not just the oil and gas industry that the Treasury has seen fit to help out. There is also something in the Budget for the coal lobby: an exemption from the carbon floor price for the use of coal slurry to generate electricity. That does not sound at all green to me. I struggle to see how that can be justified. This is apparently a low-carbon policy yet we are giving an exemption for a high-carbon-emitting source of fuel used to make electricity. That makes no sense. Again, could the Minister explain that logic? We do not need to give tax breaks to the coal industry under the banner of an environmental policy.

We could talk about many other measures, such as the Government’s double-dealing with the combined heat and power sector. We have helped the industry by giving it an exemption from the carbon floor price but we are also removing its exemptions from the climate change levy. Overall, the industry is a net loser: £45 million is saved from the carbon floor price but £110 million is lost from the CCL exemption removal.

Then we come to the carbon reduction commitments. I admit that I am not a great fan of this policy but it addresses the important point of those people not currently caught by the EU Emissions Trading Scheme. I welcome the fact that we will look again at this and the potential for a different, simpler environmental tax. I suggest that one option is to think about the extension of the upstream Emissions Trading Scheme to the suppliers of heating fuels. Since they are outside the cap, any measure to price carbon there would definitely be additional. That would be a revenue-raiser for the Treasury and could replace the CRC in creating a price signal to encourage investment in energy efficiency.

There have been many other criticisms of the Budget on green issues. The Chancellor made great play of the terrible burden that the habitats directive placed on business. That has obviously been proved to be a complete red herring. There is also the concern about the deregulation of planning leading to urban sprawl and essentially a developer’s charter. There is now a presumption in favour of sustainable development but my fear is that, having seen the Budget, “sustainable development” includes absolutely everything from coal slurry to offshore oil and gas, and gas fracking. That could all be put in under this definition of sustainable development. I would like to hear some reassurance that that is not the case.

So many things could have been different. We could have seen a proper investment in the renewable sector. The engineering giant, Alsthom, has recently invested quite heavily in creating a wind turbine manufacturing plant in France for offshore wind turbines. That is despite the fact that the overall market for offshore wind in France is very small in comparison to that in the UK; the problem is a huge amount of policy uncertainty and a sense that the Government are not pulling together behind the renewables industry. The Chancellor has a lot of responsibility for giving that impression.

One policy could have been in there and would have given a sign that the Chancellor cares and understands what will help us to achieve our low-carbon economy: providing more help for energy efficiency measures. One example is the use of voltage optimisation technology, which is an excellent example of UK expertise and has come out of the University of Liverpool. We now have world-leading technology that helps householders to save electricity without doing anything; it simply optimises their use of electricity, taking around 10 per cent off their Bills. The Government have absolutely failed to be able to provide any support for that sector, which is currently excluded from the Green Deal for reasons of huge bureaucracy rather than it not being a good technology. It is a good technology and is already used in DECC and No. 10 to save money, yet it has not been supported for others to take up the policy. A lower reduced rate of VAT could have been given for that technology; it would have boosted jobs and helped to breed a very good UK sector in something that we excel at.

Overall, the Budget fails miserably to match up to the expectations that we might have from the greenest Government ever, and I am sorry that I cannot be more positive.

Economy: Growth

Baroness Worthington Excerpts

Thursday 31st March 2011 Lords Chamber

[Baroness Worthington]

My Lords, it is a great privilege to stand before you today to give my maiden speech. I will begin by thanking my sponsors, my noble friends Lord Eatwell and Lord Bassam of Brighton, and my mentor, my noble friend Lord Puttnam. I also extend my gratitude to all the staff of the House who have made me and my baby son feel very welcome. My elevation coincided almost exactly with my becoming a mother—in effect, two life sentences in one week. I am most grateful for the tolerance and patience that everyone has shown towards me as I try to balance these two important new roles. I am grateful to my noble friend Lord Hollick for tabling an important debate as it allows me the opportunity to offer some thoughts on the issue I know most about: the need to tackle global climate change with sustainable economic policy.

Climate change is the political and moral challenge of our time. Each year brings fresh evidence of the consequences of gambling with our planet's atmosphere. Future generations will judge us on how we act on this issue more than on any other. To date, sadly, our progress has been too slow. In preparing this speech, I looked back through Hansard and was interested to see that in March 1991, a week after the Budget had been published, the House held a debate on global warming. A great deal has changed since then, but sadly some concerns expressed by noble Lords two decades ago are still very pertinent today.

The good news is that in 2011 our economy is less reliant than it once was on the burning of fossil fuels. The carbon intensity of our economy has steadily fallen. The bad news is that this has not necessarily been done deliberately: it is largely due to a decline in our heavy industries and manufacturing, and to the dash for gas. To consciously reduce emissions is a much harder thing to achieve, as we have discovered in a succession of well meaning but largely ineffectual climate change policies throughout the 1990s and 2000s. This is why, when I worked at Friends of the Earth, I felt that we needed a new legal framework to begin the process of decarbonising our economy.

Having set up the campaign for new climate laws, I left Friends of the Earth to join energy company Scottish and Southern—poacher turned gamekeeper, if you will. There I was fortunate to work closely with the CEO, Ian Marchant, who was a great inspiration. My recruitment was his idea and I think that his intention was to shake things up a bit—both his organisation and my own preconceptions. Until that point I had campaigned to shut down dirty, old, coal-fired power stations, two of which Scottish and Southern owned. I still believe that we need to shut down our old coal, but I now have a lot more respect for the men and women who work tirelessly to keep the lights on. Our task is to ensure that they can continue to do so without a negative impact on the environment.

While at Scottish and Southern, I was seconded to the Department for Environment, Food and Rural Affairs. There I was able to view life through yet another prism and came to better understand the process of government. I became part of the team tasked with drafting the Climate Change Bill. When the Act entered the statute book in 2008 it was a world first, committing the UK to delivering emissions cuts of 80 per cent by 2050 using a series of successive carbon budgets.

With a climate Act in place, what has changed since 1991? The only mention of the environment in the Budget Statement of the then Chancellor, now the noble Lord, Lord Lamont, was in relation to an increase in fuel duty; yet 20 years of high fuel taxation has proved only that it is very difficult to price people and goods off the roads unless there is an affordable alternative.

Last week's Budget at least contained a few more references to climate change, but it was still a long way from being a green Budget. Fuel duty was frozen, but with no clear plan for weaning us of our addiction to oil. The green investment bank, as previous speakers have said, has its hands tied. The carbon floor price is merely an expensive way to deliver no environmental impact, with no guarantees that anything will be built. Under the previous Government, an investment of just over £20 million secured jobs in an electric car manufacturing plant in Sunderland. I am sad to say that the scheme that enabled that investment no longer exists.

I am conscious that time today is limited. There are many issues relating to climate change and energy that I hope I can return to in subsequent debates. We need to have a deep debate about the role of nuclear power. The recent terrible events in Japan remind us of the risks inherent in a technology that was developed primarily for Cold War military application. A civilian nuclear programme based on inherently safer, thorium-fuelled reactors could engender a paradigm shift in how we view nuclear power.

Britain has a history of delivering industrial revolution. This revolution towards a sustainable, low-carbon economy will not be easy; it will involve countering a large number of powerful opposing forces and vested interests. However, as Archimedes once remarked, “Give me the right place to stand and I can move mountains”. I hope that in this Chamber, I am standing in the right place and that, together, we can move mountains.