Energy Bill [HL]

Debate between Lord Lea of Crondall and Lord Lawson of Blaby

Wednesday 22nd December 2010 Lords Chamber

[Lord Lea of Crondall]

My Lords, we are obviously having a broad debate on energy policy and I welcome that. One of the difficulties has been the rather disjointed way in which all the various announcements have been made. Those announcements must have been coincidental, because I cannot think that they were made as part of the planning. We had hugely important announcements last week about the electricity market regime, and a very important paper, Carbon Price Floor, was recently produced by the Treasury and HM Revenue and Customs. Ever since Rio in 1992, we have known that the trend in policy, including the Climate Change Bill and so on, has involved two or three different rationales for big price increases, and I want to come on to some of the social problems associated with that. I do not want to labour the point but I find it astonishing that we have this Bill dealing with important, as well as less important, matters relative to the hugely significant announcement that we need £110 billion of new generation by 2020. That is 10 years away, and you do not need to be Einstein to figure out that that is more than £10 billion a year. Talk about Heathrow Airport, the railways, the roads and so on! This is a much bigger deal if these figures are correct.

Although I agree to a large extent with the speech of the noble Lord, Lord Lawson of Blaby, and I greatly admire his analysis, I think that we have now entered a new narrative period, because the incentives for new investment seem to have fallen short of the supply requirements for energy security. The situation is a bit like that of Heathrow Airport. We were all astonished last week when it was seriously stated that Heathrow was running optimally, at 98 per cent of capacity. I have never heard such an absurd statement. However, it is a national problem and this, too, is a big national problem. I agree with the noble Lord, Lord Lawson, that we cannot have a sort of Gosplan for energy but I would say—and I do not know whether the noble Lord would agree—that we need a more holistic narrative than the highly disjointed one that we have at present.

The Treasury has come up with this framework for a carbon price floor and I want to ask the Minister one question. I hope that the noble Lord, Lord Marland, is not going to say, “Well, these are all questions outside the scope of the Bill. My job is to get the Bill through. I am not interested in any other questions”, which I think could be his reply. He has indicated that it will be. I thank him but I am not going to sit down; I am going to continue my speech. You cannot have a carbon price floor in Britain without a number of questions arising about a price floor across Europe or any other price floor. I should like to ask him a question and, if he does not want to reply today, I am sure that the department will be able to write plenty of letters, provided that the Treasury agrees with Chris Huhne’s department. I am not trying to be nasty about this. Both Secretaries of State are wonderful people working in co-operation at the moment. However, I think that we need a wider view about the context of this carbon price floor.

It seems to me that there are three different rationales for this 30 per cent price increase, announced last week, by 2020—which, surprise, surprise, is the same year as the £110 billion should have been spent. One rationale for the price increase probably has something to do with finding £110 billion, but we do not think that a big percentage of the £110 billion will come from price increases.

[Lord Lawson of Blaby]

I was very interested to hear the noble Lord’s remarks on my intervention. Does he not recall that in the Treasury document to which he referred the rise in the wholesale price of electricity is projected as being between 68 per cent and 88 per cent?

[Lord Lea of Crondall]

Let me take that as a base from which to throw in my next suggestion. That is that these numbers are baffling to most people. I was in the middle of saying that there are three possible rationales for a 30 per cent price increase. One of them on the face of it has nothing to do with the £110 billion; it is to do with restricting consumption in line with the climate change targets. However, there is no ownership by the British people in the pubs or the HGVs that that is the price that they are to pay.

I had a debate with my noble friend Lord Rooker when the Climate Change Bill was going through three years ago. I had tabled an amendment that there be introduced a carbon tax industrial and consumer impact forum. Its role would have been to look at, first, the impact of increases in carbon taxes or other such taxes; secondly, the changes in relative costs between different sectors of the economy; and, thirdly, the role of the European globalisation adjustment fund, because those are big industrial structural adjustments. I said that the forum should include representatives from HMG, employers, trade unions and consumer organisations—I subsumed the Met Office and others in HMG. It would produce a report each budgetary period on the impact of all the things I mentioned.

Let me deal with one in particular, which was the real purpose of my amendment. If we are to get ownership of price increases, we need two things. One is a forum where representatives of consumers, trade unions and everyone else sit around the table looking at the energy framework. The second is that we need a degree of hypothecation of the money coming in. I think that the Treasury has stuck its toe into the water for the first time on hypothecation—just as my noble friend Lord Prescott did with the arguments about congestion charging. All the money raised from the Rolls-Royce going along Piccadilly is going to buses. People might start to understand if there were what I might call a hypothetical hypothecation, by which I mean that it would not be separate from the Budget Statement but there must be an understanding of who is paying what, where the money is coming from and why.

The third possible rationale for a 30 per cent price increase is to do with paying for things such as the Green Deal. None of these things come without a price tag attached.

When the House authorities consider what amendments are allowable on the Bill—my noble friend Lady Smith of Basildon will no doubt give me a steer on this—we need to test what amendments we can table to the Bill. Since the Bill has been published, we have had all these announcements of huge importance right in the territory of the Bill. We must look at that.

At minute 10, I shall make two final points. One is to say that, given the regressive nature of price increases on something as basic as electricity, there will be great social unrest unless we do some redistribution. There will, of course, be squeals from big industry about its competitive position, but we need a frank debate. We cannot just look separately at an argument about winter fuel payments. These are huge, important questions, and we need a holistic narrative which would include homes. I agree with the noble Lord, Lord Best, about blocks of flats which form a not-inconsiderable part of big cities such as London. I have been chairman of my residents’ association for a number of years. We have 99-year leases like many people. If you want to say to an individual, “Do this to your ceiling”, “Do this to your loft”, “Do this to your walls”, or “Do, this to your floors”, the managing agent will say, “No, you can’t play around with the building like that”. So even if the residents’ association wants to do something, the managing agent, on behalf of the ground landlord, can say, “I don’t agree”. There is a prima facie question along the lines posed by the noble Lord, Lord Best, and one or two others.

I take this opportunity to say that I am glad that the noble Lord, Lord Lawson, put in his usual plea for us not to rely on base load from wind power. It is not a joke any more. It is a fantasy, and we ought to recognise that. I also take this opportunity to congratulate the noble Baroness, Lady Noakes, with whom I almost always try to agree. However, on this occasion, her worry about what she calls the consumer is the same, essentially, as what you might call the social policy dimension as a whole. Again, we just have to test what amendments are going to be allowed in the course of the Committee stage on this Bill.