Energy Bill [HL]

Debate between Lord Lea of Crondall and Lord Teverson

Wednesday 2nd March 2011 Lords Chamber

[Lord Teverson]

My Lords, I agree with my noble friend Lady Maddock about the involvement of local authorities. I know from conversations with the Minister and other Ministers that this is very much in the Government’s mind. I welcome the fact that, as I hope they will, local authorities will be integrated into the process.

I want to talk about carbon budgets. Reducing carbon, as we talked about with regard to the Climate Change Act, is fundamental, but I just do not think that local carbon budgets are the right instrument to do that. There is huge pressure on local government finance at the moment, so I would agree that because of that—I declare that I am a member of a local authority—local authorities are starting to concentrate on activities where they have statutory obligations. Where they do not, they are having to consider rather more. If there were a more perfect way of doing this, I would like to see some statutory obligation generally in terms of climate change in a broader sense. However, I fundamentally believe that it should then be left to local authorities to decide how they implement and deliver that, and that they should have the powers to do so.

I spent a huge amount of time in this House two or three years ago on the Climate Change Bill. We spent a huge amount of time working out how national budgets could work. We looked at all the difficulties regarding air transportation, imports and exports and—maybe more esoterically, but importantly—whether carbon consumption was more important than carbon production. We looked at the transfers of budgets between years and at all the other sorts of mechanisms that there are. We considered what happens in terms of the EU ETS, transfers of that in or out and how it worked. We gave particular thought to air and shipping.

If you bring that down to local authorities—many parts of the country still have not one tier of local authority but two, so you have to add them up and they will not come to the national budget anyway—you have the issues of transportation, such as motorways being major emitters. The easiest way to mitigate those would be to stop industry coming into your local authority and get it to go the other side of your local authority boundary. If you took this seriously, you would have all sorts of weird incentives whose outcomes would be perverse.

[Lord Lea of Crondall]

I have thought about this point for some time. Is it not a fact that one of the possible anomalies in the whole discussion going back to the Climate Change Bill is that carbon budgeting and financial budgeting in the traditional sense do not correspond? That has to be done at some point or the whole thing will get out of sync. Does the noble Lord agree that you need a clear analysis of how carbon budgeting corresponds with financial budgeting at national level before you discuss it at other levels?

[Lord Teverson]

I would probably agree with the noble Lord on that matter. However, I do not want to prolong this discussion as we want to get through the Bill. Although it is vital that we reduce carbon emissions and local authorities need to play a key part in that, that objective should be a statutory obligation on them which is outside this Bill. They should have a much greater connection with the Climate Change Committee which should have a local authority aspect. It would be great if local authorities wanted to engage in a modified form of carbon budgeting.

Energy Bill [HL]

Debate between Lord Lea of Crondall and Lord Teverson

Tuesday 8th February 2011 Grand Committee

[Lord Teverson]

In terms of home energy costs, surely price elasticity is directly related to the income group that you are relating to. In a fuel poverty area, price elasticity is extremely high, which is one of the big problems of the energy crisis that the noble Lord is talking about. At the higher income levels, price elasticity is remarkably low, which I should think is the thing that affects price elasticity rather than the particular source of energy.

[Lord Lea of Crondall]

I think that the noble Lord is wrong. On reading the literature, heating is inelastic because people do not want to freeze to death, whereas they can drive less in their cars. This is the difference between the two elasticities.

--- Later in debate ---

[Lord Teverson]

I say this as a really serious point. One of the biggest obscenities in this country is that people die because they do not heat themselves sufficiently. It is a real issue and I am sure that others share my concern. Statistically, when the temperature goes down in this country, we get a significant increase in deaths, which is because people will not put on the heat.

[Lord Lea of Crondall]

I am comparing the price elasticity of home heating with the price elasticity of petrol for your car. That is my main point. It is precisely because people do not generally in this country freeze to death that price elasticity is different.

It is necessary to note that, in practice, the people at the bottom are stopping motoring. There is another statistical problem, or fallacy, built into the ONS statistics. Because they have disappeared from the statistics, it does not look as if the detailed distribution for motorists is as bad as it was. It is rather like saying, “The working class can no longer go to the Costa Brava for their holidays. We do not want that riff-raff going there anyway”. They are out of the statistics and they are out of the motoring statistics. This is another problem with the idea that we can easily use the price mechanism to determine consumption, even though in an ideal world it might be somehow very nice if there was a big reduction in motoring or airline expenditure. As I said in an earlier intervention, the logic is to have the same market externality carbon price, whether it is for aviation or for anything else. But how do you deal with the poverty effects on home heating?

I have three other points. At Second Reading, I used the phrase, “hypothetical hypothecation”, which will not get wider circulation in the bar in Burton upon Trent. We need a statistical picture which would be revealed by hypothetical hypothecation—I will not use the word again I can assure you—but would be quite separate from the actual amount of recycling of revenues within the system to deal with the actual regressiveness.

On the consultative forum, people will ask themselves intuitively, “Where is all this money going?” There is an extent to which we want to say that it is obvious how we are going to spend it. My noble friend Lord Prescott always used to say, “It doesn't matter if someone is charging £50 to drive 100 yards down Piccadilly in a Rolls-Royce. You can throw £50 notes out of it and that will satisfy the Rolls-Royce driver”. But Ken Livingstone or somebody like that would put it all into new buses. That is hypothecation. There is implicitly some undercurrent of the need for hypothecation—with a less fancy word—in what we are talking about. We need a statistical picture that would be revealed by hypothecation even though that is separate from the actual amount of recycling of revenues.

Finally, on fiscal arithmetic, there is a price floor for carbon, which is currently £15 per tonne. The power industry argues that the price needs to be about £35 a tonne to provide a viable return and the noble Lord, Lord Stern, for his part, is in a different fantasyland with an assumption of £75 a tonne at 2010 prices to make his scheme work.

Putting all that together, we have to take a crack at what I am saying in my first amendment so that there is no doubt that we have an agreed statistical basis. Who is going to agree it? That is the second amendment. A consultative body, I might be told by the noble Lord, Lord Marland, is not going to be flavour of the month with a coalition Government who is scrapping public bodies right, left and centre. However, I will make a practical point that even the Government’s own philosophy on the Public Bodies Bill is that it is not supposed to be the slaughter of the innocents. It is supposed to be ostensibly the slaughter of those who are not fit for purpose. I radically disagree with some of the conclusions that they make about that, but fit for purpose this would be. It would have a very clear purpose to get agreement, understanding and therefore some ownership of buy-in on behalf of their constituents—in every sense of that word—and all the different stakeholders in the country.

We have got to a point where this will literally begin to make sense in the bar in Burton upon Trent. It is those people who will complain about the price of heating, petrol, congestion taxes, parking taxes or whatever. This is where the regressiveness issue provides a bridge with the consultative stakeholder forum I referred to on Amendment 37B.

I should leave it there. I thank the noble Lord, Lord Marland, for his co-operation in getting some of these statistics sorted out with the department and the Treasury. I beg to move.