Clean Growth Strategy

Alan Whitehead Excerpts

Thursday 12th October 2017 Commons Chamber

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I welcome the final publication—after, we have to agree, many delays—of “The Clean Growth Strategy”, and I agree with the Minister that the UK has been, as it should be, towards the front of the pack in action to decarbonise our economy. I also agree that the responsibility for getting us to that position lies with the Members to whom she has paid tribute today. I also welcome the Minister’s clear position that she is fundamentally onside on the need to radically decarbonise our country to meet climate change imperatives—unlike, I have to say, many of her Back-Bench colleagues. I warmly welcome her efforts in this direction and clear commitment to the tasks we have to undertake.

I also welcome many of the additional policy directions that are contained in the document. I particularly welcome the commitment to further rounds of offshore wind to assist with the decarbonisation of the energy sector, and what I hope will be an intention to return to the development of onshore wind. These new policies and commitments, among many others, are important because it is clear that on present policies the UK is set to miss its key targets for decarbonisation, set out in the fourth and fifth carbon budgets, which this House has endorsed. That is surely the point of judgment for the efficacy of this plan: does it do what it is required by the terms of the Climate Change Act 2008:

“The Secretary of State must prepare such proposals and policies”

as

“will enable the carbon budgets that have been set…to be met”?

On that measure, it is clear from the report that the Government have failed in that task.

Even with the additional measures set out in this plan, as the report states on page 41, it is estimated that the UK will over-emit at the conclusion of the fourth carbon budget by 6% above that budget and at the conclusion of the fifth carbon budget by 9.7%. What additional proposals does the Minister have in mind to rectify that deficit—or does she consider that somehow we will get there without anything other than what is in this plan?

On getting there, does the Minister recognise just how far behind in decarbonisation we are in the heat sector? Does she consider that the funding set out for the renewable heat incentive up to 2021, which appears to be a restatement of what is already there, and of the energy company obligation, which appears to be a time extension of present funding for energy efficiency, will get us anywhere near the indicative heat decarbonisation and energy efficiency carbon reductions set out by the Committee on Climate Change in the fifth carbon budget?

The Minister will recall what emphasis the Committee on Climate Change placed on the role of carbon capture and storage. She mentioned in her statement that the Government now appear to be waking up once again to the idea that carbon capture and storage is a good thing. While I welcome that apparent renewed interest in actually doing something about the establishment of CCS, both for energy generation and energy-intensive industries, does she consider that taking away £1 billion of funding for the development of CCS, as the Government did in 2016, and replacing it with up to £100 million of development funding in this plan will get us anywhere near the level of CCS use that the Committee on Climate Change recommends?

The Minister will be aware of how very important the traded sector is in the UK in terms of carbon emission reductions. The traded sector is kept on track by the EU emissions trading scheme. In her report, the long-term importance of the EU ETS is underlined, yet we currently have no certainty that the UK will remain within the EU ETS on Brexit, or that there will be any commitment, if not, that a substantive and internationally connected UK trading scheme will be established that can continue to keep the traded sector on target. Does she agree about the importance of the EU ETS in this sector? Can she commit today to work towards continued UK membership of the EU ETS in the future?

I agree with the Minister that a low-carbon transition can go hand-in-hand with economic growth, and she has today and on other occasions emphasised that the use of industrial strategy to drive decarbonisation, while providing for jobs, supply chains and manufacturing in the process, is a very important fundamental platform for our decarbonisation approach generally.

Labour has committed itself to attain the key mission of industrial strategy that 60% of all energy—all energy, including electricity and heat—would arise from renewable and low-carbon sources by 2030, the middle of the fifth carbon budget. That would in itself ensure that the targets of the fifth carbon budget were met. Will the Minister today endorse the setting of that target and work with the Opposition to bring it about?

[Claire Perry]

I thank the hon. Gentleman for his refreshingly scientific comments. It is always a pleasure to discuss this subject with him. I will try to answer some of his questions.

I welcome what I think was a compliment; of course I am very committed to this agenda, but I have to say, and he can perceive this from the fact that the Prime Minister wrote the foreword of this document, that from the Prime Minister downwards—she also mentioned this at the United Nations Assembly a few short weeks ago—and right across the Government, we are all completely committed to this agenda, because not only is it the right thing to do, but the opportunities that arise from it are enormous. I would like to reassure him about that.

I want to spend a moment on what the hon. Gentleman points out is the carbon budget page—page 41. To reassure him, some of the estimates we have for our delivery of carbon savings from the policies and proposals in the plan today are very well advanced, and we have included carbon savings from about 30% of the new proposals today. Some of them, of course, we have to continue to work to shape, particularly in the light of issues like the Hackett inquiry around the Grenfell review of building regulations and fire safety, so we will be sequencing our consultations in accordance with such work, and that will enable us to set additional reductions in carbon budgets once we have further developed those policies.

I want to reassure the hon. Gentleman, however, and I have helpfully set out on page 41 the fact that, should we have to, and with the consent of the Committee on Climate Change, we can use flexibilities. My intention is that we do not have to use them. Because we have over-delivered, and will over-deliver so substantially on current projections, up to carbon budget 3, more than enough will have been built up in terms of flexibilities to cover carbon budget 4 with more left over. My sense is that, given the ambition, the pace of change and the extraordinary changes in the cost and adaptation of new technology, we will comfortably exceed these budgets. But he is right that we have a statutory duty to report on this. This is a very good example of legislation making politicians focus on what is important, over the political cycle. I thank him for his ability to question, which enables me to confirm those points.

The hon. Gentleman discussed the EU ETS. I am actually off to Luxembourg tomorrow. The UK’s piloting of the emissions trading scheme was absolutely vital in designing the scheme. We remain a very important partner, and I have been absolutely clear that we will do nothing that in any way disadvantages our own economy or that of our EU partners, as we negotiate the new terms of our relationship with Europe.

I admire the hon. Gentleman’s shadow ambition for renewable energy, but I want to be clear today that when we look at new technologies, it is important that we apply the triple test. First, the technology must decarbonise sufficiently; secondly, it must be affordable—we have to see a very good cost trajectory; and thirdly, it must build capabilities that Britain can build on, so that we can export and grow our own economy.

I would be delighted to sit down over a cup of coffee and review the hon. Gentleman’s plans for renewables and see whether they meet those tests. I think those are very appropriate tests, through which all technologies should be reviewed as we go forward.

Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 12th September 2017 Commons Chamber

[Richard Harrington]

I thank the hon. Gentleman for effectively congratulating the Government on the results of the recent auction for energy prices—I, too, was delighted that the cost of offshore wind effectively dropped by half. I also remind him, however, that energy has to remain a mix. Nuclear is part of that mix, and as with all mixes aimed at maintaining continuity of supply, some are more expensive and some are cheaper. What matters is the average price paid, and I think that Hinkley will turn out to be a really good deal for the taxpayer, as it involves no public funds upfront, which is very unusual for this kind of massive development.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I am a little concerned by the Minister’s reply to my hon. Friend the Member for Garston and Halewood (Maria Eagle). The Secretary of State specifically told the BEIS Select Committee in the spring that it was very much in Britain’s energy security interest to continue to participate in the internal energy market. Does the Minister agree with his own Secretary of State on this matter? If so, what action has he been taking to ensure that we can participate in that market after Brexit?

[Richard Harrington]

It is the job of the hon. Gentleman—the Opposition spokesman—to be concerned about everything that the Minister says. I fully accept that. In this particular case, however, I can but reiterate that maintaining continuity of supply is our first priority. That is what my right hon. Friend the Secretary of State says we must do, and that is what we shall do.

Euratom Membership

Alan Whitehead Excerpts

Wednesday 12th July 2017 Westminster Hall

[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Gray. It is quite clear that the legal position is not clear. That stems from the fact that the Euratom treaty is not the same treaty signed in 1957 as the EU treaty. Leaving Euratom would involve separate negotiation of the arrangements for co-operative or associated status alongside any other negotiations in the EU. That is fairly clear.

In that context, I want to raise a concern that I hope the Government have considered, but I suspect they have not, about leaving Euratom under those circumstances and the status of the Hinkley C nuclear power station programme. In autumn 2016, the Secretary of State signed an investment agreement—charmingly known as a SoSIA— concerning Hinkley C with EDF, the French Government and the Chinese Government that contains a number of issues relating to what a qualifying shutdown occurrence would consist of as far as the progress of Hinkley C power station is concerned. That investment agreement defined that a qualifying shutdown occurrence would consist of a Government intervention in the working of Hinckley Point C power station, or its construction, or if the EU were to do that, or if there were a change in treaty arrangements relating to the construction or operation of the power station. If we left Euratom unilaterally, as is proposed, with no alternative position in place, it is likely that that would mean a qualifying shutdown. The effect would be a possibility of the other contracting parties to the arrangement—EDF and others concerned with the power station—walking away from the deal and claiming up to £20 billion compensation for so doing. That seems to be an important consideration that we might think about. I would be interested to hear from the Minister whether the Government have considered the risk of that occurrence.

That concern is not just mine; it was raised by the National Audit Office in its June 2017 report on Hinckley C. It indicated that it thought that the Government had not undertaken any risk assessment relating to the Secretary of State’s investment agreement and that perhaps they should do so. I would be interested to hear from the Minister whether that risk assessment has been undertaken and whether the Minister considers that the Secretary of State’s investment agreement on Hinckley C would be at risk as a result of what has been decided so far about leaving Euratom.

Energy Price Cap

Alan Whitehead Excerpts

Monday 3rd July 2017 Commons Chamber

[Dr Alan Whitehead (Southampton, Test) (Lab)]

(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy if he will make a statement on the Government’s intention for an energy price cap.

[The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)]

Following a two-year inquiry, the Competition and Markets Authority found that energy customers on standard variable tariffs were paying on average £1.4 billion a year more than would be the case in a competitive market. That is completely unacceptable, so my party’s manifesto committed to introduce a safeguard tariff to extend the price protection currently in place for some vulnerable customers—those on pre-payment meters—to more customers on the poorest-value tariffs. The energy regulator, Ofgem, has the powers necessary to impose such a price cap without delay, and I wrote to its chief executive on 21 June to ask it to use its powers to do so. Today, the regulator has replied and announced that it will work with consumer groups to take measures, including extending the current safeguard tariff for those on pre-payment meters to a wider group of consumers, and move urgently to implement these changes.

I welcome this initial proposal—it is a step in the right direction—but I will wait to see the actual proposals turned into action to cut bills, as the test of whether the regulator’s changes go far enough is whether they move sufficiently to eradicate the detriment to consumers that the CMA identified. I remain prepared to legislate if they do not, and I hope that such legislation would command wide support across the House.

[Dr Whitehead]

I thank the Minister for his response. Does he recall that during the election his party placed the promise of an overall cap on energy prices at the centre of its manifesto? Indeed, does he recall the Prime Minister stating:

“I am making this promise: if I am re-elected on 8 June, I will take action to end this injustice by introducing a cap on unfair energy price rises. It will protect around 17 million families on standard variable tariffs from being exploited with sudden and unjustified increases in bills”?

Does the Secretary of State accept that Ofgem’s response to his letter of 21 June on energy prices falls far short of implementing that promise and that, although there are welcome suggestions on safeguarding tariffs and capping warrant charges for the installation of pre-pay meters, those measures would affect only 2.5 million customers, leaving more than 14 million SVT customers completely unprotected from price rises over the next period? Will he confirm that his letter did not ask Ofgem to consider introducing a general price cap? Will he tell the House why it did not, even though the chief executive officer of Ofgem confirmed earlier this year that it would have the discretionary power to implement an energy price cap?

Does the Secretary of State intend to pass legislation to require Ofgem to introduce a price cap, or is he now content to let his firm election promise of a cap fall by the wayside? If so, what does he have to say to the 17 million people on standard variable tariffs who thought that relief from rip-off price rises was on its way but will now feel completely betrayed by this policy U-turn?

Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 27th June 2017 Commons Chamber

[Claire Perry]

Even those who do not think that this is a pressing international issue must surely welcome the fact that there are now more than 400,000 people employed in this industry—more than in the aerospace sector. Britain has shown, in the G7 and the Environment Council meetings, that we are absolutely prepared to stand shoulder to shoulder with our European and international partners to make up any deficit caused by Mr Trump’s withdrawal.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

We were promised the publication of this report in the middle of 2016. In October 2016, the permanent secretary promised that it would be published by February 2017. In January 2017, the then Secretary of State promised that the report would be published in the first three months of this year. Now we hear that it might be published this autumn. A year and a half on from the original promise, we are now clearly defaulting on our commitment under the Climate Change Act 2008, which requires that the plan is published as soon as is reasonably practicable after the order has been laid. Is not the Minister ashamed of this lamentable failure to act on that legislative requirement to produce a report that is important to the future of climate change activity, and will she apologise to the House for the delay?

[Claire Perry]

I would have expected more from the hon. Gentleman. Let me just remind him what has happened since the Committee on Climate Change’s report was produced. We have had Brexit, we have had a general election and we have had the withdrawal of the USA from the Paris climate change agreement. I want to take the time to ensure that this report exceeds his expectations. I will take no lessons from those on the Opposition Front Bench, who have consistently failed to welcome this country’s progress, which the right hon. Member for Doncaster North (Edward Miliband)—who is, sadly, not in his place—was sensible enough to kick off in 2009. I believe in delivery, not promises, unlike the Labour party’s manifesto.

Draft Electricity and Gas (Energy Company Obligation) (amendment) Order 2017

Alan Whitehead Excerpts

Wednesday 22nd March 2017 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hanson. I thank the Minister for his Panglossian commentary on the measure. The Opposition do not want to stand in the way of these detailed regulations. I am sure the hon. Member for Lichfield, having looked in detail at the explanatory memorandum, will note—

[Michael Fabricant]

Was the hon. Gentleman looking, as I was, at the schedules? I think that, like me, he is a chartered engineer. I am slightly disappointed that there was no integration, but merely fractions involved.

[Dr Whitehead]

Regrettably, the hon. Gentleman has not done his homework about my qualifications—I am not a chartered engineer—but he makes a valid and important point about the appendices. I draw his and the Committee’s attention to an earlier part of the explanatory memorandum, which enjoins us to pass this measure because:

“The 31st March 2017 is the latest that the instrument can be brought into force, as otherwise the period set for meeting all of the targets under the 2014 Order would come to an end on 31st March 2017 and a failure by any supplier to fully meet their targets by measures installed before that date would be a breach, which could lead to enforcement action by the Administrator.”

We are discussing this order a week before we are in breach of that order. The Government are to some extent trading on Her Majesty’s Opposition’s generosity of spirit and warm-heartedness. We are sailing very close to the wind in terms of the management of the measure. The Minister might wish to have a word with his business managers to ensure that nothing like this happens again. We really should not be discussing the measure so close to that date, as we would be in breach if there were any hiccups or halts in its progress through the House.

Although I said that we do not want to stand in the way of the regulations, I am not mollified about their overall thrust. We need to be clear that the regulations will represent a reduction on the reduction in the ambition of the ECO as far as energy efficiency measures are concerned, both for those in fuel poverty and for the climate change purposes of increasing energy efficiency in properties. They are an endorsement of the collapse of the energy efficiency measures going into all homes, and even with the change of emphasis toward the fuel-poor and those receiving measures under the carbon emissions reduction obligation, other parts of the ECO have in effect been removed.

The draft regulations represent a diminution of measures to assist with fuel poverty to such an extent that, even according to the explanatory memorandum, we will barely meet the Government’s own targets, reset from previous fuel poverty targets—people in fuel poverty living in properties not worse than EPC band E by 2020 was a substantial revision of previous targets. The Government are therefore almost failing to reach their own new target in the regulations, and they are certainly endorsing a substantial reduction in measures overall.

The reduction in measures is to such an extent that, were we to look over the past five years on a graph, we would see that the measures peaked in 2012, largely as a washover of the previous Labour Government’s obligations—the carbon emissions reduction target and the community energy saving programme—to be followed by a precipitous and cliff-like fall of 80% in energy efficiency and home improvement measures up to 2015. Today’s measures, as outlined by the Minister, represent a further reduction in the ECO from £860 million per annum under the previous obligation, which was itself a reduction in ambition from the original £1.2 billion, to £640 million a year. That is for the interim scheme, and I understand that is also to be the limit for the longer term scheme, if we ever get to consultations on that in the not-too-distant future.

Under the new regime, that will be the limit of ambition for all energy efficiency measures in homes. That was not quite as the Minister set out today in terms of the progress of the obligation. As hon. Members will recall, the cut in green obligations was imposed in response to the infamous “get rid of all the green ****” period that the previous Prime Minister oversaw. As it happens, ECO measures bore the brunt of those cuts, which is why we have less money available for the ECO now, not only for today’s interim scheme, but for the scheme after 2018, assuming it happens—I will make some comments on that in due course.

We are barely reaching fuel poverty targets. I welcome the important emphasis on fuel poverty in the measures—a substantial and welcome shift of fuel poverty-focused measures up from 30% to 70% of measures within the ECO as a whole—but I emphasise that that is within an overall reduction of the pot. The consequence of that is that the measures under the CERO part of the ECO scheme reduce substantially and carbon saving community obligation measures disappear entirely. The measures under CERO represent a reduction, in that smaller pot, from 34% to 30% of the total. That is very important in terms of the treatments of properties that might be available under ECO, in terms of the energy efficiency climate change targets.

Those targets are fairly stark. In the fourth carbon budget, which was adopted and accepted by the Government, the Committee on Climate Change considered that 2.2 million solid wall treatments by the early 2020s should be included in that, to make the contribution to energy efficiency climate change targets. Hon. Members may want to reflect on the targets that are in this measure today: 32,000 treatments envisaged in the 18 months up to 2018. If extrapolated, and even if that amount is maintained over the full period of the next ECO, when it succeeds the interim measure we are discussing this morning, that would mean we would fall short of the target, which was agreed by Government, by 1.8 million treatments. That is an astonishing shortfall. That is not a question of falling slightly short—it is effectively extinguishing any serious consideration of those targets over the period, which is potentially catastrophic for our ability to meet our obligations under the carbon budgets.

The Minister will be aware that there is feverish work going on at the moment in the basement of his Department looking at how a low carbon plan can be drawn up. It has repeatedly been put off and delayed. There are assurances that it will come out later this year. I understand that there are people in the Department at the moment with towels around their heads working out how on earth a low carbon plan can possibly meet the terms of the fourth carbon budget, in terms of what the Government are presently undertaking. The complete failure in this measure to get to grips with solid wall insulations is one area where those towels will have to be tied much more tightly around heads.

Does the Minister intend to review the figure and the mechanisms behind it when looking at the longer term ECO? As set out in the 2015 autumn statement, that is scheduled to take us on from 2018 to 2022. If he is not looking at reviewing those measures, what explanation might he offer for this abject failure to get to grips with solid wall insulation? Are there any other measures that he might be thinking about that could get us back on track as far as those treatments are concerned?

I would also like to ask the Minister about the very wise consultation response that came forward to him. I am sure the hon. Member for Lichfield will also be aware that there is a passage on the consultation at the back of the explanatory memorandum. It indicates that those people who were consulted thought that local authorities should be involved in identifying 20% or more placements for treatments, particularly as far as the fuel poverty element of ECO is concerned. That was an overwhelming endorsement in the consultation of the role of local authorities in identifying and assisting those treatments at local level. There was also an overwhelming endorsement by those obliged suppliers themselves, who have for a long time said how difficult it was to find people in those fuel poverty categories, in order to apply treatments, and the substantial additional burden of finance that often placed on them.

[Michael Fabricant]

Would it not be fair to add that this is just during the testing period, as it says in the explanatory notes? The Government can then come back with the alternative percentage.

[Dr Whitehead]

The hon. Gentleman anticipates my next paragraph. The explanatory statement mentions that this is a testing period. The whole of the obligation we are discussing is essentially a transitional testing period from the old ECO to the new ECO.

Bearing in mind that both those responding to the consultation and those obliged suppliers all thought that local authorities should have a much more substantial, economical and effective role in bringing forward people in fuel poverty who require treatments, why have the Government, even in this transitional period, limited that role to 10%? Is there a reason that the Government have decided it should be 10% for local authorities, when the evidence overwhelmingly points in the opposite direction? Do the Government not trust local authorities to identify those people, or do they believe that what the obliged companies are saying is not so, and that it is a walk in the park to find people in fuel poverty, so that the arrangements can proceed as before? If the Minister is not able to say anything today about that 10% figure, what is he going to do during the period of transition, pointed out by the hon. Member for Lichfield, to appraise whether local authorities can have a greater role? Can he assure me that when we are able to look at the detail of the later ECO, that will be reviewed and that the position of local authorities in deciding who gets treatment and how it can best be related to obliged suppliers can be established on a coherent basis?

I do not wish to detain the Committee further, but I do emphasise that the Opposition consider the measures to be woefully inadequate for those in fuel poverty and to address wider concerns about climate change. If we had the opportunity, we would fundamentally revise their scope and extent in order to make a proper impact on fuel poverty and the overwhelming imperative of getting energy efficiency under control in the context of concerns on climate change.

--- Later in debate ---

[Jesse Norman]

I am happy to look at the hon. Gentleman’s suggestion. On the point I was making to my hon. Friend the Member for Reigate, we are not starting from the position he described. That position has the effect of disguising costs. The reason why we have carbon emissions issues is precisely because of the externalities built into previous models of industrial development. Those substantial costs were not included in the true cost of production of the goods and services concerned. It is simply untrue to suggest, even by implication—I am not suggesting my hon. Friend was suggesting this—that there had been some Elysium or status beforehand in which costs were explicit and are now not; there were costs before that were not explicit and there may be costs now that are not. From a Government standpoint, there is no hiding of costs as regards expenditure by either consumers or the Government.

Let me say a couple of other things. The overall energy market approach my hon. Friend describes was well outlined recently in a report by the House of Lords Economic Affairs Committee, as he may know. It remains an important part of the accountability of Government that we respond to it and are aware of it as an alternative. However, it is worth saying that it would do nothing as such to alleviate the issues of fuel poverty that concern us today. In my judgment, it is not an answer to say that local authorities are somehow a go-to alternative. The truth is that the delivery of those and related measures by local authorities has historically been quite mixed.

On the setting the 10% figure, that was designed, based on the consultation, to allow for a period of experimentation during the transition period, precisely to assess whether that number could be raised in line with the suggestions that have been made. The number involved—even at 10% of £45 million—is not a trivial amount of supplier obligation. I think that is a reasonable and proper justification.

I will say a couple of things about the matters raised by the hon. Member for Southampton, Test. He asked why we were presenting the order so late. I share his concern about that. My preference would be for measures to be presented to Parliament as early as possible. The difficulty has been—in part, this refers to a couple of earlier points—last year’s changes in Government and knock-on effects, which have delayed the process. It is certainly not something that any Government would want to make a habit of, so I take the point.

I have a couple of comments to make in response to what the hon. Gentleman said about a reduction on a reduction: first, the number of homes in fuel poverty has continued to fall since 2010, and it is clear that the measures continue to have a powerful effect. It is also important to bear down on consumers’ bills. If the hon. Gentleman wants to introduce specific costed proposals for restoring the funding that he criticises the Government for reducing, it is incumbent on him to state by how much he would be prepared to put it up, and how much he would be prepared to burden taxpayers or consumers. In addition, we expect, by September 2018, to have met a target of 850,000 homes insulated. That leaves 150,000 by 2020, which is in line with the manifesto commitment made in 2015. The Government believe that they are on track.

As for the fourth carbon budget, the hon. Gentleman was talking about totals—and the challenge for the Government is to meet the fourth carbon budget in total. The support and advice that the Committee on Climate Change offers is always welcome and of interest to us, but the focus is on the total. The hon. Gentleman painted a beguiling picture of towels being tightened and retightened in the bowels of the Department; but I think it is fair to describe the process of aligning all the different carbon saving measures required to meet the budgets as complex and difficult. That is what the clean growth plan, which will be published in due course, will do.

[Dr Whitehead]

Does the Minister want to add anything to the phrase “in due course” with reference to the clean growth plan?

[Jesse Norman]

I thank the hon. Gentleman for that tempting invitation, but I can say that “due course” will be due, and a matter of course; so the answer to his question is no.

As to whether there will be a review of the long-term effects of the ECO, we anticipate that there will be a consultation later this year—I can give the Committee some clarity on that—in line with thinking about what the further process will be after 2018-22. I have addressed the issue of the figure of 10% in relation to affordable warmth, which we have discussed.

Among other key elements worth picking out is the question of the proportion of fuel-poor homes in band E, or above, in England, which is expected to be about 92% by the end of the extension. That will be up from 88% three years ago. Again, that underlines the progress that has been made.

This has been an interesting and useful debate and I thank hon. Members for their speeches. As I said, the scheme has helped to deliver more than 2 million energy saving measures to more than 1.6 million households, including 1.2 million measures to 900,000 low-income and vulnerable consumers. At a time of rising energy bills, the Government think that it is right for support to be targeted to those most in need. At the same time, the amendments being made to the existing order should reduce the cost of the scheme to bill payers to about £25 a year from the current level of £34 to £35—and nearly £60 at the time of its launch in 2013.

With the amendment order the ECO is expected to provide 545,000 households with more energy saving measures. We will thereby give a balance of improvements and continuity to consumers and the energy efficiency industry for 18 months, before further change is made through a longer-term scheme, from 2018 to 2022.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Electricity and Gas (Energy Company Obligation) (Amendment) Order 2017.

Draft Electricity Supplier Payments (Amendment) Regulations 2017

Alan Whitehead Excerpts

Monday 20th March 2017 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Alan. The regulations are, by and large, sensible, in that they clarify and extend provisions relating to the CfD counterparty that were originally set out, as the Minister has said, in regulations in 2014 and that have been further iterated since, including today.

The regulations change and make coherent references to settlement dates, set a new rate for the operational costs for the CfD counterparty and, interestingly—the Minister fleetingly mentioned this—introduce a new arrangement that allows the CfD counterparty to reduce the reserve fund if, in the opinion of the fund, it has too much in it. I would like to hear from the Minister about some issues relating to that particular provision.

In order to get to that position, we need to backtrack slightly in the narrative and establish why the CfD counterparty was set up in the first place. In effect, the issue arose during the passage of the Energy Act 2013, when it was acknowledged that a counterparty body was needed to hold the ring with regard to the operators, who would expect to receive regular payment for their possession of the CfD. That payment would cover the difference between the strike price at which they settled the CfD and the reference price or prevailing wholesale price of electricity. In order to invest, those operators would need to know that they would get paid from a fund containing the payments and a reserve fund levy paid in by electricity producers in general. The operators needed an assurance that they would get paid, and the other side also needed an assurance that money would go into a fund to enable that to happen. Both sides had to be fully assured.

The question that arose at the time was how to guarantee that transfer and ensure that the operators could be sure of receiving the payments, and that they could be made from a secure fund. The easiest option would have been for the Government simply to guarantee the transfer, but that was deemed not possible by the Treasury, because it would effectively have counted as public spending. A solution was found by the end of the legislation’s passage through Parliament: a separate company, the Low Carbon Contracts Company, would be set up to be the receiving and payment agency, not backed by Government but with a high enough level of probability in its operation to satisfy investors that payments would be forthcoming. That meant that a linking mechanism was needed between payments in and payments out and payments in and the reserve fund, to ensure that payments would continue if there was a hiccup at the receiving end. That was implemented in the 2014 regulations.

A leading law company’s brief synopsis of the LCCC states that

“the CfD will take the form of a bilateral private law contract between the generator and the CfD counterparty, a wholly owned subsidiary of the Government…the obligation of the CfD counterparty to make payments under the CfD is limited by the ‘pay when paid’ principle. This means that the CfD counterparty is channelling payments between generators and suppliers, but has no obligation to make payments if not previously received from suppliers or generator. There is no payment guarantee from the Government…the CFD counterparty will levy funds on a (likely) monthly basis from suppliers under the supplier obligation to cover the difference payments due to generators from the previous month and will transfer these funds to generators once received from suppliers.”

That is the position with regard to this independent company, which is not backed by the Government but is a subsidiary of the Department in its operational life.

Interestingly—hon. Members might think that this is not very interesting, but I think it is—the 2014 regulations, which the regulations under discussion repeat and extend, use probability theory. It is the first time that I have seen defined in law what probability theory has to say about ability to pay and the necessary arrangements that a company should make. Regulation 7 states that the LCCC should work towards, essentially, a 95% probability of being able to pay. That transfers and slightly extends the probability theory statement in the 2014 regulations. As the explanatory memorandum helpfully emphasises, that means that payment will take place in 19 out of 20 scenarios. The regulations do not specify what those scenarios might be; the company itself has to think about them and act accordingly. In other words, at that point the company is the judge of its own probable solvency.

I did not like that formulation in the 2014 regulations and I do not particularly like it now. The scenarios that the company is supposed to consider can be unbalanced, because the law provides no direction. For example, according to the National Audit Office, offshore wind has recently turned out to be far more efficient than was previously thought, so it will require far more CfD payments and draw more from the fund than it might previously have done. That is just one scenario and the explanatory memorandum emphasises another, namely that the counterparty will need to make arrangements for the massive Hinkley Point CfDs when they start being produced.

As I have said, the regulations include a new provision that allows the CfD counterparty company to reduce its reserve fund without any notice, if it thinks it has been oversubscribed, but it has to be in a position to make payment in 19 out of 20 scenarios. The reserve fund is there, among other reasons, to ensure that the payments are made even if there is a hiatus in the money coming in. Under the regulations, the company will decide for itself the sample points that will go into its initial calculation of its own likely solvency. It will then be able to make a further subjective determination of the solidity, or otherwise, of its own reserve fund. As I am sure the Minister will agree, that will add a further subjective factor to each sample point, because of the company’s new ability to reduce its own reserve fund if it thinks it should do so.

All of that makes the provisions look a little wobbly. The regulations introduce a new factor that turns the probability position set out in the 2014 regulations into a further probability scenario of their own. In other words, what is the probability of a company reducing its own reserve fund without notice and therefore compromising its long-term likelihood of solvency?

I do not intend to divide the Committee, but will the Minister tell us whether he thinks that the arrangements proposed by the regulations, which are complicated by the new provision about reducing reserve funds, are a cause for concern with regard to the future solidity of the hard-worked arrangements set out in the 2013 Act, or does he think that everything is hunky-dory? I would assess the probability of getting a clear answer to that at a little over one in two, but of course I could be proved wrong by events, as all probability theory calculations have to acknowledge.

--- Later in debate ---

[Jesse Norman]

I am grateful to all hon. Members who have contributed for their comments and questions. If I may, I would like to correct something that I said earlier in response to my right hon. Friend the Member for Chelmsford. Officials have reminded me that regulations 1 and 19 will come into effect the day after the regulations are made. Regulation 14 will come into effect on 1 April, regulation 8 on 1 October, and all others on 1 July. I hope that that will comfort him. I apologise for misleading him earlier. I have been corrected on one other thing: it is not just the day, but the day after the day on which the regulations are made. I am doubly corrected

On the questions raised by the hon. Member for Kilmarnock and Loudoun, I hope he will correct me because I did not quite catch his final point about mutualisation. On onshore wind, as he is aware, the Government issued a consultation in November 2016 and continue to be heavily engaged in discussing the situation with the Scottish Government, developers, island communities and other Members. I hope that gives him comfort.

On the issue of costs, the hon. Gentleman will see that they have been included. We expect the costs for Hinkley Point to be in the region of £1.4 million for 2017-18. It is not at all clear why that should go up, but it is worth saying that Hinkley Point C is a complex contract and the Government’s approach is based on a flexible outsourcing model of getting professional advice to fit the needs, so that may change. If there is an issue of mutualisation, I invite him to come back to me because I did not quite understand the point he made.

The hon. Member for Southampton, Test was right to separate out the fixed levy portion from the lump sum reserve payment, and to point out that the intention of the lump sum reserve payment is to give 95% confidence that that will be paid. In the past, the effect of the previous regulations meant that the LCCC over-collected. The purpose of the regulations under discussion is to allow it to remit more quickly those funds that may have been over-collected, rather than trap them in parallel with the faster settlement process that has been introduced. Therefore, the question whether the organisations are under-constrained does not arise. As I have said, their operating costs are scrutinised by the Government, and of course they are subject to mutualisation and are therefore undoubtedly subject to question by the suppliers who pay their costs.

[Dr Whitehead]

I am sure the Minister will agree that the existence of the reserve fund still has some salience in this process, in so much as it functions as a backstop when there have been hiatuses—if that word exists—in payment or collection. The reserve fund can, in such circumstances, be brought in to smooth the passage and allow for the continuation of business, even if there are problems at either end. The question of reducing the reserve fund unilaterally and with no notice, which is in the regulations, is not just a technical issue; it is a real issue that has a bearing on how the rest of the company works, and therefore the probability within which it works overall.

[Jesse Norman]

I take that point, but I think the hon. Gentleman has got the incentives the wrong way around. The incentives are to maintain a large reserve fund because that gives a degree of comfort and prevents challenge. The point of the provision is to create an inventive if it is perfectly clear that more money has been accumulated than is required to be paid out. In general, the companies concerned will have a tremendous incentive to retain what reserves they can, precisely for the reasons he suggests. In reality, I do not think there is any real danger.

Question put and agreed to.

Energy Prices

Alan Whitehead Excerpts

Thursday 16th March 2017 Commons Chamber

[Dr Alan Whitehead (Southampton, Test) (Lab)]

We have had an excellent and powerful debate, and I thank the hon. Member for Weston-super-Mare (John Penrose), my right hon. Friend the Member for Don Valley (Caroline Flint) and the hon. Member for North Ayrshire and Arran (Patricia Gibson) for securing it. I know there were a number of problems with the televising of the pitch for it, but as it turned out the pitch was successful, and the wisdom of the Backbench Business Committee has been borne out by the powerful contributions made today by my hon. Friends the Members for Hartlepool (Mr Wright), for Brent Central (Dawn Butler) and for Bristol East (Kerry McCarthy), the hon. Member for North Ayrshire and Arran (Patricia Gibson), and my hon. Friend the Member for Bradford South (Judith Cummins).

I intend to comment specifically on what Members have said today, but I think we can agree that they all emphasised that the present energy market is broken and no longer doing its best for customers, who, after all, are at the heart of energy generation and supply. We have found ourselves in rather an odd position, in that we have not been discussing—as we frequently do in the Chamber—the plight of a persecuted minority and what we might do about it; instead, we have been discussing the plight of a persecuted majority and what we might do about it. If that does not emphasise the point that Members have been making about the brokenness of the market, I do not know what does.

We have seen eye-watering price increases lately. A number of companies have raised the price of dual fuel by 10%, and there have been double-figure increases in electricity bills from others. The companies justify their increases on the basis of a combination of wholesale prices and the Government’s environmental measures, and even—as we have heard recently—the impact of smart meters. The problem is that we have no easy way of assessing the extent to which those claims are justified. However, as was emphasised by my right hon. Friend the Member for Don Valley, we need to lay one canard to rest, and that is the suggestion that price rises are a result of low-carbon levies. They are not. As we heard from my hon. Friend the Member for Hartlepool, the recent report from the Committee on Climate Change indicated that, overall, only 9% of bills result from Government energy measures. Indeed, not only are those energy measures not a huge part of the overall bill, but they will contribute to decreasing bills in the future by decreasing demand, by increasing energy efficiency, and, in terms of renewable energy, by changing the merit order of energy supply so that eventually the wholesale price of energy can be driven down over a period.

[Mr Iain Wright]

What does my hon. Friend think about the fact that E.ON UK last week justified its dual fuel price increase by saying:

“It is due mainly”—

we should think about that word—

“to the rise in non-energy parts of the bill such as social and environmental schemes which support renewable energy and help customers use less energy”?

Yet today it has announced big rises in profits, primarily owing to lower costs in conjunction with Government-mandated energy efficiency measures. They want to have their cake and eat it.

[Dr Whitehead]

My hon. Friend makes a powerful point; they do want to have their cake and eat it. The problem is that we are not sure where the cake is and how we can work out which bits of the cake come from which source, because the whole energy market as it stands is non-transparent. Transparency is central to being able to judge whether such price rises are justified. The transactions that the energy companies undertake in order to trade, to hedge their trading, and to bring the costs of wholesale into the retail market are almost wholly opaque, and they continue to be so.

In addition, as we have heard this afternoon, the persecuted majority get hit all ways; they are hit by the price rises and hit by paying for the most expensive tariffs in the company roster—and in some cases, up to 90% of the customers of those companies are paying for the most expensive tariffs. So not only should we not speak about standard variable tariff customers as if they are an endangered minority, because they are in fact an endangered majority, but we must stop suggesting that it is somehow their fault that they have not switched and as if they are responsible for not switching. If we look at the history that my right hon. Friend the Member for Don Valley pointed out, we see a correlation between the areas from which modern energy companies originated and their sticky customer base. In fact, in a number of instances, a large proportion of those sticky customers were inherited when the companies were privatised and have stayed with them ever since. One might think that that shows admirable loyalty to those companies, and that to treat those customers in the way we have heard about this afternoon is absolutely the wrong thing to do.

Such behaviour produces a huge base of customers that is advantageous to energy companies, not to put too fine a point on it. As the hon. Member for Weston-super-Mare said, those customers will pay more for less year after year, they will not desert the company as a result, and they can be relied on to be milked to the benefit of the company’s finances. That points to the problem with the solution to this issue that the Government and the Competition and Markets Authority have been pursuing, which is sort of to blame those sticky customers for the plight they find themselves in and say, “Well, if only you’d switched, everything would be okay.” Indeed, that idea is at the heart of the recent CMA report on the energy market: “Why don’t all these sticky customers switch? If they don’t, how can we poke and prod them until they do? If we keep prodding and poking them and they still do not switch, we can get other companies in to poke and prod them a bit more and then they might switch.” That is not a satisfactory final remedy, given the scale, the nature and the brokenness of the market.

However, we should not therefore be surprised to read in the principles attached to the provisional remedies that the CMA put forward—the principles on which it operated the recent inquiry—the following statement:

“It is through customers shopping around and making choices between the offerings of rival suppliers that the benefits of competition emerge.”

That is what it thought it was doing through the inquiry.

The CMA has come up with the idea of putting a cap on tariffs for customers on prepaid meters, and I pay tribute to my hon. Friend the Member for Brent Central, who has been instrumental in securing that through her campaigning on the status of those on prepaid meters and the excess sums they were paying. However, although that cap idea is welcome, it does not do very much for the overall issue. We know that those sticky customers are not going to switch in a hurry and that the energy companies know that; we know that there is no evidence that companies are trembling at the thought of their customers switching and are trimming their rises accordingly. As we have heard this afternoon, the evidence from reports is that switching is a substantial occupation for some, but not for most. Switching figures in total often conceal a churn of switching between companies, often ending back in the same place, and multiple switching by a proactive few, but none by most.

So we have almost a perfect storm in our markets. Prices are spiralling. Ofgem said about recent price rises that it did not

“see any case for significant price increases where suppliers have bought energy well in advance.”

Customers were stuck in the middle of that spiral, however, and in most instances were paying out on disadvantageous tariffs, to boot. So, in the customers’ interest, we need to get a grip on that problem urgently.

We have heard this afternoon that getting that grip has been promised on a number of occasions. We heard that the Prime Minister suggested that everyone should be put on the lowest tariff. That has disappeared. We heard more recently Ministers saying that companies are in the last-chance saloon and something has to happen, but very little has actually taken place. That is despite the fact that, as Members have mentioned, it is plain that customers have been overcharged for a long period by energy companies, with the CMA itself estimating a sum of almost £2 billion by 2015.

So a regulated price cap within which competition could take place is a good idea. I recognise, however, that a price cap has to be considered within the context of the fact that there will be real pressures on costs. It is true that, on occasions, wholesale markets go up, and the energy companies will have to absorb that through price increases. So a cap that allows that arrangement to take place, but within which work can be done to ensure that competition remains, is a good starting idea, as is the idea that sticky customers should, after a certain period, be taken into protected tariffs, as my right hon. Friend the Member for Don Valley suggested, or on to the lowest tariff that a company offers. That is one way of starting to take action in relation to sticky customers.

I believe that there is rather more to the present dysfunction of the energy market than just the question of sticky customers, however. Ofgem said recently that there was not a case for significant price rises when suppliers had bought energy well in advance. Perhaps we need to deconstruct that sentence. It is not clear whether Ofgem was referring to companies buying wisely in advance or a long time in advance. Either way, the injunction is sound. Long-term buying strategies and smart hedging mean that price rises should not be spiking in the way that they all too often do, but we do not know what companies are actually up to when they are buying.

We do not know what is happening as far as energy company trades are concerned. For example, 95% of trades by wholesale energy companies are over the counter and we cannot see what they consist of. We do not know the extent to which energy companies that are vertically integrated effectively trade with themselves, or the extent to which this reflects fair trade in the market in forward trading. Surely we need to open up the market to full transparency, not just day-ahead but right along the curve, so that we know what is going on and we can act to prevent the abuses of trading positions that take place to the advantage of companies’ resources but to the disadvantage of customers.

[John Penrose]

I am sure that transparency is a sensible and worthwhile thing to aim for, but does the hon. Gentleman agree that it does not matter terribly much from a consumer’s point of view, because consumers do not care whether their supplier has a good hedging strategy or a bad one? That is up to the supplier to deal with and to manage. Some will get it right and some will get it wrong, but if they get it wrong, it should hit their managers’ bonuses and their shareholders’ returns rather than the price that the consumer eventually pays. We might want to understand this, but we should not seek to use it as a justification for high or low prices. Ultimately we should be tougher on the suppliers than that.

[Dr Whitehead]

Indeed. The hon. Gentleman makes an important point about the relationship of the customer to those transactions. However, with vertical integration, those transactions could cause money that should go to the customer to be siphoned off into different areas as a result of those opaque trades, and that is important to the customer in the long term. That is why we need full transparency in all those market trade arrangements.

[Caroline Flint]

My hon. Friend makes an important point about the vertically integrated nature of these companies. In this dark, dark world of electricity generation and supply, is it not the case that the big six generate energy, sell it to themselves and then sell it on to us? That not only impacts on the fairness of pricing but excludes others, including independent generators and retailers, from coming into the market to put downward pressure on prices.

[Dr Whitehead]

My right hon. Friend’s point is spot on. It demonstrates the need to understand a lot more about how those trades work, who is doing what to whom and, sometimes, who is doing what to themselves. This is a complicated picture, involving trading right up to closure and trading in times of scarcity. There has been a suggestion that traders can pull back on their generation in order to trade when the generation becomes more scarce in order to get more money. The lack of accountability in those companies and the opacity of the system mean that we are badly served in regard to knowing what money goes where and who is benefiting from it, and what is happening to the customer in the end.

We need to open up the market to full transparency but we need to go still further and introduce a pool system of trading, so that all trades into the pool and all trades out of it are conducted transparently and, most importantly, on a level playing field for all suppliers. This works in other European countries—Scandinavia has the Nord Pool, for example—so why can it not work here? That does not mean that companies cannot make money. As Ofgem says, if companies have a good purchasing and hedging strategy, they can make money. What they will not be able to do is pass benefits on to themselves that otherwise ought to go to the customer.

We need urgent action, which is perhaps a little ironic. My right hon. Friend the Member for Don Valley will recall that we have between us been through several Bills, now Acts, and reforms that have passed through the House under the heading of energy market reform. We have seen a great deal of reform, but we certainly have not seen reform of the energy market in all that time. It is time that we got serious about reform of how the energy market works, of its opacity, and of how it does not serve sticky customers properly, victimising and demonising the majority of them. We need urgent action on that. Otherwise, we will be condemned to the same old cycle of price rises, muttering, remedies being tossed around, commissions being engaged, remedies gathering dust on shelves, and then another round of price rises. I commend the motion, but it should herald the start of a serious look at how the whole market works and how the customer can finally be brought into its centre. It is a fine start, but we need to follow it through to the end.

Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 14th March 2017 Commons Chamber

[Jesse Norman]

It is fair to say that we have stated that we will come to the House as soon we can and that the matter is presently under consideration.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The Minister mentioned the capacity market. I am sure he will agree that the prime purpose of that market has been to procure new infrastructure capacity. Will he tell me how many new gas-fired power stations have been procured with the £3.4 billion that has been spent so far on the capacity market? What plans does he have to improve that number?

[Jesse Norman]

rose—

[Dr Whitehead]

To be helpful, the answer is: one new power plant in King’s Lynn.

[Jesse Norman]

Well, I am all in favour of the self-answering question, but I remind the hon. Gentleman that the last capacity market procured energy at a cost of £7 per kilowatt, which is cheaper than any conceivable alternative.

Petroleum Licensing (Exploration and Production) (Landward Areas) (Amendment) (England and Wales) Regulations 2016

Alan Whitehead Excerpts

Wednesday 1st March 2017 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I beg to move,

That the Committee has considered the Petroleum Licensing (Exploration and Production) (Landward Areas) (Amendment) (England and Wales) Regulations 2016 (S.I. 2016, No. 1029).

It is a pleasure to serve under your chairmanship, Mr Gray. We have before us a statutory instrument purporting finally to put in place protection against surface drilling for hydraulic fracturing in national parks, sites of special scientific interest, areas of outstanding natural beauty and similar areas. It might be worth casting our minds back and considering how we got to a position in which this SI is being presented to us today. During the passage of the Infrastructure Act 2015, the then Secretary of State for Energy and Climate Change, the right hon. Member for Hastings and Rye (Amber Rudd), assured us that

“we have agreed an outright ban on fracking in national parks, sites of special scientific interest and areas of outstanding natural beauty.”—[Official Report, 26 January 2015; Vol. 591, c. 586.]

That was assumed to be the outcome of the Infrastructure Bill discussions, but it turned out, at the end of consideration of that Bill, that a separate SI needed to be introduced to give effect to the outright ban. That secondary legislation was laid before us in autumn 2015, but it turned out that it was not an outright ban on fracking in national parks, sites of special scientific interest and so on, because it separated hydraulic fracking underground from drilling on the surface in national parks. Although it indicated that hydraulic fracking would be restricted as far as sub-surface activity was concerned, it appeared to many of us at the time that that was something of an absurdity, inasmuch as a common-sense interpretation of fracking is that it does involve drilling a hole in the ground, and then fracking that hole, so separating the two in the way the SI did might be regarded as somewhat Jesuitical.

When that SI was laid before Parliament, the then Minister of State, Department of Energy and Climate Change, the right hon. Member for South Northamptonshire (Andrea Leadsom), reassured those who had made that point that

“the Government have separately committed to ensure that hydraulic fracturing cannot be conducted from wells that are drilled at the surface of national parks and other protected areas. Members can be reassured that that remains the Government’s position.”—[Official Report, Second Delegated Legislation Committee, 27 October 2015; c. 7-8.]

That is why we have this statutory instrument today; it is a third go. It deals at last with surface drilling in national parks and sites of special scientific interest.

One would therefore expect these regulations finally to lay that trail to rest, so that we could say that yes, there is to be an outright ban on fracking in national parks and sites of special scientific interest, which I believe all hon. Members present would want. Elementary research—I will not go into names or places—shows that a number of Members present have those areas in their constituency. What the Minister says about a ban today may give them some succour in discussions in their constituency with people who are concerned about fracking in their area. Hon. Members might have welcomed the regulations as finally indicating that their wishes had come true, and that there actually was to be a ban, and might have thought that we could leave the room this morning safe in thinking that that was what we had voted for. Unfortunately, it appears unlikely that that is what will happen if we vote for the regulations.

In the 2015 Act, there is a definition not just of fracking—surface drilling—but of “associated hydraulic fracturing”, which is fracking that involves

“more than 1,000 cubic metres of fluid at each stage, or expected stage, of the hydraulic fracturing, or…more than 10,000 cubic metres of fluid in total.”

That fluid is the water associated with the fracking process. It is injected into a well, comes back up again, and then has to be dealt with as waste once the fracking has been completed. If a well produces less fluid than that, it is not deemed associated hydraulic fracturing under the Act, although common sense would suggest that it is fracking.

Proposed new clause 22A(2)(c) slightly redefines “associated hydraulic fracturing” as “Relevant Hydraulic Fracturing”, although that has exactly the same definition as “associated hydraulic fracturing” does in the 2015 Act. The regulations define relevant hydraulic fracturing as

“hydraulic fracturing of shale or strata encased in shale which is carried out in connection with the use of a Well to search or bore for or get petroleum, and involves, or is expected to involve, the injection of—

more than 1,000 cubic metres of fluid at any stage, or expected stage, of the hydraulic fracturing, or

more than 10,000 cubic metres of fluid in total.”

Proposed new clause 22A(1) states:

“The Licensee shall not carry out Relevant Hydraulic Fracturing from a Well if the well pad is in a Protected Area in England or Wales.”

There is a clear link between the definition of relevant hydraulic fracturing and whether a licensee can carry out that fracking in a protected area. That is a problem, because if, in legislation to protect such areas, we place a limit below which fracking is not fracking, then evidently, straightforwardly and logically there is a point below which that area is not protected. It is not protected if someone is fracking in it but not producing 10,000 cubic metres of fluid. That is what appears in the explanatory memorandum that accompanies these regulations:

“The purpose of this instrument is to amend the model clauses for onshore petroleum exploration and development licences in order to ensure that licensees do not carry out high volume hydraulic fracturing from a well if the well pad is located in a protected area”.

I emphasise “high volume”, because that is the reality of what is in front of us today. We are talking not about fracking, but about high-volume fracking, and those are two very different things.

I mention this problem because we have expert testimony on what happened with hydraulic fracking in the United States; I am sorry to call on the wisdom of experts, because I know there is some dispute about whether we should listen to experts. In the United States, the amount of water used for fracking in any well is notified to the Environmental Protection Agency. There is still an EPA in the United States, which is good; it monitors how much water is used in each well and publishes the numbers once the fracking is completed. Work by Professor Stuart Haszeldine at the University of Edinburgh looking at more than 17,000 wells fracked in the United States between 2000 and 2010 shows that 43% of wells fracked through gas fracking, hydraulic fracking, and machinery and surface drilling—the whole lot—would not be defined as fracking under UK rules simply because the amount of water they used did not reach the American equivalent of that 10,000 cubic metres overall definition.

In case we do not agree with experts, I—a non-expert—have looked at the EPA’s more recent data from 2011 to 2013 on wells that have been fracked, and not only do they show a very similar picture, but in the majority of states in which wells have been fracked, all the wells are below the 10,000 cubic metre water level. That suggests that to some extent this is an issue of variability in geology, the difficulty of fracking a particular well and so on. In some states in the United States, most of the wells use more than 10,000 cubic metres of water in the fracking process, and in other states, most do not.

Of course, we simply do not know whether the UK is likely to be an Arkansas, a New Mexico or even a Texas as far as fracking is concerned because we have the evidence of only two wells. It may be that all the wells across the UK will have to use more than 10,000 cubic metres of water, or it may turn out that none or not many will. The problem with the statutory instrument is that the outcome is pre-empted and predicted by it stating that protection from fracking in protected areas will be based on a prescribed definition of what it is to frack a well, and what amount of water is involved.

[Maria Eagle (Garston and Halewood) (Lab)]

As everyone on the Committee knows, many people campaign against fracking, particularly in places where it is to take place. How does my hon. Friend think people who campaign because they fear the damage from fracking will react to politicians who have told them that protected areas will not be fracked, if they see wells in those areas because the fracking will involve less than the specified volume of water?

[Dr Whitehead]

I cannot imagine anything other than that those people will feel betrayed, let down and effectively duped when they find that what they thought was the protection of those areas turns out to be nothing of the sort.

Perhaps the Minister can assist me; under the SI, what will be the process for deciding to frack in a particular area? What process will have to be carried out in relation to the 10,000 cubic metre outcome? The SI is pretty silent on that. Taking the provisions at face value, I can imagine that a company wanting to frack in a national park—and, indeed, surface-drill, so that things will be worse than under previous statutory instruments—will merely have to say, “We are confident that this well will not produce 10,000 cubic metres of water, so it is not relevant hydraulic fracking—so we can go ahead, can’t we?”.

It may be suggested that there are other means by which that outcome could be prevented, such as through planning arrangements or ministerial intervention. Ministerial intervention has already overturned a planning decision, in an early fracking case, in Preston, but that is not the real point. The point is that the SI was supposed to be the definitive measure finally establishing protection—on the surface and under the surface—in national parks: protection for national parks with no ifs, no buts and no quibbles. I suggest that the SI simply does not do that. Furthermore, as my hon. Friend the Member for Garston and Halewood mentioned, it opens the door to a possible series of national confusions; what people thought was the case may turn out not to be, and we, collectively, will find that we are responsible for that.

There are two possible explanations for the SI taking the form it does. Either the Government consider that all wells drilled in this country will use more than 10,000 cubic metres of water, in which case it would be a good idea to have some evidence on the table to demonstrate that. Alternatively, they do not want proper protection for national parks, despite previous statements, and have produced the SI in accordance with that. I cannot believe that such mendaciousness is involved, however; I prefer to think that either the Government erroneously believe that all wells will have 10,000 cubic metres of water associated with them, or they believe that other mechanisms can protect the national parks, despite what the SI says. If that is the case, I hope that the Minister will be able to explain.

In the absence of all those explanations, I suggest that the right thing for hon. Members to do—this is not a party issue; it is a matter of doing what we collectively said we would do on fracking—is, as we say in our conferences, refer this back. We should not vote for the motion, but should ask the Government to go away and come back with a statutory instrument that produces the result that we all want.

It is unfortunate that statutory instruments cannot be amended, because the easiest thing to do would be simply to delete proposed new clause 22A(2)(c) and let the rest of the SI stand. The rest of it—the protections for national parks—is perfectly okay. It is just the introduction of the concept of relevant fracking that fatally overturns the intention behind the regulations. Unless we receive a bolted-on, cast-iron explanation of why the world is not as we see it, I am afraid we will not support these regulations, and we will seek a Division.

--- Later in debate ---

[Jesse Norman]

Perhaps I can reassure the hon. Lady. The point of the regulations is precisely to ensure that smaller scale operations meet an equivalent range of safeguards to those set out in the Petroleum Act 1998. In some cases there may be local activities that are subject to all of the usual procedures and, if they are not hydraulic fracturing, they are captured by separate rules. However, hydraulic fracturing in national parks has been banned. That is the Government’s position.

I draw the hon. Lady’s attention to the fact that even at the sub-surface level, protections are in place to ensure not merely that hydraulic fracturing using more than 10,000 cubic metres of fluid cannot be done, but that hydraulic fracturing using more than 1,000 cubic metres of fluid at any one stage cannot be done either. That is a comprehensive response to the question.

[Dr Whitehead]

The problem is that proposed new clause 22A(1) states:

“The Licensee shall not carry out Relevant Hydraulic Fracturing from a Well if the well pad is in a Protected Area in England or Wales.”

The Minister has simply not answered the question of whether a well cannot be drilled at all in a national park or an area of outstanding natural beauty, or whether it can be drilled from the surface within a national park if the well uses less than 10,000 cubic metres of water overall. If he cannot assure me about that, does he accept that the assurance he has just given is not correct?

[Jesse Norman]

No. The position is that “well pad”, as the hon. Gentleman knows, describes the location in which a well is drilled. That term was defined in paragraph 3.33 of the Government’s response to the landwards regulations consultation. Further consideration may be needed of whether a more explicit definition is required elsewhere, but what is in the response is clear. To give him comfort, let me reiterate that a well pad counts as being in a protected area if any part of it is in that area. There should be no ambiguity about that; it is what the response to the consultation says. I take his point, but it has already been addressed.

If I may continue with what I was saying, I should emphasise that the shale gas resources beneath this country have enormous potential, which we as a country should not underrate. We have a very secure regime in place.

--- Later in debate ---

[Dr Whitehead]

I think it is evident from our exchanges this morning that the central question about drilling from wells and fracking from the ground underneath them is this: can that take place using less than 10,000 cubic metres of water? As I have set out for the Committee—not as my contention, but in a series of facts—yes, it can. It happens in the United States, not just occasionally, but to a very substantial extent—indeed, in just under half of all fracking operations. Everybody in the United States regards those as real fracking operations, with real wells drilled and real volumes of water involved.

We are not talking about whether fracking is safe or a boon to the economy. We are talking about the fact that Ministers have given apparently cast-iron assurances that fracking will not take place in areas of outstanding natural beauty, national parks or sites of special scientific interest, but the Minister has not given any assurances to that effect today, and it is quite evident, not just from external sources but from the wording of the SI, that there is no such protection in legislation. The Minister said that we should not get too hung up on nomenclature, but we absolutely should, because legislation is all about getting it right. It is about getting assurances in writing, so that people know that what Ministers say is backed up by legislation from this House.

[John Woodcock]

My hon. Friend has made a compelling case today, which has clearly raised new questions for Government Members. I credit the Minister for being honest with hon. Members about not having the answers, and for saying that he is prepared to write to the right hon. Member for Arundel and South Downs. However, does the shadow Minister agree that, in the circumstances, the sensible thing would be to pause this process and resume it when we have the right assurances and the proper facts to enable us to decide whether to proceed?

[Dr Whitehead]

My hon. Friend makes an important point. Writing to the right hon. Member for Arundel and South Downs and to the hon. Member for The Cotswolds after we have voted on this legislation today will have no weight at all and will provide no assurances whatever. Either the legislation protects national parks and areas of outstanding national beauty from fracking and drilling on the surface—not lateral drilling, but wells in pads drilled within the curtilage of the parks—or it does not. If it does not, no amount of writing to hon. Members to assure them that it does will alter that.

A strong case has been made this morning. I make the caveat that we do not know for certain whether every well drilled in the United Kingdom will use more than 10,000 cubic metres of water; we can merely refer to the evidence from the United States, which is that a lot do and a lot do not. My hon. Friend the Member for Newport West points out that the UK’s geology is very different from that of the United States. It may be that, just as there are different circumstances—I pointed those out in my evidence to the Committee, as it were—in different states of the US, different amounts of water are used in different geological circumstances. Given the difficult geology in the UK, it may be that quite a lot of water would be used. It may be that Bowland shale and Wealden shale need different amounts of water for fracking.

It will be extremely difficult—the Minister fell on this difficulty—to walk out of this room assured that there will be no fracking in national parks and sites of special scientific interest as a result of the regulations. If that is what we believe, we should not allow the SI to proceed. That is not to say that the Minister is not sincere and clear in his contention that there is no intention to enable fracking to take place in national parks and SSSIs, but evidently there is a dissonance between what the Minister says and what the legislation says.

[Geoffrey Clifton-Brown]

On a point of order, Mr Gray. Could you advise the Committee on what the procedure would be for taking the SI away, looking at it carefully, and bringing it back when answers have been given to the queries raised in this Committee?

[The Chair]

I am grateful to the hon. Gentleman for his point of order. The position is that the statutory instrument has been laid before Parliament, made and come into force already. All we are considering today is whether the Committee has considered the statutory instrument. Those who believe that the Committee has considered it properly will vote aye; those who believe that the Committee has not considered it properly will vote no. In either case, there will not be a change to the status of the SI, which is already in force.

[Dr Whitehead]

My understanding is that because this SI was under the negative procedure, was prayed against and was brought to this Committee, it is indeed in operation at the moment, but if we do not vote for it, that brings into question whether it should continue in operation without some form of amendment that would meet the intentions behind the SI. As for what should be done for the future, it is not possible to amend statutory instruments, as I said, but the wishes of Members and the discussion that we have had will be on the record,. If we in this House do not indicate that we wish the SI to proceed in its present form, it will, in my view, be incumbent on the Government to bring forward an SI that fulfils its purpose, which perhaps we could support.

[The Chair]

Order. For the sake of clarity, I point out that if there were a feeling in the Committee that there was something wrong with the statutory instrument, it would be perfectly open to the Opposition or anybody else to engineer a vote on the matter on the Floor of the House of Commons, using one of a variety of instruments, including, but not limited to, the Backbench Business Committee. This Committee is merely considering whether the statutory instrument has been considered.

[Dr Whitehead]

Thank you for that clarification, Mr Gray. Were the SI not accorded a positive vote, there would be a deferred Division, as I understand it, on the Floor of the House next week, and we would have to vote on it. If, however, there is a yes vote on the SI this morning, that Division would not take place; we therefore could not seek any further clarity on the SI. I have made clear what, to my mind, the safe course of action would be. I take the points made, and I commend the right hon. Member for Arundel and South Downs, and the hon. Member for The Cotswolds, for seeking the clarification that I think is essential on the SI. It appears that we should not give the SI our positive commendation today, but should refer it for consideration on the Floor of the House. Between now and next week, we may get the further clarification that we did not get this morning.

In any event, the right course of action, which I urge upon the Government, is to bring forward a further SI that establishes that the things that have been said about national parks and sites of special scientific interest are really the case, with no ifs or buts. We would all be able to stand behind that. Anything less would need us to take another look at it.

Question put.