Jobs and Growth in a Low-carbon Economy

Chris Heaton-Harris Excerpts

Monday 5th March 2012 Commons Chamber

[Mr Peter Lilley (Hitchin and Harpenden) (Con)]

My right hon. and hon. Friends on the Government Front Bench will probably be relieved to hear that I do not intend on this occasion to dispute the wisdom of the renewables targets that we have imposed on ourselves or had imposed upon us by the European Union. If we take those targets as given, we must accept the need to tax or ration fossil fuels and to subsidise or set quotas for renewables if we are to meet them. However, I dispute the premise that appears to underlie contributions to the debate from both sides of the House: that the move from low-cost energy to high-cost energy can generate jobs or growth. Such a move might be necessary, but we delude ourselves if we imagine that it will have either of those effects.

Subsidies can boost employment in the area that is subsidised, just as taxes can reduce employment in the area that is taxed, but the suggestion that subsidies can produce a net increase in additional jobs, as the right hon. Member for Don Valley (Caroline Flint) suggested, is a delusion. It is self-evident nonsense and involves abolishing the rules of arithmetic, because we would destroy as many jobs with the taxes we would have to levy to pay for the subsidies as the subsidies given at other points would create. That is essentially the green version of the old broken windows fallacy, according to which we can create jobs by breaking someone’s windows because the householder would have to employ a glazier, who would have to employ glassmakers and the people who produce the other raw materials. That fallacy was destroyed ages ago and should not be reproduced by Members on either Front Bench.

[Chris Heaton-Harris (Daventry) (Con)]

I am wondering whether my right hon. Friend is making an interesting and strange bid for the siting of the green investment bank in either Hitchin or Harpenden.

[Mr Lilley]

We have absolutely no desire to have what is essentially a sub-prime bank in our area. The idea that we can boost—[Interruption.] It will be a sub-prime bank, because the Government have said that it will not accept prime investment opportunities, which will be left to the market. The bank will be able to lend only to those opportunities that are not attractive to industry—despite huge subsidies, quotas, publicity and fashion. In short, it will be able to lend only to the sub-prime opportunities, so let us hope that it is a long time coming. We do not want it in Hitchin.

The idea that we can boost productivity by replacing competitive sources of energy with uncompetitive sources of energy is so ludicrous that it is strange it has passed without comment today. We have a need for electricity generation. If we invest a certain amount of money in wind, which is four times as expensive as gas turbines, we will get for a given investment only one quarter of the electricity that we would if we relied on gas turbines. With onshore generation we will get half the electricity that we would from gas, so the idea that we can boost growth through low-productivity, high-cost industries is nonsense, and we should cease deluding ourselves that we can. It has been suggested that we might be able to generate jobs in the supply industries for those forms of energy, but it is nonsense to suppose that subsidising the use of renewable technologies automatically results in an increase in the domestic production of equipment for them. It manifestly has not; there is no reason to suppose that it should; the Government are not allowed to give subsidies to those equipment suppliers under EU rules; and in any case the record of Governments trying to pick winners is lamentable and miserable, so it is probably just as well that they cannot.